<PAGE>
SCHEDULE 14A INFORMATION
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
THORNBURG MORTGAGE ASSET CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
THORNBURG MORTGAGE ASSET CORPORATION
March 29, 1999
To Our Shareholders:
You are cordially invited to attend the 1999 Annual Meeting of Shareholders
(the "Annual Meeting") of Thornburg Mortgage Asset Corporation to be held at the
Eldorado Hotel, 309 West San Francisco Street, Santa Fe, New Mexico 87501, on
Thursday, April 29, 1999, at 9:00 a.m. Mountain Standard Time ("MST").
The business of the meeting is to elect two nominees to the Board of
Directors. Information about the nominees for election are in the enclosed
proxy statement.
Only shareholders of record at the close of business on March 19, 1999 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,
/s/ Larry A. Goldstone
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 Eldorado Hotel, 309 West San Francisco Street, Santa Fe, New
Mexico 87501, on Thursday, April 29, 1999, at 9:00 a.m. MST, to consider and act
upon the following matters:
1. The election of two Class II Directors to serve for three-year terms and
until their successors are duly elected and qualified;
2. 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 19, 1999, 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
/s/ Michael B. Jeffers
Michael B. Jeffers
Secretary
Dated: March 29, 1999
-----------------------------------------
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 29, 1999
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 Eldorado Hotel, 309 West San
Francisco Street, Santa Fe, New Mexico 87501, on Thursday, April 29, 1999, 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 29, 1999.
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 19, 1999, the record date, are entitled to notice of,
and to vote at, the Annual Meeting. On that date, 21,489,663 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.
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. 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 15, 1999,
relating to the beneficial ownership of the Company's Common Stock by each
director of the Company and all executive officers and directors of the Company
as a group. To the Company's knowledge, there are no beneficial owners who hold
more than 5% of the outstanding shares of the Company's Common Stock.
<TABLE>
<CAPTION>
Percent of
Number Voting Shares
Name of Security Holder of Shares Outstanding (1)
- ------------------------------------------------------------------ --------- ---------------
<S> <C> <C>
Garrett Thornburg (2)............................................ 688,423 3.12%
David A. Ater (3)................................................ 45,035 *
Joseph H. Badal (4).............................................. 47,930 *
Larry A. Goldstone (5)........................................... 263,672 1.20%
Owen M. Lopez (6)................................................ 27,946 *
James H. Lorie (3)............................................... 45,035 *
Stuart C. Sherman (7)............................................ 34,460 *
Richard P. Story (8)............................................. 124,965 *
All Executive Officers and Directors as a Group (8 persons) (9).. 1,277,466 5.79%
</TABLE>
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* less than 1% of the outstanding shares.
(1) Based on 22,045,032 Common Shares (including 555,369 shares which can be
acquired within 60 days from the date of this Proxy Statement 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 246,528 Common Shares which can be acquired within 60 days from
the date of this Proxy Statement upon the exercise of options.
(3) Includes 13,338 Common Shares which can be acquired within 60 days from the
date of this Proxy Statement upon the exercise of options.
(4) Includes 45,035 Common Shares which can be acquired within 60 days from the
date of this Proxy Statement upon the exercise of options.
(5) Includes 142,188 Common Shares which can be acquired within 60 days from
the date of this Proxy Statement upon the exercise of options.
(6) Includes 26,671 Common Shares which can be acquired within 60 days from the
date of this Proxy Statement upon the exercise of options.
(7) Includes 32,986 Common Shares which can be acquired within 60 days from the
date of this Proxy Statement upon the exercise of options.
(8) Includes 35,285 Common Shares which can be acquired within 60 days from the
date of this Proxy Statement upon the exercise of options.
(9) Includes 555,369 Common Shares which can be acquired within 60 days from
the date of this Proxy Statement 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
2
<PAGE>
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 2001, 1999, and 2000,
respectively. Two Class II directors of the Company are to be elected at the
Annual Meeting to serve for three-year terms and until their successors are duly
elected and qualified. Mr. Owen M. Lopez and Mr. James H. Lorie have been
nominated by the Board of Directors as Class II 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 and Mr. Lorie,
each to serve as Class II 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.
The nominees are currently members of the Board of Directors and have agreed to
continue to serve if elected. In the event either 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 Nominees - Terms Expiring in 1999
Mr. Lopez, 58, 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
was formerly 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.
Mr. Lorie, 77, 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. 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.
Class I and III Directors - Terms Expiring in 2000 and 2001
Mr. Thornburg, 53, 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 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. Mr. Thornburg is also CEO and co-founder of American Foundation
Realty, Inc., a real estate investment trust, structured to assist non-profit
orgainizations in their acceptance of charitable gifts of commercial real
estate. TMC is advisor to the ten 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 eight 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 eight Thornburg bond
funds and two equity funds currently have assets of $2.26 billion. TMC also acts
as a subadvisor to the New
3
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England Investment Company's Daily Tax Free Income Fund with assets of $662
million and as placement agent to six of their tax-free money funds with assets
of $1.45 billion. Mr. Thornburg is a graduate of Williams College, B.A. and
Harvard University, MBA.
Mr. Ater, 54, 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 eight portfolios: six bond funds and two equity funds. Mr.
Ater is actively involved with a number of charitable and community
organizations, and is currently a member of 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. Badal, 54, 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. Goldstone, 44, is the President and 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 Thornburg Mortgage Advisory
Corporation (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. Sherman, 60, 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.
Information Regarding the Board of Directors
The Board of Directors held three meetings and acted by unanimous written
consent four times during 1998. 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 1998.
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 1998.
4
<PAGE>
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 once during
1998.
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 Amended and
Restated 1992 Stock Option Plan (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 to each director 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 (including shares
issued through the waiver provision of the Optional Cash Purchase feature of the
Company's Dividend Reinvestment and Stock Purchase Plan (the "DRP"), but
excluding other shares issued under the DRP and shares issued pursuant to the
exercises of options under the Plan). The stock option committee met two times
and acted by unanimous written consent one time during 1998.
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
once during 1998.
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 accordance with a predetermined formula, during 1998 each member of the
stock option committee received options to purchase 1,894 shares of Common Stock
at exercise prices that ranged from $15.00 to $17.50 and 664 Dividend Equivalent
Rights (DERs). In lieu of $2,788 of dividends earned on DERs and Phantom Stock
Rights (PSRs) outstanding during 1998, each committee member chose to receive
213 PSRs. As of December 31, 1998, the Unaffiliated Directors, as a group, held
131,368 options with exercise prices that range from $9.375 to $22.625, 103,768
of these options are exercisable.
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. 53 Chairman of the Board, Director and
Chief Executive Officer
Larry A. Goldstone 44 Director, President and Chief Operating
Officer
Richard P. Story 46 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.
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<PAGE>
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 and a Managing Director of the Manager since December 1998.
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, Dividend Equivalent Rights ("DERs"), Phantom Stock Rights ("PSRs") and
Stock Appreciation Rights ("SARs") to the executive officers and directors
pursuant to the Company's Plan.
The following table presents the total number of stock options granted to
executive officers of the Company during the year ended December 31, 1998.
Stock Options Granted During Year Ended December 31, 1998
<TABLE>
<CAPTION>
Number of % of
Shares Total
Underlying Options Value
Options Granted to Exercise Expiration on Date
Granted Employees Price Date of Grant (1)
---------- ----------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
H. Garrett Thornburg, Jr. 3,234 6.68% $ 17.500 1/28/2008 $ 4,528
2,285 4.72% 15.250 2/25/2008 2,833
1,213 2.51% 15.625 3/27/2008 1,553
1,625 3.36% 15.000 4/28/2008 2,015
Larry A. Goldstone 3,234 6.68% 17.500 1/28/2008 4,528
2,285 4.72% 15.250 2/25/2008 2,833
1,213 2.51% 15.625 3/27/2008 1,553
1,625 3.36% 15.000 4/28/2008 2,015
Richard P. Story 1,619 3.34% 17.500 1/28/2008 2,267
1,147 2.37% 15.250 2/25/2008 1,422
609 1.26% 15.625 3/27/2008 780
814 1.68% 15.000 4/28/2008 1,009
</TABLE>
- ----------
(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 1998: dividend yield of 10%; expected
volatility of 25.6%; risk-free interest rate of 5.68%; and expected lives
of 7 years.
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<PAGE>
The following table presents the total number of stock options exercised during
1998 and held as of December 31, 1998 by the executive officers of the Company
and the year-end value of these options.
Aggregated Option Exercises in 1998 and Option Values as of December 31, 1998
<TABLE>
<CAPTION>
Number of Securities Value of
Number of Underlying Unexercised Unexercised In-the-Money
Shares Stock Options at 12/31/98 Stock Options at 12/31/98 (2)
Acquired Value -------------------------- -----------------------------
on Exercise Realized (1) Exercisable Unexercisable Exercisable Unexercisable
----------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
H. Garrett Thornburg, Jr. 0 $ 0 218,028 30,500 $ 0 $ 0
Larry A. Goldstone 23,880 13,489 135,568 30,500 0 0
Richard P. Story 41,103 24,969 61,138 15,250 0 0
</TABLE>
- ----------
(1) The value realized is based on the market value of the underlying
securities on the exercise date, less the exercise price.
(2) The value of unexercised options is calculated using the closing price of
$7.625 on the New York Stock Exchange (the "NYSE") of the Company's Common
Stock on December 31, 1998.
The following table presents the total number of DERs granted, the value of
dividends earned on DERs and the number of PSRs issued in lieu of cash dividends
on DERs and PSRs to executive officers during 1998.
DERs Granted and Outstanding as of December 31, 1998
<TABLE>
<CAPTION>
1998 Number of
Number of Dividends PSRs Issued Number of Value of
DERs Vested DERs Earned on In Lieu of PSRs PSRs
Granted Outstanding (1) DERs/PSRs Dividends (2) Outstanding Outstanding (3)
--------- --------------- --------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
H. Garrett Thornburg, Jr. 2,926 10,849 $ 14,361 1,096 1,344 $ 10,250
Larry A. Goldstone 2,926 10,849 14,361 1,096 1,344 10,250
Richard P. Story 1,466 5,427 7,182 548 672 5,125
</TABLE>
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(1) DERs granted in connection with the Company's Series A preferred shares are
not vested until and unless the Company's Series A preferred shares are
converted to Common Shares.
(2) PSRs are issued in lieu of cash dividends for DERs and PSRs at the
discretion of the holders of DERs and PSRs.
(3) The value of outstanding PSRs is calculated using the closing price of
$7.625 on the NYSE of the Company's Common Stock on December 31, 1998.
7
<PAGE>
Total Return Comparison
The following graph presents a total return comparison of the Company's
Common Stock for the five year period from December 31, 1993 through December
31, 1998, to the Bloomberg Mortgage REIT Index, the National Association of Real
Estate Investment Trusts, Inc. ("NAREIT") All REIT Index and the Lehman Long-
term Bond 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 Total Return Comparison presented in the prior fiscal
year's Proxy Statement included the S & P 500 Index which has been replaced with
the Lehman Long-term Bond Fund Index and the NAREIT Mortgage REIT Index which
has been replaced with the Bloomberg Mortgage REIT Index. For the five years
ended December 31, 1998, the S & P 500 Index had a total return of 194% as
compared to 56% for the Lehman Long-term Bond Index. The NAREIT Mortgage REIT
Index had a five-year total return of 37% as compared to a negative total return
of 10% for the Bloomberg Mortgage REIT Index. The members of both indexes that
were replaced are generally significantly dissimilar to the Company in the
nature of their operations and in their performance through economic cycles.
Since the Company's performance is primarily driven by changes in interest
rates, the relationship between long-term bonds and the Company's performance
should, over time, be a better measure of the Company's performance. The
Bloomberg Mortgage REIT Index is a fairly recent index that has been constructed
to include most of the Company's direct competitors and very few other members
that do not compete directly with the Company, compared to the NAREIT Mortgage
REIT Index that is generally composed of members who are dissimilar to the
Company in the nature of their operations. In general, NAREIT includes in their
mortgage REIT index any company that does not fit the definition of an equity
REIT, a REIT that has a direct equity interest in real estate, but in doing so,
NAREIT's Mortgage REIT Index includes a number of companies that, by the nature
of their business, do not provide a reasonable comparison to the Company. The
information herein has been obtained from sources believed to be reliable, but
neither its accuracy nor its completeness is guaranteed. The graph assumes that
the value of the investment in the Company's Common Stock and each index was
$100 on December 31, 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.
[PERFORMANCE GRAPH GOES HERE]
<TABLE>
<CAPTION>
12/31/93 12/31/94 12/31/95 12/31/96 12/31/97 12/31/98
- ---------------------------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Thornburg Mortgage Asset Corp..... $ 100.00 $ 50.76 $ 107.15 $ 151.24 $ 133.64 $ 85.33
Bloomberg Mortgage REIT Index..... 100.00 64.11 102.74 145.57 119.21 89.99
NAREIT All REIT Index............. 100.00 92.36 120.71 119.66 137.70 156.32
Lehman Long-term Bond Index....... 100.00 100.81 119.26 161.90 192.44 156.22
</TABLE>
8
<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 a Managing
Director and 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, 1998, the Company paid the
Manager $4,142,000 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, 1998, the Company paid the Manager $759,000 in
performance based compensation in accordance with the terms of the Agreement.
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.
Mr. Goldstone, Mr. Story, Mr. Ater and Mr. Lorie have all entered into
full-recourse, interest-bearing notes receivable, pursuant to a program approved
by the Board of Directors in December 1997, which were used to purchase Common
Stock of the Company pursuant to the exercise of stock options under the Plan.
The notes have maturity terms ranging from 3 years to 9 years and accrue
interest at rates that range from 5.47% to 6.00% per annum. In addition, the
notes are secured by a pledge of the shares of the Common Stock acquired.
Interest is payable quarterly, with the balance due at the maturity of the
notes. The payment of the notes will be accelerated only upon the sale of the
shares of Common Stock pledged for the notes. The notes may be prepaid at any
time at the option of each borrower.
As of March 15, 1999, the outstanding balances on the notes receivable
entered into by Mr. Goldstone, Mr. Story, Mr. Ater and Mr. Lorie were
$1,643,790, $1,340,364, $508,143 and $470,700, respectively.
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.
SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934 requires the
Company's directors and certain of its officers, and persons who own more than
10% of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Executive officers, directors and greater than 10% stockholders
are required by SEC regulations to furnish the Company with copies of all
Section 16(a) forms they file.
There are no beneficial owners of 10% or more of the Company's equity
securities. Based solely on its review of the copies of such forms received by
it, or written representations from certain reporting persons that no Form 5's
9
<PAGE>
were required for those persons, the Company believes that during the year ended
December 31, 1998, all filing requirements applicable to its executive officers
and directors were complied with during the fiscal year.
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, 1999. 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 2000 Annual
Meeting of shareholders must be received in writing by the Secretary of the
Company prior to December 6, 1999. 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 1998 Annual Report to shareholders including financial statements for
the year ended December 31, 1998, 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, 1998, 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
/S/ LARRY A. GOLDSTONE
Larry A. Goldstone
March 29, 1999 President and Chief Operating Officer
10
<PAGE>
Thornburg Mortgage Asset Corporation
119 East Marcy St.
Santa Fe, NM 87501
505-989-1900
PROXY -- Annual Meeting of Shareholders -- Thursday, April 29, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby appoints Garrett Thornburg and Larry A. Goldstone as
proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the Common Shares of
Thornburg Mortgage Asset Corporation held of record by the undersigned on March
19, 1999 at the Annual Meeting of Shareholders to be held on Thursday, April
29, 1999 or at any adjournment thereof.
1. ELECTION OF DIRECTORS. The election of two Class II Directors to serve for
three years, each until his successor is duly elected and qualified.
FOR all WITHHOLD
nominees listed AUTHORITY to
(except as vote for all
marked to the nominees listed
contrary below) below [_]
[_]
INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.
Owen M. Lopez, James H. Lorie
2. Such other business as may properly come before the Annual Meeting of
Shareholders, or at any and all adjournments thereof.
(Continued, and to be signed, on Reverse Side)
Thornburg Mortgage Asset Corporation
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED IN FAVOR OF ALL NOMINEES LISTED FOR ELECTION AS DIRECTORS AND IN
ACCORDANCE WITH THE PROXIES' BEST JUDGEMENT UPON OTHER MATTERS PROPERLY COMING
BEFORE THE MEETING AND ANY ADJOURNMENTS THEREOF.
Please sign exactly as your name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
Date ______________________________
------------------------------------
Signature
------------------------------------
Signature, if held jointly.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE ENCLOSED
ENVELOPE.
