SCHEDULE 14A
(Rule 14a-101)
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:
[ ] 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 Rule 14a-11(c) or Rule 14a-12
ANTHRACITE CAPITAL, INC.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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:
_______________________________________________________________
(2) Aggregate number of securities to which transaction applies:
_______________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
_______________________________________________________________
(4) Proposed maximum aggregate value of transaction:
_______________________________________________________________
(5) Total fee paid:
_______________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid: _________________________________________
(2) Form, Schedule or Registration Statement No.: ___________________
(3) Filing Party: ___________________________________________________
(4) Date Filed:______________________________________________________
Anthracite Capital, Inc.
40 East 52nd Street, New York, New York 10022
April 25, 2003
Dear Fellow Stockholders:
On behalf of the Board of Directors, I cordially invite you to attend
the Annual Meeting of Stockholders of Anthracite Capital, Inc. (the "Annual
Meeting") to be held at the Omni Berkshire Place, 21 East 52nd Street, Second
Floor, New York, New York 10022 on Tuesday, May 20, 2003, at 10 a.m., Eastern
Time. The matters to be considered by the stockholders at the Annual Meeting
are described in detail in the accompanying materials.
IT IS VERY IMPORTANT THAT YOU BE REPRESENTED AT THE ANNUAL MEETING
REGARDLESS OF THE NUMBER OF SHARES YOU OWN OR WHETHER YOU ARE ABLE TO ATTEND
THE ANNUAL MEETING IN PERSON. Let me urge you to mark, sign and date your
proxy card today and to return it in the envelope provided, even if you plan
to attend the Annual Meeting. This will not prevent you from voting in person,
but will ensure that your vote is counted if you are unable to attend the
Annual Meeting.
Your continued support of and interest in Anthracite Capital, Inc.
are sincerely appreciated.
Sincerely,
/s/ Laurence D. Fink
Laurence D. Fink
Chairman of the Board of Directors
ANTHRACITE CAPITAL, INC.
___________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 20, 2003
To the Stockholders of Anthracite Capital, Inc.:
NOTICE IS HEREBY GIVEN that the 2003 annual meeting of stockholders
(the "Annual Meeting") of Anthracite Capital, Inc. (the "Company") will be
held at the Omni Berkshire Place, 21 East 52nd Street, Second Floor, New York,
New York 10022 on Tuesday, May 20, 2003, at 10 a.m., Eastern Time, for the
following purposes:
1. To elect two directors to serve on the Board of Directors of the
Company for a three-year term and until their respective successors
have been duly elected and qualified;
2. To ratify the appointment by the Board of Directors of Deloitte &
Touche LLP as the independent auditors of the Company for the fiscal
year ending December 31, 2003; and
3. To transact such other business as may properly come before the
Annual Meeting or any adjournments or postponements thereof.
Only stockholders of the Company of record as of the close of
business on March 31, 2003 will be entitled to notice of, and to vote at, the
Annual Meeting or any adjournments or postponements thereof.
Further information regarding the Annual Meeting, the nominees for
election as directors, the independent auditors and other matters is contained
in the enclosed Proxy Statement. We have enclosed a Proxy Statement, form of
proxy and self-addressed envelope. Please complete, date and sign the proxy
card. Return it promptly in the envelope provided, which requires no postage
if mailed in the United States. If you attend the Annual Meeting, you may
withdraw your proxy and vote in person, if you so choose.
By order of the Board of Directors,
/s/ Robert L. Friedberg
Robert L. Friedberg
Secretary
New York, New York
April 25, 2003
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IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING IN PERSON OR BY
PROXY; PLEASE MARK, DATE, SIGN AND RETURN THE APPROPRIATE ENCLOSED PROXY OR
PROXIES IN THE ACCOMPANYING ENVELOPE PROVIDED FOR YOUR CONVENIENCE, WHICH
REQUIRED NO POSTAGE IF MAILED IN THE UNITED STATES.
===============================================================================
ANTHRACITE CAPITAL, INC.
40 EAST 52ND STREET
NEW YORK, NEW YORK 10022
_______________________
PROXY STATEMENT
_______________________
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement and the accompanying proxy card and Notice of
Annual Meeting are provided in connection with the solicitation of proxies by
the Board of Directors of Anthracite Capital, Inc., a Maryland corporation
(the "Company"), for use at the annual meeting of stockholders (the "Annual
Meeting") to be held at the Omni Berkshire Place, 21 East 52nd Street, Second
Floor, New York, New York 10022 on Tuesday, May 20, 2003, at 10 a.m., Eastern
Time, and any adjournments or postponements thereof. The mailing address of
the Company's executive office is 40 East 52nd Street, New York, New York
10022. This Proxy Statement, the accompanying proxy card and the Notice of
Annual Meeting are first being mailed to holders of the Company's common
stock, par value $0.001 per share (the "Common Stock"), on or about April 25,
2003.
Matters to be Considered at the Meeting
At the Annual Meeting, holders of the Company's Common Stock will
vote upon (i) the election of two directors to serve on the Board of Directors
of the Company; (ii) the ratification of the appointment by the Board of
Directors of Deloitte & Touche LLP as the independent auditors of the Company
for the fiscal year ending December 31, 2003; and (iii) such other business as
may properly come before the Annual Meeting or any adjournments or
postponements thereof.
Stockholders Entitled to Vote
The Board of Directors has fixed the close of business on March 31,
2003 as the record date for the determination of stockholders entitled to
notice of and to vote their shares of Common Stock at the Annual Meeting. As
of March 31, 2003, the Company had 47,731,318 shares of Common Stock
outstanding. Each share of Common Stock entitles its holder to one vote.
Voting at the Annual Meeting
If the enclosed proxy is properly executed and returned to the
Company in time to be voted at the Annual Meeting, it will be voted as
specified on the proxy, unless it is properly revoked prior thereto. If no
specification is made on the proxy as to any one or more of the proposals, the
shares of Common Stock represented by the proxy will be voted as follows:
FOR the election of each of the director nominees; and
FOR the ratification of the appointment of Deloitte & Touche LLP as
the independent auditors of the Company for the fiscal year ending
December 31, 2003.
Voting on Other Matters
If any other matters are properly presented at the Annual Meeting for
consideration, the persons named in the proxy will have the discretion to vote
on those matters for you. As of the date of this Proxy Statement, the Company
did not know of any other matter to be raised at the Annual Meeting.
Required Vote
A majority of the votes entitled to be cast at the Annual Meeting,
represented in person or by proxy, constitutes a quorum for purposes of
transacting business at the Annual Meeting. Election of each nominee for
director will require the affirmative vote of the holders of a plurality of
the votes cast at the Annual Meeting for such nominee. The ratification of the
independent auditors and any other matters submitted to a vote of the
stockholders will be determined by a majority of the votes cast at the Annual
Meeting.
Under the rules of the New York Stock Exchange, brokers who hold
shares in "street name" may have the authority to vote on certain matters when
they do not receive instructions from beneficial owners. Brokers that do not
receive instructions are entitled to vote on the election of directors and the
ratification of the independent auditors. In determining whether the proposal
to ratify the appointment of the independent auditors has received the
requisite vote, abstentions will be disregarded and will have no effect on the
outcome of the vote. A vote "withheld" from a director nominee will have no
effect on the outcome of the vote because a plurality of the votes cast at the
Annual Meeting is required for the election of each director and the two
nominees who receive the most votes cast at the Annual Meeting will be
elected.
Cost of Proxy Solicitation
The Company will pay the expenses of soliciting proxies. Proxies may
be solicited in person or by mail, telephone, electronic transmission, and
facsimile transmission on our behalf by directors, officers or employees of
the Company or its subsidiaries, without additional compensation. The Company
will reimburse brokerage houses and other custodians, nominees and fiduciaries
that are requested to forward soliciting materials to the beneficial owners of
the stock held of record by such persons.
Revocation of Proxies
A person giving the enclosed proxy has the power to revoke it at any
time before it is exercised by (i) attending the Annual Meeting and voting in
person, (ii) duly executing and delivering a proxy bearing a later date prior
to the Annual Meeting or (iii) sending written notice of revocation to the
Company's Secretary prior to the Annual Meeting at 40 East 52nd Street, New
York, New York 10022.
List of Stockholders
A list of stockholders entitled to vote at the Annual Meeting will be
available at the Annual Meeting and for ten days prior to the Annual Meeting,
between the hours of 9:00 a.m. and 5:00 p.m., at the Company's executive
office at 40 East 52nd Street, New York, New York 10022, by contacting the
Secretary of the Company.
Copies of Annual Report to Stockholders
A copy of the Annual Report on Form 10-K filed by the Company with
the Securities and Exchange Commission (the "SEC") for its latest fiscal year
is available without charge to stockholders at the Company's website at
www.anthracitecapital.com or upon written request to Anthracite Capital, Inc.,
40 East 52nd Street, New York, New York 10022, Attention: Secretary.
Confidentiality of Voting
The Company keeps all proxies, ballots and voting tabulations
confidential as a matter of practice. The Company only lets its Inspector of
Election, American Stock Transfer and Trust Company, examine these documents.
Voting Results
American Stock Transfer and Trust Company, the Company's independent
tabulating agent, will count the votes and act as the Inspector of Election.
The Company will publish the voting results in its Quarterly Report on Form
10-Q for the fiscal quarter ending June 30, 2003, which the Company plans to
file with the SEC in August 2003.
Recommendations of the Board of Directors
The Board of Directors recommends a vote FOR each of the nominees for
director and FOR the ratification of the appointment of Deloitte & Touche LLP
as the independent auditors of the Company for the fiscal year ending December
31, 2003.
PROPOSAL 1
ELECTION OF DIRECTORS
The Company's By-Laws provides that the Board of Directors shall
consist of no less than three and no more than nine directors, and the number
of directors may be increased or decreased by the Board of Directors. The
Company's Board of Directors is presently comprised of eight members
classified into three groups, designated Class I, Class II and Class III. The
term of office of the members of one class of directors expires each year in
rotation so that the members of one class are elected at each annual meeting
to serve for full three-year terms, or until their successors are elected and
qualified. Each class consists, as nearly as may be possible, of one-third of
the total number of directors constituting the entire Board of Directors.
At the Annual Meeting, two directors will be elected for a three-year
term and until their successors are duly elected and qualified. The shares of
Common Stock represented by the enclosed proxy will be voted for the election
as directors of the two nominees named below, unless a vote is withheld from
any of the two individual nominees. If any nominee becomes unavailable or
unwilling to serve as a director on the Board of Directors of the Company for
any reason, shares of Common Stock represented by the accompanying proxy will
be voted for such other person as the Board of Directors may nominate. The
Board of Directors has no reason to doubt the availability of any nominee, and
each nominee has indicated his willingness to serve as a director of the
Company if elected by the stockholders at the Annual Meeting.
Information Concerning the Director Nominees
The Board of Directors has unanimously proposed Laurence D. Fink and
Kendrick R.Wilson, III as nominees for election as directors of the Company.
The Board of Directors recommends a vote FOR each of the nominees for
director.
Information Concerning the Incumbent Directors and the Director Nominees
Information concerning the names, ages, terms and positions with the
Company and business experience of the members of the Board of Directors is
set forth below. Mr. Fink has been elected to the Board of Directors since
November 1997, and Mr. Wilson has been elected to the Board of Directors since
March 1998. Both of them have served continuously with the Company since their
respective election.
Director
Term
Name Age Position Expires (1)
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Inside Directors:
Laurence D. Fink 50 Chairman of the Board of Directors 2003
Hugh R. Frater 47 President, Chief Executive Officer and Director 2005
Unaffiliated Directors:
David M. Applegate 42 Director 2005
Donald G. Drapkin (3) 55 Director 2004
Carl F. Geuther (2) 56 Director 2004
Jeffrey C. Keil (2) (3) 59 Director 2005
Leon T. Kendall 74 Director 2004
Kendrick R. Wilson, III (2) (3) 56 Director 2003
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(1) The Company's Board of Directors is classified into three groups and each group is elected on a
staggered basis for three-year terms.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
Laurence D. Fink, Chairman of the Board of Directors, is also director,
chairman and chief executive officer of BlackRock Financial Management, Inc.
(the "Manager") and director, chairman and chief executive officer of
BlackRock, Inc., the Manager's indirect parent company ("BlackRock"), since
BlackRock's formation in 1998 and of BlackRock's and the Manager's predecessor
entities since 1988. Additionally, Mr. Fink is the chairman of BlackRock's
management committee and a member of its investment strategy group. He is also
president and a trustee of the BlackRock Funds, a director of several of
BlackRock's offshore funds and alternative investment vehicles, and chairman
of the board of Nomura BlackRock Asset Management Co., Ltd. Mr. Fink is also a
member of the board of directors of the New York Stock Exchange, Inc.
Hugh R. Frater, President, Chief Executive Officer and Director, is a Managing
Director and a member of the management committee of the Manager, where he is
head of the BlackRock Real Estate Division. The Real Estate Division is
responsible for the development of all BlackRock commercial real estate
products including commercial mortgage backed securities and whole loan
products. Prior to heading the Real Estate Division, Mr. Frater co-headed the
BlackRock Account Management Group. Before joining BlackRock in 1988, Mr.
Frater was a Vice President in Investment Banking at Lehman Brothers in the
financial institutions department.
David M. Applegate, Director, is President and Chief Executive Officer of GMAC
Residential and a member of the GMAC Mortgage Group Board of Directors. Mr.
Applegate also serves as Chairman for GMAC Home Services, Chairman of GMAC
Bank and Chairman, President and Chief Executive Officer of GMAC Mortgage
Corporation. From 1999 to January 2001, Mr. Applegate was Chief Operating
Officer of GMAC Mortgage responsible for all aspects of mortgage operations
including lending, servicing and capital markets. From 1996 to 1999, Mr.
Applegate was Chief Financial Officer of GMAC Mortgage Corporation responsible
for legal, accounting, tax, finance, treasury, strategic planning and mergers
and acquisitions. Prior to 1996, Mr. Applegate was Senior Vice President of
Capital Markets at GMAC Mortgage.
Donald G. Drapkin, Director, has been a Director and Vice Chairman of
MacAndrews & Forbes Holdings Inc. and various of its affiliates since 1987.
Prior to joining MacAndrews & Forbes, Mr. Drapkin was a partner in the law
firm of Skadden, Arps, Slate, Meagher & Flom LLP for more than five years. Mr.
Drapkin is also a director of the following corporations which file reports
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"): The Molson Companies Limited, Panavision, Inc., Playboy.com, Inc.,
Playboy Enterprises, Inc., Revlon Consumer Products Corporation, Revlon, Inc.
and SIGA Technologies.
Carl F. Geuther, Director, is a former Executive Vice President and Chief
Financial Officer of WMC Mortgage Corp., a mortgage banking company. Mr.
Geuther was Vice Chairman and Chief Financial Officer, and previously
Executive Vice President, of Great Western Financial Corporation and Great
Western Bank since 1986. Mr. Geuther joined Great Western following its
acquisition of Aristar, Inc., a consumer finance and insurance company, in
1983, where he served as Executive Vice President and Chief Financial Officer
and previous financial management positions since 1974.
Jeffrey C. Keil, Director, has been President of Ellesse, LLC, a company
providing advice to Lily Safra, since July 2001. From January 1998 to June
2001, Mr. Keil was Chairman of the Executive Committee of International Real
Returns, LLC, investment advisor to an investment company organized by Lazard
Freres & Co. From 1996 to January 1998, Mr. Keil was a General Partner of Keil
Investment Partners, a private fund that invested in the financial sector in
Israel. From 1984 to 1996, Mr. Keil was President, Director and Chairman of
the Finance Committee of Republic New York Corporation and Vice Chairman and a
Member of the Executive Committee of Republic National Bank of New York.
Leon T. Kendall, Director, is a former Chairman of the Board of Mortgage
Guaranty Insurance Corporation, Vice-Chairman of the parent company, MGIC
Investment Corporation, and a member of the Board of Directors of both firms.
Prior to joining MGIC in 1974, he served as President of the Securities
Industry Association and its predecessor, the Association of Stock Exchange
Firms. He has also served as Vice President and economist for the New York
Stock Exchange and as economist for the U.S. League of Savings Institutions
and the Federal Reserve Bank of Atlanta. From 1988 to August 2002, Mr. Kendall
was a member of the Kellogg School of Management faculty. His teaching
responsibilities include the management of financial institutions,
securitization, urban development and real estate market analysis. In June
1999, he became the second Norman Strunk Chair Professor of Financial
Institutions. Mr. Kendall retired in August 2002.
Kendrick R. Wilson, III, Director, has been a Managing Director of Goldman
Sachs & Co. in the Financial Institutions Group since 1998. From 1989 to 1998,
Mr. Wilson was Vice Chairman and member of the Management Committee of Lazard
Freres & Co. Mr. Wilson is a director of Celanese AG and American Marine
Holdings Corp. He is a Trustee of the Montana Land Reliance, Middlebury
College and the Hospital for Special Surgery.
Unaffiliated Directors
The Articles of Incorporation of the Company require that a majority
of the Company's directors be "Unaffiliated Directors." "Unaffiliated
Director" means any director who (a) does not own greater than a de minimis
interest in the Manager or any of its affiliates, other than the Company and
any person controlled by the Company or (b) within the last two years has not
directly or indirectly (i) been an officer of or employed by the Company or
the Manager or any of their respective affiliates, (ii) been a director of the
Manager or any of its affiliates, other than the Company and any person
controlled by the Company, (iii) performed more than a de minimis amount of
services for the Manager or any of its affiliates or (iv) had any material
business or professional relationship with the Manager or any of its
affiliates other than as a director of the Company or any person controlled by
the Company. There are presently six Unaffiliated Directors on the Company's
Board of Directors: Messrs. Applegate, Drapkin, Geuther, Keil, Kendall and
Wilson.
Compensation of Directors
Directors are elected for a term of three years and hold office until
their successors are elected and qualified. The Company pays an annual
director's fee to each Unaffiliated Director of $20,000 and a fee of $1,000
for each meeting of the Board of Directors in excess of four meetings attended
by the Unaffiliated Director. The Company reimburses the costs and expenses of
all directors for attending meetings of the Board of Directors. Affiliated
directors will not be, and have not been, separately compensated by the
Company other than through the Company's 1998 Stock Option Plan (discussed
below).
Board and Committee Meetings
The Board of Directors has two standing committees: an Audit
Committee and a Compensation Committee. The following descriptions of the
functions performed by the committees of the Board of Directors are general in
nature and are qualified in their entirety by reference to the committees'
charters.
The Audit Committee of the Board of Directors, presently composed of
Messrs. Geuther, Keil and Wilson, makes recommendations to the Board of
Directors concerning the selection of independent auditors, reviews the
financial statements of the Company and considers such other matters in
relation to the internal and external audit of the financial affairs of the
Company as may be necessary or appropriate to facilitate accurate and timely
financial reporting. Each Audit Committee member is "independent" as defined
in the New York Stock Exchange listing standards and the applicable SEC rules.
The Board of Directors has determined that Mr. Geuther qualifies as an "audit
committee financial expert" as defined in the recently adopted SEC rules. The
Audit Committee met five times during the fiscal year ended December 31, 2002.
The Compensation Committee of the Board of Directors, presently
composed of Messrs. Wilson, Drapkin and Keil, administers the Company's 1998
Stock Option Plan, reviews all aspects of compensation of the Company's
officers and makes recommendations on such matters to the full Board of
Directors.
During the fiscal year ended December 31, 2002, the Board of
Directors of the Company met on four occasions. In 2002, each director then
serving attended 75% or more of the meetings of the Board of Directors and of
the committees of the Board of Directors on which such director served.
The Company currently has no Nominating Committee.
Report of the Audit Committee
In accordance with and to the extent permitted by the rules of the Securities
and Exchange Commission (the "SEC"), the information contained in the
following Report of the Audit Committee shall not be incorporated by reference
into any of the Company's future filings made under the Securities Exchange
Act 1934, as amended (the "Exchange Act"), or under the Securities Act of
1933, as amended (the "Securities Act"), and shall not be deemed to be
"soliciting material" or to be "filed" under the Exchange Act or the
Securities Act.
The Board of Directors has appointed an Audit Committee consisting of three
directors. All of the members of the Audit Committee are "independent" as
defined in the New York Stock Exchange listing standards. The Board of
Directors has adopted a written charter for the Audit Committee. A copy of
that charter is included as Exhibit A to the Company's proxy statement filed
with the SEC on April 20, 2001 and mailed to the Company's stockholders in
connection with the 2001 Annual Meeting of Stockholders of the Company.
The Audit Committee's job is one of oversight, as set forth in its charter. It
is not the duty of the Audit Committee to prepare the Company financial
statements, to plan or conduct audits or to determine that the Company
financial statements are complete and accurate and are in accordance with
generally accepted accounting principles. BlackRock Financial Management Inc.
is the Manager of the Company and is responsible for preparing the Company's
financial statements and for maintaining internal control and disclosure
controls and procedures. The independent auditors are responsible for auditing
the financial statements and expressing an opinion as to whether those audited
financial statements fairly present the financial position, results of
operations and cash flows of the Company in conformity with the generally
accepted accounting principles.
The Audit Committee has reviewed and discussed the Company's audited financial
statements with management and with Deloitte & Touche LLP, the Company's
independent auditors for fiscal year 2002.
The Audit Committee has discussed with Deloitte & Touche LLP the matters
required by Statement on Auditing Standards No. 61.
The Audit Committee has received from Deloitte & Touche the written
disclosures and letter required by Independent Standards Board Standard No. 1,
Independence Discussions with Audit Committees, and has discussed Deloitte &
Touche LLP's independence with Deloitte & Touche LLP and has considered the
compatibility of nonaudit services with the auditor's independence.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors, and the Board has approved, that the
audited financial statements be included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2002 for filing with the SEC. The
Audit Committee and the Board of Directors also have recommended, subject to
stockholder approval, the selection of the Company's independent auditors for
fiscal year 2003.
MEMBERS OF THE AUDIT COMMITTEE
Carl F. Geuther
Jeffrey C. Keil
Kendrick R. Wilson, III
Compensation Committee
At present, the Company's officers are not compensated by the
Company. Instead, the officers are separately compensated by the Manager. As
discussed under "Certain Relationships and Related Transactions," the Company
pays a base management fee and incentive compensation, among other things, to
the Manager pursuant to the Management Agreement (defined below). During 2002,
the Company did not pay any cash compensation to its executive officers, and
there was no grant of stock options or stock appreciation rights to the
Company's executive officers during the fiscal year ended December 31, 2002.
Accordingly, the Compensation Committee did not meet during the fiscal year
ended December 31, 2002, and no Compensation Committee report is included in
this Proxy Statement.
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to
the executive officers of the Company who are not also members of the Board of
Directors of the Company. For information concerning Hugh R. Frater, see
"Information Concerning the Incumbent Directors and Director Nominees."
Name Age Position
-----------------------------------------------------------------------------------------------
Hugh R. Frater 47 President, Chief Executive Officer and Director
Richard M. Shea 43 Chief Operating Officer and Chief Financial Officer
Chris A. Milner 36 Chief Investment Officer and Vice President
Daniel P. Sefcik 38 Chief Credit Officer and Vice President
Robert L. Friedberg 42 Vice President and Secretary
Mark S. Warner 41 Vice President
Alexander K. Zabik 44 Vice President
Because the Manager maintains principal responsibility for managing
the affairs of the Company, the Company does not employ full-time personnel,
and the officers listed above perform only ministerial functions as officers
of the Company, such as executing contracts and filing reports with regulatory
agencies. In the future, the Company may have salaried employees. All officers
serve at the discretion of the Company's Board of Directors. The persons
listed above, who are also officers of the Manager and will be compensated by
the Manager, are expected in their capacities as officers of the Manager, when
fulfilling duties of the Manager under the Management Agreement, dated March
27, 1998, between the Company and the Manager (as amended to date, the
"Management Agreement"), to devote a substantial amount of their time to the
affairs of the Company. As officers of the Manager, such persons will not have
fiduciary obligations to the Company and its stockholders in that capacity.
Richard M. Shea, Esq., Chief Operating Officer and Chief Financial Officer, is
also a Managing Director of the Manager. Prior to joining the Manager in 1993,
Mr. Shea was an Associate Vice President and tax counsel at Prudential
Securities, Inc. Mr. Shea joined Prudential in 1988 and was responsible for
corporate tax planning, tax-oriented investment strategies and tax issues of
CMOs and original issue discount obligations. Mr. Shea earned a B.S. degree in
accounting from the State University of New York at Plattsburgh in 1981 and a
J.D. degree from New York Law School in 1984.
Chris A. Milner, Chief Investment Officer and Vice President, is also a
Managing Director of the Manager. Mr. Milner is a member of BlackRock's
Mortgage Investment Strategy Group. Prior to joining the Manager in 1997, Mr.
Milner was Vice President & Manager - PNC Real Estate Capital Markets where he
was responsible for origination, underwriting and securitization of all
commercial mortgage conduit production. Mr. Milner has completed over 300 real
estate debt, equity and capital markets transactions with an aggregate value
of over $13 billion. Mr. Milner joined PNC in 1990 upon completion of his
graduate work (M.B.A. magna cum laude in Finance with a concentration in Real
Estate) at Indiana University and a B.A. degree from DePauw University in
1988.
Daniel P. Sefcik, Chief Credit Officer and Vice President, is also a Director
of the Manager where his primary responsibility is ensuring credit quality of
the Manager's primary real estate vehicles, the Company and Carbon Capital,
Inc., as well as various separate accounts. Since joining the Manager in early
1998, Mr. Sefcik supervised the diligence on more than 3,000 real estate
assets and resolution of all product types including multi-family, office,
hotel, retail, self storage and industrial properties in connection with
investments in subordinate CMBS bonds. Prior to joining the Manager, Mr.
Sefcik served as a Vice President for Institutional Real Estate for PNC Bank
in the New York City office from 1996 to 1998. Mr. Sefcik earned his B.A.
degree in Economics in 1986 from Colorado State University and a M.A. degree
in Economics from Rutgers University in 1997.
Robert L. Friedberg, CPA, Vice President and Secretary, is also a Director of
the Manager where his responsibilities include directing the financial
reporting for the Manager's various real estate accounts as well as closing
acquisitions for the real estate accounts. Prior to joining the Manager in
1999, Mr. Friedberg was Treasurer of Vornado Realty Trust, where he was
responsible for corporate and property finance. Mr. Friedberg joined Vornado
in 1997. Mr. Friedberg earned a BBA degree in Accounting at George Washington
University in 1982 and received his Certified Public Accountants license in
1994.
Mark S. Warner, CFA, Vice President, is also a Managing Director and portfolio
manager of the Manager, where his primary responsibility is managing client
portfolios, specializing in the commercial mortgage and non-agency residential
mortgage sectors. Prior to joining the Manager in 1993, Mr. Warner was a
Director in the Capital Markets Unit of the Prudential Mortgage Capital
Company. Mr. Warner joined Prudential in 1987. Mr. Warner earned a B.A. degree
in Political Science from Columbia University in 1983 and an M.B.A. degree in
Finance and Marketing from Columbia Business School in 1987. Mr. Warner
received his Chartered Financial Analyst (CFA) designation in 1993.
Alexander K. Zabik, Vice President, is also a Director of the Manager, where
his primary responsibility is originating real estate mezzanine debt and
equity transactions. Prior to joining the Manager in 1998, Mr. Zabik was
Managing Director at AEC, L.P., a private real estate opportunity fund he
founded to focus on smaller, middle-tier commercial and residential
properties. From 1994 to 1996, Mr. Zabik was Managing Director and co-head of
the Structured Real Estate Finance Group at Blaylock & Partners, L.P., a
boutique investment bank. Mr. Zabik earned a B.A. Degree from Boston
University in 1980 and an M.B.A. in Finance from Babson College in 1984.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Stock Beneficially Owned by Principal Stockholders
The following table sets forth certain information with respect to
the beneficial ownership of the Company's Common Stock as of March 31, 2003 by
any person (including any "group" as that term is used in Section 13(d)(3) of
the Exchange Act) who is known to the Company to beneficially own more than
five percent of the issued and outstanding shares of Common Stock as of such
date.
As of March 31, 2003, there were 47,731,318 shares of Common Stock
outstanding.
Number of
Shares
of Common Percent
Name & Address Stock of Class
----------------------------------------------------------------------------------------------------
Barclays Global Investors, NA (1).................................. 2,937,309 6.15%
45 Fremont Street
San Francisco, CA 94105
James Grosfeld & Nancy Grosfeld, joint tenants (2)................. 2,874,500 6.02%
20500 Civic Center Drive
Suite 3000
Southfield, MI 40876
Capital Group International, Inc. (3).............................. 2,641,930 5.54%
11100 Santa Monica Blvd,
Los Angeles, CA 90025
(1) Based on information contained in a Schedule 13G filed with the SEC on
February 12, 2003. According to such Schedule 13G, (i) Barclays Global
Investors, NA, (ii) Barclays Global Fund Advisors (45 Fremont Street,
San Francisco, CA 94105), (iii) Barclays Global Investors, Ltd (1 Royal
Mint Court, London, EC3N 4HH), (iv) Barclays Trust and Banking Company
(Japan) Limited (1-1-39 Hiroo Shibuya-Ku, Tokyo 150-0012 Japan), (v)
Barclays Life Assurance Company Limited (Unicorn House 5th Floor, 252
Romford Road, Forest Gate, London 37 9JB England), (vi) Barclays Bank
Plc (54 Lombard Street, London, England EC3P 3AH), (vii) Barclays
Capital Securities Limited (5 The North Colonmade, Canary Wharf, London,
England E14 4BB), (viii) Barclays Capital Investments (5 The North
Colonmade, Canary Wharf, London, England E14 4BB), (ix) Barclays Private
Bank & Trust (Isle of Man) Limited (4th Floor, Queen Victoria House,
Isle of Man, IM99 IDF), (x) Barclays Private Bank and Trust (Jersey)
Limited (39/41 Broad Street, St. Helier, Jersey, Channel Islands JE4
8PU) and (xi) Barclays Private Bank and Trust Limited (Sussie) (10 rue
d'Italie, CH-1204 Geneva, Switzerland) are deemed to be the beneficial
owners of an aggregate of 2,937,309 shares of Common Stock as a result
of them holding shares of Common Stock in trust accounts for the
economic benefit of the beneficiaries of those accounts.
(2) Based on number of shares beneficially owned by Mr. and Mrs. Grosfeld
as of March 28, 2003.
(3) Based on information contained in a Schedule 13G filed with the SEC on
February 11, 2003. According to such Schedule 13G, Capital Guardian
Trust Company is deemed to be the beneficial owner of 2,641,930 shares
of Common Stock as a result of its serving as the investment manager of
various institutional accounts.
Stock Beneficially Owned by Directors, Director Nominees and Officers
The following table sets forth the beneficial ownership of the
Company's Common Stock, as of March 31, 2003, by (i) each director and
director nominee of the Company, (ii) each executive officer of the Company
and (iii) all directors, director nominees and executive officers as a group.
Unless otherwise indicated, such shares of Common Stock are owned directly and
the indicated person has sole voting power or investment power over the shares
of Common Stock shown.
The number of shares of Common Stock shown in the following security
ownership table as beneficially owned by each director and executive officer
is determined under the rules of the SEC and the information is not
necessarily indicative of beneficial ownership for any other purpose. For
purposes of the following table, beneficial ownership includes any shares of
Common Stock as to which the individual has sole or shared voting power or
investment power and also any shares of Common Stock that the individual has
the right to acquire within 60 days of March 31, 2003 through the exercise of
any option, warrant or right. As of March 31, 2003, there were 47,731,318
shares of Common Stock outstanding.
Number of Shares of
Common Stock
Name Beneficially Owned (1) Percent of Class
---- ---------------------- ----------------
Laurence D. Fink............................................. 75,842 *
Hugh R. Frater............................................... 377,000 *
David M. Applegate........................................... 64 *
Donald G. Drapkin............................................ 21,315 *
Carl F. Geuther.............................................. 21,315 *
Jeffrey C. Keil.............................................. 21,315 *
Leon T. Kendall (2).......................................... 78,030 *
Kendrick R. Wilson, III...................................... 21,315 *
Richard M. Shea.............................................. 232,625 *
Robert L. Friedberg.......................................... 28,025 *
Chris A. Milner.............................................. 188,650 *
Daniel P. Sefcik............................................. 58,320 *
Mark S. Warner............................................... 118,000 *
Alexander K. Zabik........................................... 12,413 *
All directors, director nominees and executive
officers as a group (14 persons)............................. 1,254,229 2.63%
* The number of shares of Common Stock held by such individual is less
than 1% of the outstanding shares of Common Stock.
(1) Includes shares of Common Stock issuable upon the exercise of options
that are currently exercisable or that will become exercisable within 60
days of March 31, 2003. Such shares of Common Stock are held as follows:
Mr. Fink (35,842); Mr. Frater (300,000); Mr. Drapkin (20,000); Mr.
Geuther (20,000); Mr. Keil (20,000); Mr. Kendall (30,800); Mr. Wilson
(20,000); Mr. Shea (200,000); Mr. Milner (175,000); Mr. Sefcik (55,000);
Mr. Warner (115,000) and Mr. Zabik (10,000).
(2) Includes 25,160 shares of Common Stock issuable upon conversion of
17,198 shares of 10% Series B Cumulative Redeemable Convertible
Preferred Stock ("Series B Preferred Stock") that are held by Mr.
Kendall. The Series B Preferred Stock is convertible into shares of
Common Stock at any time at the option of its holders.
EXECUTIVE COMPENSATION
Summary of Compensation
During the fiscal year ended December 31, 2002, the Company did not
pay any cash compensation to its executive officers but may, in the future,
pay annual compensation to the Company's executive officers for their services
as executive officers. The Company may from time to time, at the discretion of
the Compensation Committee of the Board of Directors, grant options to
purchase shares of the Company's Common Stock to the Company's executive
officers pursuant to the 1998 Stock Option Plan.
Stock Options and Stock Appreciation Rights
There was no grant of stock options or stock appreciation rights to
the Company's executive officers during the fiscal year ended December 31,
2002.
Exercise of Stock Options and Stock Appreciation Rights
The following table sets forth information concerning the exercise of
stock options during the fiscal year ended December 31, 2002 by the Company's
executive officers and the fiscal year-end value of their unexercised options.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES
Number of Securities
Underlying Value of Unexercised
Unexercised Options/ In-the-Money
Shares Acquired SARs at FY-End (#) Options/SARS at FY-End (1) ($)
on Value --------------------------- ------------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
--------------------------------------------------------------------------------------------------------------------------
Hugh R. Frater 0 $ 0 300,000 0 $ 0 $ 0
Richard M. Shea 30,000 80,716 200,000 0 0 0
Chris M. Milner 50,000 134,527 175,000 0 61,500 0
Daniel P. Sefcik 25,000 67,263 55,000 0 61,500 0
Robert L. Friedberg 50,000 155,527 0 0 0 0
Mark S. Warner 0 0 115,000 0 36,900 0
Alexander K. Zabik 20,000 53,810 10,000 0 24,600 0
(1) The fair market value of a share of Common Stock on December 31, 2002
was $10.90, which corresponds to its closing price on the New York Stock
Exchange on December 31, 2002. The value of the unexercised in-the-money
options is calculated by multiplying (A) the number of securities
underlying such options by (B) the difference between (i) $10.90 (the
closing price of the Common Stock on the New York Stock Exchange on
December 31, 2002) and (ii) the option exercise price.
1998 Stock Option Plan
On March 23, 1998, the Company adopted a stock option plan (the "1998
Stock Option Plan") that provides for the grant of both qualified incentive
stock options ("ISOs") that meet the requirements of Section 422 of the
Internal Revenue Code and non-qualified stock options, stocks appreciation
rights and dividend equivalent rights (collectively, "Awards"). Awards other
than ISOs may be granted to (i) any employee or director of the Company, any
subsidiary of the Company or the Manager, (ii) the Manager or (iii) any other
individual or entity performing services for the Company or a subsidiary. ISOs
may be granted to officers and key employees of the Company. The exercise
price for any option granted under the 1998 Stock Option Plan may not be less
than 100% of the fair market value of the shares of Common Stock at the time
the option is granted.
As of December 31, 2002, net of terminated options, the Company
granted options to purchase up to 1,743,242 shares of Common Stock,
predominantly to directors and executive officers of the Company.
Subject to anti-dilution provisions for stock splits, stock dividends
and similar events, the 1998 Stock Option Plan authorizes the grant of options
to purchase up to an aggregate of 2,470,453 shares of the Company's Common
Stock. If an option granted under the 1998 Stock Option Plan expires or
terminates, the shares of Common Stock subject to any unexercised portion of
that option will again become available for the issuance of further options
under the 1998 Stock Option Plan. Unless previously terminated by the Board of
Directors, the 1998 Stock Option Plan will terminate ten years from its
effective date, and no options may be granted under the 1998 Stock Option Plan
thereafter.
The 1998 Stock Option Plan is administered by a committee of the
Board of Directors comprised entirely of Unaffiliated Directors, referred to
as the Compensation Committee. Options granted under the 1998 Stock Option
Plan become exercisable in accordance with the terms of the grant made by the
Compensation Committee. The Compensation Committee has discretionary authority
to determine at the time an option is granted whether it is intended to be an
ISO or a non-qualified option, and when and in what increments shares of
Common Stock covered by the option may be purchased. If stock options are
proposed to be granted to the Unaffiliated Directors, then the full Board of
Directors must first approve such grants.
Generally, each option must terminate no more than ten years from the
date it is granted. Options may be granted on terms providing that they will
be exercisable in whole or in part at any time or times during their
respective terms, or only in specified percentages at stated time periods or
intervals during the term of the option.
The exercise price of any option granted under the 1998 Stock Option
Plan is payable in full (i) in cash, (ii) by surrender of shares of the
Company's Common Stock having a market value equal to the aggregate exercise
price of all shares to be purchased, (iii) by cancellation of indebtedness
owed by the Company to the option holder, (iv) pursuant to procedures approved
by the Company through a broker-dealer, (v) if approved by the Compensation
Committee, by a full recourse promissory note executed by the option holder or
(vi) by any combination of the foregoing. The terms of the promissory note may
be changed from time to time by the Company's Board of Directors to comply
with applicable regulations or other relevant pronouncements of the Internal
Revenue Service or the SEC.
The Company's Board of Directors may, without affecting any
outstanding options, from time to time revise or amend the 1998 Stock Option
Plan, and may suspend or discontinue it at any time. However, no such revision
or amendment may increase the number of shares of common stock subject to the
1998 Stock Option Plan (with the exception of adjustments resulting from
changes in capitalization) without stockholder approval.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee is presently comprised of Messrs. Wilson,
Drapkin and Keil, none of which were officers or employees of the Company
during the fiscal year ended December 31, 2002 or before.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth certain information relating to the
Company's equity compensation plans as of December 31, 2002:
Number of securities
Number of securities remaining available for
to be issued Weighted-average future issuance under
upon exercise of exercise price of equity compensation plans
outstanding options, outstanding options, (excluding securities
Plan Category warrants and rights warrants and rights reflected in column (a))
------------- -------------------- -------------------- ------------------------
(a) (b) (c)
Equity compensation
plans approved by
security holders (1).............. 1,468,144 14.53 727,211
Equity compensation
plans not approved by
security holders................... N/A N/A N/A
Total................ 1,468,144(2) 14.53(2) 727,211
---------------------
(1) Represents shares authorized for issuance under the 1998 Stock Option Plan.
(2) Excludes information for options assumed by the Company in connection
with its acquisition of CORE Cap, Inc. on May 15, 2000. As of December
31, 2002, a total of 92,398 shares of the Company's Common Stock were
issuable upon the exercise of outstanding options assumed in the
acquisition. The weighted average exercise price of those outstanding
options is $13.84 per share of Common Stock. No additional options may
be granted in the future pursuant to the plan under which these options
were assumed.
THE MANAGER
The Manager is a wholly-owned subsidiary of BlackRock, Inc., which is
listed for trading on the New York Stock Exchange under the symbol "BLK."
BlackRock, Inc. is 69% owned by PNC Bank, National Association, which is
itself a wholly-owned subsidiary of PNC Financial Services Group, Inc. (NYSE:
PNC). Established in 1988, the Manager is a registered investment adviser
under the Investment Advisers Act of 1940, as amended, and is one of the
largest investment management firms in the United States.
COMPLIANCE WITH SECTION 16(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons beneficially owning more than ten percent of a
registered class of the Company's equity securities to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the SEC and the
New York Stock Exchange. These persons are also required to furnish the
Company with copies of all Forms 3, 4 and 5 that they file.
Based solely on the Company's review of the copies of such forms it
has received, the Company believes that all its executive officers, directors
and greater than ten percent beneficial owners complied with all filing
requirements applicable to them with respect to transactions during the fiscal
year ended December 31, 2002.
PROPOSAL 2
RATIFICATION OF INDEPENDENT AUDITORS
Proposed Independent Auditor
Deloitte & Touche LLP, independent certified public accountants, has
served as independent auditors of the Company and its subsidiaries for the
fiscal year ended December 31, 2002. The Audit Committee of the Board of
Directors has appointed Deloitte & Touche LLP to be the Company's independent
auditors for the fiscal year ending December 31, 2003 and has further directed
that the selection of the independent auditors be submitted for ratification
by the stockholders at the Annual Meeting.
Representatives of Deloitte & Touche LLP will be present at the
Annual Meeting, will be given the opportunity to make a statement, if they so
desire, and will be available to respond to appropriate questions from
stockholders.
Recommendation of the Board of Directors
The Board of Directors recommends a vote FOR the ratification of the
appointment of Deloitte & Touche LLP as the independent auditors for the
Company for the fiscal year ending December 31, 2003.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Relationship between the Company and the Manager
The Manager is a wholly-owned subsidiary of BlackRock, Inc.
BlackRock, Inc. is 69% owned by PNC Bank, National Association, which is
itself a wholly-owned subsidiary of PNC Financial Services Group, Inc. The
Manager, subject to the supervision of the Board of Directors, is responsible
for the day-to-day operations of the Company pursuant to a Management
Agreement. The Management Agreement was extended in March 2003 for one year
through March 31, 2004. The following table summarizes all compensation, fees
and other benefits (including reimbursement of out-of-pocket expenses) that
the Manager may earn or receive under the terms of the Management Agreement.
Recipient Payor Amount
-------------------------------------------------------------------------------------------------------
Manager Company Base management fee equal to a percentage of the average invested
assets by rating category of the Company(1)
Manager Company Incentive compensation based on the amount, if any, by which the
Company's GAAP earnings exceed a hurdle rate
Manager Company Out-of-pocket expenses of Manager paid to third parties(2)
(1) The base management fee is equal to 1% per annum of average invested
assets rated less than BB- or not rated, 0.75% of average invested
assets rated BB- through BB+ and 0.20% of average invested assets rated
above BB+.
(2) The Manager may engage PNC Bank, Midland Loan Services, Inc.
("Midland"), a wholly-owned subsidiary of PNC Bank, or unaffiliated
third parties to conduct due diligence with respect to potential
portfolio investments and to provide certain other services.
Accordingly, a portion of the out-of-pocket expenses may be paid to PNC
Bank or Midland in such capacities. The Company's guidelines require
the contract for such engagement to be conducted at arm's length, as
evidenced by documentation provided by the Manager to the Board of
Directors. PNC Bank and Midland are paid fees and out-of-pocket
expenses as would customarily be paid to unaffiliated third parties for
such services.
The base management fee is intended to compensate the Manager for its
costs in providing management services to the Company. The Board of Directors
of the Company may adjust the base management fee with the consent of the
Manager in the future if necessary to align the fee more closely with the
costs of such services.
Prior to July 1, 2001, the Manager was entitled to receive incentive
compensation for each fiscal quarter in an amount equal to the product of (A)
25% of the dollar amount by which (1)(a) Funds From Operations (as defined
below) of the Company (before the incentive fee) per share of Common Stock
(based on the weighted average number of shares outstanding) plus (b) gains
(or minus losses) from debt restructuring and sales of property per share of
Common Stock (based on the weighted average number of shares outstanding),
exceed (2) an amount equal to (a) the weighted average of the price per share
of Common Stock in the initial offering and the prices per share of Common
Stock in any secondary offerings by the Company multiplied by (b) the Ten-Year
U.S. Treasury Rate (as defined below) plus three and one-half percent per
annum (expressed as a quarterly percentage) multiplied by (B) the weighted
average number of shares of Common Stock outstanding during such quarter.
Notwithstanding the foregoing, accrual and payment of any portion of the
incentive compensation that is attributable to net capital gains of the
Company will be delayed to the extent, if any, required by the Investment
Advisors Act of 1940, as amended. "Funds From Operations" as defined by the
National Association of Real Estate Investment Trusts means net income
computed in accordance with generally accepted accounting principles ("GAAP")
excluding gains (or losses) from debt restructuring and sales of property,
plus depreciation and amortization on real estate assets, and after
adjustments for unconsolidated partnerships and joint ventures. Funds From
Operations does not represent cash generated from operating activities in
accordance with GAAP and should not be considered as an alternative to net
income as an indication of the Company's performance or to cash flows as a
measure of liquidity or ability to make distributions. As used in calculating
the Manager's compensation, the term "Ten-Year U.S. Treasury Rate" means the
arithmetic average of the weekly average yield to maturity for actively traded
current coupon U.S. Treasury fixed interest rate securities (adjusted to
constant maturities of ten years) published by the Federal Reserve Board
during a quarter, or if such rate is not published by the Federal Reserve
Board, any Federal Reserve Bank or agency or department of the federal
government selected by the Company.
Effective July 1, 2001, the Manager revised the hurdle rate
applicable to the incentive fee from 3.5% over the Ten-Year U.S. Treasury Rate
to the greater of 3.5% over the Ten-Year U.S. Treasury Rate or 9.5% on the
adjusted issue price of the Common Stock. Additionally, on March 25, 2002, the
Management Agreement was extended for one year through March 27, 2003, with
the unanimous approval of the Unaffiliated Directors, on terms similar to the
prior agreement with the following changes: (i) the incentive fee calculation
would be based upon GAAP earnings instead of Funds From Operations, (ii) the
removal of the four year period to value the Management Agreement in the event
of termination and (iii) subsequent renewal periods of the Management
Agreement would be for one year instead of two years.
On March 6, 2003, the Unaffiliated Directors approved an extension of
the Management Agreement from its expiration of March 27, 2003 for one year
through March 31, 2004. The terms of the renewed agreement are similar to the
prior agreement except for the incentive fee calculation which would provide
for a rolling four-quarter high watermark rather than a quarterly calculation.
In determining the rolling four-quarter high watermark, the Manager would
calculate the incentive fee based upon the current and prior three quarters'
net income (the "Yearly Incentive Fee"). The Manager would be paid an
incentive fee in the current quarter if the Yearly Incentive Fee is greater
than what was paid to the Manager in the prior three quarters cumulatively.
The Company will phase in the rolling four-quarter watermark commencing with
the second quarter of 2003. Calculation of the incentive fee will be based on
GAAP and adjusted to exclude special one-time events pursuant to changes in
GAAP accounting pronouncements after discussion between the Manager and the
Unaffiliated Directors. The incentive fee threshold did not change. The high
watermark will be based on the existing incentive fee hurdle, which provides
for the Manager to be paid 25% of the amount of earnings (calculated in
accordance with GAAP) per share of Common Stock that exceeds the product of
the adjusted issue price per share of the Company's Common Stock ($11.39 as of
December 31, 2002) and the greater of 9.5% or 350 basis points over the
Ten-Year U.S. Treasury Rate.
For the year ended December 31, 2002, the Company paid the Manager
$9,332,000 in base management fees and $3,195,000 in incentive compensation.
In accordance with the provisions of the Management Agreement, the Company
recorded reimbursements to the Manager of $14,000 for certain expenses
incurred on behalf of the Company by the Manager during 2002.
In addition, for the year ended December 31, 2002, the Company paid
the Manager $168,000 pursuant to the terms of an administration agreement
between the Manager and the Company. Under the terms of the administration
agreement, the Manager provides financial reporting, audit coordination and
accounting oversight services. The Company pays the Manager a monthly
administrative fee at an annual rate of 0.06% of the first $125 million of
average net assets, 0.04% of the next $125 million of average net assets and
0.03% of average net assets in excess of $250 million subject to a minimum
annual fee of $120,000.
Relationship Between the Manager and the Company's Directors and
Executive Officers
In addition to being Chairman of the Board of Directors of the
Company, Laurence D. Fink is Chairman of the Board of Directors and Chief
Executive Officer of the Manager. Hugh R. Frater is a Managing Director of the
Manager, as well as President and Chief Executive Officer of the Company.
Richard M. Shea is a Managing Director of the Manager in addition to his
position as Chief Operating Officer and Chief Financial Officer of the
Company. Similarly, each of the Company's executive officers also serves as an
officer of the Manager.
Other Material Transactions Between the Company and the Manager
On July 20, 2001, the Company entered into a $50 million commitment
to acquire shares in Carbon Capital, Inc. ("Carbon"), a private commercial
real estate income opportunity fund managed by the Manager. The period during
which the Company may be required to purchase shares under the commitment
expires in July 2004. On November 19, 2001, the Company received a capital
call notice to fund $8,784,000 of its Carbon investment, which was paid on
November 19, 2001. On October 30, 2002, the Company funded an additional
capital call notice in the amount of $6,100,000. The proceeds of the capital
calls were primarily used by Carbon to acquire commercial loans secured by
real estate or ownership interests in entities that own real estate. On
December 31, 2001, the Company owned 32.5% of the outstanding shares in
Carbon. In March 2002, Carbon obtained additional commitments from
unaffiliated institutional investors while the Company's commitment remained
unchanged. Accordingly, the Company's ownership was reduced from 32.5% to
18.8%. On December 30, 2002, the Company received dividends from its
investment of $1,089,000. The Company's remaining commitment at December 31,
2002 and 2001 was $35,116,000 and $41,216,000, respectively. On February 6,
2003, the Company funded an additional capital call notice in the amount of
$2,680,000, which was used by Carbon to acquire a mezzanine loan secured by
ownership interests in an entity that owns a mixed-use development.
On May 15, 2000, the Company completed the acquisition of CORE Cap,
Inc. The merger was a stock for stock acquisition where the Company issued
4,180,552 shares of its Common Stock and 2,261,000 shares of its Series B
Preferred Stock. At the time of the CORE Cap acquisition, the Manager agreed
to pay GMAC (CORE Cap, Inc.'s external advisor) $12,500,000 over a ten-year
period ("Installment Payment") to purchase the right to manage the assets
under the then existing management contract of CORE Cap, Inc. ("GMAC
Contract"). The GMAC Contract had to be terminated in order to allow for the
Company to complete the merger, as the Company's Management Agreement with the
Manager did not provide for multiple managers. As a result the Manager offered
to buy out the GMAC contract as the Manager estimated it would receive
incremental fees above and beyond the Installment Payment, and thus was
willing to pay for, and separately negotiate, the termination of the GMAC
Contract. Accordingly, the value of the Installment Payment was not considered
in the Company's allocation of its purchase price to the net assets acquired
in the acquisition of CORE Cap, Inc. The Company agreed that should the
Management Agreement with its Manager be terminated, not renewed or not
extended for any reason other than for cause, the Company would pay to the
Manager an amount equal to the Installment Payment less the sum of all
payments made by the Manager to GMAC. As of December 31, 2002, the Installment
Payment would be $9,500,000 payable over eight years. The Company does not
accrue for this contingent liability.
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return
on the Common Stock of the Company from March 24, 1998 (the date the Company
became a public company) through December 31, 2002, with the cumulative total
return of the Standard & Poor's 500 Stock Price Index (the "S&P 500"), the
Nasdaq Composite Index ("NASDAQ Composite") and the SNL All MBS REIT Index,
for the same period. The graph assumes the investment of $100 in the Common
Stock of the Company and in each index, for comparative purposes. Total return
equals appreciation in stock price plus dividends paid, and assumes that all
dividends are reinvested. The following information has been obtained from
sources believed to be reliable, but neither its accuracy nor its completeness
is guaranteed. The performance graph is not necessarily indicative of future
investment performance.
TOTAL RETURN PERFORMANCE
[Graph demonstrating comparative stockholder returns omitted from this filing.]
Period Ending
-------------------------------------------------------------------------------
Index 3/24/98 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
-------------------------------------------------------------------------------------------------------------------
Anthracite Capital, Inc. 100.00 55.31 55.42 78.52 125.73 140.43
S&P 500 100.00 112.44 136.10 123.70 109.01 84.80
NASDAQ Composite 100.00 120.60 224.47 136.52 108.10 74.33
SNL All MBS REIT Index (1) 100.00 68.48 46.50 55.89 98.00 127.07
(1) The SNL All MBS REIT Index currently comprises the following companies:
Anthracite Capital, Inc.; American Mortgage Acceptance Company; Anworth
Mortgage Asset Corporation; Apex Mortgage Capital, Inc.; BRT Realty Trust;
Capital Alliance Income Trust Ltd.; CRIIMI MAE Inc.; Capstead Mortgage
Corporation; Dynex Capital Inc.; Friedman, Billings, Ramsey Group, Inc.;
Hanover Capital Mortgage Holdings, Inc.; Impac Mortgage Holdings, Inc.;
American Residential Investment Trust, Inc.; MFA Mortgage Investments, Inc.;
Newcastle Investment Corp.; NovaStar Financial, Inc.; Annaly Mortgage
Management, Inc.; RAIT Investment Trust; Redwood Trust, Inc.; iStar Financial
Inc.; Thornburg Mortgage, Inc. and American Church Mortgage Company.
In accordance with the rules of the SEC, this section entitled
"Performance Graph" shall not be incorporated by reference into any future
filings by the Company under the Securities Act or the Exchange Act, and shall
not be deemed to be soliciting material or to be filed under the Securities
Act or the Exchange Act.
INDEPENDENT AUDITORS
At its meeting on January 23, 2003, the Audit Committee of the Board
of Directors appointed Deloitte & Touche LLP to serve as the Company's
independent auditors for fiscal year ending December 31, 2003. Representatives
of Deloitte & Touche LLP are expected to be present at the Annual Meeting and
will have an opportunity to make a statement if they so desire and will be
available to respond to appropriate questions of stockholders.
The Audit Committee considered the non-audit services provided by
Deloitte & Touche LLP and determined that the provision of such services was
compatible with maintaining Deloitte & Touche LLP's independence. Deloitte &
Touche LLP, the members of Deloitte Touche Tohmatsu and their respective
affiliates (collectively, "Deloitte") billed the following:
Audit Fees
The aggregate fees billed by Deloitte for professional services
rendered for the audit of the Company's annual financial statements for the
fiscal year ended December 31, 2002 and for the reviews of the financial
statements included in the Company's Quarterly Reports on Form 10-Q for that
fiscal year were $366,000.
Financial Information Systems Design and Implementation Fees
Deloitte did not provide the Company with any professional services
for information technology services relating to financial information systems
design and implementation for the fiscal year ended December 31, 2002.
All Other Fees
The aggregate fees billed by Deloitte for services rendered to the
Company, other than the services described above, for the fiscal year ended
December 31, 2002 were $97,000, primarily for income tax return preparation
and related consultations, acquisition transactions, equity offerings and
assistance. The Company's Audit Committee has determined that the provision of
these services is compatible with maintaining Deloitte's independence.
STOCKHOLDER PROPOSALS FOR 2004 ANNUAL MEETING
Proposals received from stockholders are given careful consideration
by the Company in accordance with Rule 14a-8 under the Exchange Act.
Stockholder proposals are eligible for consideration for inclusion in the
proxy statement for the 2004 annual meeting of stockholders if they are
received by the Company on or before December 27, 2003. Any proposal should be
directed to the attention of the Company's Secretary at 40 East 52nd Street,
New York, New York 10022. In order for a stockholder proposal submitted
outside of Rule 14a-8 to be considered "timely" within the meaning of Rule
14a-4(c), such proposal must be received by the Company not later than the
last date for submission of stockholder proposals under the Company's By-Laws.
In order for a proposal to be "timely" under the Company's By-Laws, it must be
received not later than the close of business on the 60th day (March 21, 2004)
nor earlier than the close of business on the 90th day (February 20, 2004)
before the first anniversary of the Annual Meeting; provided, however, that in
the event that the date of the 2004 annual meeting of stockholders is advanced
by more than 30 days or delayed by more than 60 days from such anniversary
date, a proposal by the stockholders to be timely must be received not earlier
than the close of business on the 90th day before such meeting and not later
than the close of business on the later of the 60th day before such meeting or
the 10th day after the day on which public announcement of the date of such
meeting is first made by the Company.
OTHER MATTERS
The Board of Directors knows of no other business to be brought
before the Annual Meeting. If any other matters properly comes before the
Annual Meeting, including a proposal omitted from this Proxy Statement in
accordance with Rule 14a-8 under the Exchange Act, the proxies will be voted
on such matters in accordance with the judgment of the persons named as
proxies therein, or their substitutes, present and acting at the meeting.
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement, and, if given or made,
such information or representation should not be relied upon as having been
authorized. The delivery of this Proxy Statement shall not, under any
circumstances, imply that there has not been any change in the information set
forth herein since the date of the Proxy Statement.
ADDITIONAL INFORMATION
The SEC has adopted rules that permit companies and intermediaries
such as brokers to satisfy delivery requirements for proxy statements with
respect to two or more stockholders sharing the same address by delivering a
single proxy statement addressed to those stockholders. This process, which is
commonly referred to as "householding," potentially provides extra convenience
for stockholders and cost savings for companies. The Company and some brokers
household proxy materials, delivering a single proxy statement to multiple
stockholders sharing an address unless contrary instructions have been
received from the affected stockholders. Once you have received notice from
your broker or the Company that they or the Company will be householding
materials to your address, householding will continue until you are notified
otherwise or until you revoke your consent. If, at any time, you no longer
wish to participate in householding and would prefer to receive a separate
proxy statement, please notify your broker if your shares are held in a
brokerage account or the Company if you hold registered shares. You can notify
the Company by sending a written request to Anthracite Capital, Inc., 40 East
52nd Street, New York, New York 10022, Attention: Secretary.
By Order of the Board of Directors,
/s/ Laurence D. Fink
Laurence D. Fink
Chairman of the Board of Directors
New York, New York
April 25, 2003
ANNUAL MEETING OF STOCKHOLDERS OF
ANTHRACITE CAPITAL, INC.
May 20, 2003
Please mark, sign, date, and mail
your proxy card in the
envelope provided as soon
as possible.
Please detach and mail in the envelope provided.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS:
PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE |X|
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FOR AGAINST ABSTAIN
1. Election of Directors 2. Proposal to ratify the appointment of |_| |_| |_|
NOMINEES Deloitte & Touche LLP as independent
|_| FOR ALL NOMINEES auditors for the fiscal year ending
|_| WITHHOLD AUTHORITY ( ) Laurence D. Fink December 31, 2003.
FOR ALL NOMINEES ( ) Kendrick R. Wilson, III
|_| FOR ALL EXCEPT
(See instructions below)
This Proxy when properly executed will be voted in
the manner directed herein by the undersigned
stockholder. If no direction is indicated, this Proxy
will be voted FOR the election of each nominee listed in
Proposal 1 and FOR Proposal 2.
This Proxy may be revoked at any time prior to the
time voting is declared closed by giving the Secretary of
ANTHRACITE CAPITAL, INC. written notice of revocation or
a subsequently dated proxy, or by casting a ballot at the
Annual Meeting or any adjournment thereof.
The undersigned hereby acknowledges receipt of the
Notice of Annual Meeting and accompanying Proxy
Statement.
INSTRUCTION: To withhold authority to vote for any individual TO INCLUDE ANY COMMENTS, USE THE COMMENTS BOX ON THE
nominee(s), mark "FOR ALL EXCEPT" and fill in REVERSE SIDE HEREOF.
the circle next to each nominee you wish to
withhold, as shown here: (X)
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PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY IN
THE ENVELOPE PROVIDED.
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To change the address on your account, please check the
box at right and indicate your new address in the address
space above. Please note that changes to the registered
name(s) on the account may not be submitted via this
method. |_|
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Signature of Stockholder _______________ Date: _______________ Signature of Stockholder _________________ Date:_____________
Note: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full
corporate name by duly authorized officer, giving full title as such. If
signer is a partnership, please sign in partnership name by authorized
person.
ANTHRACITE CAPITAL, INC.
PROXY - ANNUAL MEETING OF STOCKHOLDERS, MAY 20, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
RICHARD M. SHEA and ROBERT L. FRIEDBERG and each of them, are hereby
appointed as the proxies of the undersigned, with full power of substitution
on behalf of the undersigned to vote, as designated on the reverse side, all
the shares of common stock of the Company held of record on March 31, 2003 by
the undersigned at the Annual Meeting of Stockholders of ANTHRACITE CAPITAL,
INC., to be held at the Omni Berkshire Place, 21 East 52nd Street, Second
Floor, New York, New York 10022 at 10:00 A.M., on Tuesday, May 20, 2003 and
all adjournments thereof and in their discretion, upon any matter that may
properly come before the Annual Meeting or any adjournment thereof, in
accordance with their best judgment.
(Continued and to be signed on the reverse side)
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COMMENTS:
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