Filed Pursuant to Rule 424(b)(5)
Registration No. 333-69848
PROSPECTUS SUPPLEMENT
(To Prospectus Dated April 29, 2002)
ANTHRACITE CAPITAL, INC.
4,000,000 SHARES
COMMON STOCK
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We have entered into a sales agency agreement with each of UBS Warburg LLC
and Brinson Patrick Securities Corporation relating to shares of our common
stock, par value $0.001 per share, offered by this prospectus supplement
and the accompanying prospectus. In accordance with the terms of the sales
agency agreements, we may offer and sell an aggregate of up to 4,000,000
shares of our common stock from time to time through either UBS Warburg LLC
or Brinson Patrick, as our sales agents. Sales of the shares, if any, will
be made by means of ordinary brokers' transactions on the New York Stock
Exchange at market prices. Our common stock is listed on the New York Stock
Exchange under the symbol "AHR". On May 16, 2002, the last reported sales
price of our common stock on the New York Stock Exchange was $12.68 per
share.
Brinson Patrick will receive from us a commission of 2.0%, and UBS Warburg
LLC will receive from us a commission of 3.0%, based, in each case, on the
gross sales price per share for any shares sold through them as agent under
the applicable sales agency agreement.
-------------------------
Before buying any of these shares of our common stock, you should carefully
consider the risk factors described in "Risk Factors" beginning on page 5
of the accompanying prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
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UBS Warburg Brinson Patrick
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This Prospectus Supplement is dated May 17, 2002.
You should rely on the information contained in or incorporated by
reference into this prospectus supplement and the accompanying prospectus.
We have not, and the agents have not, authorized any other person to
provide you with different information. If anyone provides you with
different or inconsistent information, you should not rely on it. We are
not, and the agents are not, making an offer to sell these securities in
any jurisdiction where the offer or sale is not permitted. The information
in this prospectus supplement and the accompanying prospectus is current as
of the date such information is presented. Our business, financial
condition, results of operations and prospects may have changed since such
dates.
TABLE OF CONTENTS
Prospectus Supplement Prospectus
Plan of distribution............S-2 About this prospectus........................... 3
Use of Proceeds.................S-2 Where you can find more information............. 3
Cautionary statement concerning
forward-looking statements............. 4
Anthracite Capital, Inc. and the Manager........ 4
Risk factors.................................... 5
Use of proceeds................................. 10
Ratio of earning to fixed charges............... 10
Ratio of earnings to combined fixed charges
and preferred stock dividends.......... 11
Description of securities....................... 11
Description of capital stock.................... 11
Description of debt securities.................. 19
Federal income tax considerations............... 25
Plan of distribution............................ 38
Legal opinions.................................. 38
Experts......................................... 39
USE OF PROCEEDS
We intend to use the net proceeds of this offering primarily to orginate and
acquire loans secured by commercial real estate and whole-pool residential
mortgage-backed securities.
PLAN OF DISTRIBUTION
We have entered into a sales agency agreement with each of UBS Warburg LLC
and Brinson Patrick Securities Corporation under which we may issue and
sell an aggregate of up to 4,000,000 shares of our common stock from time
to time through either UBS Warburg LLC or Brinson Patrick, as our sales
agents. Sales of the shares, if any, will be made by means of ordinary
brokers' transactions on the New York Stock Exchange at market prices.
UBS Warburg LLC and Brinson Patrick will offer the shares of common stock
subject to the sales agency agreement on a daily basis or as otherwise
agreed upon by us and UBS Warburg LLC and Brinson Patrick. We will
designate the maximum amount of shares of common stock to be sold through
either UBS Warburg LLC or Brinson Patrick on a daily basis or otherwise as
we and the agents agree. Subject to the terms and conditions of the sales
agency agreements, UBS Warburg LLC and Brinson Patrick will each use its
reasonable efforts to sell on our behalf all of the designated shares of
common stock. We may instruct either agent not to sell shares of common
stock if the sales cannot be effected at or above the price designated by
us in any such instruction. We or either of the agents with respect to
sales by it under the sales agency agreement may suspend the offering of
shares of common stock upon proper notice and subject to other conditions.
Each of the agents will provide written confirmation to us following the
close of trading on the New York Stock Exchange each day in which shares of
common stock are sold by it for us under the sales agency agreement. Each
confirmation will include the number of shares sold on that day, the net
proceeds to us and the compensation payable by us to such agent.
Brinson Patrick will receive from us a commission equal to 2.0%, and UBS
Warburg LLC will receive from us a commission equal to 3.0%, in each case,
of the gross sales price per share for any shares sold through it as agent,
as set forth in the applicable sales agency agreement. The remaining sales
proceeds, after deducting any expenses payable by us and any transaction
fees imposed by any governmental or self-regulatory organization in
connection with the sales, will equal our net proceeds for the sale of the
shares.
Settlement for sales of common stock will occur on the third business day
following the date on which any sales were made in return for payment of
the net proceeds to us. There is no arrangement for funds to be received in
an escrow, trust or similar arrangement.
We will deliver to the New York Stock Exchange the number of copies of this
prospectus supplement that are required by the exchange. We will report at
least quarterly the number of shares of common stock sold through either
UBS Warburg LLC or Brinson Patrick, the net proceeds to us and the
compensation paid by us to either agent in connection with the sales of
common stock. Each of UBS Warburg LLC and Brinson Patrick will act as sales
agent on a reasonable efforts basis.
In connection with the sale of the common stock on our behalf, UBS Warburg
LLC and Brinson Patrick may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, and the compensation paid to either
agent may be deemed to be underwriting commissions or discounts. We have
agreed to provide indemnification and contribution to UBS Warburg LLC and
Brinson Patrick against certain civil liabilities, including liabilities
under the Securities Act. Either of UBS Warburg LLC or Brinson Patrick may
engage in transactions with, or perform other services for, us in the
ordinary course of business.
If we or either of the agents have reason to believe that the exemptive
provisions set forth in Rule 101(c)(1) of Regulation M under the Securities
Exchange Act of 1934 are not satisfied, that party will promptly notify the
others and sales of common stock under the sales agency agreement will be
suspended until that or other exemptive provisions have been satisfied in
the judgment of the agents and our company.
The offering of common stock pursuant to a sales agency agreement will
terminate upon the earlier of (i) the sale of all shares of common stock
subject to the agreement, (ii) May 15, 2003, and (iii) with respect to
either agent, the termination of the sales agency agreement with respect to
such agent.
PROSPECTUS
$371,975,600
ANTHRACITE CAPITAL, INC.
COMMON STOCK, PREFERRED STOCK, DEBT SECURITIES AND WARRANTS
_______________________
Anthracite Capital, Inc. may sell to the public:
- common stock
- preferred stock
- debt securities
- warrants to purchase common stock
- warrants to purchase preferred stock
References in this prospectus to "Anthracite," "we," "us," or
"our" refer to Anthracite Capital, Inc. Prior to January 1998, our name was
Anthracite Mortgage Capital, Inc.
We urge you to read this prospectus and the accompanying
prospectus supplement, which will describe the specific terms of the common
stock, the preferred stock, the debt securities and the warrants, carefully
before you make your investment decision.
AN INVESTMENT IN THE SECURITIES BEING OFFERED INVOLVES SIGNIFICANT
RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 5.
_______________________
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or
determined if this prospectus or the accompanying prospectus supplement is
truthful or complete. Any representation to the contrary is a criminal
offense.
_______________________
THIS PROSPECTUS MAY NOT BE USED TO SELL SECURITIES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
The date of this prospectus is April 29, 2002
TABLE OF CONTENTS
PAGE
----
About This Prospectus................................................................................3
Where You Can Find More Information..................................................................3
Cautionary Statement Concerning Forward Looking Statements...........................................4
Anthracite Capital And The Manager...................................................................4
Risk Factors.........................................................................................5
Use Of Proceeds......................................................................................10
Ratio Of Earnings To Fixed Charges...................................................................10
Ratio Of Combined Earnings to Fixed Charges And Preferred Stock Dividends............................11
Description of Securities............................................................................11
Description Of Capital Stock.........................................................................11
Description Of Debt Securities.......................................................................19
Federal Income Tax Considerations....................................................................25
Plan Of Distribution.................................................................................38
Legal Opinions.......................................................................................38
Experts..............................................................................................39
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed
with the Securities and Exchange Commission using a "shelf" registration
process. Under this shelf process, we may sell any combination of the
securities described in this prospectus in one of more offerings up to a
total dollar amount of proceeds of $371,975,600. This prospectus provides
you with a general description of the securities we may offer. Each time we
sell securities, we will provide a prospectus supplement that will contain
specific information about the terms of that offering. The prospectus
supplement may also add, update or change information contained in this
prospectus. You should read both this prospectus and any prospectus
supplement together with additional information described under the heading
"Where You Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements, and other information with the
SEC. Such reports, proxy statements, and other information concerning us
can be read and copied at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330
for further information on the Public Reference Room. The SEC maintains an
Internet site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the SEC, including ours. Our common stock is listed and
traded on the New York Stock Exchange. These reports, proxy statements and
other information are also available for inspection at the offices of the
NYSE, 20 Broad Street, New York, New York 10005.
This prospectus is part of a registration statement filed with the
SEC by us. The full registration statement can be obtained from the SEC as
indicated above, or from us.
The SEC allows us to "incorporate by reference" the information we
file with the SEC. This permits us to disclose important information to you
by referencing these filed documents. Any information referenced this way
is considered part of this prospectus, and any information filed with the
SEC subsequent to this prospectus will automatically be deemed to update
and supersede this information. We incorporate by reference the following
documents which we have filed with the SEC (File No. 1-13937) under the
Securities Exchange Act of 1934 (the "Exchange Act"), and these documents
are incorporated herein by reference:
o Our Annual Report on Form 10-K for the fiscal year ended December
31, 2001, as amended by our annual Report on Form 10-K/A filed on
April 29, 2002;
o Our Current Report on Form 8-K filed on April 29, 2002;
o Our Current Report on Form 8-K filed on February 13, 2002;
o Our Definitive Proxy Statement filed on April 17, 2002; and
o The description of the common stock contained in our registration
statement on Form 8-A, filed on March 9, 1998, under the Exchange
Act, including any amendment or report filed to update the
description.
We incorporate by reference the documents listed above and any
future filings made with the SEC pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act from the date of this prospectus until we file a
post-effective amendment which indicates the termination of the offering of
the securities made by this prospectus.
Any statement contained in a document incorporated or considered
to be incorporated by reference in this prospectus shall be considered to
be modified or superseded for purposes of this prospectus to the extent
that a statement contained in this prospectus or in any subsequently filed
document that is or is considered to be incorporated by reference modifies
or supersedes the statement. Any statement that is so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
We will provide without charge upon written or oral request, a
copy of any or all of the documents which are incorporated by reference to
this prospectus. You may direct your requests to Investor Relations,
Anthracite Capital, Inc., 40 East 52nd Street, New York, New York 10022
(telephone number (212) 409-3333).
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Some statements contained or incorporated by reference in this
registration statement constitute forward-looking statements as such term
is defined in Section 27A of the Securities Act and Section 21E of the
Exchange Act. Some factors could cause actual results to differ materially
from those in the forward-looking statements. Factors that might cause such
a material difference include, but are not limited to:
(a) changes in the general economic climate,
(b) termination of the management agreement,
(c) interest rate fluctuations,
(d) our failure to qualify as a REIT and
(e) general competitive factors.
ANTHRACITE CAPITAL, INC. AND THE MANAGER
Anthracite Capital, Inc., a Maryland corporation, was formed in
November 1997 to invest in multifamily, commercial and residential mortgage
loans, mortgage-backed securities and other real estate related assets in
both U.S. and non-U.S. markets. Our business focuses on (i) originating
high yield commercial real estate loans, which includes senior interests in
partnerships that own real property and are reported as real estate or
joint venture investments, (ii) investing in below investment grade
commercial mortgage backed securities where the Company has the right to
control the foreclosure/workout process on the underlying loans, and (iii)
acquiring investment grade real estate related securities. We have elected
to be taxed as a real estate investment trust ("REIT") under the Internal
Revenue Code of 1986, as amended (the "Code") beginning with our 1998
taxable year, and we will generally not be subject to federal income tax to
the extent that we distribute our net income to our stockholders and
qualify for taxation as a REIT. Our address is 40 East 52nd Street, New
York, New York 10022 and our Internet address is www.anthracitecapital.com.
The information on our Internet site is not part of this prospectus. Our
operations are managed by BlackRock Financial Management, Inc. which is
referred to in this prospectus as "BlackRock." We have no ownership
interest in BlackRock.
BlackRock is a subsidiary of PNC Bank, National Association, which
is itself a wholly owned subsidiary of the PNC Financial Services Group,
Inc. Established in 1988, BlackRock is a registered investment adviser
under the Investment Advisers Act of 1940 and is one of the largest
fixed-income investment management firms in the United States. BlackRock
engages in investment and risk management as its sole businesses and
specializes in the management of domestic and offshore fixed-income assets
for pension and profit sharing plans, financial institutions such as
banking and insurance companies and mutual funds for retail and
institutional investors. The address of BlackRock is 40 East 52nd Street,
New York, New York 10022 and BlackRock's Internet address is
www.blackrock.com. The information on BlackRock's Internet site is not part
of this prospectus.
RISK FACTORS
Conflicts of interest of BlackRock may result in decisions that do not
fully reflect stockholders' best interests.
Anthracite and BlackRock have common officers and directors, which
may present conflicts of interest in Anthracite's dealings with BlackRock
and its affiliates, including Anthracite's purchase of assets originated by
such affiliates. For example, Anthracite may purchase certain mortgage
assets from PNC Bank, which owns 70% of the outstanding capital stock of
BlackRock, Inc., the sole shareholder of BlackRock. PNC Bank will be able
to influence the investment decisions of Anthracite.
BlackRock and its employees may engage in other business
activities which could reduce the time and effort spent on the management
of Anthracite. BlackRock also provides services to REITs not affiliated
with us. As a result, there may be a conflict of interest between the
operations of BlackRock and its affiliates in the acquisition and
disposition of mortgage assets. In addition, BlackRock and its affiliates
may from time to time purchase mortgage assets for their own account and
may purchase or sell assets from or to Anthracite. Such conflicts may
result in decisions and allocations of mortgage assets by BlackRock that
are not in our best interests.
Although we have adopted investment guidelines, those guidelines
give BlackRock significant discretion in investing. Anthracite's investment
and operating policies and the strategies that BlackRock uses to implement
those policies may be changed at any time without the consent of
stockholders.
We are dependent on BlackRock and the termination by us of our management
agreement with BlackRock could result in a termination fee.
The management agreement between Anthracite and BlackRock provides
for base management fees payable to BlackRock without consideration of the
performance of Anthracite's portfolio and also provides for incentive fees
based on certain performance criteria, which could result in BlackRock
recommending riskier or more speculative investments. Termination of the
management agreement between Anthracite and BlackRock by Anthracite would
result in the payment of a substantial termination fee, which could
adversely affect Anthracite's financial condition. Termination of the
management agreement by Anthracite could also adversely affect Anthracite
if Anthracite were unable to find a suitable replacement.
Interest rate fluctuations will affect the value of our mortgage assets,
net income and common stock.
Interest rates are highly sensitive to many factors, including
governmental monetary and tax policies, domestic and international economic
and political considerations and other factors beyond our control. Interest
rate fluctuations can adversely affect the income and value of our common
stock in many ways and present a variety of risks, including the risk of a
mismatch between asset yields and borrowing rates, variances in the yield
curve and changing prepayment rates.
An interest rate mismatch could occur between asset yields and borrowing
rates resulting in decreased yield.
Our operating results depend in large part on differences between
the income from our assets (net of credit losses) and our borrowing costs.
We fund a substantial portion of our assets with borrowings which have
interest rates that reset relatively rapidly, such as monthly or quarterly.
We anticipate that, in most cases, the income from our assets will respond
more slowly to interest rate fluctuations than the cost of borrowings,
creating a potential mismatch between asset yields and borrowing rates.
Consequently, changes in interest rates, particularly short-term interest
rates, may significantly influence our net income. Increases in these rates
tend to decrease our net income and market value of our net assets.
Interest rate fluctuations that result in our interest expense exceeding
interest income would result in Anthracite incurring operating losses.
Interest rate caps on our mortgage-backed securities may adversely affect our
profitability.
Our adjustable-rate mortgage-backed securities are typically
subject to periodic and lifetime interest rate caps. Periodic interest rate
caps limit the amount an interest rate can increase during any given
period. Lifetime interest rate caps limit the amount an interest rate can
increase through maturity of a mortgage-backed security. Our borrowings are
not subject to similar restrictions. Accordingly, in a period of rapidly
increasing interest rates, we could experience a decrease in net income or
a net loss because the interest rates on our borrowings could increase
without limitation while the interest rates on our adjustable-rate
mortgage-backed securities would be limited by caps.
Because we acquire fixed-rate securities, an increase in interest rates may
adversely affect our profitability.
We also invest in fixed-rate mortgage-backed securities. In a
period of rising interest rates, our interest payments could increase while
the interest we earn on our fixed-rate mortgage-backed securities would not
change. This would adversely affect our profitability.
A disproportionate rise in short term interest rates as compared to long term
interest rates may adversely affect our income.
The relationship between short-term and long-term interest rates
is often referred to as the "yield curve." Ordinarily, short-term interest
rates are lower than long-term interest rates. If short-term interest rates
rise disproportionately relative to long-term interest rates (a flattening
of the yield curve), our borrowing costs may increase more rapidly than the
interest income earned on our assets. Because our borrowings will primarily
bear interest at short-term rates and our assets will primarily bear
interest at medium-term to long-term rates, a flattening of the yield curve
tends to decrease our net income and market value of our net assets.
Additionally, to the extent cash flows from long-term assets that return
scheduled and unscheduled principal are reinvested, the spread between the
yields of the new assets and available borrowing rates may decline and also
may tend to decrease the net income and market value of our net assets. It
is also possible that short-term interest rates may adjust relative to
long-term interest rates such that the level of short-term rates exceeds
the level of long-term rates (a yield curve inversion). In this case,
borrowing costs may exceed the interest income and operating losses could
be incurred.
Our assets include subordinated commercial mortgage-backed securities which
are subordinate in right of payment to more senior securities.
Our assets include a significant amount of subordinated commercial
mortgage-backed securities, which are the most subordinate class of
securities in a structure of securities secured by a pool of loans and
accordingly are the first to bear the loss upon a restructuring or
liquidation of the underlying collateral and the last to receive payment of
interest and principal. We may not recover the full amount or, in extreme
cases, any of our initial investment in such subordinated interests.
Additionally, market values of these subordinated interests tend to be more
sensitive to changes in economic conditions than more senior interests. As
a result, such subordinated interests generally are not actively traded and
may not provide holders thereof with liquidity of investment.
Our assets include mezzanine loans which have greater risks of loss than more
senior loans.
Our assets include a significant amount of mezzanine loans which
involve a higher degree of risk than long-term senior mortgage loans. In
particular, a foreclosure by the holder of the senior loan could result in
the mezzanine loan becoming unsecured. Accordingly, we may not recover some
or all of our investment in such a mezzanine loan. Additionally, the
Company may permit higher loan to value ratios on mezzanine loans than it
would on conventional mortgage loans when it is entitled to share in the
appreciation in value of the property securing the loan.
Prepayment rates can increase which would adversely affect yields on our
investments.
The yield on investments in mortgage loans and mortgage-backed
securities and thus the value of our common stock is sensitive to changes
in prevailing interest rates and changes in prepayment rates, which results
in a divergence between Anthracite's borrowing rates and asset yields,
consequently reducing income derived from our investments.
Our ownership of non-investment grade mortgage assets subjects us to an
increased risk of loss.
We acquire mortgage loans and non-investment grade mortgage-backed
securities, which are subject to greater risk of credit loss on principal
and non-payment of interest in contrast to investments in senior investment
grade securities.
Our mortgage loans are subject to certain risks.
We acquire, accumulate and securitize mortgage loans as part of
our investment strategy. While holding mortgage loans, we are subject to
risks of borrower defaults, bankruptcies, fraud and special hazard losses
that are not covered by standard hazard insurance. Also, the costs of
financing and hedging the mortgage loans can exceed the interest income on
the mortgage loans. In the event of any default under mortgage loans held
by us, we will bear the risk of loss of principal to the extent of any
deficiency between the value of the mortgage collateral and the principal
amount of the mortgage loan. In addition, delinquency and loss ratios on
Anthracite's mortgage loans are affected by the performance of third-party
servicers and special servicers.
We invest in multifamily and commercial loans which involve a greater risk
of loss than single family loans.
Our investments include multifamily and commercial real estate
loans which are considered to involve a higher degree of risk than single
family residential lending because of a variety of factors, including
generally larger loan balances, dependency for repayment on successful
operation of the mortgaged property and tenant businesses operating
therein, and loan terms that include amortization schedules longer than the
stated maturity which provide for balloon payments at stated maturity
rather than periodic principal payments. In addition, the value of
multifamily and commercial real estate can be affected significantly by the
supply and demand in the market for that type of property.
Limited recourse loans limit our recovery to the value of the mortgaged
property.
A substantial portion of the mortgage loans we acquire may contain
limitations on the mortgagee's recourse against the borrower. In other
cases, the mortgagee's recourse against the borrower is limited by
applicable provisions of the laws of the jurisdictions in which the
mortgaged properties are located or by the mortgagee's selection of
remedies and the impact of those laws on that selection. In those cases, in
the event of a borrower default, recourse may be limited to only the
specific mortgaged property and other assets, if any, pledged to secure the
relevant mortgage loan. As to those mortgage loans that provide for
recourse against the borrower and their assets generally, there can be no
assurance that such recourse will provide a recovery in respect of a
defaulted mortgage loan greater than the liquidation value of the mortgaged
property securing that mortgage loan.
The volatility of certain mortgaged property values may adversely affect our
mortgage loans.
Commercial and multifamily property values and net operating
income derived therefrom are subject to volatility and may be affected
adversely by a number of factors, including, but not limited to, national,
regional and local economic conditions (which may be adversely affected by
plant closings, industry slowdowns and other factors); local real estate
conditions (such as an oversupply of housing, retail, industrial, office or
other commercial space); changes or continued weakness in specific industry
segments; perceptions by prospective tenants, retailers and shoppers of the
safety, convenience, services and attractiveness of the property; the
willingness and ability of the property's owner to provide capable
management and adequate maintenance; construction quality, age and design;
demographic factors; retroactive changes to building or similar codes; and
increases in operating expenses (such as energy costs).
We invest in foreign mortgage loans and real properties which are subject to
currency conversion risks, foreign tax laws and uncertainty of foreign laws.
We invest in mortgage loans secured by real property located
outside the United States, which exposes us to currency conversion risks,
foreign tax laws and the uncertainty of foreign laws.
Leveraging our investments may increase our exposure to loss.
Our charter does not expressly limit borrowings. We leverage our
investments and thereby increase the volatility of our income and net asset
value which may result in operating or capital losses. If borrowing costs
increase, or if the cash flow generated by our assets decreases, our use of
leverage will increase the likelihood that we will experience reduced or
negative cash flow and reduced liquidity.
Our hedging transactions can limit our gains and increase our exposure to
losses.
We use hedging strategies that involve risk and that may not be
successful in insulating us from exposure to changing interest and
prepayment rates. There can be no assurance that a liquid secondary market
will exist for hedging instruments purchased or sold, and we may be
required to maintain a position until exercise or expiration, which could
result in losses.
Failure to maintain REIT status would have adverse tax consequences.
To continue to qualify as a REIT, we must comply with requirements
regarding the nature of our assets and our sources of income. If we are
compelled to liquidate our mortgage-backed securities, we may be unable to
comply with these requirements, ultimately jeopardizing our status as a
REIT. For further discussion of these asset and source of income
requirements, and the consequences of our failure to continue to qualify as
a REIT, please see the "Federal Income Tax Considerations" section of this
prospectus.
Potential future offerings could dilute the interests of holders of our common
stock.
Stockholders will be subject to significant potential dilution
from future equity offerings, including offerings of preferred stock and
conversions of preferred stock or exercises of options or warrants which
may have an adverse effect on the market price of our common stock.
Competition may adversely affect our ability to acquire assets.
Because of competition, we may not be able to acquire mortgage-backed
securities at favorable yields.
Failure to maintain an exemption from the investment company act would restrict
our operating flexibility.
We conduct our business so as not to become regulated as an
investment company under the Investment Company Act of 1940 (the "1940
Act"). Accordingly, we do not expect to be subject to the restrictive
provisions of the 1940 Act. Failure to maintain an exemption from the 1940
Act would adversely affect our ability to operate.
Restrictions on ownership of our common stock may inhibit market activity.
In order for Anthracite to meet the requirements for qualification
as a REIT at all times, our charter prohibits any person from acquiring or
holding, directly or indirectly, shares of capital stock in excess of 9.8%
(in value or in number of shares, whichever is more restrictive) of the
aggregate of the outstanding shares of any class of our capital stock. Our
charter further prohibits (i) any person from beneficially or
constructively owning shares of capital stock that would result in
Anthracite being "closely held" under Section 856(h) of the Code or would
otherwise cause Anthracite to fail to qualify as a REIT, and (ii) any
person from transferring shares of capital stock if such transfer would
result in shares of capital stock being beneficially owned by fewer than
100 persons. If any transfer of shares of capital stock occurs which, if
effective, would result in a violation of one or more ownership
limitations, then that number of shares of capital stock, the beneficial or
constructive ownership of which otherwise would cause such person to
violate such limitations (rounded to the nearest whole shares) shall be
automatically transferred to a trustee of a trust for the exclusive benefit
of one or more charitable beneficiaries, and the intended transferee may
not acquire any rights in such shares; provided, however, that if any
transfer occurs which, if effective, would result in shares of capital
stock being owned by fewer than 100 persons, then the transfer shall be
null and void and the intended transferee shall acquire no rights to the
stock. Subject to certain limitations, our Board of Directors may waive the
limitations for certain investors.
The authorized capital stock of Anthracite includes preferred
stock issuable in one or more series. The issuance of preferred stock could
have the effect of making an attempt to gain control of Anthracite more
difficult by means of a merger, tender offer, proxy contest or otherwise.
The currently outstanding preferred stock has a preference on dividend
payments that could affect our ability to make dividend distributions to
the common stockholders.
The provisions of our charter or relevant Maryland law may inhibit
market activity and the resulting opportunity for the holders of our common
stock to receive a premium for their common stock that might otherwise
exist in the absence of such provisions. Such provisions also may make
Anthracite an unsuitable investment vehicle for any person seeking to
obtain ownership of more than 9.8% of the outstanding shares of our common
stock.
Material provisions of the Maryland General Corporation Law
("MGCL") relating to "business combinations" and a "control share
acquisition" and of the charter and bylaws of Anthracite may also have the
effect of delaying, deterring or preventing a takeover attempt or other
change in control of Anthracite that would be beneficial to stockholders
and might otherwise result in a premium over then prevailing market prices.
Although the bylaws of Anthracite contain a provision exempting the
acquisition of our common stock by any person from the control share
acquisition statute, there can be no assurance that such provision will not
be amended or eliminated at any time in the future.
We may become subject to environmental liabilities.
We may become subject to environmental risks when we acquire
interests in properties with material environmental problems. Such
environmental risks include the risk that operating costs and values of
these assets may be adversely affected by the obligation to pay for the
cost of complying with existing environmental laws, ordinances and
regulations, as well as the cost of complying with future legislation. Such
laws often impose liability regardless of whether the owner or operator
knows of, or was responsible for, the presence of such hazardous or toxic
substances. The costs of investigation, remediation or removal of hazardous
substances could exceed the value of the property. Our income and ability
to make distributions to our stockholders could be affected adversely by
the existence of an environmental liability with respect to our properties.
There is a limitation on the liability of BlackRock.
Pursuant to the management agreement, BlackRock will not assume
any responsibility other than to render the services called for thereunder
and will not be responsible for any action of the Board of Directors in
following or declining to follow its advice or recommendations. BlackRock
and its directors and officers will not be liable to Anthracite, any of our
subsidiaries, the unaffiliated directors, our stockholders or any
subsidiary's stockholders for acts performed in accordance with and
pursuant to the management agreement, except by reason of acts constituting
bad faith, willful misconduct, gross negligence or reckless disregard of
their duties under the management agreement. We have agreed to indemnify
BlackRock and its directors and officers with respect to all expenses,
losses, damages, liabilities, demands, charges and claims arising from acts
of BlackRock not constituting bad faith, willful misconduct, gross
negligence or reckless disregard of duties, performed in good faith in
accordance with and pursuant to the management agreement.
Our investments may be illiquid and their value may decrease.
Many of our assets are relatively illiquid. In addition, certain
of the mortgage-backed securities that we have acquired or we will acquire
will include interests that have not been registered under the relevant
securities laws, resulting in a prohibition against transfer, sale, pledge
or other disposition of those mortgage-backed securities except in a
transaction that is exempt from the registration requirements of, or
otherwise in accordance with, those laws. Our ability to vary our portfolio
in response to changes in economic and other conditions may be relatively
limited. No assurances can be given that the fair market value of any of
our assets will not decrease in the future.
USE OF PROCEEDS
Unless otherwise specified in a prospectus supplement, we intend
to use the proceeds of any securities sold for general corporate purposes,
including acquisitions.
RATIO OF EARNINGS TO FIXED CHARGES
The following table displays our ratio of earnings to fixed charges.
For Year Ended For Year Ended For Year Ended For The Period
December 31, 2001 December 31, 2000 December 31, 1999 March 24, 1998
Through December
31, 1998
-------------------------------------------------------------------------------------
Ratio of earnings to
fixed charges............. 1.98X 1.77X 2.03X 0.94X
Earnings were inadequate to cover fixed charges (loss of $1.4
million) for the fiscal year ended December 31, 1998. The loss included a
non-recurring realized loss of $18.44 million. Excluding the non-recurring
loss, the ratio of earnings to fixed charges was 1.69x.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
For Year Ended For Year Ended For Year Ended For The Period March
December 31, 2001 December 31, 2000 December 31, 1999 24, 1998 Through
December 31, 1998
--------------------------------------------------------------------------------------------
Ratio of earnings to
combined fixed charges
and preferred stock
dividends............... 1.72X 1.55X 2.01X 0.94X
DESCRIPTION OF SECURITIES
This prospectus contains a summary of the common stock, preferred
stock, debt securities and warrants to purchase our common stock or
preferred stock. These summaries are not meant to be a complete description
of each security. However, this prospectus and the accompanying prospectus
supplement contain the material terms and conditions for each security.
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 500,000,000 shares of
capital stock, 400,000,000 of such shares being common stock, par value
$.001 per share, and 100,000,000 shares being preferred stock, par value
$.001 per share, issuable in one or more series. As of March 25, 2002,
45,924,297 shares of common stock were issued and outstanding. 2,212,697
shares of 10% Series B Cumulative Redeemable Convertible Preferred Stock
were issued and outstanding as of March 25, 2002. The Series B Preferred
Stock is convertible into 3,237,065 shares of our common stock at a
conversion price of $17.09 per share.
No warrants to purchase either common stock or preferred stock
were issued or outstanding as of March 25, 2002.
COMMON STOCK
VOTING RIGHTS. Each holder of common stock is entitled to one vote
for each share held on all matters to be voted upon by our stockholders,
subject to the provisions of our charter regarding the ownership of shares
of common stock in excess of the ownership limitations described below
under "Repurchase of Shares and Restrictions on Transfer".
DIVIDENDS. The holders of outstanding shares of common stock,
subject to any preferences that may be applicable to any outstanding series
of preferred stock, are entitled to receive ratably such dividends out of
assets legally available for that purpose at such times and in such amounts
as the board of directors may from time to time determine.
LIQUIDATION AND DISSOLUTION. Upon liquidation or dissolution of
Anthracite, the holders of the common stock will be entitled to share
ratably in our assets legally available for distribution to stockholders
after payment of, or provision for, all known debts and liabilities and
subject to the prior rights of any holders of any preferred stock then
outstanding.
OTHER RIGHTS. Holders of the common stock generally have equal
dividend, distribution, liquidation and other rights, and shall have no
preference, conversion, exchange, appraisal, preemptive or cumulative
voting rights. All outstanding shares of the common stock are, and any
common shares offered by a prospectus supplement, when issued, will be,
duly authorized, fully paid and non-assessable by Anthracite.
TRANSFER AGENT AND REGISTRAR
The Bank of New York acts as transfer agent and registrar for the
common stock.
PREFERRED STOCK
GENERAL. We are authorized to issue 100,000,000 shares of
preferred stock. 2,212,697 shares of 10% Series B Preferred Stock were
issued and outstanding as of March 25, 2002. The Series B Preferred Stock
is convertible into 3,237,065 shares of our common stock at a conversion
price of $17.09 per share. No warrants to purchase either common stock or
preferred stock were issued or outstanding as of March 25, 2002. Our board
of directors has the authority, without further action by the stockholders,
to issue shares of preferred stock in one or more series and to fix the
number of shares, dividend rights, conversion rights, voting rights,
redemption rights, liquidation preferences, sinking funds, and any other
rights, preferences, privileges and restrictions applicable to each such
series of preferred stock. The issuance of preferred stock could have the
effect of making an attempt to gain control of us more difficult by means
of a merger, tender offer, proxy contest or otherwise. The preferred stock,
if issued, would have a preference on dividend payments that could affect
our ability to make dividend distributions to the common stockholders. The
preferred stock will, when issued, be duly authorized, fully paid and
non-assessable by Anthracite.
A prospectus supplement relating to any series of preferred stock
being offered will include specific terms relating to the offering. They
will include:
- the title and stated value of the preferred stock;
- the number of shares of the preferred stock offered, the
liquidation preference per share and the offering price of the
preferred stock;
- the dividend rate(s), period(s) and/or payment date(s) or
method(s) of calculation thereof applicable to the preferred
stock;
- whether dividends shall be cumulative or non cumulative and, if
cumulative, the date from which dividends on the preferred stock
shall accumulate;
- the procedures for an auction and remarketing, if any, for the
preferred stock;
- the provisions for a sinking fund, if any, for the preferred
stock;
- any voting rights of the preferred stock;
- the provisions for redemption, if applicable, of the preferred
stock;
- any listing of the preferred stock on any securities exchange;
- the terms and conditions, if applicable, upon which the preferred
stock will be convertible into our common stock, including the
conversion price or the manner of calculating the conversion
price and conversion period;
- if appropriate, a discussion of Federal income tax consequences
applicable to the preferred stock;
- any limitations on direct or beneficial ownership and
restrictions on transfer, in each case as may be appropriate to
assist us in qualifying as a REIT;
- all series of preferred stock will rank on a parity with each
other unless otherwise specified in the charter and will rank
senior to common stock with respect payment of dividends and
distribution of assets upon liquidation; and
- any other specific terms, preferences, rights, limitations or
restrictions of the preferred stock.
CONVERSION OR EXCHANGE. The terms, if any, on which the preferred
stock may be convertible into or exchangeable for our common stock or other
securities will be stated in the preferred stock prospectus supplement. The
terms will include provisions as to whether conversion or exchange is
mandatory, at the option of the holder or at our option, and may include
provisions pursuant to which the number of shares of our common stock or
other securities to be received by the holders of preferred stock would be
subject to adjustment.
DESCRIPTION OF WARRANTS
We may issue warrants for the purchase of preferred stock or
common stock. Warrants may be issued independently or together with any
offered securities and may be attached to or separate from such securities.
Each series of warrants will be issued under a separate warrant agreement
to be entered into between a warrant agent specified in the agreement and
us. The warrant agent will act solely as our agent in connection with the
warrants of that series and will not assume any obligation or relationship
of agency or trust for or with any holders or beneficial owners of
warrants.
The applicable prospectus supplement will describe the following
terms, where applicable, of the warrants in respect of which this
prospectus is being delivered:
- the title of the warrants;
- the aggregate number of the warrants;
- the price or prices at which the warrants will be issued;
- the currencies in which the price or prices of the warrants may
be payable;
- the designation, amount and terms of the offered securities
purchasable
- upon exercise of the warrants;
- the designation and terms of the other offered securities, if
any, with which the warrants are issued and the number of the
warrants issued with the security;
- if applicable, the date on and after which the warrants and the
offered securities purchasable upon exercise of the warrants will
be separately transferable;
- the price or prices at which and currency or currencies in which
the offered securities purchasable upon exercise of the warrants
may be purchased;
- the date on which the right to exercise the warrants shall
commence and the date on which the right shall expire;
- the minimum or maximum amount of the warrants which may be
exercised at any one time;
- information with respect to book-entry procedures, if any;
- if appropriate, a discussion of Federal income tax consequences;
and
- any other material terms of the warrants, including terms,
procedures and limitations relating to the exchange and exercise
of the warrants.
REPURCHASE OF SHARES AND RESTRICTIONS ON TRANSFER
Two of the requirements for qualification as a real estate investment trust
are that
(1) during the last half of each taxable year for which a REIT election
is made, other than the first taxable year for which a REIT
election is made, not more than 50% in value of the outstanding
shares may be owned directly or indirectly by five or fewer
individuals. This requirement is known as the "5/50 Rule"; and
(2) there must be at least 100 stockholders on 335 days of each taxable
year of 12 months, other than the first taxable year for which a
REIT election is made.
To assist us in meeting these requirements, the charter prohibits
any person from acquiring or holding, directly or indirectly, in excess of
9.8%, in value or in number of shares, whichever is more restrictive, of
the number of our outstanding shares of common stock or any class of
preferred stock. For this purpose, the term "ownership" is defined in
accordance with the REIT Provisions of the Internal Revenue Code and the
constructive ownership provisions of Section 544 of the Internal Revenue
Code, as modified by Section 856(h)(1)(B) of the Internal Revenue Code.
Subject to certain limitations, our board of directors may modify the
ownership limitations provided such action does not affect our
qualification as a REIT.
For purposes of the 5/50 Rule, the constructive ownership
provisions applicable under Section 544 of the Internal Revenue Code
(1) attribute ownership of securities owned by a corporation,
partnership, estate or trust proportionately to its stockholders,
partners or beneficiaries,
(2) attribute ownership of securities owned by certain family members
to other members of the same family, and
(3) treat securities with respect to which a person has an option to
purchase as actually owned by that person.
These rules will be applied in determining whether a person holds
shares of common stock or preferred stock in violation of the ownership
limitations specified in the articles of amendment and restatement.
Accordingly, under certain circumstances, shares of common stock or
preferred stock owned by a person who individually owns less than 9.8% of
the shares outstanding may nevertheless be in violation of the ownership
limitations specified in the charter. Ownership of shares of common stock
through such attribution is generally referred to as constructive
ownership. The 100 stockholder test is determined by actual, and not
constructive, ownership.
The articles of amendment and restatement further provide that if
any transfer of shares of common stock which, if effective, would
(1) result in any person beneficially or constructively owning shares
of common stock in excess or in violation of the 9.8% ownership
limitations described above,
(2) result in our stock being beneficially owned by fewer than 100
persons, determined without reference to any rules of attribution,
or
(3) result in us being "closely held" under Section 856(h) of the
Internal Revenue Code,
then that number of shares of common or preferred stock the beneficial or
constructive ownership of which otherwise would cause such person to
violate such limitations, rounded to the nearest whole shares, shall be
automatically transferred to a trustee as trustee of a trust for the
exclusive benefit of one or more charitable beneficiaries, and the intended
transferee shall not acquire any rights in such shares. Shares of common or
preferred stock held by the trustee shall be issued and outstanding shares
of common or preferred stock. The intended transferee shall not benefit
economically from owning any shares held in the trust, shall have no rights
to dividends, and shall possess no rights to vote or other rights
attributable to the shares held in the trust. The trustee shall have all
voting rights and rights to dividends or other distributions with respect
to shares held in the trust, which will be exercised for the exclusive
benefit of the charitable beneficiary. Any dividend or other distribution
paid to the intended transferee before our discovery that shares of common
or preferred stock have been transferred to the trustee shall be paid with
respect to such shares to the trustee by the intended transferee upon
demand and any dividend or other distribution authorized but unpaid shall
be paid to the trustee. Our board of directors may, in its discretion,
modify these restrictions on owning shares in excess of the ownership
limitations, to the extent such modifications do not affect our
qualification as a REIT.
Within 20 days of receiving notice from us that shares of common
or preferred stock have been transferred to the trust, the trustee shall
sell the shares held in the trust to a person, designated by the trustee,
whose ownership of the shares will not violate the ownership limitations
specified in the charter. Upon such sale, the interest of the charitable
beneficiary in the shares sold shall terminate and the trustee shall
distribute the net proceeds of the sale to the intended transferee and to
the charitable beneficiary as follows: The intended transferee shall
receive the lesser of (1) the price paid by the intended transferee for the
shares or, if the intended transferee did not give value for the shares in
connection with the event causing the shares to be held in the trust, e.g.,
in the case of a gift, devise or other such transaction, the market price,
as defined below, of the shares on the day of the event causing the shares
to be held in the trust, and (2) the price per share received by the
trustee from the sale or other disposition of the shares held in the trust.
Any net sales proceeds in excess of the amount payable to the intended
transferee shall be immediately paid to the charitable beneficiary. In
addition, shares of common or preferred stock transferred to the trustee
shall be deemed to have been offered for sale to us, or our designee, at a
price per share equal to the lesser of (1) the price per share in the
transaction that resulted in such transfer to the trust or, in the case of
a devise or gift, the market price at the time of such devise or gift, and
(2) the market price on the date we, or our designee, accept such offer. We
shall have the right to accept such offer until the trustee has sold shares
held in the trust. Upon such a sale to us, the interest of the charitable
beneficiary in the shares sold shall terminate and the trustee shall
distribute the net proceeds of the sale to the intended transferee.
The term "market price" on any date shall mean, with respect to
any class or series of outstanding shares of our stock, the closing price,
as defined below, for such shares on such date. The "closing price" on any
date shall mean the last sale price for such shares, regular way, or, in
case no such sale takes place on such day, the average of the closing bid
and asked prices, regular way, for such shares, in either case as reported
in the principal consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock Exchange or,
if such shares are not listed or admitted to trading on the New York Stock
Exchange, as reported on the principal consolidated transaction reporting
system with respect to securities listed on the principal national
securities exchange on which such shares are listed or admitted to trading
or, if such shares are not listed or admitted to trading on any national
securities exchange, the last quoted price, or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities Dealers,
Inc., Automated Quotation Systems, or, if such system is no longer in use,
the principal other automated quotation system that may then be in use or,
if such shares are not quoted by any such organization, the average of the
closing bid and asked prices as furnished by a professional market maker
making a market in such shares selected by our board of directors or, in
the event that no trading price is available for such shares, the fair
market value of the shares, as determined in good faith by our board of
directors.
Every owner of more than 5%, or such lower percentage as required
by the Internal Revenue Code or the regulations promulgated under the
Internal Revenue Code, of the outstanding shares or any class or series of
our stock, within 30 days after the end of each taxable year, is required
to give written notice to us stating the name and address of such owner,
the number of shares of each class and series of our stock beneficially
owned and a description of the manner in which such shares are held. Each
owner of more than 5% shall provide to us additional information as we may
request in order to determine the effect, if any, of such beneficial
ownership on our qualification as a REIT and to ensure compliance with the
ownership limitations.
MATERIAL PROVISIONS OF MARYLAND LAW AND OF OUR CHARTER AND BYLAWS
The following is a summary of the material provisions of the
Maryland General Corporation Law, as amended from time to time, and of our
charter and bylaws. It does not restate the material provisions completely.
We urge you to read our charter and bylaws, copies of which are
incorporated by reference into the registration statement of which this
prospectus is a part. See "Where You Can Find More Information." For a
description of additional restrictions on transfer of the common stock, see
"Description of Capital Stock--Repurchase of Shares and Restrictions on
Transfer."
REMOVAL OF DIRECTORS
The charter provides that a director may be removed from office at
any time for cause by the affirmative vote of the holders of at least
two-thirds of the votes of the shares entitled to be cast in the election
of directors.
STAGGERED BOARD
The charter and bylaws divide the board of directors into three
classes of directors, each class constituting approximately one-third of
the total number of directors, with the classes serving staggered
three-year terms. The classification of the board of directors will make it
more difficult for stockholders to change the composition of the board of
directors because only a minority of the directors can be elected at any
one time. The classification provisions could also discourage a third party
from accumulating our stock or attempting to obtain control of us, even
though this attempt might be beneficial to us and some, or a majority, of
our stockholders. Accordingly, under certain circumstances stockholders
could be deprived of opportunities to sell their shares of common stock or
preferred stock at a higher price than might otherwise be available.
BUSINESS COMBINATIONS
Under the MGCL, certain "business combinations" including a
merger, consolidation, share exchange or, in some circumstances, an asset
transfer or issuance or reclassification of equity securities, between a
Maryland corporation and an "interested stockholder" or an affiliate of an
interested stockholder are prohibited for five years after the most recent
date on which the interested stockholder becomes an interested stockholder.
An interested stockholder is defined in the MGCL as any person who
beneficially owns 10% or more of the voting power of the corporation's
shares or an affiliate of the corporation who, at any time within the
two-year period prior to the date in question, was the beneficial owner of
10% or more of the voting power of the then outstanding voting stock of the
corporation. During the five year period, any applicable business
combination must be recommended by the board of directors of that
corporation and approved by the affirmative vote of at least
(a) 80% of the votes entitled to be cast by holders of outstanding
shares of voting stock of the corporation and
(b) two-thirds of the votes entitled to be cast by holders of voting
Stock of the corporation other than shares held by the interested
stockholder with whom, or with whose affiliate, the business
combination is to be effected, unless, among other conditions, the
corporation's common stockholders receive a minimum price, as
defined in the MGCL, for their shares and the consideration is
received in cash or in the same form as previously paid by the
interested stockholder for its shares. The MGCL does not apply,
however, to business combinations that are approved or exempted by
the board of directors of the corporation before the interested
stockholder becomes an interested stockholder.
CONTROL SHARE ACQUISITIONS
The MGCL provides that "control shares" of a Maryland corporation
acquired in a "control share acquisition" have no voting rights except to
the extent approved by a vote of two-thirds of the votes entitled to be
cast on the matter, excluding shares of stock owned by the acquirer, by
officers or by directors who are employees of the corporation. "Control
shares" are voting shares of stock which, if aggregated with all other such
shares of stock previously acquired by the acquirer or in respect of which
the acquirer is able to exercise or direct the exercise of voting power,
except solely by virtue of a revocable proxy, would entitle the acquirer to
exercise voting power in electing directors within one of the following
ranges of voting power:
(1) one-tenth or more but less than one-third,
(2) one-third or more but less than a majority or
(3) a majority or more of all voting power. Control shares do not
include shares the acquiring person is then entitled to vote as
a result of having previously obtained stockholder approval. A
"control share acquisition" means the acquisition of control
shares, subject to certain exceptions.
A person who has made or proposes to make a control share
acquisition, upon satisfaction of certain conditions, including an
undertaking to pay expenses, may compel the board of directors of the
corporation to call a special meeting of stockholders to be held within 50
days of demand to consider the voting rights of the shares. If no request
for a meeting is made, the corporation may itself present the question at
any stockholders meeting.
If voting rights are not approved at the meeting or if the
acquiring person does not deliver an acquiring person statement as required
by the statute, then, subject to certain conditions and limitations, the
corporation may redeem any or all of the control shares, except those for
which voting rights have previously been approved, for fair value
determined, without regard to the absence of voting rights for the control
shares, as of the date of the last control share acquisition by the
acquirer or of any meeting of stockholders at which the voting rights of
such shares are considered and not approved. If voting rights for control
shares are approved at a stockholders meeting and the acquirer becomes
entitled to vote a majority of the shares entitled to vote, all other
stockholders may exercise appraisal rights. The fair value of the shares as
determined for purposes of such appraisal rights may not be less than the
highest price per share paid by the acquirer in the control share
acquisition.
The control share acquisition statute does not apply
- to shares acquired in a merger, consolidation or share exchange
if the corporation is a party to the transaction, or
- to acquisitions approved or exempted by the charter or bylaws of
the corporation.
Our bylaws contain a provision exempting from the control share
acquisition statute any and all acquisitions by any person of our shares of
common stock. We cannot give any assurance that such provision will not be
amended or eliminated at any time in the future.
AMENDMENT TO THE CHARTER
We reserve the right from time to time to make any amendment to
our charter that is authorized by law at present or in the future,
including any amendment which alters the contract rights as expressly
stated in the charter, of any shares of outstanding stock. The charter may
be amended only by the affirmative vote of holders of shares entitled to
cast at least a majority of all the votes entitled to be cast on the
matter; provided, however, that provisions relating to the indemnification
of our present and former directors and officers, our election to be taxed
as a REIT, the removal of directors for cause and dissolution of Anthracite
may be amended only by the affirmative vote of a majority of the board of
directors and the holders of shares entitled to cast at least two-thirds of
all the votes entitled to be cast in the election of directors.
DISSOLUTION OF ANTHRACITE
The dissolution of Anthracite must be approved by the affirmative
vote of at least two-thirds of all of the votes ordinarily entitled to be
cast in the election of directors, voting together as a single class, and
the affirmative vote of holders of at least two-thirds of any series or
class of stock expressly granted a series or class vote on the dissolution
of Anthracite in the resolutions providing for such series or class. Before
such vote, the dissolution must be approved by a majority of the board of
directors.
ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS
The bylaws provide that
(a) with respect to an annual meeting of stockholders, nominations of
persons for election to the board of directors and the proposal of
business to be considered by stockholders may be made only
(1) pursuant to our notice of the meeting,
(2) by the board of directors or,
(3) by a stockholder who is entitled to vote at the meeting
and has complied with the advance notice procedures
specified in the bylaws, and
(b) with respect to special meetings of stockholders, only the
business specified in our notice of meeting may be brought before
the meeting of stockholders and nominations of persons for
election to the board of directors or
(c) provided that the board of directors has determined that directors
shall be elected at such meeting, by a stockholder who is entitled
to vote at the meeting and has complied with the advance notice
provisions specified in the bylaws.
POSSIBLE ANTI-TAKEOVER EFFECT OF MATERIAL PROVISIONS OF MARYLAND LAW AND OF
THE CHARTER AND BYLAWS
The business combination provisions and, if the applicable
provision in the bylaws is rescinded, the control share acquisition
provisions of the MGCL, the provisions of the charter creating a staggered
board and the advance notice provisions of the bylaws could delay, defer or
prevent a change in control of Anthracite or other transaction that might
involve a premium price for holders of our common stock or otherwise be in
their best interest.
REPORTS TO STOCKHOLDERS
We will furnish our stockholders with annual reports containing
audited financial statements and such other periodic reports as we may
determine to furnish or as may be required by law.
DESCRIPTION OF DEBT SECURITIES
The following description contains general terms and provisions of
the debt securities to which any prospectus supplement may relate. The
particular terms of the debt securities offered by any prospectus
supplement and the extent, if any, to which such general provisions may not
apply to the debt securities so offered will be described in the prospectus
supplement relating to such debt securities. For more information please
refer to the senior indenture among a trustee to be selected and us,
relating to the issuance of the senior notes, and the subordinated
indenture among a trustee to be selected and us, relating to issuance of
the subordinated notes. Forms of these documents are filed as exhibits to
the registration statement, which includes this prospectus.
As used in this prospectus, the term indentures refers to both the
senior indenture and the subordinated indenture. The indentures will be
qualified under the Trust Indenture Act. As used in this prospectus, the
term trustee refers to either the senior trustee or the subordinated
trustee, as applicable.
The following are summaries of material provisions of the senior
indenture and the subordinated indenture. They do not restate the
indentures in their entirety. We urge you to read the indentures applicable
to a particular series of debt securities because they, and not this
description, define your rights as the holders of the debt securities.
Except as otherwise indicated, the terms of the senior indenture and the
subordinated indenture are identical.
GENERAL
Each prospectus supplement will describe the following terms relating to a
series of notes:
- the title;
- any limit on the amount that may be issued;
- whether or not such series of notes will be issued in global
form, the terms and who the depository will be;
- the maturity date(s);
- the annual interest rate(s) (which may be fixed or variable) or
the method for determining the rate(s) and the date(s) interest
will begin to accrue, the date(s) interest will be payable and
the regular record dates for interest payment dates or the method
for determining such date(s);
- the place(s) where payments shall be payable;
- our right, if any, to defer payment of interest and the maximum
length of any such deferral period;
- the date, if any, after which, and the price(s) at which, such
series of notes may, pursuant to any optional redemption
provisions, be redeemed at our option, and other related terms
and provisions;
- the date(s), if any, on which, and the price(s) at which we are
obligated, pursuant to any mandatory sinking fund provisions or
otherwise, to redeem, or at the Holder's option to purchase, such
series of notes and other related terms and provisions;
- the denominations in which such series of notes will be issued,
if in other than denominations of $1,000 and any integral
multiple thereof; and
- any mandatory or optional sinking fund or similar provisions;
- the currency or currency units of payment of the principal of,
premium, if any, and interest on the notes;
- any index used to determine the amount of payments of the
principal of, premium, if any, and interest on the notes and the
manner in which such amounts shall be determined;
- the terms pursuant to which such notes are subject to defeasance;
- the terms and conditions, if any, pursuant to which such notes
are secured;
- any other terms (which terms shall not be inconsistent with the
Indenture).
The notes may be issued as original issue discount securities. An original
issue discount security is a note, including any zero-coupon note, which:
- is issued at a price lower than the amount payable upon its
stated maturity and
- provides that upon redemption or acceleration of the maturity, an
amount less than the amount payable upon the stated maturity,
shall become due and payable.
United States federal income tax consequences applicable to notes
sold at an original issue discount will be described in the applicable
prospectus supplement. In addition, United States federal income tax or
other consequences applicable to any notes which are denominated in a
currency or currency unit other than United States dollars may be described
in the applicable prospectus supplement.
Under the indentures, we will have the ability, in addition to the
ability to issue notes with terms different from those of notes previously
issued, without the consent of the holders, to reopen a previous issue of a
series of notes and issue additional notes of that series, unless the
reopening was restricted when the series was created, in an aggregate
principal amount determined by us.
CONVERSION OR EXCHANGE RIGHTS
The terms, if any, on which a series of notes may be convertible
into or exchangeable for our common stock or other securities will be
described in the prospectus supplement relating to that series of notes.
The terms will include provisions as to whether conversion or exchange is
mandatory, at the option of the holder or at our option, and may include
provisions pursuant to which the number of shares of our common stock or
other securities to be received by the holders of the series of notes would
be subject to adjustment.
CONSOLIDATION, MERGER OR SALE
The indentures do not contain any covenant which restricts our
ability to merge or consolidate, or sell, convey, transfer or otherwise
dispose of all or substantially all of their assets. However, any successor
or acquirer of such assets must assume all of our obligations under the
indentures or the notes, as appropriate.
EVENTS OF DEFAULT UNDER THE INDENTURE
The following are events of default under the indentures with
respect to any series of notes issued:
- failure to pay interest when due and such failure continues for
30 days and the time for payment has not been extended or
deferred;
- failure to pay the principal (or premium, if any) when due;
- failure to observe or perform any other covenant contained in the
notes or the indentures (other than a covenant specifically
relating to another series of notes), and such failure continues
for 90 days after we receive notice from the trustee or holders
of at least 25% in aggregate principal amount of the outstanding
notes of that series; and
- certain events of bankruptcy, insolvency or reorganization of
Anthracite.
If an event of default with respect to notes of any series occurs
and is continuing, the trustee or the holders of at least 25% in aggregate
principal amount of the outstanding notes of that series, by notice in
writing to us (and to the trustee if notice is given by such holders), may
declare the unpaid principal of, premium, if any, and accrued interest, if
any, due and payable immediately.
The holders of a majority in principal amount of the outstanding
notes of an affected series may waive any default or event of default with
respect to such series and its consequences, except defaults or events of
default regarding:
- payment of principal, premium, if any, or interest; or
- certain covenants containing limitations on our ability to pay
dividends and make payments on debt securities in certain
circumstances.
Any such waiver shall cure such default or event of default.
Subject to the terms of the indentures, if an event of default
under an indenture shall occur and be continuing, the trustee will be under
no obligation to exercise any of its rights or powers under such indenture
at the request or direction of any of the holders of the applicable series
of notes, unless such holders have offered the trustee reasonable
indemnity. The holders of a majority in principal amount of the outstanding
notes of any series will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the trustee,
or exercising any trust or power conferred on the trustee, with respect to
the notes of that series, provided that:
- it is not in conflict with any law or the applicable indenture;
- the trustee may take any other action deemed proper by it which
is not inconsistent with such direction; and
- subject to its duties under the Trust Indenture Act, the trustee
need not take any action that might involve it in personal
liability or might be unduly prejudicial to the holders not
involved in the proceeding.
A holder of the notes of any series will only have the right to
institute a proceeding under the indentures or to appoint a receiver or
trustee, or to seek other remedies if:
- the holder has given written notice to the trustee of a
continuing event of default with respect to that series;
- the holders of at least 25% in aggregate principal amount of the
outstanding notes of that series have made written request, and
such holders have offered reasonable indemnity to the trustee to
institute such proceedings as trustee; and
- the trustee does not institute such proceeding, and does not
receive from the holders of a majority in the aggregate principal
amount of the outstanding notes of that series other conflicting
directions within 60 days after such notice, request and offer.
These limitations do not apply to a suit instituted by a holder of
notes if we default in the payment of the principal, premium, if any, or
interest on, the notes.
We will periodically file statements with the trustee regarding
our compliance with certain of the covenants in the indentures.
MODIFICATION OF INDENTURE; WAIVER
Anthracite and the trustee may change an indenture without the
consent of any holders with respect to certain matters, including:
- to fix any ambiguity, defect or inconsistency in such indenture;
and
- to change anything that does not materially adversely affect the
interests of any holder of notes of any series.
In addition, under the indentures, the rights of holders of a
series of notes may be changed by us and the trustee with the written
consent of the holders of at least a majority in aggregate principal amount
of the outstanding notes of each series that is affected. However, we can
make the following changes only with the consent of each holder of any
outstanding notes affected:
- extending the fixed maturity of such series of notes;
- change any of our obligations to pay additional amounts;
- reducing the principal amount, reducing the rate of or extending
the time of payment of interest, or any premium payable upon the
redemption of any such notes;
- reducing the percentage of notes, the holders of which are
required to consent to any amendment.
- reduce the amount of principal of an original issue discount
security or any other note payable upon acceleration of the
maturity thereof,
- change currency in which any note or any premium or interest is
payable,
- impair the right to enforce any payment on or with respect to any
note,
- adversely change the right to convert or exchange, including
decreasing the conversion rate or increasing the conversion price
of, such note, if applicable,
- in the case of the subordinated indenture, modify the
subordination provisions in a manner adverse to the holders of
the subordinated notes,
- if the notes are secured, change the terms and conditions
pursuant to which the notes are secured in a manner adverse to
the holders of the secured notes,
- reduce the percentage in principal amount of outstanding notes of
any series, the consent of whose holders is required for
modification or amendment of the applicable indenture or for
waiver of compliance with certain provisions of the applicable
indenture or for waiver of certain defaults,
- reduce the requirements contained in the applicable indenture for
quorum or voting,
- change any of our obligations to maintain an office or agency in
the places and for the purposes required by the indentures, or
- modify any of the above provisions.
FORM, EXCHANGE, AND TRANSFER
The notes of each series will be issuable only in fully registered
form without coupons and, unless otherwise specified in the applicable
prospectus supplement, in denominations of $1,000 and any integral multiple
thereof. The indentures will provide that notes of a series may be issuable
in temporary or permanent global form and may be issued as book-entry
securities that will be deposited with, or on behalf of, The Depository
Trust Company or another depository named by us and identified in a
prospectus supplement with respect to such series.
At the option of the holder, subject to the terms of the
indentures and the limitations applicable to global securities described in
the applicable prospectus supplement, notes of any series will be
exchangeable for other notes of the same series, in any authorized
denomination and of like tenor and aggregate principal amount.
Subject to the terms of the indentures and the limitations
applicable to global securities described in the applicable prospectus
supplement, notes may be presented for exchange or for registration of
transfer, duly endorsed or with the form of transfer endorsed, duly
executed if so required by us or the security registrar, at the office of
the security registrar or at the office of any transfer agent designated by
us for such purpose. Unless otherwise provided in the notes to be
transferred or exchanged, we will not require a service charge for any
registration of transfer or exchange, but we may require payment of any
taxes or other governmental charges. The security registrar and any
transfer agent initially designated by us for any notes will be named in
the applicable prospectus supplement. We may at any time designate
additional transfer agents or rescind the designation of any transfer agent
or approve a change in the office through which any transfer agent acts,
except that we will be required to maintain a transfer agent in each place
of payment for the notes of each series.
If the notes of any series are to be redeemed, we will not be
required to:
- issue, register the transfer of, or exchange any notes of that
series during a period beginning at the opening of business 15
days before the day of mailing of a notice of redemption of any
such notes that may be selected for redemption and ending at the
close of business on the day of such mailing; or
- register the transfer of or exchange any notes so selected for
redemption, in whole or in part, except the unredeemed portion of
any such notes being redeemed in part.
INFORMATION CONCERNING THE TRUSTEE
The trustee, other than during the occurrence and continuance of
an event of default under an indenture, undertakes to perform only such
duties as are specifically described in the indentures and, upon an event
of default under an indenture, must use the same degree of care as a
prudent person would exercise or use in the conduct of his or her own
affairs. Subject to this provision, the trustee is under no obligation to
exercise any of the powers given it by the indentures at the request of any
holder of notes unless it is offered reasonable security and indemnity
against the costs, expenses and liabilities that it might incur. The
trustee is not required to spend or risk its own money or otherwise become
financially liable while performing its duties unless it reasonably
believes that it will be repaid or receive adequate indemnity.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable prospectus
supplement, payment of the interest on any notes on any interest payment
date will be made to the person in whose name such notes or one or more
predecessor securities are registered at the close of business on the
regular record date for such interest.
Principal of and any premium and interest on the notes of a
particular series will be payable at the office of the paying agents
designated by us, except that unless otherwise indicated in the applicable
prospectus supplement, interest payments may be made by check mailed to the
holder. Unless otherwise indicated in such prospectus supplement, the
corporate trust office of the trustee in The City of New York will be
designated as our sole paying agent for payments with respect to notes of
each series. Any other paying agents initially designated by us for the
notes of a particular series will be named in the applicable prospectus
supplement. We will be required to maintain a paying agent in each place of
payment for the notes of a particular series.
All moneys paid by us to a paying agent or the trustee for the
payment of the principal of or any premium or interest on any notes which
remains unclaimed at the end of two years after the principal, premium or
interest has become due and payable will be repaid to us, and the holder of
the security may then look only to us for payment.
GOVERNING LAW
The indentures and the notes will be governed by and construed in
accordance with the laws of the State of New York except to the extent that
the Trust Indenture Act shall be applicable.
SUBORDINATION OF SUBORDINATED NOTES
The subordinated notes will be unsecured and will be subordinate
and junior in priority of payment to certain of our other indebtedness to
the extent described in a prospectus supplement. The subordinated indenture
does not limit the amount of subordinated notes which we may issue, nor
does it limit us from issuing any other secured or unsecured debt.
FEDERAL INCOME TAX CONSIDERATIONS
THE FOLLOWING IS A SUMMARY OF THE FEDERAL INCOME TAX CONSEQUENCES
THAT ARE ANTICIPATED TO BE MATERIAL TO AN INVESTOR IN THE COMMON STOCK OF
ANTHRACITE. THIS SUMMARY IS BASED ON CURRENT LAW, IS FOR GENERAL
INFORMATION ONLY AND IS NOT TAX ADVICE. THE TAX CONSEQUENCES RELATED TO AN
INVESTMENT IN ANTHRACITE MAY VARY DEPENDING ON AN INVESTOR'S PARTICULAR
SITUATION AND THIS DISCUSSION DOES NOT PURPORT TO DISCUSS ALL ASPECTS OF
TAXATION THAT MAY BE RELEVANT TO A HOLDER OF OUR SECURITIES IN LIGHT OF HIS
OR HER PERSONAL INVESTMENT OR TAX CIRCUMSTANCES, OR TO HOLDERS OF OUR
SECURITIES SUBJECT TO SPECIAL TREATMENT UNDER THE FEDERAL INCOME TAX LAWS.
INVESTORS SUBJECT TO SPECIAL TREATMENT INCLUDE, WITHOUT LIMITATION,
INSURANCE COMPANIES, FINANCIAL INSTITUTIONS, BROKER-DEALERS, TAX- EXEMPT
ORGANIZATIONS, INVESTORS HOLDING SECURITIES AS PART OF A CONVERSION
TRANSACTION, OR A HEDGE OR HEDGING TRANSACTION OR AS A POSITION IN A
STRADDLE FOR TAX PURPOSES, FOREIGN CORPORATIONS OR PARTNERSHIPS, AND
PERSONS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED STATES. IN
ADDITION, THE SUMMARY BELOW DOES NOT CONSIDER THE EFFECT OF ANY FOREIGN,
STATE, LOCAL OR OTHER TAX LAWS THAT MAY BE APPLICABLE TO YOU AS A HOLDER OF
OUR SECURITIES.
Based on various factual representations made by us regarding our
operations and income, in the opinion of Skadden, Arps, Slate, Meagher &
Flom LLP, our tax counsel, commencing with our taxable year ended December
31, 1998, we have been organized in conformity with the requirements for
qualification as a REIT under the Code, and our method of operating has
enabled us, and will enable us, to meet the requirements for qualification
and taxation as a REIT. It must be emphasized that this opinion is: based
on various assumptions relating to the validity, authenticity, accuracy and
enforceability of documents delivered by us to Skadden, Arps, Slate,
Meagher & Flom LLP; and conditioned upon representations made by us, as to
various factual matters. Moreover, our qualification as a REIT depends upon
our ability to meet the various requirements imposed under the Code through
actual operations. Skadden, Arps, Slate, Meagher & Flom LLP will not review
our operations, and no assurance can be given that actual operations will
meet these requirements. The opinion of Skadden, Arps, Slate, Meagher &
Flom LLP is not binding on the Internal Revenue Service ("IRS") or any
court. The opinion of Skadden, Arps, Slate, Meagher & Flom LLP is based
upon existing law, IRS regulations and currently published administrative
positions of the IRS and judicial decisions, all of which are subject to
change either prospectively or retroactively.
The information in this summary is based on the Internal Revenue
Code of 1986, as amended, (the "Code") current, temporary and proposed
Treasury regulations promulgated under the Code, the legislative history of
the Code, current administrative interpretations and practices of the
Internal Revenue Service, and court decisions, all as of the date of this
prospectus. The administrative interpretations and practices of the
Internal Revenue Service upon which this summary is based include its
practices and policies as expressed in private letter rulings which are not
binding on the Internal Revenue Service, except with respect to the
taxpayers who requested and received such rulings. Future legislation,
Treasury regulations, administrative interpretations and practices, and
court decisions may affect the tax consequences contained in this summary,
possibly on a retroactive basis. We have not requested, and do not plan to
request, any rulings from the Internal Revenue Service concerning our tax
treatment, and the statements in this prospectus are not binding on the
Internal Revenue Service or a court. Thus, we can provide no assurance that
the tax consequences contained in this summary will not be challenged by
the Internal Revenue Service or sustained by a court if challenged by the
Internal Revenue Service.
You are urged to consult your tax advisor regarding the specific
tax consequences to you of (1) the acquisition, ownership and sale or other
disposition of our securities, including the federal, state, local, foreign
and other tax consequences, (2) our election to be taxed as a real estate
investment trust for federal income tax purposes and (3) potential changes
in applicable tax laws.
TAXATION OF ANTHRACITE - GENERAL
Commencing with our taxable year ended December 31, 1998, we have
elected to be taxed as a REIT under Sections 856 through 860 of the Code.
We believe we have been organized and have operated in a manner which
allows us to qualify for taxation as a REIT under the Code, and we intend
to continue to operate in this manner. Our qualification and taxation as a
REIT, however, depend upon our ability to meet, through actual annual
operating results, certain asset levels, distribution levels, diversity of
stock ownership, and various other requirements imposed under the Code.
Accordingly, there can be no assurance that we have operated or will
continue to operate in a manner so as to qualify or remain qualified as a
REIT. See "--Failure to Qualify."
The sections of the Code that relate to the qualification and
taxation of REITs are highly technical and complex. The following describes
the material aspects of the sections of the Code that govern the Federal
income tax treatment of a REIT and its stockholders. This summary is
qualified in its entirety by the applicable Code provisions, rules and
regulations promulgated under the Code, and administrative and judicial
interpretations of the Code.
Provided we qualify for taxation as a REIT, we generally will not
be subject to Federal corporate income tax on our net income that is
currently distributed to our stockholders. This treatment substantially
eliminates the "double taxation" that generally results from an investment
in a corporation. Double taxation means taxation once at the corporate
level when income is earned and once again at the stockholder level when
such income is distributed. Even if we qualify for taxation as a REIT,
however, we will be subject to Federal income taxation as follows:
- We will be required to pay tax at regular corporate rates on any
undistributed REIT taxable income, including undistributed net
capital gains.
- We may be required to pay the "alternative minimum tax" on items
of tax preference, if any.
- If we have (a) net income from the sale or other disposition of
"foreclosure property" which is held primarily for sale to
customers in the ordinary course of business or (b) other
nonqualifying income from foreclosure property, we will be
required to pay tax at the highest corporate rate on this income.
In general, foreclosure property is property acquired through
foreclosure after a default on a loan secured by the property or
on a lease of the property.
- We will be required to pay a 100% tax on any net income from
prohibited transactions. In general, prohibited transactions are
sales or other taxable dispositions of property, other than
foreclosure property, held for sale to customers in the ordinary
course of business. Further we will be required to pay a 100% tax
in respect of amounts that are treated by us as rents from real
property but are properly allocable or attributable under the
Code to services rendered by a taxable REIT subsidiary (see
below).
- If we fail to satisfy the 75% or 95% gross income tests, as
described below, but have maintained our qualification as a REIT,
we will be required to pay a 100% tax on an amount equal to (a)
the gross income attributable to the greater of the amount by
which we fail the 75% or 95% gross income test multiplied by (b)
a fraction intended to reflect our profitability.
- We will be required to pay a 4% excise tax on the amount by which
our annual distributions to our stockholders is less than the sum
of (1) 85% of our ordinary income for the year, (2) 95% of our
real estate investment trust capital gain net income for the
year, and (3) any undistributed taxable income from prior
periods.
- If we acquire an asset from a corporation which is not a REIT in
a transaction in which the basis of the asset in our hands is
determined by reference to the basis of the asset in the hands of
the transferor corporation, and we subsequently sell the asset
within ten years, then under Treasury regulations not yet
finalized, we would be required to pay tax at the highest regular
corporate tax rate on this gain to the extent (a) the fair market
value of the asset exceeds (b) our adjusted tax basis in the
asset, in each case, determined as of the date on which we
acquired the asset. The results described in this paragraph
assume that we will elect this treatment in lieu of an immediate
tax when the asset is acquired.
- We will generally be subject to tax on the portion of any "excess
inclusion" income derived from an investment in residual
interests in real estate mortgage investment conduits to the
extent our stock is held by specified tax exempt organizations
not subject to tax on unrelated business taxable income.
REQUIREMENTS FOR QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST
The Code defines a REIT as a corporation, trust or association:
(1) that is managed by one or more trustees or directors;
(2) that issues transferable shares or transferable
certificates of beneficial ownership to its owners;
(3) that would be taxable as a regular corporation, but for
its election to be taxed as a REIT;
(4) that is not a financial institution or an insurance
company under the Code;
(5) that is owned by 100 or more persons;
(6) not more than 50% in value of the outstanding stock of
which is owned, actually or constructively, by five or
fewer individuals, as defined in the Code to include some
entities, during the last half of each year; and
(7) that meets other tests, described below, regarding the
nature of its income and assets, and the amount of its
distributions.
The Code provides that conditions (1) to (4) must be met during
the entire year and that condition (5) must be met during at least 335 days
of a year of twelve months, or during a proportionate part of a shorter
taxable year. Conditions (5) and (6) do not apply to the first taxable year
for which an election is made to be taxed as a REIT. For purposes of
condition (6), tax-exempt entities are generally treated as individuals,
subject to a "look-through" exception for pension funds.
Our charter provides for restrictions regarding ownership and
transfer of our stock. These restrictions are intended to assist us in
satisfying the share ownership requirements described in (5) and (6) above.
These stock ownership and transfer restrictions are described in
"Description of Capital Stock--Restrictions on Ownership and Transfer."
These restrictions, however, may not ensure that we will, in all cases, be
able to satisfy the share ownership requirements described in (5) and (6)
above. If we fail to satisfy these share ownership requirements, our status
as a REIT would terminate. If, however, we comply with the rules contained
in applicable Treasury regulations that require us to determine the actual
ownership of our shares and we do not know, or would not have known through
the exercise of reasonable diligence, that we failed to meet the
requirement described in condition (6) above, we would not be disqualified
as a REIT.
In addition, a corporation may not qualify as a REIT unless its
taxable year is the calendar year. We have and will continue to have a
calendar taxable year.
OWNERSHIP OF A PARTNERSHIP INTEREST
The Treasury regulations provide that if we are a partner in a
partnership, we will be deemed to own our proportionate share of the assets
of the partnership, and we will be deemed to be entitled to our
proportionate share of the gross income of the partnership. The character
of the assets and gross income of the partnership generally retains the
same character in our hands for purposes of satisfying the gross income and
asset tests described below.
TAXABLE REIT SUBSIDIARIES
REITs are permitted to own up to 100% of the shares in a
corporation that elects to be treated as a taxable REIT subsidiary
("taxable REIT subsidiary"). In order to obtain taxable REIT subsidiary
status, the corporation and the REIT must file a joint election with the
Internal Revenue Service. A taxable REIT subsidiary pays tax at regular
corporate income rates on any income it earns. Moreover, the Code contains
rules (including a limitation on interest deductions and rules requiring
the imposition of taxes on the REIT at a rate of 100% on certain
reallocated income and expenses) to ensure that contractual arrangements
between a taxable REIT subsidiary and its beneficial owners are at arm's
length. Securities in taxable REIT subsidiaries will not qualify as "real
estate assets" for the purposes of the 75% asset test described below under
the heading Federal Income Tax Considerations - Asset Test.
QUALIFIED REIT SUBSIDIARIES
A "qualified REIT subsidiary" is a corporation, all of the stock
of which is owned by a REIT. Under the Code, a qualified REIT subsidiary is
not treated as a separate corporation from the REIT. Rather, all of the
assets, liabilities, and items of income, deduction, and credit of the
qualified REIT subsidiary are treated as the assets, liabilities, and items
of income, deduction, and credit of the REIT for purposes of the REIT
income and asset tests described below. A qualified REIT subsidiary does
not include a corporation that elects to be treated as a taxable REIT
subsidiary.
INCOME TESTS
We must meet two annual gross income requirements to qualify as a
REIT. First, each year we must derive, directly or indirectly, at least 75%
of our gross income, excluding gross income from prohibited transactions,
from investments relating to real property or mortgages on real property,
including "rents from real property" and mortgage interest, or from
specified temporary investments. Second, each year we must derive at least
95% of our gross income, excluding gross income from prohibited
transactions, from investments meeting the 75% test described above, or
from dividends, interest and gain from the sale or disposition of stock or
securities. For these purposes, the term "interest" generally does not
include any interest of which the amount received depends on the income or
profits of any person. An amount will generally not be excluded from the
term "interest," however, if such amount is based on a fixed percentage of
receipts or sales.
Any amount includable in gross income by us with respect to a
regular or residual interest in a real estate mortgage investment conduit
is generally treated as interest on an obligation secured by a mortgage on
real property for purposes of the 75% gross income test. If, however, less
than 95% of the assets of a real estate mortgage investment conduit consist
of real estate assets, we will be treated as receiving directly our
proportionate share of the income of the real estate mortgage investment
conduit, which would generally include non-qualifying income for purposes
of the 75% gross income test. In addition, if we receive interest income
with respect to a mortgage loan that is secured by both real property and
other property and the principal amount of the loan exceeds the fair market
value of the real property on the date we purchased the mortgage loan,
interest income on the loan will be apportioned between the real property
and the other property, which apportionment would cause us to recognize
income that is not qualifying income for purposes of the 75% gross income
test.
In general, and subject to the exceptions in the preceding
paragraph, the interest, original issue discount, and market discount
income that we derive from investments in mortgage backed securities, and
mortgage loans will be qualifying interest income for purposes of both the
75% and the 95% gross income tests. It is possible, however, that interest
income from a mortgage loan may be based in part on the borrower's profits
or net income, which would generally disqualify such interest income for
purposes of both the 75% and the 95% gross income tests.
We may acquire construction loans or mezzanine loans that have
shared appreciation provisions. To the extent interest on a loan is based
on the cash proceeds from the sale or value of property, income
attributable to such provision would be treated as gain from the sale of
the secured property, which generally should qualify for purposes of the
75% and 95% gross income tests.
We may employ, to the extent consistent with the REIT Provisions
of the Code, forms of securitization of our assets under which a "sale" of
an interest in a mortgage loan occurs, and a resulting gain or loss is
recorded on our balance sheet for accounting purposes at the time of sale.
In a "sale" securitization, only the net retained interest in the
securitized mortgage loans would remain on our balance sheet. We may elect
to conduct certain of our securitization activities, including such sales,
through one or more taxable subsidiaries, or through qualified REIT
subsidiaries, formed for such purpose. To the extent consistent with the
REIT Provisions of the Code, such entities could elect to be taxed as real
estate mortgage investment conduits or financial asset securitization
investment trusts.
If we fail to satisfy one or both of the 75% or 95% gross income
tests for any year, we may still qualify as a REIT if we are entitled to
relief under the Code. Generally, we may be entitled to relief if:
- our failure to meet the gross income tests was due to reasonable
cause and not due to willful neglect;
- we attach a schedule of the sources of our income to our Federal
income tax return; and
- any incorrect information on the schedule was not due to fraud
with the intent to evade tax.
It is not possible to state whether in all circumstances we would
be entitled to rely on these relief provisions. If these relief provisions
do not apply to a particular set of circumstances, we would not qualify as
a REIT. As discussed above in "--Taxation of Anthracite--General", even if
these relief provisions apply, and we retain our status as a REIT, a tax
would be imposed with respect to our income that does not meet the gross
income tests. We may not always be able to maintain compliance with the
gross income tests for REIT qualification despite periodically monitoring
our income.
FORECLOSURE PROPERTY
Net income realized by us from foreclosure property would
generally be subject to tax at the maximum Federal corporate tax rate.
Foreclosure property includes real property and related personal property
that (1) is acquired by us through foreclosure following a default on
indebtedness owed to us that is secured by the property and (2) for which
we make an election to treat the property as foreclosure property.
PROHIBITED TRANSACTION INCOME
Any gain realized by us on the sale of any property, other than
foreclosure property, held as inventory or otherwise held primarily for
sale to customers in the ordinary course of business will be prohibited
transaction income, and subject to a 100% penalty tax. This prohibited
transaction income may also adversely affect our ability to satisfy the
gross income tests for qualification as a REIT. Whether property is held as
inventory or primarily for sale to customers in the ordinary course of a
trade or business depends on all the facts and circumstances surrounding
the particular transaction. While the Treasury regulations provide
standards which, if met, would not result in prohibited transaction income,
we may not be able to meet these standards in all circumstances.
HEDGING TRANSACTIONS
We may enter into hedging transactions with respect to one or more
of our assets or liabilities. Our hedging transactions could take a variety
of forms, including interest rate swaps or cap agreements, options, futures
contracts, forward rate agreements, or similar financial instruments. To
the extent that we enter into hedging transactions to reduce our interest
rate risk on indebtedness incurred to acquire or carry real estate assets,
any income, or gain from the disposition of hedging transactions should be
qualifying income for purposes of the 95% gross income test, but not the
75% gross income test.
ASSET TESTS
At the close of each quarter of each year, we also must satisfy
four tests relating to our assets.
First, at least 75% of the value of our total assets must be real
estate assets, cash, cash items and government securities. For purposes of
this test, real estate assets include real estate mortgages, real property,
interests in other REITs and stock or debt instruments held for one year or
less that are purchased with the proceeds of a stock offering or a
long-term public debt offering.
Second, not more than 25% of our total assets may be represented
by securities, other than those securities includable in the 75% asset
class.
Third, of the investments included in the 25% asset class, the
value of any one issuer's securities that we hold may not exceed 5% of the
value of our total assets, and we may not own more than 10% of the total
voting power or more than 10% of the value of the outstanding securities of
any corporation which is not a REIT, a qualified REIT subsidiary or a
taxable REIT subsidiary. Under a transition rule, the limitation on owning
more than 10% of the value of the outstanding securities of a corporation
does not apply to securities held on July 12, 1999, provided the issuer of
those securities does not engage in a substantial new line of business or
acquire substantial new assets after that date and provided that we do not
acquire additional securities in such issuer after that date.
Finally, no more than 20% of the value of a REIT's total assets
may be represented by securities of one or more taxable REIT subsidiaries.
We expect that any mortgage backed securities, real property, and
temporary investments that we acquire will generally be qualifying assets
for purposes of the 75% asset test, except to the extent that less than 95%
of the assets of a real estate mortgage investment conduit in which we own
an interest consists of "real estate assets." Mortgage loans, including
distressed mortgage loans, construction loans, bridge loans, and mezzanine
loans also will generally be qualifying assets for purposes of the 75%
asset test to the extent that the principal balance of each mortgage loan
does not exceed the value of the associated real property.
We anticipate that we may securitize all or a portion of the
mortgage loans which we acquire, in which event we will likely retain
certain of the subordinated and interest only classes of mortgage backed
securities which may be created as a result of such securitization. The
securitization of mortgage loans may be accomplished through one or more
real estate mortgage investment conduits established by us or, if a
non-real estate mortgage investment conduit securitization is desired,
through one or more qualified REIT subsidiaries or taxable subsidiaries
established by us. The securitization of the mortgage loans through either
one or more real estate mortgage investment conduits or one or more
qualified REIT subsidiaries or taxable subsidiaries should not affect our
qualification as a REIT or result in the imposition of corporate income tax
under the taxable mortgage pool rules. Income realized by us from a real
estate mortgage investment conduit securitization could, however, be
subject to a 100% tax as a "prohibited transaction." See "--Prohibited
Transaction Income."
After meeting the asset tests at the close of any quarter, we will
not lose our status as a REIT if we fail to satisfy the asset tests at the
end of a later quarter solely by reason of changes in asset values. In
addition, if we fail to satisfy the asset tests because we acquire
securities or other property during a quarter, we can cure this failure by
disposing of sufficient nonqualifying assets within 30 days after the close
of that quarter.
We will monitor the status of the assets that we acquire for
purposes of the various asset tests and we will manage our portfolio in
order to comply with such tests.
ANNUAL DISTRIBUTION REQUIREMENTS
To qualify as a REIT, we are required to distribute dividends,
other than capital gain dividends, to our stockholders in an amount at
least equal to the sum of (1) 90% of our "REIT taxable income" and (2) 90%
of our after tax net income, if any, from foreclosure property, minus (3)
the sum of certain items of noncash income. In general, "REIT taxable
income" means taxable ordinary income without regard to the dividends paid
deduction. In addition, if we dispose of any asset within 10 years of
acquiring it from a taxable C corporation in a tax free reorganization or
any other similar carry over basis transaction, we will be required, under
Treasury regulations not yet promulgated, to distribute at least 90% of the
after-tax built-in gain, if any, recognized on the disposition of the
asset.
We are required to distribute income in the taxable year which it
is earned, or in the following taxable year before we timely file our tax
return if such dividend distributions are declared and paid on or before
our first regular dividend payment. Except as provided in "--Taxation of
Taxable U.S. Stockholders" below, these distributions are taxable to
holders of common stock in the year in which paid, even though these
distributions relate to our prior year for purposes of our 95% distribution
requirement. To the extent that we do not distribute all of our net capital
gain or distribute at least 95%, but less than 100% or our "REIT taxable
income," we will be subject to tax at regular corporate tax rates.
From time to time we may not have sufficient cash or other liquid
assets to meet the above distribution requirements due to timing
differences between the actual receipt of cash and payment of expenses, and
the inclusion of income and deduction of expenses in arriving at our
taxable income. If these timing differences occur, in order to meet the
REIT distribution requirements, we may need to arrange for short-term, or
possibly long-term, borrowings, or to pay dividends in the form of taxable
stock dividends.
Under certain circumstances, we may be able to rectify a failure
to meet a distribution requirement for a year by paying "deficiency
dividends" to our stockholders in a later year, which may be included in
our deduction for dividends paid for the earlier year. Thus, we may be able
to avoid being subject to tax on amounts distributed as deficiency
dividends. We will be required, however, to pay interest based upon the
amount of any deduction claimed for deficiency dividends. In addition, we
will be subject to a 4% excise tax on the excess of the required
distribution over the amounts actually distributed if we should fail to
distribute each year at least the sum of 85% of our ordinary income for the
year, 95% of our capital gain income for the year, and any undistributed
taxable income from prior periods.
RECORD KEEPING REQUIREMENTS
We are required to maintain records and request on an annual basis
information from specified stockholders. This requirement is designed to
disclose the actual ownership of our outstanding stock.
FAILURE TO QUALIFY
If we fail to qualify for taxation as a REIT in any taxable year,
and the relief provisions of the Code described above do not apply, we will
be subject to tax, including any applicable alternative minimum tax, and
possibly increased state and local taxes, on our taxable income at regular
corporate rates. Such taxation would reduce the cash available for
distribution by us to our stockholders. Distributions to stockholders in
any year in which we fail to qualify as a REIT will not be deductible by us
and we will not be required to distribute any amounts to our stockholders.
If we fail to qualify as a REIT, distributions to our stockholders will be
subject to tax as ordinary income to the extent of our current and
accumulated earnings and profits and, subject to certain limitations of the
Code, corporate stockholders may be eligible for the dividends received
deduction. Unless entitled to relief under specific statutory provisions,
we would also be disqualified from taxation as a REIT for the four taxable
years following the year during which we lost our qualification. It is not
possible to state whether in all circumstances we would be entitled to
statutory relief.
TAXATION OF TAXABLE U.S. STOCKHOLDERS
When we use the term "U.S. stockholders," we mean a holder of
shares of our stock who is, for United States federal income tax purposes:
- a citizen or resident of the United States;
- a corporation, or other entity taxable as a corporation and
created or organized in or under the laws of the United
States or of any state thereof or in the District of
Columbia, unless Treasury regulations provide otherwise;
- an estate the income of which is subject to United States
federal income taxation regardless of its source; or
- a trust whose administration is subject to the primary
supervision of a United States court and which has one or
more United States persons whom have the authority to
control all substantial decisions of the trust.
DISTRIBUTIONS GENERALLY
Distributions out of our current or accumulated earnings and
profits, other than capital gain dividends will be taxable to our U.S.
stockholders as ordinary income. Provided we qualify as a REIT, our
dividends will not be eligible for the dividends received deduction
generally available to U.S. stockholders that are corporations.
To the extent that we make distributions in excess of our current
and accumulated earnings and profits, our distributions will be treated as
a tax-free return of capital to each U.S. stockholder, and will reduce the
adjusted tax basis which each U.S. stockholder has in its shares of stock
by the amount of the distribution, but not below zero. Distributions in
excess of a U.S. stockholder's adjusted tax basis in its shares will be
taxable as capital gain, provided that the shares have been held as capital
assets, and will be taxable as long-term capital gain if the shares have
been held for more than one year. Dividends we declare in October,
November, or December of any year and pay to a stockholder of record on a
specified date in any of those months will be treated as both paid by us
and received by the stockholder on December 31 of that year, provided we
actually pay the dividend in January of the following year. Stockholders
may not include in their own income tax returns any of our net operating
losses or capital losses.
CAPITAL GAIN DISTRIBUTIONS
Distributions designated as net capital gain dividends will be
taxable to our U.S. stockholders as capital gain income to the extent that
they do not exceed our actual net capital gain for the taxable year,
without regard to the period for which a U.S. stockholder has held his
shares. Such capital gain income will be taxable to non-corporate U.S.
stockholders at a 20% or 25% rate based on the characteristics of the asset
we sold that produced the gain. U.S. stockholders that are corporations may
be required to treat up to 20% of certain capital gain dividends as
ordinary income.
RETENTION OF NET CAPITAL GAINS
We may elect to retain, rather than distribute as a capital gain
dividend, our net capital gains. If we make this election, we would pay tax
on such retained capital gains. In such a case, our stockholders would
generally:
- include their proportionate share of our undistributed net
capital gains in their taxable income;
- receive a credit for their proportionate share of the tax
paid by us; and
- increase the adjusted basis of their stock by the difference
between the amount of their capital gain and their share of
the tax paid by us;
PASSIVE ACTIVITY LOSSES AND INVESTMENT INTEREST LIMITATIONS
Distributions we make, and gain arising from the sale or exchange
by a U.S. stockholder of our shares, will not be treated as passive
activity income. As a result, U.S. stockholders will not be able to apply
any "passive losses" against income or gain relating to our stock.
Distributions we make, to the extent they do not constitute a return of
capital, generally will be treated as investment income for purposes of
computing the investment interest limitation.
DISPOSITIONS OF STOCK
If you are a U.S. stockholder and you sell or dispose of your
shares of stock, you will recognize gain or loss for Federal income tax
purposes in an amount equal to the difference between the amount of cash
and the fair market value of any property you receive on the sale or other
disposition and your adjusted tax basis in the shares of stock. This gain
or loss will be capital gain or loss if you have held the stock as a
capital asset, and will be long-term capital gain or loss if you have held
the stock for more than one year. In general, if you are a U.S. stockholder
and you recognize loss upon the sale or other disposition of stock that you
have held for six months or less, the loss you recognize will be treated as
a long-term capital loss to the extent you received distributions from us
which were required to be treated as long-term capital gains.
BACKUP WITHHOLDING AND INFORMATION REPORTING
We report to our U.S. stockholders and the Internal Revenue
Service the amount of dividends paid during each calendar year, and the
amount of any tax withheld. Under the backup withholding rules, a
stockholder may be subject to backup withholding with respect to dividends
paid unless the holder is a corporation or comes within other exempt
categories and, when required, demonstrates this fact, or provides a
taxpayer identification number or social security number, certifies as to
no loss of exemption from backup withholding, and otherwise complies with
applicable requirements of the backup withholding rules. A U.S. stockholder
that does not provide us with his correct taxpayer identification number or
social security number may also be subject to penalties imposed by the
Internal Revenue Service. Backup withholding is not an additional tax. Any
amount paid as backup withholding will be creditable against the
stockholder's income tax liability. In addition, we may be required to
withhold a portion of capital gain distributions to any stockholders who
fail to certify their non-foreign status.
TAXATION OF TAX-EXEMPT STOCKHOLDERS
The Internal Revenue Service has ruled that amounts distributed as
dividends by a REIT do not constitute unrelated business taxable income
when received by a tax-exempt entity. Based on that ruling, provided that a
tax-exempt stockholder, has not held its shares as "debt financed property"
within the meaning of the Code and the shares are not otherwise used in a
unrelated trade or business, dividend income on our stock and income from
the sale of our stock should not be unrelated business taxable income to a
tax-exempt stockholder. Generally, debt financed property is property, the
acquisition or holding of which was financed through a borrowing by the
tax-exempt stockholder.
For tax-exempt stockholders which are social clubs, voluntary
employee benefit associations, supplemental unemployment benefit trusts,
and qualified group legal services plans exempt from Federal income
taxation under Sections 501(c)(7), (c)(9), (c)(17) and (c)(20) of the Code,
respectively, income from an investment in our shares will constitute
unrelated business taxable income unless the organization is able to
properly claim a deduction for amounts set aside or placed in reserve for
certain purposes so as to offset the income generated by its investment in
our shares. These prospective investors should consult their tax advisors
concerning these "set aside" and reserve requirements.
Notwithstanding the above, however, a portion of the dividends
paid by a "pension-held REIT" may be treated as unrelated business taxable
income as to any pension trust which:
- is described in Section 401(a) of the Code;
- is tax-exempt under Section 501(a) of the Code; and
- holds more than 10%, by value, of the equity interests in
the REIT.
Tax-exempt pension funds that are described in Section 401(a) of
the Code are referred to below as "qualified trusts."
A REIT is a "pension held REIT" if:
- it would not have qualified as a REIT but for the fact that
Section 856(h)(3) of the Code provides that stock owned by
qualified trust shall be treated, for purposes of the 5/50
Rule, as owned by the beneficiaries of the trust, rather
than by the trust itself; and
- either at least one qualified trust holds more than 25%, by
value, of the interests in the REIT, or one or more
qualified trusts, each of which owns more than 10%, by
value, of the interests in the REIT, holds in the aggregate
more than 50%, by value, of the interests in the REIT.
The percentage of any REIT dividend treated as unrelated business
taxable income is equal to the ratio of:
- the gross income from the unrelated business earned by the
REIT, less direct expenses relating to this gross income,
treating the REIT as if it were a qualified trust and
therefore subject to tax on unrelated business taxable
income, to
- the total gross income of the REIT less direct expenses
relating to this gross income.
A de minimis exception applies where the percentage is less than
5% for any year. As a result of the limitations on the transfer and
ownership of stock contained in the charter, we do not expect to be
classified as a "pension-held REIT."
TAXATION OF NON-U.S. STOCKHOLDERS
The rules governing Federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships, and other foreign
stockholders (collectively, "non-U.S. stockholders") are complex and no
attempt will be made herein to provide more than a summary of such rules.
PROSPECTIVE NON-U.S. STOCKHOLDERS SHOULD CONSULT THEIR TAX
ADVISORS TO DETERMINE THE IMPACT OF FOREIGN, FEDERAL, STATE, AND LOCAL
INCOME TAX LAWS WITH REGARD TO AN INVESTMENT IN OUR SECURITIES AND OF OUR
ELECTION TO BE TAXED AS A REAL ESTATE INVESTMENT TRUST INCLUDING ANY
REPORTING REQUIREMENTS.
Distributions to non-U.S. stockholders that are not attributable
to gain from sales or exchanges by us of U.S. real property interests and
are not designated by us as capital gain dividends or retained capital
gains will be treated as dividends of ordinary income to the extent that
they are made out of our current or accumulated earnings and profits. Such
distributions will generally be subject to a withholding tax equal to 30%
of the distribution unless an applicable tax treaty reduces or eliminates
that tax. However, if income from an investment in our stock is treated as
effectively connected with the non-U.S. stockholder's conduct of a U.S.
trade or business, the non-U.S. stockholder generally will be subject to
Federal income tax at graduated rates, in the same manner as U.S.
stockholders are taxed with respect to such distributions (and also may be
subject to the 30% branch profits tax in the case of a non-U.S. stockholder
that is a corporation). We expect to withhold U.S. income tax at the rate
of 30% on the gross amount of any distributions made to a non-U.S.
stockholder unless (i) a lower treaty rate applies and any required form,
such as Form W-8BEN, evidencing eligibility for that reduced rate is filed
by the non-U.S. stockholder with us or (ii) the non-U.S. stockholder files
a Form W-8ECI with us claiming that the distribution is effectively
connected income.
Any portion of the dividends paid to non-U.S. stockholders that is
treated as excess inclusion income from a real estate mortgage investment
conduit will not be eligible for exemption from the 30% withholding tax or
a reduced treaty rate. In addition, if Treasury regulations are issued
allocating our excess inclusion income from non-real estate mortgage
investment conduits among our stockholders, some percentage of our
dividends would not be eligible for exemption from the 30% withholding tax
or a reduced treaty withholding tax rate in the hands of non-U.S.
stockholders.
Distributions in excess of our current and accumulated earnings
and profits will not be taxable to a stockholder to the extent that such
distributions do not exceed the adjusted basis of the stockholder's stock,
but rather will reduce the adjusted basis of such shares. To the extent
that distributions in excess of current and accumulated earnings and
profits exceed the adjusted basis of a non-U.S. stockholder's stock, such
distributions will give rise to tax liability if the non-U.S. stockholder
would otherwise be subject to tax on any gain from the sale or disposition
of its stock, as described below. Because it generally cannot be determined
at the time a distribution is made whether or not such distribution will be
in excess of current and accumulated earnings and profits, the entire
amount of any distribution normally will be subject to withholding at the
same rate as a dividend. However, amounts so withheld are refundable to the
extent it is subsequently determined that such distribution was, in fact,
in excess of our current and accumulated earnings and profits. We are also
required to withhold 10% of any distribution in excess of our current and
accumulated earnings and profits.
For any year in which we qualify as a REIT, distributions that are
attributable to gain from sales or exchanges of a U.S. real property
interest, which includes certain interests in real property, but generally
does not include mortgage loans or mortgage backed securities, will be
taxed to a Non-U.S. stockholder under the provisions of the Foreign
Investment in Real Property Tax Act of 1980 ("FIRPTA"). Under FIRPTA,
distributions attributable to gain from sales of U.S. real property
interests are taxed to a non-U.S. stockholder as if such gain were
effectively connected with a U.S. business. Non-U.S. stockholders thus
would be taxed at the normal capital gain rates applicable to U.S.
stockholders (subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien individuals).
Distributions subject to FIRPTA also may be subject to the 30% branch
profits tax in the hands of a non-U.S. corporate stockholder. We are
required to withhold 35% of any distribution that is or can be designated
by us as a U.S. real property capital gains dividend. The amount withheld
is creditable against the non-U.S. stockholder's FIRPTA tax liability.
Gain recognized by a non-U.S. stockholder upon a sale of our stock
generally will not be taxed under FIRPTA if we are a "domestically
controlled REIT," which is a REIT in which at all times during a specified
testing period less than 50% in value of the stock was held directly or
indirectly by non-U.S. persons. Because our stock is publicly traded, no
assurance can be given that we are or will remain a "domestically
controlled REIT." In addition, a non-U.S. stockholder that owns, actually
or constructively, 5% or less of a class of our stock throughout a
specified testing period will not recognize taxable gain on the sale of his
stock under FIRPTA if the shares are traded on an established securities
market.
Gain not subject to FIRPTA will be taxable to a non-U.S.
stockholder if (i) the non-U.S. stockholder's investment in the stock is
effectively connected with a U.S. trade or business, in which case the
non-U.S. stockholder will be subject to the same treatment as U.S.
stockholders with respect to such gain, or (ii) the non-U.S. stockholder is
a nonresident alien individual who was present in the U.S. for 183 days or
more during the taxable year and other conditions are met, in which case
the nonresident alien individual will be subject to a 30% tax on the
individual's capital gains. If the gain on the sale of the stock were to be
subject to taxation under FIRPTA, the non-U.S. stockholder would be subject
to the same treatment as U.S. stockholders with respect to such gain
(subject to applicable alternative minimum tax, a special alternative
minimum tax in the case of nonresident alien individuals, and the possible
application of the 30% branch profits tax in the case of non-U.S.
corporations). A similar rule will apply to capital gain dividends to which
FIRPTA does not apply.
WITHHOLDING TAX AND INFORMATION REPORTING ON DISPOSAL OF REIT STOCK
The payment of proceeds from the disposition of common stock to or
through a U.S. office of a broker will be subject to information reporting
and backup withholding, unless the beneficial owner furnishes to the broker
the appropriate documentation upon which the beneficial owner certifies,
under penalties of perjury, among other things, its status as a non-U.S.
stockholder or otherwise establishes an exemption and provided the broker
does not have actual knowledge or reason to know that the beneficial owner
is a U.S. stockholder.
The payment of proceeds from the disposition of common stock to or
through a non-U.S. office of a broker generally will not be subject to
backup withholding and information reporting, except as noted below.
In the case of proceeds from a disposition of common stock paid to
or through a non-U.S. office of a broker that is:
- a U.S. person;
- a "controlled foreign corporation" for U.S. federal income
tax purposes; or
- a foreign person 50% or more of whose gross income from a
specified period is effectively connected with a U.S. trade
or business;
information reporting, but not backup withholding, will apply unless the
broker has documentary evidence in its files that the owner is a non-U.S.
stockholder and other conditions are satisfied, or the beneficial owner
otherwise establishes an exemption, and the broker has no actual knowledge
to the contrary.
The sale of common stock outside of the U.S. through a non-U.S.
broker will also be subject to information reporting if the broker is a
foreign partnership and at any time during its tax year:
- one or more of its partners are United States persons, as
defined for U.S. federal income tax purposes, who in the
aggregate hold more than 50% of the income or capital
interests in the partnership; or
- the foreign partnership is engaged in a U.S. trade or
business.
Backup withholding is not an additional tax. Any amounts withheld
under the backup withholding rules from a payment to a non-U.S. stockholder
can be refunded or credited against the non-U.S. stockholder's U.S. federal
income tax liability, if any, provided that the required information is
furnished to the Internal Revenue Service in a timely manner.
Each prospective holder of common stock should consult that
holder's own tax adviser with respect to the information and backup
withholding requirements.
STATE, LOCAL AND FOREIGN TAXATION
We may be required to pay state, local and foreign taxes in
various state, local and foreign jurisdictions, including those in which we
transact business or make investments, and our stockholders may be required
to pay state, local and foreign taxes in various state, local and foreign
jurisdictions, including those in which they reside. Our state, local and
foreign tax treatment may not conform to the Federal income tax
consequences summarized above. In addition, your state, local and foreign
tax treatment may not conform to the Federal income tax consequences
summarized above. Consequently, you should consult your tax advisor
regarding the effect of state, local and foreign tax laws on an investment
in our securities.
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING REITS.
The rules dealing with Federal income taxation are constantly
under review by persons involved in the legislative process and by the
Internal Revenue Service and the U.S. Treasury Department. Changes to the
tax law, which may have retroactive application, could adversely affect us
and our investors. It cannot be predicted whether, when, in what forms, or
with what effective dates, the tax law applicable to us or our investors
will be changed.
PLAN OF DISTRIBUTION
We may sell common stock, preferred stock or any series of debt
securities being offered by this prospectus in one or more of the following
ways from time to time:
- to underwriters for resale to the public or to institutional
investors;
- directly to institutional investors; or
- through agents to the public or to institutional investors.
Underwriters and agents from time to time may include UBS Warburg
LLC and Brinson Patrick Securities Corporation.
The prospectus supplements will describe the terms of the offering
of the securities, including the name or names of any underwriters or
agents, the purchase price of such securities and the proceeds to us from
such sale, any underwriting discounts or agency fees and other item's
constituting underwriters' or agents' compensation, any initial public
offering price, any discounts or concessions allowed or reallowed or paid
to dealers and any securities exchanges on which such securities may be
listed.
If underwriters are used in the sale, the securities will be
acquired by the underwriters for their own account and may be resold from
time to time in one or more transactions, including negotiated
transactions, at a fixed public offering price or prices, which may be
changed, at market prices prevailing at the time of sale, at prices related
to such prevailing market prices or at negotiated prices.
Unless a prospectus supplement states otherwise, the obligations
of the underwriters to purchase any series of securities will be subject to
certain conditions precedent and the underwriters will be obligated to
purchase all of such series of securities, if any are purchased.
Underwriters and agents may be entitled under agreements entered
into with us to indemnification by us against certain civil liabilities,
including liabilities under the Securities Act of 1933, or to contribution
with respect to payments which the underwriters or agents may be required
to make. Underwriters and agents may be customers of, engage in
transactions with, or perform services for us and our affiliates in the
ordinary course of business.
Each series of securities will be a new issue of securities and
will have no established trading market other than the common stock which
is listed on the NYSE. Any common stock sold pursuant to a prospectus
supplement will be listed on the NYSE, subject to official notice of
issuance. Any underwriters to whom we sell securities for public offering
and sale may make a market in the securities, but such underwriters will
not be obligated to do so and may discontinue any market making at any time
without notice. The securities, other than the common stock, may or may not
be listed on a national securities exchange.
LEGAL OPINIONS
The validity of the shares of common stock offered hereby will be
passed upon for us by Miles & Stockbridge, a Professional Corporation,
Baltimore, Maryland. Certain matters relating to federal income tax
considerations will be passed upon for us by Skadden, Arps, Slate, Meagher
& Flom LLP, New York, New York.
EXPERTS
The consolidated financial statements incorporated in this
prospectus by reference from Anthracite Capital, Inc.'s Annual Report on
Form 10-K for the year ended December 31, 2001 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report,
which is incorporated herein by reference, and have been so incorporated in
reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.