SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [ X ] Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ X ] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
THORNBURG MORTGAGE ASSET CORPORATION
(Name of Registrant as Specified in Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
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 to
Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
Set forth the amount on which the filing fee is calculated and state how it
was determined.
[ ] 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 number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid: $0
2) Form, Schedule or Registration No.:
3) Filing Party:
4) Date Filed:
<PAGE>
THORNBURG MORTGAGE ASSET CORPORATION
March 24, 1997
To Our Shareholders:
You are cordially invited to attend the 1997 Annual Meeting of
Shareholders (the "Annual Meeting") of Thornburg Mortgage Asset Corporation
to be held at the Hotel Plaza Real, Nambe Room, 125 Washington Avenue, Santa
Fe, New Mexico 87501, on Thursday, April 24, 1997, at 9:00 a.m. Mountain
Standard Time ("MST").
The business of the meeting is to elect four nominees to the Board of
Directors and to approve amendments to the amended and restated 1992 Stock
Option Plan. Information about the nominees for election and the amendments to
the amended and restated 1992 Stock Option Plan are in the enclosed proxy
statement.
Only shareholders of record at the close of business on March 14, 1997 will
be entitled to notice of and to vote at the Annual Meeting.
While we hope many shareholders will exercise their right to vote their
shares in person, we recognize that many shareholders may not be able to attend
the Annual Meeting. Accordingly, we have enclosed a proxy which will enable you
to vote your shares on the issues to be considered at the Annual Meeting even if
you are unable to attend. All you need to do is mark the proxy to indicate your
vote, date and sign the proxy, and return it in the enclosed postage-paid
envelope as soon as conveniently possible. If you desire to vote in accordance
with management's recommendations, you need not mark your votes on the proxy but
need only sign, date and return the proxy in the enclosed postage-paid envelope
in order to record your vote.
Sincerely,
Larry A. Goldstone
President and Chief Operating Officer
<PAGE>
THORNBURG MORTGAGE ASSET CORPORATION
119 East Marcy Street
Santa Fe, New Mexico 87501
(505) 989-1900
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Our Shareholders:
The Annual Meeting of Shareholders of Thornburg Mortgage Asset Corporation
will be held at the Hotel Plaza Real, Nambe Room, 125 Washington Avenue, Santa
Fe, New Mexico 87501, on Thursday, April 24, 1997, at 9:00 a.m. MST, to consider
and act upon the following matters:
1. The election of one Class II Director to serve for a two-year term and until
his successor is duly elected and qualified and three Class III Directors to
serve for three-year terms and until their successors are duly elected and
qualified;
2. Approval of amendments to the amended and restated 1992 Stock Option Plan;
and
3. Such other business as may properly come before the Annual Meeting of
Shareholders, or any and all adjournments thereof.
Only shareholders of record at the close of business on March 14, 1997, the
record date, will be entitled to vote at the Annual Meeting.
Management desires to have maximum representation of shareholders at the
Annual Meeting. In order that your shares may be represented at the Annual
Meeting, management respectfully requests that you date, execute and promptly
mail the enclosed proxy in the accompanying postage-paid envelope. A proxy may
be revoked by a shareholder by notice in writing to the Secretary of the Company
at any time prior to its use, by presentation of a later-dated proxy, or by
attending the Annual Meeting and voting in person.
By order of the Board of Directors
Michael B. Jeffers
Secretary
Dated: March 24, 1997
YOUR VOTE IS IMPORTANT.
PLEASE PROMPTLY DATE, SIGN AND RETURN
YOUR PROXY IN THE ENCLOSED ENVELOPE.
<PAGE>
THORNBURG MORTGAGE ASSET CORPORATION
119 East Marcy Street
Santa Fe, New Mexico 87501
(505) 989-1900
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 24, 1997
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Thornburg Mortgage Asset Corporation, a
Maryland corporation, (the "Company") for use at the Annual Meeting of
Shareholders of the Company to be held at the Hotel Plaza Real, Nambe Room, 125
Washington Avenue, Santa Fe, New Mexico 87501, on Thursday, April 24, 1997, at
9:00 a.m. MST and any and all adjournments thereof (collectively the "Annual
Meeting"). The Annual Meeting is being held for the purposes set forth in the
accompanying Notice of Annual Meeting of Shareholders. This proxy statement, the
accompanying proxy card and the Notice of Annual Meeting of Shareholders are
being provided to shareholders beginning on or about March 24, 1997.
GENERAL INFORMATION
SOLICITATION OF PROXIES
The enclosed proxy is solicited by the Board of Directors of the Company. The
costs of this solicitation will be borne by the Company. Proxy solicitations
will be made by mail, and also may 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 material to the beneficial
owners and to obtain authorization for the execution of proxies. The Company
will, upon request, reimburse such parties for their reasonable expenses in
forwarding proxy materials to their beneficial owners. The Company does not
expect to engage an outside firm to solicit votes.
RECORD DATE, QUORUM AND VOTING REQUIREMENTS
Holders of shares of the Company's common stock ("Common Stock") at the close
of business on March 14, 1997, the record date, are entitled to notice of, and
to vote at, the Annual Meeting. On that date, 16,321,578 shares of Common Stock
were outstanding. Each share of Common Stock outstanding on the record date is
entitled to one vote on each matter presented at the Annual Meeting. The
presence, in person or by proxy, of shareholders representing 50% or more of the
issued and outstanding stock entitled to vote constitutes a quorum for the
transaction of business at the Annual Meeting.
Shares of Common Stock represented by all properly executed proxies received
in time for the Annual Meeting will be voted in accordance with the choices
specified in the proxy. Unless contrary instructions are indicated on the proxy,
the shares will be voted FOR the election of the nominees named in this proxy
statement as directors and FOR the proposal to amend the amended and restated
1992 Stock Option Plan (the "Plan").
Representatives of the Company's transfer agent will assist the Company in
the tabulation of the votes. Abstentions and broker non-votes are counted as
shares represented at the meeting for purposes of determining a quorum. An
abstention has the effect of a vote "withheld" with respect to the election of
directors and has no effect on the outcome with respect to the proposal to amend
the Plan. Broker non-votes are not entitled to vote because they indicate the
withholding of power to vote on a specific matter and therefore have no effect
on the outcome of a proposal.
<PAGE>
REVOCABILITY OF PROXY
The giving of the enclosed proxy does not preclude the right to vote in
person should the shareholder giving the proxy so desire. A proxy may be revoked
at any time prior to its exercise by delivering a written statement to the
Secretary of the Company that the proxy is revoked, by presenting to the Company
a later-dated proxy executed by the person executing the prior proxy, or by
attending the Annual Meeting and voting in person.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 14, 1997,
relating to the beneficial ownership of the Company's Common Stock by beneficial
owners who hold more than 5% of the outstanding shares of the Company's Common
Stock, each director of the Company and all executive officers and directors of
the Company as a group.
Percent of
Number Voting Shares
Name of Security Holder of Shares Outstanding (1)
---------------------------------------------- --------- ---------------
H. Garrett Thornburg, Jr. (2) ................ 405,815 2.39%
David A. Ater (3)............................. 31,697 *
Joseph H. Badal (3) .......................... 34,062 *
Larry A. Goldstone (2) ....................... 178,564 1.05%
Owen M. Lopez (4) ............................ 13,333 *
James H. Lorie (3) ........................... 34,697 *
Stuart C. Sherman (5)......................... 32,888 *
Wellington Management Company (6) ...........1,589,400 9.40%
All Executive Officers and Directors
as a Group (8 persons) (7) .................. 819,817 4.84%
* less than 1% of the outstanding shares.
(1) Based on 16,901,609 shares of Common Stock (including 580,031 shares which
can be acquired upon the exercise of options granted pursuant to the Stock
Option Plan) issued and outstanding, as of the date of this Proxy
Statement.
(2) Includes 175,980 Common Shares which can be acquired upon the exercise of
options.
(3) Includes 31,697 Common Shares which can be acquired upon the exercise of
options.
(4) Includes 13,333 Common Shares which can be acquired upon the exercise of
options.
(5) Includes 31,648 Common Shares which can be acquired upon the exercise of
options.
(6) Based on information filed with the Securities & Exchange Commission as
of December 31, 1996. The address of Wellington Management Company is:
75 State Street, Boston, MA, 02109.
(7) Includes 580,031 Common Shares which can be acquired upon the exercise of
options. None of the Executive Officers or Directors own any Preferred
Shares of the Company.
ELECTION OF DIRECTORS
The Company's bylaws provide that the number of directors which shall
constitute the entire Board of Directors shall be fixed from time to time by
resolutions adopted by the Board of Directors, but shall not be less than three
(3) persons nor greater than nine (9). The Company's Bylaws also provide for a
classified Board of Directors comprised of Classes I, II and III. The Company's
bylaws further provide that a majority of the Board of Directors shall be
unaffiliated (the "Unaffiliated Directors"), directly or indirectly, with any
person or entity responsible for directing and performing the day-to-day
business affairs of the Company. The Board of Directors has determined that
seven (7) directors is an appropriate number, five (5) of whom are unaffiliated,
with two directors in Class I and Class II and three directors in Class III. The
terms are staggered to provide for the election of one class each year. The
Class I, Class II and Class III directors of the Company are serving for terms
expiring in 1998, 1999, and 1997, respectively. One Class II director of the
Company, Mr. Owen Lopez, has been nominated for election at the Annual Meeting
to serve for a two-year term and until his successor is elected and duly
qualified because he was elected by the Board of Directors on December 18, 1996
to fill a vacancy, and therefore is standing for election by the shareholders.
Three Class III directors of the Company are to be elected at the Annual Meeting
to serve for three-year terms and until their successors are elected and duly
qualified. Mr. H. Garrett Thornburg, Jr., Mr. Joseph H. Badal and Mr. Stuart C.
Sherman have been nominated by the Board of Directors as Class III Directors for
election to the Board at the Annual Meeting. Except where authority to do so is
withheld, the accompanying Proxy will be voted FOR the election of Mr. Lopez to
serve as a Class II director of the Company for a term of two years and until
his successor is duly elected and qualified and FOR the election of Mr.
Thornburg, Mr. Badal and Mr. Sherman, each to serve as Class III directors of
the Company for a term of three years and until their successors are duly
elected and qualified. The proxies cannot be voted for a greater number of
persons than the number of nominees named herein. All of the nominees are
currently members of the Board of Directors and have agreed to continue to serve
if elected. In the event any of the nominees shall unexpectedly be unable to
serve, the proxyholders will vote for such other person as the Board of
Directors may designate. The election of each nominee as a director requires the
affirmative vote of the holders of a plurality of the shares of Common Stock
cast in the election of the directors. Votes that are withheld and shares held
in street name that are not voted in the election of the directors will not be
included in determining the number of votes cast. Biographical information
regarding each nominee is set forth below along with biographical information
for each continuing director:
INFORMATION REGARDING DIRECTOR NOMINEES AND CONTINUING DIRECTORS
CLASS II NOMINEE - TERM EXPIRING IN 1999
MR. LOPEZ, 56, was elected to the Board of Directors on December 18,
1996. Mr. Lopez has been the Executive Director of the McCune Charitable
Foundation in Santa Fe, New Mexico since 1994 and before that he was the
Managing Partner of the Hinkle Law Firm, Santa Fe, New Mexico, from 1982 to
1993. Mr. Lopez is actively involved with a number of charitable and
community organizations, and is currently a trustee of the International Folk
Art Foundation, a board member of the Santa Fe Chamber Music Festival, a
regent of New Mexico Tech, a commissioner of the National Museum of American
Art of Smithsonian, a board member of St. John's College in Santa Fe and a
trustee of the Rocky Mountain Mineral Law Foundation. Mr. Lopez is a
graduate of Stanford University, B.A. and Notre Dame University, J.D.
CLASS III NOMINEES - TERMS EXPIRING IN 2000
MR. THORNBURG, 51, is the Chairman of the Board, Chief Executive Officer and
has been a director of the Company since the Company commenced operations in
June of 1993. He is also Chairman, Chief Executive Officer and a director of
Thornburg Mortgage Advisory Corporation (the "Manager") and Thornburg Management
Company ("TMC"), an investment advisory firm organized in 1982 and Thornburg
Securities Corporation ("TSC"), a registered broker-dealer that acts as a
distributor of mutual funds managed by TMC and also has participated as an
underwriter in previous public offerings of the Company's common stock. Mr.
Thornburg owns a majority of the voting shares of TMC, TSC, and the Manager. TMC
is advisor to the eight Thornburg Mutual Funds. Mr. Thornburg is also the
President and a trustee of Thornburg Investment Trust, a regulated investment
company organized as a Massachusetts business trust, that is the issuer of six
of the Thornburg Mutual Funds. Mr. Thornburg is also Chairman of the Board and a
director of Limited Term Municipal Fund, Inc., a regulated investment company
organized as a Maryland corporation. The seven Thornburg bond funds and one
equity fund currently have assets in excess of $1.6 billion. TMC also acts as a
subadvisor to the New England Investment Company's Daily Tax Free Income Fund
with assets of $610 million and as placement agent to six of their Tax-Free
Money Funds with assets of $1.1 billion. Mr. Thornburg is a graduate of Williams
College, B.A. and Harvard University, MBA.
MR. BADAL, 52, has been a director of the Company since it commenced
operations in June of 1993. He is currently Senior Vice President of
Residential Loan Production with Charter Mortgage Company, headquartered in
Albuquerque, New Mexico. From 1980 through 1994, Mr. Badal was the President
of Merit Southwest Development Company, Inc., a consulting and commercial and
industrial real estate development firm in Albuquerque, New Mexico. Mr.
Badal is a former member of the New Mexico House of Representatives and
former Chairman of the New Mexico Mortgage Finance Authority. Mr. Badal is a
graduate of Temple University, B.S. and the University of New Mexico, MBA.
MR. SHERMAN, 58, has been a director of the Company since it commenced
operations in June of 1993. He has been the President of S. C. Sherman &
Company, Inc. and American Southwest Development Company, Inc. since 1978,
both commercial real estate development firms. From April 1991 until
September 1994, Mr. Sherman was also Executive Vice President of The Royce
Company, a commercial real estate brokerage firm and an affiliate of Great
Western Financial Corporation.
CLASS I AND II DIRECTORS - TERMS EXPIRING IN 1998 AND 1999
MR. ATER, 51, has been a director of the Company since March of 1995. Mr.
Ater is the President of Ater & Associates, an owner/broker of various
commercial and residential real estate development projects, as well as a
planning and management consulting firm. Mr. Ater is a principal in
Zeckendorf Oregon Ventures, also a real estate development entity. Mr. Ater
is also a Trustee of Thornburg Investment Trust, an open-end management
investment company, which has six portfolios: five bond funds and one equity
fund. Mr. Ater is actively involved with a number of charitable and
community organizations, and is currently a member of Santa Fe Economic
Development, GBAC, the New Mexico Governor's Business Advisory Council, and
the New Mexico Amigos, the state's official goodwill ambassadors. Mr. Ater
has been involved in a variety of real estate development projects since
1980, and from 1970 to 1980, was employed by First National Bank of Santa Fe
where he was President and Chief Executive Officer from 1978 to 1980. Mr.
Ater is a graduate of Stanford University.
MR. GOLDSTONE, 42, is the President, Chief Operating Officer and has been a
director of the Company since the Company commenced operations in June of 1993.
Mr. Goldstone is also a Managing Director of the Manager. The Manager is
responsible for the day-to-day operations of the Company, subject to the
supervision of the Board of Directors. From November 1991 until August 1992, Mr.
Goldstone was employed at Downey Savings and Loan Association, where he was a
Senior Vice President and Treasurer. While employed by Downey Savings and Loan,
Mr. Goldstone was primarily responsible for cash and liquidity management,
mortgage portfolio management, wholesale funding and interest rate risk
management. Prior to his employment at Downey Savings, Mr. Goldstone was
employed by Great American Bank, a federal savings bank, for a period of eight
years. Mr. Goldstone held a variety of increasingly responsible positions,
including manager in the Treasury Department and in the Mortgage Portfolio
Management Department. Mr. Goldstone was responsible for the management and
trading of a $3 billion mortgage-backed securities portfolio and was
instrumental in structuring over $1 billion of privately and publicly issued
adjustable and variable-rate mortgage-backed securities. Additionally, Mr.
Goldstone has extensive experience in all facets of mortgage finance, interest
rate risk management and hedging. Mr. Goldstone resigned from Great American in
October 1991, having held the title of Senior Vice President.
MR. LORIE, 75, has been a director of the Company since it commenced
operations in June of 1993. He currently is Eli B. and Harriet B. Williams
Professor Emeritus of Business Administration in the Graduate School of Business
at the University of Chicago. Mr. Lorie has been Director of Research, Associate
Dean and Acting Dean of the Graduate School of Business, University of Chicago.
He is presently on the Board of Directors of the Acorn Fund and ARDCO. He has
been a consultant to SRI on the future of the securities industry and has been a
member of the National Market Advisory Board, the Board of the Chicago Board
Options Exchange, the Board of the National Association of Securities Dealers,
Inc., the Board of Directors of Elsinore Corporation, Merrill Lynch & Co., Inc.,
the Square D Company and the Vulcan Materials Company.
INFORMATION REGARDING THE BOARD OF DIRECTORS
The Board of Directors held five meetings in 1996. Each of the directors
attended at least 75% of the meetings of the Board of Directors and of the
committees on which each served during the period for which each was a director
during 1996.
The Board of Directors has an audit committee which consists of Mr. Ater, Mr.
Badal, and Mr. Sherman. The audit committee meets with the Company's independent
certified public accountants at least twice a year, once before and once after
the annual audit, to review the scope of and to discuss the results of the
annual audit. The audit committee may also meet at such other times as they
shall deem appropriate and the Company's independent certified public
accountants have been instructed to inform the audit committee at any time of
any information concerning the Company that they consider appropriate. The audit
committee met twice during 1996.
The Board of Directors also has a nominating committee consisting of Mr.
Ater, Mr. Badal, Mr. Lopez, Mr. Lorie and Mr. Sherman. The nominating
committee was established for the sole purpose of having the Unaffiliated
Directors recommend to the entire Board of Directors future nominees for
election as Unaffiliated Directors of the Company. The nominating committee
met twice during 1996.
The Board of Directors does not have a compensation committee since the
Company has no paid officers or employees. However, the Board of Directors does
have a stock option committee consisting of Mr. Ater, Mr. Badal, Mr. Lopez, Mr.
Lorie and Mr. Sherman. The stock option committee administers the Plan of the
Company and has exclusive discretion to make stock option grants and other
awards under the Plan. The stock option committee members can only receive
grants of stock options under a predetermined formula which is defined in the
Plan. Under the Plan, Non-Qualified Options for 13,333 shares are granted under
a formula to each unaffiliated director as of the date of election to office,
and thereafter options are granted for 0.2% of the Common Stock sold by the
Company during the previous fiscal quarter as part of a continuous offering or
0.2% of the Common and Preferred Stock sold by the Company on the pricing date
of a firm commitment public offering or direct placement (excluding shares
issued under the Company's Dividend Reinvestment and Stock Purchase Plan and
shares issued pursuant to the exercises of options under the Plan). The stock
option committee met three times during 1996.
The Board of Directors has an executive committee comprised of Mr.
Thornburg, Mr. Ater and Mr. Sherman. The executive committee meets to
consider various matters delegated by the Board of Directors and to make
recommendations to the Board of Directors regarding such matters. The
executive committee met two times during 1996.
In addition, the Unaffiliated Directors annually review the Company's
contract with the Manager to determine whether the contracted fee schedule is
reasonable in relation to the nature and quality of services performed by the
Manager under the contract.
The Unaffiliated Directors receive an annual fee of $15,000 per year plus
$1,000 for each meeting of the Board of Directors. The members of the audit
committee receive $1,000 per year for their services as members of the audit
committee. The members of the nominating committee and the stock option
committee do not receive compensation for service on those respective
committees. The unaffiliated members of the executive committee receive $1,000
per meeting for their services as members of the executive committee.
Unaffiliated Directors are reimbursed for expenses related to their attendance
at Board of Directors and committee meetings.
In addition, in accordance with a predetermined formula, during 1996 the
Company granted to each member of the stock option committee, except Mr. Lopez,
options to purchase 8,151 shares of Common Stock, 836 at an exercise price of
$14.375 and 7,315 at an exercise price of $15.625. Mr. Lopez was granted options
to purchase 13,333 shares of Common Stock at an exercise price of $19 at the
time he was elected to the Board of Directors, in accordance with the
predetermined formula for newly elected unaffiliated directors. As of December
31, 1996, 32,604 of these options are exercisable, 3,344 of which will expire on
March 29, 2006 and 29,260 of which will expire on May 2, 2006. The 13,333 stock
options granted to Mr. Lopez will become exercisable on June 18, 1997 and will
expire on December 19, 2006.
MANAGEMENT OF THE COMPANY
The executive officers of the Company and their position are as follows:
Name Age Position(s) Held
------------------------- ----- ---------------------------------
H. Garrett Thornburg, Jr. 51 Chairman of the Board, Director
and Chief Executive Officer
Larry A. Goldstone 42 Director, President and Chief
Operating Officer
Richard P. Story 44 Chief Financial Officer and
Treasurer
The executive officers serve at the discretion of the Company's Board of
Directors. Biographical information regarding Mr. Thornburg and Mr.
Goldstone is provided above. Biographical information regarding Mr. Story is
set forth below.
Mr. Story has been the Chief Financial Officer of the Company and the Chief
Accounting Officer of the Manager since May 1993 and Treasurer of the Company
since June 1994. From April 1992 until April 1993, he was the Controller of
Sharp HealthCare, a health care company in San Diego, California. As Controller,
Mr. Story was responsible for financial statement preparation and reporting,
accounts payable, payroll, fixed assets and corporate tax. From 1976 until April
1992, Mr. Story was employed at Great American Bank, a federal savings bank in
San Diego, and from 1988 until 1992 held the position of Controller at that
institution. As Controller, he was responsible for financial reporting,
budgeting and planning, financial analysis, loan portfolio reporting and
analysis, insurance risk management, corporate tax, accounts payable, fixed
assets and payroll.
EXECUTIVE COMPENSATION
The Company has not paid, and does not intend to pay, any annual compensation
to the Company's executive officers for their services as executive officers.
However, the Company may from time to time, at the direction of the stock option
committee, grant options to purchase shares of the Company's Common Stock to the
executive officers and directors pursuant to the Company's Plan.
STOCK OPTIONS GRANTED AND OUTSTANDING
The following table presents the total number of stock options granted to
executive officers of the Company during the year ended December 31, 1996.
STOCK OPTIONS GRANTED DURING YEAR ENDED DECEMBER 31, 1996
Number of % of
Shares Total
Underlying Options Value
Options Granted to Exercise Expiration on Date of
Granted Employees Price Date Grant (1)
-------- --------- -------- --------- -----------
H. Garrett Thornburg, Jr. 1,780 1.56% $ 14.375 3/29/2006 $ 1,976
38,182 33.44% 15.000 4/23/2006 45,818
2,297 2.01% 15.625 5/02/2006 2,963
Larry A. Goldstone 1,780 1.56% 14.375 3/29/2006 1,976
38,182 33.44% 15.000 4/23/2006 45,818
2,297 2.01% 15.625 5/02/2006 2,963
Richard P. Story 890 0.78% 14.375 3/29/2006 988
19,097 16.73% 15.000 4/23/2006 22,916
1,152 1.01% 15.625 5/02/2006 1,486
(1)The value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1996: dividend yield of 10%; expected
volatility of 23.3%; risk-free interest rate of 6.52%; and expected lives of
7 years.
<PAGE>
The following table presents the total number of stock options held by the
executive officers of the Company as of December 31, 1996 and the year-end value
of these options. There were no stock option exercises by the executive officers
during 1996.
AGGREGATED OPTION EXERCISES IN 1996 AND OPTION VALUES AS OF DECEMBER 31, 1996
Number of
Securities Value of
Underlying Unexercised
Number Unexercised In-the-money
of Stock Options Stock Options
Shares at 12/31/96 at 12/31/96 (1)
Acquired ------------------ ----------------
on Value Exer- Unexer- Exer- Unexer-
Exercise Realized cisable cisable cisable cisable
H. Garrett Thornburg, Jr 0 $0 175,980 0 $1,046,114 $ 0
Larry A. Goldstone .... 0 0 175,980 0 1,046,114 0
Richard P. Story ...... 0 0 87,999 0 523,112 0
(1) The value of unexercised options is calculated using the closing price of
$21.375 on the New York Stock Exchange (the "NYSE") of the Company's Common
Stock on December 31, 1996.
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 June 25,
1993 through December 31, 1996, to the S&P Composite-500 Stock Index, the
National Association of Real Estate Investment Trusts, Inc. ("NAREIT") All REIT
Index and NAREIT Mortgage REIT Index. The total return reflects stock price
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 June 25, 1993, 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.
TOTAL RETURN COMPARISON SINCE COMMENCEMENT OF OPERATIONS
THROUGH DECEMBER 31, 1996
PERFORMANCE GRAPH APPEARS HERE
6/25/93 12/31/93 12/31/94 12/31/95 12/31/96
-------- -------- -------- -------- --------
Thornburg Mortgage Asset Corp. $ 100.00 $ 111.93 $ 57.77 $ 119.80 $ 168.30
S&P Composite-500 Index ...... 100.00 104.93 106.31 146.09 179.64
NAREIT Mortgage REIT Index ... 100.00 107.85 81.64 133.41 201.27
NAREIT All REIT Index ........ 100.00 102.39 103.22 122.12 165.78
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In addition to being Chairman of the Board, Chief Executive Officer and a
director of the Company, Mr. Thornburg is Chairman of the Board, President
and a director of the Manager and owns a controlling interest in the
Manager. Mr. Goldstone, in addition to being the President, Chief Operating
Officer and a director of the Company, is a managing director of the
Manager. Mr. Story, the Treasurer and Chief Financial Officer of the
Company, is also the Chief Accounting Officer of the Manager. As such, Mr.
Thornburg, Mr. Goldstone and Mr. Story are paid employees of the Manager.
Mr. Goldstone and Mr. Story own minority interests in the Manager.
The Company pays the Manager an annual base management fee based on average
shareholders' equity, adjusted for liabilities that are not incurred to finance
assets ("Average Shareholders' Equity" or "Average Net Invested Assets" as
defined in the Agreement) payable monthly in arrears as follows: 1.1% of the
first $300 million of Average Shareholders' Equity, plus 0.8% of the portion
above $300 million. For the year ended December 31, 1996, the Company paid the
Manager $1,872,000 in base management fees in accordance with the terms of the
Agreement.
The Manager is also entitled to earn performance based compensation in an
amount equal to 20% of the Company's annualized net income, before performance
based compensation, above an annualized Return on Equity equal to the ten year
U.S. Treasury Rate plus 1%. For purposes of the performance fee calculation,
equity is generally defined as proceeds from issuance of common stock, before
underwriter's discount and other costs of issuance, plus retained earnings. For
the year ended December 31, 1996, the Company paid the Manager $2,462,000 in
performance based compensation in accordance with the terms of the Agreement.
On September 18, 1996, the Board of Directors of the Company completed a
study of the management fees and expenses of comparable companies. The study
indicated that the total management fees and other operating expenses of the
Company are below the level of other comparable companies, whether the other
companies were self-managed or externally managed. The study also indicated that
the Company's base management fee was significantly less than any other
externally managed company and that the performance fee was higher. As a result
of the study, the unaffiliated directors decreased the formula for the
performance based compensation from 25% to 20% of the Company's annualized net
income, before performance based compensation, above an annualized Return on
Equity as described above. Additionally, the unaffiliated directors simplified
the formula described above for the base management fee.
These changes took effect October 1, 1996. The combined fees paid to the
Manager for the period from October 1, 1996 to December 31, 1996 were virtually
the same under the new management fee formulas as they would have been under the
prior formula.
Pursuant to the terms of the Management Agreement, in the event a person or
entity obtains more than 20% of the Company's Common Stock, if the Company is
combined with another entity, or if the Company terminates the Management
Agreement other than for cause, the Company is obligated to acquire
substantially all of the assets of the Manager through an exchange of shares
with a value based on a formula tied to the Manager's net profits.
The Bylaws of the Company provide that the Board of Directors shall evaluate
the performance of the Manager before entering into or renewing any management
arrangement and that the Unaffiliated Directors shall determine at least
annually that the Manager's compensation is reasonable in relation to the nature
and quality of services performed.
The Company does not intend to purchase any mortgage securities or enter into
any servicing or administrative agreements (other than the Management Agreement)
with any entities affiliated with the Manager.
Thornburg Securities Corporation, an affiliate of the Manager, was an
underwriter in both the April 1996 public offering of the Company's Common Stock
and the January 1997 public offering of the Company's Preferred Stock. Thornburg
Securities Corporation was not the lead underwriter in either offering and did
not participate in any negotiations of the underwriters' compensation or the
terms of either offering.
<PAGE>
AMENDMENT AND RESTATEMENT OF 1992 STOCK OPTION PLAN
At the Annual Meeting, shareholders will be asked to consider and approve an
amendment and restatement of the Company's 1992 Stock Option Plan (the "Plan").
The summary description of certain features of the amended and restated Plan
contained below, is qualified in its entirety by the full text of the amended
and restated Plan, which is attached hereto as Appendix A.
BACKGROUND OF THE PLAN
The Plan, was originally adopted by the Board of Directors and approved by
the Company's shareholders in September, 1992, and first amended and restated by
the Company in May, 1996. The Plan originally authorized the issuance of
1,000,000 shares of the Company's Common Stock for issuance under the Plan. The
Board of Directors may amend the Plan, subject in certain cases to shareholder
approval. The Plan is administered by the stock option committee.
The existing Plan provides for the granting of options to directors,
officers, other employees and consultants of the Company to purchase shares of
Common Stock aggregating up to 5% of the outstanding shares. Such options may be
either "incentive stock options" ("Incentive Options") as defined by Section 422
the Internal Revenue Code of 1986, as amended (the "Code"), or options that do
not so qualify ("Nonqualified Options"). Incentive Options may be granted only
to employees, must have an exercise price not less than the fair market value of
the shares on the grant date, and may be exercisable for a term of not more than
ten years. Subject to certain other limitations contained in the Plan, the terms
of each option grant are in other respects generally determined by the stock
option committee in its discretion.
Under the existing Plan, Non-Qualified Options for 13,333 shares are granted
under a formula to each unaffiliated director as of the date of election to
office, and thereafter options are granted for 0.2% of the Common Stock sold by
the Company during the previous fiscal quarter as part of a continuous offering
or 0.2% of the Common and Preferred Stock sold by the Company on the pricing
date of a firm commitment public offering or direct placement (excluding shares
issued under the Company's Dividend Reinvestment and Stock Purchase Plan and
shares issued pursuant to the exercises of options under the Plan). All such
options are granted at 100% of the fair market value on the date of grant.
Although not required under the Plan, it has been the policy of the stock option
Committee to also grant Incentive and Non-Qualified options to the inside
directors, executive officers and key employees of the Company in the aggregate
amount of 3% of the Company's outstanding Common Stock sold in public or private
offerings.
PROPOSED AMENDMENT AND RESTATEMENT OF THE PLAN
On March 14, 1997, the Board of Directors adopted an amendment and
restatement of the Plan, subject to shareholder approval, to increase the number
of shares subject to the Plan from 1,000,000 shares to 2,000,000 shares and to
expand the Plan to authorize the grants of, in addition to stock options,
Dividend Equivalent Rights ("DERs"), Stock Appreciation Rights ("SARs"), and
Phantom Stock Rights ("PSRs"). The stock option provisions of the Plan are being
expanded to permit the grant of options upon the issuance of Convertible
Preferred Stock, exercisable only upon conversion of the Convertible Preferred
Stock into Common Stock. The amendments also provide for acceleration and full
vesting of options and rights upon a change of control of the Company and for
the authorization of loans to individuals to provide funds for the exercise of
options. The amended and restated Plan changes the name of the Plan to the
"Thornburg Mortgage Asset Corporation Amended and Restated 1992 Stock Option and
Incentive Plan" in order to reflect these changes. Although the Plan authorizes
a number of additional types of stock-based awards, the number of shares subject
to the Plan is not being increased.
INCREASE IN NUMBER OF SHARES RESERVED UNDER THE PLAN
The Plan is being amended to increase the number of Shares subject to the
Plan from 1,000,000 shares to 2,000,000 shares. However, the number of stock
options which may be granted under the Plan is limited to an aggregate of 5% of
the Company's outstanding shares of Common Stock. As of March 14, 1997, options
for 766,261 shares have been granted under the Plan, leaving only 233,739 shares
available for future option grants. Accordingly, the number of shares subject to
the Plan is being increased to provide for option grants in future years under
the formula described above.
NEW TYPES OF AWARDS
The following is a summary description of the new amendments to the Plan
which authorizes the grant of the following new types of incentive and
stock-based awards.
DERs. The Committee may grant dividend equivalent rights, which entitle the
recipient to receive cash equal to the dividends that would be paid if the
grantee had held a specified number of Shares. DERs may be granted as a
component of stock options or other awards or as a free standing award. Dividend
equivalents credited under the Plan may be paid currently in cash or may be
deemed to be reinvested in additional shares of Common Stock, which may
thereafter accrue additional dividend equivalents.
The formula provision of the amended and restated Plan authorizes the grant
of DERs to independent directors and officers at the same time as the options,
exercisable separately, in the amount of 25% of options granted in 1998; 45% of
options granted in 1999; 55% of options granted in 2000; 65% of options granted
in 2001; and 75% of options granted in following years. The stock option
committee's policy is to grant DERs to inside directors, officers and key
employees in similar proportions to the stock options granted to such
individuals.
SARs and PSRs. The stock option committee may award SARs and/or PSRs either
as a freestanding award or in tandem with a stock option. Upon exercise of an
SAR, the holder will be entitled to receive an amount in cash equal to the
excess of the fair market value on the date of exercise of one share of Common
Stock over the exercise price per share specified in such right multiplied by
the number of shares with respect to which the SAR is exercised. Upon exercise
of a PSR, the holder will be entitled to receive an amount in cash equal to the
value of the Common Stock at the time of exercise multiplied by the number of
shares with respect to which the PSR is exercised. The PSR grants may also
include the right to receive DERs on the number of shares covered by the PSR
grant.
CHANGE OF CONTROL PROVISIONS
The amended and restated Plan provides that in the event of a "Change of
Control" (as defined in the Plan) of the Company, all stock options and SARs
shall automatically become fully exercisable and all restrictions on PSRs and
DERs shall automatically lapse and become fully vested. In addition, at any time
prior to or after a Change of Control, the stock option committee may accelerate
awards and waive conditions and restrictions on any awards to the extent it may
determine appropriate.
RESPONSE TO TAX LAW CHANGES
Each member of the stock option committee must qualify as an "outside
director" as defined under Section 162(m) of the Code. Each grant awarded under
the Plan must be "performance-based," as defined in the applicable Treasury
Regulations and the stock option committee must certify that the performance
goals prescribed under a particular grant have been met. Notwithstanding the
discussion below of the deductibility of compensation under the Plan by the
Company, Section 162(m) to the Code would render non-deductible to the Company
certain compensation to certain of the Company's officers to the extent such
person's total compensation exceeds $1,000,000 in any year unless such excess
compensation is "qualified performance-based compensation" (as defined) or is
otherwise exempt from these limits on deductibility. The applicable conditions
of an exemption for qualified performance-based compensation plans include,
among others, a requirement that the shareholders approve the material terms of
the plans. No assurances can be given that compensation payable under the Plan
to such persons will be deductible to the Company if such $1,000,000 limitation
is exceeded. The Plan has been adopted by the Committee subject to stockholder
approval. Although the Company believes that certain performance awards under
the Plan may be exempt from such limits as performance based compensation in any
event, other awards under the Plan would not be.
<PAGE>
TAX ASPECTS OF THE AMENDMENTS
DERs. A recipient of a DER award will not realize taxable income at the time
of grant and the Company will not be entitled to a deduction at that time. When
a dividend equivalent is paid, the participant will recognize ordinary income,
and the Company will be entitled to a deduction. The measure of the income and
deduction will be the amount of cash and the fair market value of the shares at
the time the DER is paid.
PSR. A participant who has been granted a PSR performance award will not
realize taxable income at the time of grant, and the Company will not be
entitled to a deduction at that time. When an award is paid, whether in cash or
shares, the participant will have ordinary income, and the Company will have a
corresponding deduction. The measure of such income and deduction will be the
amount of cash and the fair market value of the shares at the time the award is
paid.
NONQUALIFIED OPTIONS AND SARs. There are no Federal income tax consequences
to either the non-employee Director optionees or to the Company on the grant of
a Nonqualified Option. On the exercise of a Nonqualified Option, the optionee
has taxable ordinary income equal to the excess of fair market value of the
Shares received on the exercise date over the option price of the Shares. The
optionee's tax basis for the Shares acquired upon exercise of a Nonqualified
Option is increased by the amount of such taxable income. The Company will be
entitled to a Federal income tax deduction in an amount equal to such excess.
Upon the sale of the Shares acquired by exercise of a Nonqualified Option, the
optionee will realize long-term or short-term capital gain or loss depending
upon his or her holding period for such Shares. Similar tax consequences result
for the Company upon the exercise of an SAR. An SAR results in ordinary
compensation income to the recipient.
INCENTIVE STOCK OPTIONS. An optionee who receives an incentive stock option
will not be treated as receiving taxable income upon the grant of the option or
upon the exercise of the option, provided the exercise occurs, in general,
during employment or within three months after termination of employment.
However, any appreciation in share value after the date of grant will be an item
of tax preference at the time of exercise in determining liability for the
alternative minimum tax. If stock acquired pursuant to an incentive stock option
is not sold or otherwise disposed of within two years from the date of grant of
the option nor within one year after the date of exercise, any gain or loss
resulting from disposition of the stock will be treated as long-term capital
gain or loss. If stock acquired upon exercise of an incentive stock option is
disposed of prior to the expiration of such holding periods (a "disqualifying
disposition"), the optionee will realize ordinary income in the year of such
disposition in an amount equal to the excess of the fair market value of the
stock on the date of exercise over the exercise price or, if less, the excess of
the amount realized on the disqualifying disposition over the exercise price.
Any remaining gain will be taxed at capital gains rates.
The Company will not be entitled to any deduction as a result of the grant or
exercise of an incentive stock option, or on a later disposition of the stock
received, except that in the event of a disqualifying disposition the Company
will be entitled to a deduction equal to the amount of ordinary income realized
by the optionee.
BOARD RECOMMENDATION
The Board of Directors believes that it is in the best interests of the
Company to provide performance-based as well as stock appreciation-based
incentives to directors, officers and other employees of the Company to provide
them with an additional means of incentive compensation that reflects the
Company's successful performance and increase to its shareholder value. FOR
THESE REASONS THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE
APPROVAL OF THE AMENDED AND RESTATED PLAN. THE AFFIRMATIVE VOTE OF FIFTY PERCENT
(50%) OF THE VOTES CAST IS REQUIRED TO APPROVE THIS PROPOSAL. PROXIES SOLICITED
BY THE BOARD WILL BE VOTED FOR SUCH APPROVAL UNLESS A VOTE AGAINST THE PROPOSAL
IS SPECIFICALLY INDICATED IN THE PROXY.
<PAGE>
APPOINTMENT OF AUDITORS
The Board of Directors has appointed McGladrey & Pullen, LLP, independent
certified public accountants, to examine the financial statements of the Company
for the year ended December 31, 1997. McGladrey & Pullen, LLP has been the
Company's independent certified public accountants since the Company commenced
operations in June 1993. A representative of McGladrey & Pullen, LLP is expected
to be available by tele-conference at the Annual Meeting and will be provided
with an opportunity to make a statement and to respond to appropriate questions
from shareholders.
OTHER MATTERS
The management and the Board of Directors of the Company know of no other
matters to come before the Annual Meeting other than those stated in the Notice
of the Annual Meeting. To date, no shareholder proposals have been received by
the Company. However, if any other matters are properly presented to the
shareholders for action, it is the intention of the proxy holders named in the
enclosed proxy to vote in their discretion on all matters on which the shares
represented by such proxy are entitled to vote.
SHAREHOLDER PROPOSALS
Any proposal that a shareholder may desire to present to the 1998 Annual
Meeting of shareholders must be received in writing by the Secretary of the
Company prior to November 28, 1997. Such written notice must set forth (i) a
brief description of the business desired to be brought before the meeting; (ii)
the shareholder's name and address as they appear on the Company's books; (iii)
the number of shares of Common Stock beneficially owned by the shareholder; and
(iv) any material interest of the shareholder in such business.
ANNUAL REPORT
The 1996 Annual Report to shareholders including financial statements for the
year ended December 31, 1996, which is being mailed to shareholders together
with this Proxy Statement, contains financial and other information about the
activities of the Company, but is not incorporated into this Proxy Statement and
is not to be considered a part of these proxy soliciting materials.
A COPY OF THE FORM 10-K ANNUAL REPORT (WITHOUT EXHIBITS) FOR THE YEAR ENDED
DECEMBER 31, 1996, INCLUDING FINANCIAL STATEMENTS AND SCHEDULES THERETO, WHICH
THE COMPANY HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, IS AVAILABLE
UPON REQUEST, WITHOUT CHARGE. THE REQUEST SHOULD BE DIRECTED TO RICHARD P.
STORY, CHIEF FINANCIAL OFFICER, AT 119 MARCY STREET, SANTA FE, NEW MEXICO,
87501.
By the order of the Board of Directors
Larry A. Goldstone
March 24, 1997 President and Chief Operating Officer
<PAGE>
[X] Please mark votes 1. The election of one Class II Director to serve for a
as in this example. two year term, and three Class III Directors to
serve for a three year term, each until his
successor is duly elected and qualified.
- ------------------
THORNBURG MORTGAGE
ASSET CORPORATION
- ------------------
With- For All
CLASS II: OWEN M. LOPEZ For hold Except
CLASS III: H. GARRETT THORNBURG, JR. [ ] [ ] [ ]
JOSEPH H. BADAL
STUART C. SHERMAN
RECORD DATE SHARES:
NOTE: If you do not wish your shares voted "For" a
particular nominee, mark the "For All Except" box and
strike a line through the nominee's(s') name(s). Your
shares will be voted for the remaining nominees.
For Against Abstain
2. Approval of amendments to
the amended and restated [ ] [ ] [ ]
1992 Stock Option Plan.
3. Such other business as may properly come before the
Annual Meeting of Shareholders, or at any and all
adjournments thereof.
Please be sure to sign
and date this Proxy.
Date___________ Mark Box at right if an address change or comment
has been noted on the reverse side of this card. [ ]
- --------------------------
Shareholder sign here
- --------------------------
Co-owner sign here
DETACH CARD DETACH HERE
THORNBURG MORTGAGE ASSET CORPORATION
Dear Shareholder:
Please take note of the important information enclosed with this Proxy Ballot.
Your vote counts, and you are strongly encouraged to exercise your right to vote
your shares.
Please mark the boxes on this proxy card to indicate how your shares will be
voted. Then sign the card, detach it and return your proxy vote in the enclosed
postage paid envelope.
Your vote must be received prior to the Annual Meeting of Shareholders, April
24, 1997.
Thank you in advance for your prompt consideration of these matters.
Sincerely,
Thornburg Mortgage Asset Corporation
- --------------------------------------------------------------------------------
THORNBURG MORTGAGE ASSET CORPORATION
119 EAST MARCY STREET, SANTA FE, NEW MEXICO 87501
(505) 989-1900
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Thornburg Mortgage Asset Corporation will
be held at the Hotel Plaza Real, Nambe Room, 125 Washington Avenue, Santa Fe,
New Mexico 87501, on Thursday, April 24, 1997, at 9:00 a.m. MST, to consider and
act upon the matters discussed on the reverse side of this card.
Management desires to have maximum representation of shareholders at the Annual
Meeting. In order that your shares may be represented at the Annual Meeting,
management respectfully requests that you date, execute and promptly mail the
enclosed Proxy in the accompanying postage-paid envelope. A Proxy may be revoked
by a shareholder by notice in writing to the Secretary of the Company at any
time prior to its use, by presentation of a later-dated Proxy, or by attending
the Annual Meeting and voting in person.
Only shareholders of record at the close of business on March 14, 1997, the
record date, will be entitled to vote at the Annual Meeting.
PLEASE VOTE, DATE AND SIGN ON REVERSE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE.
Please sign this Proxy exactly as your name appears on the books of the
Corporation. Joint owners should each sign personally. Trustees and other
fiduciaries should indicate the capacity in which they sign, and where more than
one name appears, a majority must sign. If a corporation, this signature should
be that of an authorized officer who should state his or her title.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
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