<PAGE>
As filed with the Securities and Exchange Commission on November 26, 1996
Registration No. 33-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------------
THORNBURG MORTGAGE ASSET CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Maryland 119 East Marcy Street, Suite 201 85-0404134
(State or other jurisdiction of Santa Fe, New Mexico 87501 (Employer I.D. Number)
incorporation or organization) (505) 989-1900
</TABLE>
(Address, including zip code, and telephone number,
including area code, of Registrant's Principal Executive Offices)
-------------------------------
H. GARRETT THORNBURG, JR. CHAIRMAN
THORNBURG MORTGAGE ASSET CORPORATION
119 EAST MARCY STREET, SUITE 201
SANTA FE, NEW MEXICO 87501
(505) 989-1900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------------------
Copies to:
MICHAEL B. JEFFERS, ESQ.
JEFFERS, WILSON & SHAFF, LLP
18881 VON KARMAN AVENUE, SUITE 1400
IRVINE, CALIFORNIA 92612
(714) 660-7700
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time following the effective date of this Registration
Statement as determined by market conditions.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
Registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum Amount of
Title of each class of Securities Amount to be Aggregate Price Aggregate Offering Registration Fee(3)
to be Registered Registered(1) Per Share (1) Price (1) (2)
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<S> <C> <C> <C> <C>
Preferred Stock, $.01 par value per
share
- -------------------------------------- ---
Preferred Stock Warrants
- --------------------------------------
Common Stock, $.01 par value per share
(4)
- -------------------------------------- $200,000,000 --- $200,000,000 $68,965.52
Common Stock Warrants (4)
- --------------------------------------
Shareholders Rights ---
- --------------------------------------------------------------------------------------------------------------------------
Total $200,000,000 --- $200,000,000 $68,965.52(5)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) In no event will the aggregate maximum offering price of all securities
issued pursuant to this Registration Statement and Registration Statement
No. 33-94646 exceed $242,776,125. Any securities registered hereunder may
be sold separately or as units with other securities registered hereunder.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o), the proposed maximum offering price per share will
be determined, from time to time, by the Registrant in connection with the
issuance by the Registrant of the securities registered hereunder.
(3) Calculated pursuant to Rule 457(o) of the rules and regulations under the
Securities Act of 1933, as amended.
(4) The aggregate amount of Common Stock registered hereunder is limited, solely
for purposes of any at the market offering, to that which is permissible
under Rule 415(a)(4) of the Securities Act of 1933, as amended.
(5) Pursuant to Rule 429 under the Securities Act of 1933, the Prospectus
included herein also relates to $42,776,125 of securities previously
registered for sale under Registration Statement No. 33-94646, which was
declared effective on September 7, 1995 and for which a filing fee of
$14,751 was previously paid. In the event any securities previously
registered for sale are offered and sold prior to the effective date of this
Registration Statement, they will not be included in any Prospectus
hereunder. The amount of securities being registered for sale, together
with the remaining securities registered under Registration Statement 33-
94646 represents the maximum number of securities which are expected to be
offered and sold.
-------------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE>
PROSPECTUS
(Subject to completion dated November 26, 1996
THORNBURG MORTGAGE ASSET CORPORATION
$200,000,000
COMMON STOCK, PREFERRED STOCK, AND WARRANTS
AND SHAREHOLDER RIGHTS TO PURCHASE COMMON STOCK AND
PREFERRED STOCK
-------------------------
Thornburg Mortgage Asset Corporation, a Maryland corporation (the "Company"),
directly or through agents, dealers or underwriters designated from time to
time, may issue and sell from time to time one or more of the following types of
its securities (the "Securities"): (i) shares of its common stock, par value
$0.01 per share ("Common Stock"); (ii) shares of its preferred stock, in one or
more series ("Preferred Stock"), (iii) warrants to purchase shares of Common
Stock ("Common Stock Warrants"); (iv) warrants to purchase Preferred Stock
("Preferred Stock Warrants"); (v) rights to purchase shares of Common Stock or
Preferred Stock issued to shareholders ("Shareholder Rights"); and (vi) any
combination of the foregoing, either individually or as units consisting of one
or more of the foregoing types of securities. The Securities offered pursuant
to this Prospectus may be issued in one or more series, in amounts, at prices
and on terms to be determined at the time of the offering of each such series
and set forth in a supplement to this Prospectus ( a "Prospectus Supplement").
The Securities offered by the Company pursuant to this Prospectus will be
limited to $200,000,000 aggregate initial public offering price, including the
exercise price of any Common Stock Warrants, Preferred Stock Warrants
(collectively, "Securities Warrants") or Shareholder Rights.
The specific terms of each offering of Securities in respect of which this
Prospectus is being delivered will be set forth in an accompanying Prospectus
Supplement relating to such offering of Securities. Such specific terms
include, without limitation, to the extent applicable (1) in the case of any
series of Preferred Stock, the specific designations, rights, preferences,
privileges and restrictions of such series of Preferred Stock, including the
dividend rate or rates or the method for calculating same, dividend payment
dates, voting rights, liquidation preferences, and any conversion, exchange,
redemption or sinking fund provisions; (2) in the case of the Securities
Warrants, Preferred Stock or Common Stock, as applicable, for which each such
warrant is exercisable, the exercise price, duration, detachability and call
provisions of each such warrant; (3) in the case of Shareholder Rights, which
entitles the shareholder to purchase Preferred Stock or Common Stock, as
applicable, the subscription price, duration, transferabilities and the over
subscription privilege of each of the Shareholder Rights; and (4) in the case of
any offering of Securities, to the extent applicable, the initial public
offering price or prices, listing on any securities exchange, certain federal
income tax consequences and the agents, dealers or underwriters, if any,
participating in the offering and sale of the Securities.
--------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
--------------------------------------
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement. The delivery in any jurisdiction of
this Prospectus together with a Prospectus Supplement relating to specific
Securities shall not constitute an offer in such jurisdiction of any other
Securities covered by this Prospectus but not described in such Prospectus
Supplement.
---------------------------------------
The date of this Prospectus is November 26, 1996.
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR THE ACCOMPANYING PROSPECTUS
SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE
<PAGE>
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER, AGENT
OR DEALER. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE ACCOMPANYING
PROSPECTUS SUPPLEMENT NOR ANY DISTRIBUTION OF SECURITIES BEING OFFERED PURSUANT
TO THIS PROSPECTUS AND AN ACCOMPANYING PROSPECTUS SUPPLEMENT SHALL UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF OR THEREOF OR THAT THE INFORMATION
CONTAINED HEREIN OR THEREIN IS CORRECT AT ANY TIME SUBSEQUENT TO THE DATE HEREOF
OR THEREOF. THIS PROSPECTUS AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT DO NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE
SECURITIES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED OR IN WHICH THE PERSON MAKING THE OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
---------------------------------------------
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy and information statements and other information
with the Securities and Exchange Commission (the "Commission"). The reports,
proxy and information statements, the Registration Statement and exhibits
thereto, and other information filed by the Company with the Commission may be
inspected and copied at the Public Reference Section of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the regional offices of the Commission located at 13th Floor, Seven World Trade
Center, New York, New York 10048, and at Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of the
material may be obtained form Public Reference Section of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The Common Stock is traded on the New York Stock Exchange,
Inc. ("NYSE"). The reports, proxy and information statements and other
information may also be inspected at the offices of the NYSE, 20 Broad Street,
New York, NY 10005.
The Company has filed with the Commission a Registration Statement (of which
this Prospectus is a part) on Form S-3 under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Securities offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain portions of which have been omitted as permitted
by the rules and regulations of the Commission. Statements contained in this
Prospectus as to the content of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of the
contract or other document filed as an exhibit to the Registration Statement,
each statement being qualified in all respects by that reference and the
exhibits to Registration Statement. For further information regarding the
Company and the Shares offered hereby, reference is hereby made to the
Registration Statement and the exhibits to the Registration Statement which may
be obtained from the Commission at its principal office in Washington, D.C.,
upon payment of fees prescribed by the Commission.
The Company currently furnishes its shareholders with annual reports
containing financial statements audited by its independent auditors and with
quarterly reports containing unaudited summary financial information for each of
the first three quarters of each fiscal year.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
There are incorporated herein by reference the following documents heretofore
filed by the Company with the Commission:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995; and
(b) The Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, 1996, June 30, 1996 and September 30, 1996, respectively.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Shares made hereby shall be deemed to be
incorporated by reference into this Prospectus.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of the Registration Statement and this Prospectus to the extent
that a statement contained in the Registration Statement, this Prospectus, or
any other subsequently filed document that is also incorporated by reference
herein modified or supersedes that statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a Prospectus is delivered, upon written
or oral request of that person, a copy of any document incorporated herein by
reference (other than exhibits to those documents unless the exhibits are
specifically incorporated by reference into the documents that this Prospectus
incorporates by reference). Requests should be directed to Mr. Richard P.
Story, Thornburg Mortgage Asset Corporation, 119 East Marcy Street, Suite 201,
Santa Fe, New Mexico, 87501, telephone number (505) 989-1900.
3
<PAGE>
THE COMPANY
GENERAL
Thornburg Mortgage Asset Corporation (the "Company") is a special purpose
financial institution that primarily invests in adjustable-rate mortgage ("ARM")
securities, thereby indirectly providing capital to the single-family
residential housing market. ARM securities represent interests in pools of
adjustable-rate mortgage loans, which often include guarantees or other credit
enhancements against losses from loan defaults. While the Company is not a bank
or savings and loan, its business purpose, strategy, method of operation and
risk profile are best understood in comparison to such institutions. The
Company leverages its equity capital using borrowed funds, invests in ARM
securities and seeks to generate income based on the difference between the
yield on its ARM securities portfolio and cost of its borrowings. The Company
is organized for tax purposes as a real estate investment trust ("REIT") and,
therefore, generally passes through substantially all of its earnings to
shareholders without paying federal or state income tax at the corporate level.
The Company commenced operations in June 1993, and as of September 30, 1996 had
assets of approximately $2.6 billion.
The Company's mortgage securities portfolio may consist of either agency or
privately issued (generally publicly registered) mortgage pass-through
securities, multiclass pass-through securities, Collateralized Mortgage
Obligations ("CMOs") or short-term investments that either mature within one
year or have an interest rate that reprices within one year.
The Company's investment policy is to invest at least 70% of total assets in
High Quality ARM securities and short-term investments. High Quality means:
(1) securities which are rated within one of the two highest rating
categories by at least one of either Standard & Poor's Corporation or
Moody's Investors Service, Inc. (the "Rating Agencies");
(2) securities that are unrated but are guaranteed by the U.S. Government
or issued or guaranteed by an agency of the U.S. Government; or
(3) securities that are unrated or whose ratings have not been updated but
are determined to be of comparable quality (by the rating standards of
at least one of the Rating Agencies) to a High Quality rated mortgage
security.
The remainder of the Company's investment portfolio, comprising not more than
30% of total assets, may consist of Other Investment assets, which may include:
(1) ARM loans secured by first liens on single-family residential
properties acquired for the purpose of securitization into investment
grade securities; or
(2) pass-through securities or CMOs backed by loans on single-family
residential properties or on multi-family, commercial or other real
estate-related properties if they are rated at least Investment Grade
at the time of purchase. "Investment Grade" generally means a security
rating of BBB or Baa or better by at least one of the Rating Agencies.
The Company does not invest in REMIC residuals or other CMO residuals and,
therefore does not create excess inclusion income or unrelated business taxable
income for tax exempt investors. Therefore, the Company is a mortgage REIT
eligible for purchase by tax exempt investors, such as pension plans, profit
sharing plans, 401(k) plans, Keogh plans and Individual Retirement Accounts
("IRAs").
To the extent the Company acquires ARM loans, the Company may create ARM pass-
through securities and CMOs through securitization. The Company intends to
purchase ARM loans for securitization when it believes that it can earn a higher
yield on the mortgage securities created through securitization than on
comparable mortgage securities purchased in the market. In order to facilitate
the securitization process, the Company may retain a limited amount of the
credit risk inherent in the mortgage loan. Following the securitization
process, the Company expects to hold the newly created ARM securities in its
investment portfolio. If the Company were to sell the newly-created ARM
securities on a regular basis, there would be a substantial risk that they would
be deemed "dealer property" and that all of the profits from such sales would be
subject to tax at the rate of 100%.
The Company purchases its ARM securities from broker-dealers and financial
institutions that regularly originate or make markets in these securities. The
Company may also purchase ARM securities from a variety of mortgage suppliers
(including mortgage bankers, banks, savings and loans, investment banking firms,
home builders and other firms involved in originating and packaging mortgage
loans). The Company does not purchase any ARM securities from or enter into any
servicing or administrative agreements (other than the management agreement with
Thornburg Mortgage Advisory Corporation the "Manager") or with any entities
affiliated with the Company.
The Company's executive offices are located at Thornburg Mortgage Asset
Corporation, 119 East Marcy Street, Suite 201, Santa Fe, New Mexico 87501. The
Company was incorporated in Maryland on July 28, 1992.
4
<PAGE>
OPERATING POLICIES AND STRATEGIES
The Company employs a leveraging strategy to increase its assets by borrowing
money on a short-term collateralized basis, generally with maturities of one
year or less, in an amount up to 92% of the historical cost of its total assets.
The Company then uses the proceeds to acquire additional ARM securities. By
borrowing against its ARM securities in this manner, the Company expects that up
to 90% (but not more than 92%) of the Company's total assets may be financed
with borrowed funds. The Company believes that this strategy allows the Company
to maximize return on equity while the borrowing limitation leaves an adequate
capital base sufficient to protect the Company against interest rate
environments that may cause the value of its assets to decline or in which the
Company's borrowing costs might exceed its interest income from ARM securities.
These conditions could occur when the interest rate adjustments on ARM
securities lag behind interest rate increases on the Company's variable-rate
borrowings or when the interest rate indices of the borrowings are mismatched
with the interest rate indices of the Company's ARM securities. If the ratio of
the Company's borrowings to total assets exceeds 92%, then, except as limited by
the sources of income tests applicable to the Company as a REIT, the Company
will reduce its assets or take other steps as necessary to reduce its borrowing
ratio to below 92% of total assets.
The Company mitigates its interest-rate risk from borrowings generally by
selecting interest-rate indices and maturities on its indebtedness that
approximately match interest-rate adjustment indices and the interest-rate
adjustment periods on its ARM securities. Accordingly, borrowings bear variable
or short-term fixed (one year or less) interest rates. Generally, the borrowing
agreements require the Company to deposit additional collateral in the event the
market value of existing collateral declines, which could require the Company to
sell assets during periods when the net value of its assets are declining in
order to reduce the borrowings.
The Company's ARM securities portfolio is financed primarily at short-term
borrowing rates utilizing reverse repurchase agreements, dollar-roll agreements,
borrowings under lines of credit and other collateralized financing which the
Company has established with approved institutional lenders. To date, reverse
repurchase agreements have been the primary financing device utilized by the
Company to finance its ARM securities portfolio. Generally, upon repayment of
each reverse repurchase agreement the ARM securities will immediately be pledged
to secure a new reverse repurchase agreement. As of the date of this prospectus
the Company has established lines of credit and collateralized financing
agreements with 26 investment banking firms and commercial banks.
The Company makes use of hedging transactions to mitigate the impact of
certain adverse changes in interest rates or prepayment rates on its net
interest income. ARM securities are generally subject to periodic and lifetime
interest rate caps. Periodic caps generally limit the maximum mortgage interest
rate change on any interest adjustment date to either a maximum of 1% per
semiannual adjustment or 2% per annual adjustment. The Company generally does
not hedge against periodic cap limitations. In addition, ARM securities have a
maximum lifetime interest rate limitation, meaning that each ARM security
contains a contractual maximum rate. The borrowings incurred by the Company to
finance its ARM securities portfolio are not subject to equivalent interest rate
caps.
The Company has purchased interest rate cap agreements to prevent the
Company's borrowing costs from exceeding the lifetime maximum rate on its ARM
securities. These agreements would have the effect of offsetting a portion of
the Company's borrowing costs if prevailing interest rates exceed the rate
specified in the cap agreement. An interest rate cap agreement is a contractual
agreement, whereby the Company pays a fee, which may at times be financed by the
counterparty to the agreement with the Company, typically to either a commercial
bank or investment banking firm, in exchange for the right to receive payments
equal to the difference between a cap rate level specified in the contract and a
periodically determined future interest rate times a contractually specified
principal, or notional, amount. These agreements also would be expected to
appreciate in value as interest rates rise, thus helping to partially offset
possible market value declines of the Company's ARM securities portfolio.
The ARM securities held by the Company were, generally, purchased at prices
greater than par. The Company is amortizing their respective premiums over
their expected lives using the level yield method of accounting. To the extent
that the prepayment rate on the Company's ARM securities differs from
expectations, the Company's net interest income will be affected. Mortgage
prepayments generally increase when current mortgage interest rates fall below
the interest rates on such ARM loans. To the extent there is an increase in
prepayment rates, resulting in a shortening of the expected lives of the ARM
securities, the Company's net income and the dividend yield on its common stock
could be adversely affected. In an attempt to mitigate the adverse effect of an
increase in prepayments on ARM securities acquired above par, the Company has
also entered into transactions where it purchases ARM securities at prices below
par, purchases seasoned ARM securities that have been outstanding for more than
5 years with a below-average prepayment history, and purchases ARM securities
that provide only for scheduled principal payments. The Company may also
purchase limited amounts of "principal only" mortgage derivative securities
backed by either fixed-rate mortgages or ARM loans as a hedge against the
adverse effect of increased prepayments.
The Company may enter into other hedging-type transactions designed to protect
its net interest income and assets from adverse changes in interest rates or
prepayment rates. Such transactions may include the purchase or sale of
interest rate future contracts, options on interest rate future contracts or
interest rate swaps. The Company may also purchase "interest only" mortgage
derivative securities or other derivative products for purposes of mitigating
risk from interest rate changes. The Company will not invest in financial
futures contracts unless the Company and the Manager are exempt
5
<PAGE>
from the registration requirements of the Commodities Exchange Act or otherwise
comply with the provisions of that Act.
The Company does not intend to hedge for speculative purposes. No hedging
strategy can completely insulate the Company from risk, and certain of the
federal income tax requirements that the Company must satisfy to qualify as a
REIT limit the Company's ability to hedge, particularly with respect to hedging
against periodic cap risk. The Company monitors and may have to limit its
hedging strategies to ensure that it does not realize excessive hedging income,
or hold hedging assets having excess value in relation to total assets.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement for any
offering of Securities, the net proceeds from the sale of Securities offered by
the Company will be available for the general corporate purposes of the Company.
These general corporate purposes may include, without limitation, repayment of
maturing obligations, redemption of outstanding indebtedness, financing future
acquisitions (including, but not limited to, acquisitions of ARM securities and
other mortgage related products), capital expenditures and working capital.
Pending any such uses, the Company may invest the net proceeds from the sale of
any Securities or may use them to reduce short-term indebtedness. If the
Company intends to use the net proceeds from a sale of Securities to finance a
significant acquisition, the related Prospectus Supplements will describe the
material terms of such acquisition.
DESCRIPTION OF SECURITIES
The following is a brief description of the material terms of the Company's
capital stock. This description does not purport to be complete and is subject
in all respects to applicable Maryland law and to the provisions of the
Company's Articles of Incorporation and Bylaws, copies of which are on file with
the Commission as described under "Available Information" and are incorporated
by reference herein.
GENERAL
The Company may offer under this Prospectus one or more of the following
categories of its Securities: (i) shares of its Common Stock, par value $0.01
per share; (ii) shares of its Preferred Stock, in one or more series, (iii)
Common Stock Warrants; (iv) Preferred Stock Warrants, (v) Shareholder Rights,
and (vi) any combination of the foregoing, either individually or as units
consisting of one or more of the types of Securities described in clauses (i)
through (vi). The terms of any specific offering of Securities, including the
terms of any units offered, will be set forth in a Prospectus Supplement
relating to such offering.
The Company's authorized equity capitalization consists of 50 million shares
which may be comprised of Common Stock and Preferred Stock. The Common Stock is
listed on the New York Stock Exchange and the Company intends to list any
additional shares of its Common Stock which are issued and sold hereunder. The
Company may list any series of its Preferred Stock which are offered and sold
hereunder, as described in the Prospectus Supplement relating to such series of
Preferred Stock.
COMMON STOCK
As of October 30, 1996, there were 16,219,241 outstanding shares of Common
Stock held by 1,043 holders of record. Holders of Common Stock are entitled to
receive dividends when, as and if declared by the Board of Directors, out of
funds legally available therefor. In the event any Preferred Stock is issued,
dividends on any outstanding shares of Preferred Stock may be required to be
paid in full before payment of any dividends on the Common Stock. Upon
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to share ratably in assets available for distribution after payment
of all debts and other liabilities and subject to the prior rights of any
holders of any Preferred Stock then outstanding.
Holders of Common Stock are entitled to one vote per share with respect to all
matters submitted to a vote of shareholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the Common Stock entitled to vote
in any election of directors may elect all of the directors standing for
election, subject to the voting rights (if any) of any series of Preferred Stock
that may be outstanding from time to time. The Company's Articles of
Incorporation and Bylaws contain no restrictions on the repurchase by the
Company of shares of the Common Stock. All the outstanding shares of Common
Stock are, and additional shares of Common Stock will be, validly issued, fully
paid and nonassessable.
Holders of Common Stock are eligible to participate in the Company's dividend
reinvestment and stock purchase plan (the "DRP") which provides shareholders of
the Company with a convenient and cost-effective method of increasing their
investment in shares of the Company's Common Stock. A participant in the DRP
may purchase additional shares of Common Stock by reinvesting some or all cash
dividends paid on the Common Stock and by making optional cash purchases which
are subject to a minimum purchase limit of $50 and a maximum purchase limit of
$15,000 for each dividend payment date. The price to be paid for each share of
Common Stock purchased directly from the Company under the DRP will be a price
equal to the market price of the Common Stock less a 3% discount. The price of
the shares
6
<PAGE>
of Common Stock purchased on the open market will be the average price of all
shares of Common Stock purchased for all Participant's in the DRP without any
discount. The same purchase price will apply to the reinvestment of cash
dividends and to any optional cash purchases.
PREFERRED STOCK
The Board of Directors is authorized to designate with respect to each series
of Preferred Stock the number of shares in each such series, the dividend rates
and dates of payment, voluntary and involuntary liquidation preferences,
redemption prices, if any, whether or not dividends shall be cumulative and, if
cumulative, the date or dates from which the same shall be cumulative, the
sinking fund provisions if any, and the terms and conditions on which shares can
be converted into or exchanged for shares of another class or series, and the
voting rights, if any. As of the date hereof, there were no shares of Preferred
Stock issued and outstanding.
Any Preferred Stock issued will rank prior to the Common Stock as to dividends
and as to distributions in the event or liquidation, dissolution or winding up
of the Company. The ability of the Board of Directors to issue Preferred Stock,
while providing flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things, adversely affect the voting
powers of holders of Common Stock. The Preferred Stock will, when issued, be
fully paid and nonassessable.
SECURITIES WARRANTS
General. The Company may issue Securities Warrants for the purchase of Common
Stock or Preferred Stock. Such warrants are referred to herein as Common Stock
Warrants and Preferred Stock Warrants, as appropriate. Securities Warrants may
be issued independently or together with any other Securities covered by the
Registration Statement offered by this Prospectus and any accompanying
Prospectus Supplement and may be attached to or separate from such other
Securities. Each issuance of Securities Warrants will be issued under a
separate agreement ("Securities Warrant Agreement") to be entered into between
the Company and a bank or trust company, as agent ("Securities Warrant Agent"),
all as set forth in the Prospectus Supplement relating to the particular issue
of offered Securities Warrants. Each issue of Securities Warrants will be
evidenced by warrant certificates (the "Securities Warrant Certificates"). The
Securities Warrant Agent will act solely as an agent of the Company in
connection with the Securities Warrant Certificates and will not assume any
obligation or relationship of agency or trust for or with any holders of
Securities Warrant Certificates or beneficial owners of Securities Warrants.
If Securities Warrants are offered, the applicable Prospectus Supplement will
describe the terms of such Securities Warrants, including the following where
applicable: (i) the offering price; (ii) the aggregate number of shares
purchasable upon exercise of such Securities Warrants, and in the case of
Securities Warrants for Preferred Stock, the designation, aggregate number and
terms of the series of Preferred Stock purchasable upon exercise of such
Securities Warrants; (iii) the designation and terms of the Securities with
which such Securities Warrants are being offered and the number of such
Securities Warrants being offered with each such Security; (iv) the date on and
after which such Securities Warrants and the related Securities will be
transferable separately; (v) the number of shares of Preferred Stock or shares
of Common Stock purchasable upon exercise of each such Securities Warrant and
the price at which such number of shares of Preferred Stock of such series or
shares of Common Stock may be purchased upon such exercise; (vi) the date on
which the right to exercise such Securities Warrants shall commence and the
Expiration Date on which such right shall expire, (vii) certain federal income
tax consequences; and (viii) any other material terms of such Securities
Warrants.
Securities Warrant Certificates may be exchanged for new Securities Warrant
Certificates of different denominations, may (if in registered form) be
presented for registration or transfer, and may be exercised at the corporate
trust office of the appropriate Securities Warrant Agent or other office
indicated in the applicable Prospectus Supplement. Prior to the exercise of any
Securities Warrants to purchase Preferred Stock or Common Stock, holders of such
Preferred Stock Warrants or Common Stock Warrants will not have any rights of
holders of the respective Preferred Stock or Common Stock purchasable upon such
exercise, including the right to receive payments of dividends, if any, on the
Preferred Stock or Common Stock purchasable upon such exercise or to exercise
any applicable right to vote.
No Rights as Shareholders. Holders of Securities Warrants will not be
entitled by virtue of being such holders, to vote, to consent, to receive
dividends, to receive notice as shareholders with respect to any meeting of
shareholders for the election of directors of the Company or any other matter,
or to exercise any rights whatsoever as shareholders of the Company.
SHAREHOLDER RIGHTS
General. The Company may issue, as a dividend at no cost, Shareholder Rights
to holders of record of the Company's Securities or any class thereof on the
applicable record date. If Shareholder Rights are so issued to existing holders
of Securities each Shareholder Right will entitle the registered holder thereof
to purchase the Securities pursuant to the terms set forth in the applicable
Prospectus Supplement.
7
<PAGE>
If Shareholder Rights are issued, the applicable Prospectus Supplement will
describe the terms of such Shareholder Rights including the following where
applicable: (i) record date; (ii) the subscription price; (iii) Subscription
Agent, (iv) the aggregate number of shares of Preferred Stock or shares of
Common Stock purchasable upon exercise of such Shareholder Rights and in the
case of Shareholder Rights for Preferred Stock, the designation, aggregate
number and terms of the series of Preferred Stock purchasable upon exercise of
such Shareholder Rights; (v) the date on and after which such Shareholder Rights
and the related Securities will be transferable separately; (vi) the date on
which the right to exercise such Shareholder Rights shall commence and the
expiration date on which such right shall expire; (vii) certain federal income
tax consequences; and (viii) any other material terms of such Shareholder
Rights.
In addition to the terms of the Shareholder Rights and the Securities issuable
upon exercise thereof, the Prospectus Supplement will describe, for a holder of
such Shareholder Rights who validly exercises all Shareholder Rights issued to
such holder, how to subscribe for unsubscribed Securities (issuable pursuant to
unexercised Shareholder Rights issued to other holders) to the extent such
Shareholder Rights have not been exercised.
No Rights as Shareholders. Holders of Shareholder Rights will not be entitled
by virtue of being such holders, to vote, to consent, to receive dividends, to
receive notice as shareholders with respect to any meeting of shareholders for
the election of directors of the Company or any other matter, or to exercise any
rights whatsoever as shareholders of the Company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and the registrar for the Company's Common Stock is State
Street Bank & Trust Company, 2 Heritage Drive, North Quincy, Massachusetts,
02171. The transfer agent and registrar for the Preferred Stock will be set
forth in the applicable Prospectus Supplement.
REPURCHASE OF SHARES AND RESTRICTIONS ON TRANSFER
Two of the requirements for qualification for the tax benefits accorded a REIT
under the Internal Revenue Code of 1986, as amended (the "Code"), are that (i)
during the last half of each taxable year not more than 50% in value of the
outstanding shares may be owned directly or indirectly by five or fewer
individuals and (ii) there must be at least 100 shareholders for at least 335
days in each taxable year. Those requirements apply for all taxable years after
the year in which a REIT elects REIT status.
The Articles of Incorporation generally prohibits, subject to the settlement
rules of the NYSE, any person or group of persons from acquiring or holding,
directly or indirectly, ownership of a number of shares of capital stock in
excess of 9.8% of the outstanding shares. Shares of capital stock owned by a
person or group of persons in excess of such amounts are referred to as "Excess
Shares." For this purpose the term "ownership" is defined in accordance with
the Code, the constructive ownership provisions of Section 544 of the Code and
Rule 13d-3 promulgated under the Exchange Act, and the term "group" is defined
to have the same meaning as that term has for purposes of Section 13(d)(3) of
the Exchange Act. Accordingly, shares of stock owned or deemed to be owned by a
person who individually owns less than 9.8% of the shares outstanding may
nevertheless be Excess Shares.
For purposes of determining whether a person holds Excess Shares, a person or
group will be treated as owning not only shares of capital stock actually or
beneficially owned, but also any shares of capital stock attributed to such
person or group under constructive ownership provisions contained in Section 544
of the Code.
The Articles of Incorporation provide that in the event any person acquires
Excess Shares, each Excess Share may be redeemed at any time by the Company at
the closing price of a share of stock of such class on the NYSE on the last
business day prior to the redemption date. From and after the date fixed for
redemption of Excess Shares, such shares shall cease to be entitled to any
distribution and other benefits, except only the right to payment of the
redemption price for such shares.
Under the Articles of Incorporation any acquisition of shares that would
result in failure to qualify as a REIT under the Code is void to the fullest
extent permitted by law, and, subject to the settlement requirements of the
NYSE, the Board of Directors is authorized to refuse to transfer shares to a
person if, as a result of the transfer, that person would own Excess Shares.
Prior to any transfer or transaction which, if consummated, would cause a
shareholder to own Excess Shares, and in any event upon demand by the Board of
Directors, a shareholder is required to file with the Company an affidavit
setting forth, as to that shareholder, the information required to be reported
in returns filed by shareholders under Treasury Regulation Section 1.857-9 and
in reports filed under Section 13(d) of the Exchange Act. Additionally, each
proposed transferee of shares of capital stock, upon demand of the Board of
Directors, also may be required to file a statement or affidavit with the
Company setting forth the number of shares already owned by the transferee and
any related person.
8
<PAGE>
PLAN OF DISTRIBUTION
The Company may sell Securities to or through one or more underwriters or
dealers for public offering and sale, to one or more investors directly or
through agents, to existing holders of its Common Stock directly through the
issuance of Shareholders Rights as a dividend, or through any combination of
these methods of sale. Any such underwriter or agent involved in the offer and
sale of the Securities will be named in the applicable Prospectus Supplement.
The distribution of the Securities may be effected from time to time in one or
more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, or at negotiated prices (any of which may represent a discount
from the prevailing market prices). The Company may also sell shares of its
Common Stock from time to time through one or more agents in ordinary brokers'
transaction on the NYSE. Such sales may be effected during a series of one or
more pricing periods at prices related to the prevailing market prices reported
on the NYSE, as shall be set forth in the applicable Prospectus Supplement.
In connection with the sale of Securities, underwriters or agents may receive
compensation from the Company or from purchasers of Securities, for whom they
may act as agents, in the form of discounts, concessions or commissions.
Underwriters may sell Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concession or commissions from
the underwriters and/or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers and agents that participate in the distribution
of Securities may be deemed to be underwriters under the Securities Act, and any
discounts or commissions they receive from the Company and any profit on the
resale of Securities they realize may be deemed to be underwriting discounts and
commissions under the Securities Act. Any such underwriter or agent will be
identified, and any such compensation received from the Company will be
described, in the applicable Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, each series
of Securities will be a new issue with no established trading market, other than
the Common Stock which is listed on the NYSE. Any shares of Common Stock sold
pursuant to a Prospectus Supplement will also be listed on the NYSE, subject to
official notice of issuance. The Company may elect to list any series of
Preferred Stock on an exchange, but is not obligated to do so. It is possible
that one or more underwriters may make a market in a series of Securities, but
will not be obligated to do so and may discontinue any market making at any time
without notice. Therefore, no assurance can be given as to the liquidity of, or
the trading market for, the Securities.
Under agreements into which the Company may enter, underwriters, dealers and
agents who participate in the distribution of Securities may be entitled to
indemnification by the Company against certain liabilities, including
liabilities under the Securities Act. Underwriters, dealers and agents may
engage in transactions with or perform services for the Company in the ordinary
course of business.
If so indicated in the applicable Prospectus Supplement, the Company may
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Securities from the Company
at regular intervals over a fixed period of time pursuant to negotiated
subscription commitments. Institutions with which such subscription commitments
may be made to include commercial and savings banks, insurance companies,
pension funds, investment companies, educational and charitable institutions and
others, but in all cases such institutions must be approved by the Company. The
obligations of any purchaser under any such subscription commitments will be
subject to certain conditions, including that the purchase of the Securities
shall not be prohibited under the laws of the jurisdiction to which such
purchaser is subject, as well as to the specific terms and conditions negotiated
that will be set forth in the applicable Prospectus Supplement. The
underwriters and such other agents will not have any responsibility in respect
of the validity or performance of such subscription commitments.
In order to comply with the securities laws of certain states, if applicable,
the Securities offered hereby will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states
Securities may not be sold unless they have been registered or qualified for
sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
Subject to the applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Securities offered hereby may not be
able to simultaneously engage in market making activities with respect to the
Securities for a period of two business days prior to the commencement of such
distribution.
FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The Code provides special tax treatment for organizations that qualify and
elect to be taxed as REITs. This treatment eliminates most of the "double
taxation" (at the corporate level and then again at the shareholder level when
the income is distributed) that typically results from investment in
corporations. To qualify for tax treatment as a REIT under the Code, the
Company must meet certain tests. The Company elected to be taxed as a REIT
under the Code commencing with its taxable year ending December 31, 1993. That
election continues in effect until revoked or terminated.
9
<PAGE>
Based on existing law and certain representations made to Counsel by the
Company, Counsel is of the opinion that the Company operated in a manner
consistent with its qualifying as a REIT under the Code since the beginning of
its 1993 taxable year through September 30, 1996, the date of the Company's last
unaudited balance sheet and income statement made available to Counsel, and the
organization and contemplated method of operation of the Company are such as to
enable it to continue to so qualify throughout the balance of 1996 and in
subsequent years. However, whether the Company will in fact so qualify will
depend on actual operating results and compliance with the various tests for
qualification as a REIT relating to its income, assets, distributions, ownership
and certain administrative matters, the results of which may not be reviewed by
Counsel. Moreover, certain aspects of the Company's method of operations have
not been considered by the courts or the Service. There can be no assurance
that the courts or the Service will agree with this opinion. In addition,
qualification as a REIT depends on future transactions and events that cannot be
known at this time. Accordingly, Counsel is unable to opine whether in the
future the Company will actually operate in a manner that will enable it to
qualify as a REIT under the Code.
TAXATION OF THE COMPANY
In any year in which the Company qualifies as a REIT, it generally will not be
subject to federal income tax on that portion of its taxable income or net
capital gain which is distributed to its shareholders. The Company will,
however, be subject to tax at normal corporate rates upon any net income or net
capital gain not distributed. The Company intends to distribute substantially
all of its taxable income to its shareholders on a pro rata basis in each year.
TAXATION OF THE HOLDERS OF THE COMPANY'S SECURITIES
General. Payments to holders of the Company's bonds or debentures will be
taxable interest income to the extent properly designated as interest or
original issue discount. The Company will report such income to individual
holders of bonds or debentures by January of the following year. The Company
will notify shareholders after the close of the Company's taxable year as to the
portions of the distributions which constitute ordinary income, return of
capital and capital gain. Dividends and distributions declared in the last
quarter of any year payable to shareholders of record on a specified date in
such month will be deemed to have been received by the shareholders and paid by
the Company on December 31 of the record year, provided that such dividends are
paid before February 1 of the following year. Distributions of the Company will
not be eligible for the dividends received deduction for corporations.
Shareholders may not deduct any net operating losses or capital losses of the
Company.
Taxation of Tax-Exempt Entities. The Company does not expect to incur excess
inclusion income and therefore does not prohibit Tax-Exempt Entities or
"disqualified organizations" from investing in its Securities. In general, a
Tax-Exempt Entity that is a holder of the Company's Securities will not be
subject to tax on distributions.
Taxation of Shareholder Rights. If the Company makes a distribution of
Shareholder Rights, in general a Shareholder's basis in the Rights received in
such distribution will be zero. If the fair market value of the Rights on the
date of issuance is 15% or more of the value of the Common Stock or if the
Shareholder so elects regardless of the value of the Rights, the Shareholder
will make an allocation between the relative fair market values of the Rights
and the Common Stock on the date of issuance of the Rights. On exercise of the
Rights, the Shareholder will generally not recognize gain or loss. The
Shareholder's basis in the Shares received from the exercise of the Rights will
be the amount paid for the Shares plus the basis, if any, of the Rights
exercised.
Foreign Investors. In general, foreign investors will be subject to special
withholding tax requirements on income and capital gains distributions
attributable to their ownership of the Company's Securities subject to reduction
pursuant to an applicable income tax treaty.
Dividend Reinvestment Plan. For income tax purposes, shareholders
participating in the DRP will be deemed to have received the full amount of any
cash distributions that the Company would have paid to them had they not elected
to participate in the DRP. Shares of Common Stock received under the program
will have a holding period beginning with the day after purchase through the DRP
and a tax basis equal to the gross amount of the distribution.
ERISA INVESTORS
Because the Common Stock will qualify as a "publicly offered security",
employee benefit plans and Individual Retirement Accounts may purchase shares of
Common Stock and treat such shares, and not the Company's assets, as plan
assets. Fiduciaries of ERISA plans should consider (i) whether an investment in
the Common Stock satisfies ERISA diversification requirements, (ii) whether the
investment is in accordance with the plans' governing instruments, and (iii)
whether the investment is prudent.
10
<PAGE>
LEGAL MATTERS
Jeffers, Wilson & Shaff LLP, as counsel to the Company, has rendered an
opinion to the Company to the effect that the shares of Capital Stock offered
hereby have been legally issued, and are fully-paid and nonassessable. Certain
tax matters discussed under "Federal Income Tax Consequences" and "ERISA
Investors" have also been included herein in reliance on the opinion of Jeffers,
Wilson & Shaff. Michael B. Jeffers, Esq., Secretary of the Company, is a member
of that firm and owns 1% of the shares of the Manager.
EXPERTS
The financial statements included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1995, which is incorporated by reference in this
Prospectus or elsewhere in the Registration Statement of which this Prospectus
is a part, to the extent and for the periods indicated in the reports, have been
audited by McGladrey & Pullen, LLP, independent certified public accountants,
and are included herein in reliance on their report upon their authority as
experts in auditing and accounting.
11
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<CAPTION>
<S> <C>
Registration fee.......................... $68,965.52
Listing fees.............................. $35,000.00*
Legal fees and expenses*.................. $20,000.00*
Accounting fees and expenses*............. $ 2,500.00*
Blue sky fees and expenses*............... $ 2,500.00*
Printing expenses*........................ $25,000.00*
Miscellaneous expenses*................... $ 5,000.00*
-----------
TOTAL EXPENSES............................ $158,965.52*
</TABLE>
- ---------------------------
* Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Maryland General Corporation Law provides that a Maryland corporation may
indemnify any person who is or was serving at the request of the corporation as
a director, officer, partner, trustee, employee, or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise or
employee benefit plan ("director"), that is made a party to any proceeding by
reason of service in that capacity unless it is established that the act or
omission of the director was material to the matter giving rise to the
proceeding and was committed in bad faith or was the result of active and
deliberate dishonesty; or the director actually received an improper personal
benefit in money, property or services; or, in the case of any criminal
proceeding, the director had reasonable cause to believe that the act or
omission was unlawful. Indemnification may be against judgments, penalties,
fines, settlements, and reasonable expenses actually incurred by the director in
connection with the proceeding, but if the proceeding was won by or in the right
of the corporation, indemnification may not be made in respect of any proceeding
in which the director shall be adjudged to be liable to the corporation. Such
indemnification may not be made unless authorized for a specific proceeding
after a determination has been made, in a manner prescribed by law, that
indemnification is permissible in the circumstances because the director has met
the applicable standard of conduct. The director must be indemnified for
expenses, however, if he has been successful in the defense of the proceeding or
as otherwise ordered by a court. The law also prescribes the circumstances
under which a corporation may advance expenses to, or obtain insurance or
similar coverage for directors.
The Company's Articles of Incorporation provide for indemnification of the
officers and directors of the Company and eliminate the liability of a director
or officer to the Company or its stockholders for money damages to the fullest
extent permitted by Maryland law.
<TABLE>
<CAPTION>
ITEM 16. EXHIBITS.
<C> <S>
5.1 Opinion of Jeffers, Wilson & Shaff regarding legality of securities
8.1 Opinion of Jeffers, Wilson & Shaff regarding certain tax matters
(included in Exhibit 5.1)*
23.1 Consent of Counsel (included in Exhibit (5.1)
23.2 Consent of McGladrey & Pullen LLP
24.1 Power of Attorney (included in signature page)
</TABLE>
ITEM 17. UNDERTAKINGS
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any Prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date to the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement;
II-1
<PAGE>
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
Provided, however, that paragraphs A(1)(i) and A(1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in the periodic reports filed by the Registrant pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement
(2) That, for the purpose of determining liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at the time shall be deemed to be the initial bona fide offering thereof.
C. The undersigned registrant hereby undertakes to supplement the
prospectus, after the expiration of a subscription period, to set forth the
results of the subscription offer, the transactions by the underwriters, if any,
during the subscription period, the amount of unsubscribed securities to be
purchased by the underwriters, if any, and the terms of any subsequent re-
offering thereof, if applicable. If any public offering by the underwriters is
to be made on terms differing from those set forth on the cover page of the
prospectus, a post-effective amendment will be filed to set forth the terms of
such offering.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Santa Fe, New Mexico, on November 26, 1996.
THORNBURG MORTGAGE ASSET CORPORATION
BY: /s/ H. GARRETT THORNBURG, JR.
---------------------------------------
H. Garrett Thornburg, Jr.
Chairman of the Board
POWER OF ATTORNEY
We, the undersigned directors and officers of Thornburg Mortgage Asset
Corporation, Inc., do hereby constitute and appoint H. Garrett Thornburg, Jr.
and Larry A. Goldstone, or either of them, acting individually, our true and
lawful attorneys and agents, to do any and all acts and things in our name and
behalf in our capacities as directors and officers and to execute any and all
instruments for us and in our names in the capacities indicated below, which
said attorneys and agents, or any one of them, may deem necessary or advisable
to enable said corporation to comply with the Securities Act of 1933, as
amended, and any rules, regulations, and requirements of the Securities and
Exchange Commission, in connection with this Registration Statement, including
specifically, but without limitation, power and authority to sign for us or any
of us in our names and in the capacities indicated below, any and all amendments
(including post-effective amendments) hereof; and we do hereby ratify and
confirm all that the said attorneys and agents, or any of them, shall do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amended Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ H. GARRETT THORNBURG, JR. Chairman of the Board November 26, 1996
- -------------------------------
H. Garrett Thornburg, Jr.
/s/ LARRY A. GOLDSTONE Director and President November 26, 1996
- -------------------------------
Larry A. Goldstone
/s/ RICHARD P. STORY Chief Financial Officer and Treasurer November 26, 1996
- -------------------------------
Richard P. Story (Principal Accounting Officer)
/s/ DAVID A. ATER Director November 26, 1996
- -------------------------------
David A. Ater
/s/ JOSEPH H. BADAL Director November 26, 1996
- -------------------------------
Joseph H. Badal
/s/ JAMES H. LORIE Director November 26, 1996
- -------------------------------
James H. Lorie
/s/ STUART C. SHERMAN Director November 26, 1996
- -------------------------------
Stuart C. Sherman
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Name of Exhibit Page Number
- ------- --------------- -----------
<C> <S> <C>
5.1 Opinion of Jeffers, Wilson & Shaff regarding legality of securities
8.1 Opinion of Jeffers, Wilson & Shaff regarding certain tax matters
(included in Exhibit 5.1)
23.1 Consent of Counsel (included in Exhibit (5.1)
23.2 Consent of McGladrey & Pullen LLP
24.1 Power of Attorney (included in signature page)
</TABLE>
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF JEFFERS, WILSON & SHAFF, LLP]
ATTORNEYS AT LAW
18881 VON KARMAN AVENUE
SUITE 1400
IRVINE, CALIFORNIA 92612
TELEPHONE: (714) 660-7700
FACSIMILE: (714) 660-7799
November 26, 1996
Thornburg Mortgage Asset Corporation
119 East Marcy Street, Suite 201
Santa Fe, New Mexico 87501
RE: SALE OF SHARES PURSUANT TO SHELF REGISTRATION STATEMENT
-----------------------------------------------------------
Gentlemen:
We have examined a copy of the Registration Statement on Form S-3 (the
"Registration Statement") of Thornburg Mortgage Asset Corporation, a Maryland
corporation (the "Company"), for the registration under the Securities Act of
1933 of the sale of an indeterminate number of shares of the Company's Common
Stock, par value $.01 per share (the "Common Stock"), preferred stock of the
Company, the terms and conditions of which are as yet undetermined (the
"Preferred Stock"), and warrants and rights to purchase Common Stock and
Preferred Stock (the Common Stock, the Preferred Stock and the warrants and
rights are referred to collectively as the "Securities") pursuant to a shelf
registration. We have also examined the Company's Articles of Incorporation, as
amended, and such other corporate records, including the resolutions of the
Company's Board of Directors, and such other documents as we have deemed
necessary in order to express the opinions set forth below. In our examination
we have assumed the genuineness of all signatures and the authenticity of all
documents submitted to us as originals and the conformity of all originals of
all documents submitted to us as copies. As to questions of fact material to
such opinions, we have relied upon statements and representations of the
Company.
Our opinions are based on existing law which is subject to change either
prospectively or retroactively. Relevant laws could change in a manner that
could adversely affect the Company or the holders of its securities. We have
no obligation to inform the Company of any such change in the law. We have not
been requested to opine, and we have not opined, as to any issues other than
those expressly set forth herein.
The Company is a Maryland corporation that is intended to qualify as a real
estate investment trust ("REIT") under the Code. Capitalized terms used in this
opinion letter and not otherwise defined are as defined in the Registration
Statement. Our opinion is based on existing law, including the Code, existing
Treasury Regulations, Revenue Rulings, Revenue Procedures, U.S. Department of
Labor regulations and administrative interpretations, proposed regulations
<PAGE>
Thornburg Mortgage Asset Corporation
November 26, 1996
Page 2
and case law, all of which are subject to change either prospectively or
retroactively. No assurance can be given that such existing law may not change
in a manner that would modify the conclusions expressed in this opinion letter.
Moreover, relevant laws could change in a manner that could adversely affect the
Company or its stockholders. We have no obligation to inform you of any such
change in the law. We have not been requested to opine, and we have not opined,
as to any issues other than those expressly set forth herein. We are admitted to
practice law in the State of California and our opinion is limited to federal
law and the laws of the State of Maryland that affect such opinion. We express
no opinion with respect to any other law or the laws of any other jurisdiction.
1. Federal Income Tax Considerations. We have reviewed the section of the
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Registration Statement entitled "Federal Income Tax Consideration" and in our
opinion such section identifies and fairly summarizes the federal income tax
considerations that are likely to be material to a holder of the Securities and
to the extent that such summaries involve matters of law, we are of the opinion
that such statements of law are correct under the Code. All opinions attributed
to Counsel in the section of the Registration Statement entitled "Federal Income
Tax Consideration" accurately reflect our opinion on the likely outcome of such
issues if challenged by the Service.
The "Federal Income Tax Consideration" section of the Registration
Statement is not exhaustive of all possible tax considerations. Such section of
the Registration Statement does not give a detailed discussion of any state,
local or foreign tax considerations. Nor does the "Federal Income Tax
Considerations" section of the Registration Statement discuss all of the aspects
of federal income taxation that may be relevant to a prospective holder of the
Securities in light of such stockholder's particular circumstances or to
certain types of stockholders (including, but not limited to, insurance
companies, certain tax-exempt entities, financial institutions,
broker/dealers, foreign corporations, employees and Affiliates acquiring stock
options and persons who are not citizens or residents of the United States)
some of whom could be subject to special treatment under federal income tax
laws.
Moreover, the Company's qualification as a REIT under the Code will
depend upon the Company's ability to meet, through actual operating results,
distribution levels, diversity of stock ownership and the various income and
asset qualification tests imposed under the Code. Such operating results may not
be reviewed by us as Counsel, and accordingly, no assurance can be given that
the actual results of the Company's operations for any one taxable year will
satisfy the requirements under the Code for REIT qualification. Moreover,
certain aspects of the Company's operations have not been considered by the
courts or the Service. There can be no assurance that the courts or the Service
will agree with our opinion. In addition, qualification as a REIT depends on
future transactions and events that cannot be known at this time. Accordingly,
we are unable to opine whether the Company, in fact, will operate in a manner
that will enable it to qualify as a REIT under the Code.
<PAGE>
Thornburg Mortgage Assets Corporation
November 26, 1996
Page 3
2. ERISA Investors. The Company has requested our opinion as to whether the
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Common Stock will constitute "publicly-offered securities" under regulations
(the "Regulations") issued by the U.S. Department of Labor so that the assets of
the Company will not be deemed to constitute "plan assets" for purposes of ERISA
or for purposes of Code Section 4975 following an investment in the Common Stock
by an ERISA Plan.
The Regulations generally provide that, in the case of an ERISA Plan's
investment in an equity interest of an entity, the ERISA Plan's assets include
both the equity investment and an undivided interest in each of the underlying
assets of the enitity unless the entity can satisfy at least one of a number of
exceptions set forth in the Regulations. One exception to such plan assets
treatment is for an equity interest that is a "publicly-offered security." In
our opinion, the Common Stock constitutes publicly offered securities within the
meaning of the Regulations.
3. Legality of Shares. Assuming the Common Stock or the Preferred Stock
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(collectively, "Shares") are issued and paid for in accordance with the terms of
the offering described in the Registration Statement, including documents
incorporated by reference thereto, and certificates representing such Shares are
issued to the purchasers, we are of the opinion that the Shares will have been
duly authorized, validly issued, and will be fully paid and nonassessable shares
of Common Stock or Preferred Stock, as the case may be, of the Company.
4. Consent. We hereby consent to the filing of this opinion letter as an
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exhibit to the Registration Statement and to the references to this firm under
the captions "Federal Income Tax Considerations," "ERISA Investors" and "Legal
Matters" in connection with this opinion.
Very truly yours,
/s/ JEFFERS, WILSON & SHAFF, LLP
JEFFERS, WILSON & SHAFF, LLP
<PAGE>
EXHIBIT 23.2
[LETTERHEAD OF MCGLADREY & PULLEN, LLP]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use of our Report dated January 12, 1996 on the
financial statements referred to therein which is incorporated by reference in
the Registration Statement, on Form S-3, of Thornburg Mortgage Asset
Corporation, as filed with the Securities and Exchange Commission.
We also consent to the reference to our firm in the Registration Statement
under the captions "Experts".
/s/ MCGLADREY & PULLEN, LLP
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MCGLADREY & PULLEN, LLP
New York, New York
November 22, 1996
