UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
FBR Asset Investment Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Notes:
FBR ASSET INVESTMENT CORPORATION
Potomac Tower
1001 Nineteenth Street North
Arlington, Virginia 22209
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
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To the Shareholders of FBR Asset Investment Corporation:
NOTICE IS HEREBY GIVEN THAT the 2000 annual meeting of shareholders (the
"Annual Meeting") of FBR Asset Investment Corporation (the "Company") will be
held at the Key Bridge Marriott Hotel, 1401 Lee Highway, Arlington, Virginia,
on Thursday, June 15, 2000, at 10:00 a.m., for the following purposes:
1. To elect five directors to serve on the Board of Directors for a one-
year term and until their successors have been duly elected and
qualified;
2. To ratify the appointment of Arthur Andersen LLP as independent
auditors for the fiscal year ended December 31, 2000; and
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment thereof.
Only shareholders of the Company of record as of the close of business on
April 20, 2000 will be entitled to notice of and to vote at the Annual Meeting
and any adjournments thereof.
Further information regarding the Annual Meeting, the nominees for
election to the Board of Directors and the independent auditors is contained in
the enclosed Proxy Statement.
By Order of the Board of Directors
/s/ Mary A. Sheehan
Mary A. Sheehan
Corporate Secretary
Arlington, Virginia
April 28, 2000
Your vote is very important. As soon as possible, please sign, date
and return the enclosed proxy card in the accompanying, postage pre-paid
envelope. Shareholders attending the meeting may vote in person even if they
have returned a proxy card.
FBR Asset Investment Corporation
Potomac Tower
1001 Nineteenth Street North
Arlington, Virginia 22209
April 28, 2000
Dear Shareholder:
On behalf of the Board of Directors, I cordially invite you to attend the
Annual Meeting of Shareholders of FBR Asset Investment Corporation, which will
be held at the Key Bridge Marriott Hotel, 1401 Lee Highway, Arlington,
Virginia, on Thursday, June 15, 2000, at 10:00 a.m. The matters to be
considered by shareholders at the Annual Meeting are described in detail in the
accompanying materials.
It is very important that you be represented at the Annual Meeting
regardless of the number of shares you own or whether you are able to attend
the Annual Meeting in person. Let me urge you to mark, sign and date your proxy
card today and return it in the envelope provided, even if you plan to attend
the Annual Meeting. This will not prevent you from voting in person, but will
ensure that your vote is counted if for whatever reason you are unable to
attend.
Your continued support of, and interest in, FBR Asset Investment
Corporation are sincerely appreciated.
Sincerely,
/s/ Eric F. Billings
Eric F. Billings
Chairman
FBR ASSET INVESTMENT CORPORATION
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PROXY STATEMENT
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GENERAL INFORMATION
This Proxy Statement and the accompanying form of proxy and Notice of Annual
Meeting are provided in connection with the solicitation of proxies by the
Board of Directors of FBR Asset Investment Corporation, a Virginia corporation
(the "Company"), for use at the annual meeting of shareholders (the "Annual
Meeting") to be held at the Key Bridge Marriott Hotel, 1401 Lee Highway,
Arlington, Virginia, on Thursday, June 15, 2000, at 10:00 a.m. and any
adjournments thereof. The mailing address of the principal executive offices of
the Company is Potomac Tower, 1001 Nineteenth Street North, Arlington, Virginia
22209. This Proxy Statement and the enclosed form of proxy and Notice of Annual
Meeting are first being mailed to the shareholders of the Company on or about
April 28, 2000.
Questions & Answers about the Meeting
Notice & Voting
Question: Who is entitled to vote?
Answer: Each outstanding share of the Company's common stock entitles its
holder to one vote. Only shareholders of record at the close of
business on April 20, 2000, will be entitled to notice of, and to
vote at, the Annual Meeting or any adjournments thereof.
Question: How do I vote?
Answer: If you complete and properly sign the accompanying proxy card, it
will be voted as you specify. If you are the shareholder of record
and do not specify, it will be voted for the election of the
nominees named in this Proxy Statement as directors and for the
ratification of the appointment of Arthur Andersen LLP as
independent auditors for the fiscal year ended December 31, 2000.
Question: Can I revoke my proxy and change my vote?
Answer: You may revoke the proxy either by delivering written notice of
such revocation to the Secretary of the Company before the Annual
Meeting, by submitting a properly executed proxy bearing a later
date or by attending the Annual Meeting and voting in person.
Question: If my shares are held in "street name" by my broker, will my
broker vote my shares for me?
Answer: If you hold your shares of Company common stock in "street name"
(that is, through a broker or intermediary), you may vote and
revoke a previous vote only by following the procedures
established by the record holder or its agent.
-1-
Question: What vote is needed to approve each item?
Answer: With regard to the election of directors, shareholders may vote in
favor of some or all of the nominees or withhold their vote as to
some or all of the nominees. If a quorum is present, then the
nominees receiving a plurality of the votes cast at the Annual
Meeting will be elected directors. With regard to the proposal to
ratify the appointment of the auditors, shareholders may vote in
favor of the proposal, against the proposal or abstain from
voting. Ratification of the appointment of the auditors requires
the affirmative vote of a majority of the votes cast on such
matter.
Question: What is the effect of an abstention?
Answer: You may not abstain from electing a nominee as a director. With
respect to each nominee, you must vote for the election of the
nominee or withhold your vote. Abstentions from the proposal to
ratify the appointment of the auditors will not be counted "for"
or "against" the proposal, but will be counted for the purpose of
determining the existence of a quorum.
Question: What if I hold my shares in "street name" and do not specify how
my shares should be voted?
Answer: Brokers holding shares for beneficial owners must vote those
shares according to the specific instructions they receive from
the owners, unless the brokers have been given discretionary
voting power by the beneficial owners. However, brokers or
nominees holding shares for a beneficial owner may not have
discretionary voting power and may not have received voting
instructions from the beneficial owner of the shares. In such
cases, the broker may not vote on these proposals. This results in
what is known as a "broker non-vote." A "broker non-vote" has the
effect of a negative vote when a majority of the shares
outstanding and entitled to vote is required for approval of a
proposal, and "broker non-votes" will not be counted as votes cast
but will be counted for the purpose of determining the existence
of a quorum. As a result, broker non-votes will have no effect on
the proposal to ratify the appointment of the auditors, since
ratification of the appointment of auditors requires the
affirmative vote of a majority of the votes cast. Because the
election of directors is a routine matter for which specific
instructions from beneficial owners will not be required, no
"broker non-votes" will arise in the context of the proposal
relating to the election of directors. Votes "withheld" from a
director-nominee also have the effect of a negative vote since a
plurality of the shares cast at the annual meeting is required for
the election of each director.
Question: What constitutes a quorum?
Answer: A majority of the votes entitled to be cast, represented in person
or by proxy, will constitute a quorum for the transaction of
business. At the close of business on April 20, 2000, the Company
had outstanding 4,782,027 shares of common stock.
Question: What are the Board's recommendations?
Answer: The Board of Directors recommends a vote FOR each of the nominees
for director and FOR the proposal to ratify the appointment of the
Company's auditors.
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Articles of Incorporation provide for a Board of Directors
consisting of not less than one nor more than nine members, unless otherwise
determined by the affirmative vote of at least 80% of the Board of Directors.
Directors are elected by the shareholders of the Company at each Annual
Meeting. The Board of Directors has set at five the number of directors
constituting the current Board of Directors to be elected at the Annual
Meeting.
All five of the current directors of the Company, Eric F. Billings, Emanuel J.
Friedman, Stephen D. Harlan, Russell C. Lindner and William R. Swanson, have
been nominated for reelection to serve as directors for a one-year term
expiring at the Company's annual meeting in 2001 or until their successors are
elected or appointed. Biographical information about each nominee is set forth
below.
If any nominee becomes unavailable or unwilling to serve the Company as a
director for any reason, the persons named as proxies in the form of proxy are
expected to consult with management of the Company in voting the shares
represented by them. The Board of Directors has no reason to doubt the
availability of any nominee, and each has indicated his willingness to serve as
a director of the Company if elected by the shareholders at the Annual Meeting.
NOMINEES FOR ELECTION AS DIRECTOR
ERIC F. BILLINGS, age 47, has served as a director of the Company since its
founding in 1997. Mr. Billings served as Vice Chairman, President and Chief
Operating Officer of the Company from its founding in 1997 until April 2000.
Since April 2000 he has served as Chairman and Chief Executive Officer. He
served as the Vice Chairman and Chief Operating Officer of Friedman, Billings,
Ramsey Group, Inc. (together with its predecessors, "FBR Group") from FBR
Group's founding in 1989 until 1999, and has served as Vice Chairman and Co-
Chief Executive Officer of FBR Group since 1999. Mr. Billings is involved in
FBR Group's investment banking, research, brokerage, and asset management
activities. He currently also serves as the Vice Chairman and Co-Chief
Executive Officer of Friedman, Billings, Ramsey Investment Management, Inc.
("FBRIM"), the manager of the Company's assets. He also manages private
investment funds sponsored by FBRIM. Mr. Billings entered the securities
industry in 1982 when he joined Legg Mason Wood Walker & Co., Inc., and from
1984 until 1989 he was Senior Vice President in the institutional sales group
at Johnston, Lemon & Co., Incorporated, a Washington, DC brokerage firm.
EMANUAL J. FRIEDMAN, age 54, has served as director of the Company since its
founding in 1997 and served as Chairman from 1997 until April 2000. He served
as Chairman and Chief Executive Officer of FBR Group from its founding in 1989
until 1999, and has served as the Chairman and Co-Chief Executive Officer of
FBR Group since 1999. Mr. Friedman is involved in FBR Group's investment
banking, research, brokerage, and asset management activities. He currently
serves as the Chairman and Co-Chief Executive Officer of FBRIM, the manager of
the Company's assets. He also manages private investment funds sponsored by
FBRIM. Mr. Friedman founded the Friedman, Billings, Ramsey Foundation, a
charitable foundation, in 1993 and currently serves as one of its directors.
Mr. Friedman entered the securities industry in 1973 when he joined Legg Mason
Wood Walker & Co., Inc., and from
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1985 until 1989 he was Senior Vice President in the institutional sales group
at Johnston, Lemon & Co., Incorporated, a Washington, DC brokerage firm.
STEPHEN D. HARLAN, age 66, has served as a director of the Company since its
founding in 1997. He is the Chairman of H.G. Smithy Company, a specialized real
estate firm that provides mortgage banking, finance, investment advisory and
property management services to commercial real estate investors. Before
joining H.G. Smithy in 1993, Mr. Harlan was Vice Chairman of KPMG Peat Marwick,
where he also served on KPMG's International Council, Board of Directors, and
Management Committee. In June 1995, President Clinton appointed Mr. Harlan to
the District of Columbia Financial Responsibility and Management Assistance
Authority, where he served as Vice Chairman until September 1998. Mr. Harlan
chairs the Finance Committee and is a member of the Board of Directors of
MedStar Health, Inc. He also serves on the Board of Directors of the Mary and
Daniel Loughran Foundation, Inc., is a member of the Senior Council of the
Greater Washington Board of Trade, is a Trustee and member of the Executive
Committee of the Carnegie Endowment for International Peace, and is the
Chairman of the Board of the Counsel for Court Excellence.
RUSSELL C. LINDNER, age 45, has served as a director of the Company since 1999.
He is currently the Chairman of the Forge Company, the parent company of
Colonial Parking, Inc., and Bear Saint Properties, Inc., a real estate
investment advisory firm. He has served as Chairman of the Forge Company since
January 1994. Mr. Lindner is a former or current board member of Riggs Bank
(Board of Consultants), The National Conference of Christians and Jews (DC),
Jubilee Housing, GW Law Alumni Association, The Salvation Army (DC), The
Federal City Council, the National Rehabilitation Hospital and the Washington
International School. Mr. Lindner recently also served a three-year term as
Chairman of the Board of The Landon School.
WILLIAM R. SWANSON, age 52, has served as a director of the Company since 1999.
Mr. Swanson served as Chief Operating Officer of the Company from its founding
in 1997 until November 1998 and as Executive Vice President and Chief Operating
Officer from November 1998 until April 2000. Since April 2000 he has served as
President and Chief Operating Officer. He has served as the Managing Director
of Friedman, Billings and Ramsey & Co., Inc.'s real estate investment banking
group since 1994. Before that, Mr. Swanson served as President of H.G. Smithy
Company, Inc., a specialized real estate firm that provides mortgage banking,
finance, investment advisory, and property management services to commercial
real estate investors. Before working at H.G. Smithy, Mr. Swanson served as a
Managing Director at LaSalle Partners, Ltd. While with LaSalle Partners, Mr.
Swanson managed and directed the firm's acquisition and development activities
for the southeastern region of the United States. Mr. Swanson, a Certified
Public Accountant, is also a director of Capital Automotive REIT, one of the
companies in which the Company has invested.
Board Recommendation
The Board of Directors recommends a vote For each of the nominees for director.
-4-
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT AUDITORS
Arthur Andersen LLP served as independent auditors for the Company for the year
ended December 31, 1999. The Audit Committee of the Board of Directors has
appointed Arthur Andersen LLP, independent public accountants, to audit the
consolidated financial statements of the Company for the fiscal year ending
December 31, 2000, and recommends that the stockholders vote in favor of
ratification of such appointment. In the event of a negative vote on such
ratification, the Board of Directors will reconsider its selection.
A representative of Arthur Andersen LLP is expected to be present at the Annual
Meeting, will have the opportunity to make a statement if he desires to do so,
and is expected to be available to respond to appropriate questions.
Board Recommendation
The Board of Directors recommends a vote For ratification of Arthur Andersen
LLP as the Company's independent auditors.
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OWNERSHIP OF THE COMPANY'S COMMON STOCK
The following table, based on information available to the Company including
shareholder filings with the Securities and Exchange Commission under Section
13 of the Securities Exchange Act of 1934, sets forth information concerning
beneficial owners of more than 5 percent of the Company's outstanding common
stock as of December 31, 1999:
Number of
Shares
Name and Address of Beneficially
Beneficial Owner Owned Percent
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Friedman Billings, Ramsey Group, Inc.(/1/)
1001 Nineteenth Street North
Arlington, VA 22209 2,159,891(/2/) 32.62%(/2/)
Boston Partners Asset Management
One Financial Center
43rd Floor
Boston, MA 02111 486,200 8.37%
Angelo Gordon
245 Park Avenue, 26th Floor
New York, NY 10167 500,000 8.61%
Loews Corp.
667 Madison Avenue
New York, NY 10021 483,100 8.32%
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(/1/) Held through wholly-owned subsidiaries.
(/2/) Includes shares as to which currently exercisable options are held.
How Much Stock Do the Company's Directors and Officers Own?
The following table sets forth the beneficial ownership of the Company's common
stock, as of March 31, 2000, by (i) each director and director nominee of the
Company, (ii) each executive officer of the Company and (iii) all directors and
executive officers as a group. Unless otherwise indicated, shares of common
stock are owned directly and the indicated person has sole voting and
investment power.
Amount and Nature of
Name Beneficial Ownership Percent of Class
---- -------------------- ----------------
Eric F. Billings 104,700(/1/)(/2/) 2.18%
Emanuel J. Friedman 0(/2/) 0%
Stephen D. Harlan 16,000(/3/) (/4/)
Kurt R. Harrington 750 (/4/)
Russell C. Lindner 15,000(/3/) (/4/)
William R. Swanson 160,000(/3/) 3.27%(/3/)
All directors and executive
officers as a group (6
persons) 296,450 6.02%(/3/)
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(/1/) Includes 92,800 shares by FBR Weston, LP, as to which Mr. Billings may be
deemed to have shared voting and dispositive power. Mr. Billings
disclaims beneficial ownership of all shares held by Weston in excess of
his pecuniary interest.
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(/2/) Does not include shares identified above for FBR Group, of which Messrs.
Billings and Friedman and W. Russell Ramsey are principal shareholders.
(/3/) Includes shares as to which currently exercisable options are held.
(/4/) Less than 1%.
Section 16(a) Beneficial Ownership Reporting Compliance
Under Section 16 of the Securities and Exchange Act of 1934, the Company's
directors and executive officers, and any persons beneficially owning more than
ten percent of a registered class of the Company's equity securities, are
required to report their ownership of the common stock and any changes in that
ownership to the SEC. These persons are also required to furnish the Company
with copies of these reports. Specific due dates for these reports have been
established, and the Company is required to report in the Proxy Statement any
failure to timely file such reports by those due dates during the 1999 fiscal
year.
Based solely upon its review of the reports furnished to the Company or written
representations from the Company's directors and executive officers that such
reports were not required from those persons, the Company believes that all of
these filing requirements were satisfied by the Company's directors and
executive officers during 1999, except that initial statements of beneficial
ownership of securities on Form 3 required to be filed by the Company's
directors and executive officers were not filed timely.
MANAGEMENT OF THE COMPANY
Who Are the Officers of the Company?
The executive officers of the Company, their ages and their positions are as
follows:
Name Age Position(s) Held
---- --- ----------------
Eric F. Billings...................... 47 Chairman and Chief Executive Officer
William R. Swanson.................... 52 President and Chief Operating Officer
Kurt R. Harrington.................... 47 Chief Financial Officer and Treasurer
The executive officers serve at the discretion of the Board of Directors.
Biographical information for the last five years about Eric F. Billings and
William R. Swanson is provided above. Biographical information for the last
five years about Kurt R. Harrington is set forth below.
Kurt R. Harrington has served as Chief Financial Officer and Treasurer of the
Company since September 1999. He joined FBR Group in March 1997 as Vice
President, Finance/Treasurer, and has served as Chief Financial Officer of FBR
Group since January 2000. From September 1996 to March 1997, Mr. Harrington was
a consultant to the venture capital industry. For the five years before then,
Mr. Harrington was Chief Financial Officer of Jupiter National, Inc., a
publicly-traded venture capital company, and in that capacity, served as a
director of a number of companies, including Viasoft, Inc., a publicly-held
software company from January 1994 to October 1995. Mr. Harrington is a
Certified Public Accountant.
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How Often Did the Board Meet in 1999?
The Board of Directors held six meetings during 1999. All directors attended at
least 75% of the Board meetings and meetings of committees of the Board on
which they served, except for Mr. Friedman.
What Committees has the Board Established?
The Company presently has an Audit Committee, Contracts Committee, Executive
Committee and a Nominating Committee of its Board of Directors. The Board may,
from time to time, form other committees as circumstances warrant. Such
committees have authority and responsibility as delegated by the Board of
Directors.
Audit Committee. The Audit Committee consists of the Company's independent
directors, Messrs. Harlan and Lindner. Mr. Harlan serves as Chairman. The Audit
Committee assists the Board in providing oversight relating to corporate
integrity and management of financial risk, adequacy of internal controls, and
adherence to relevant accounting standards and financial reporting
requirements. The Audit Committee helps assure the objectivity and independence
of the Company's independent auditors and monitors and reviews the services and
fees of such independent auditors. The Audit Committee held one meeting during
1999.
Contracts Committee. The Contracts Committee consists solely of the Company's
independent directors, Messrs. Harlan and Lindner. Mr. Lindner serves as
Chairman. The Contracts Committee assists the Board of Directors in reviewing
any contract that the Company may propose to enter into with FBRIM or its
affiliates, including without limitation, the Management Agreement between the
Company and FBRIM, and monitors on an ongoing basis the performance of FBRIM or
any of its affiliates pursuant to any such contract. During 1999, reviews of
proposed transactions in which FBRIM or its affiliates had an interest were
handled in the course of regular Board meetings in which the members of the
Contracts Committee participated. In addition, the Contracts Committee held two
separate meetings during 1999.
Executive Committee. The Executive Committee consists of Messrs. Billings,
Friedman and Swanson. Mr. Billings serves as the Chairman. When the Board of
Directors is not in session, the Executive Committee exercises all of the Board
of Director's authority, provided, however, that unless otherwise authorized by
the Company's Bylaws, the Executive Committee does not have the authority to
elect directors, declare dividends or distributions on stock, recommend to
shareholders any action that requires shareholder approval, amend or repeal the
Company's Bylaws, approve any merger or share exchange that does not require
shareholder approval, authorize the issuance of stock, or approve transactions
that require the approval of the independent directors. The Executive Committee
held no meetings during 1999.
Nominating Committee. The Nominating Committee consists solely of the Company's
independent directors, Messrs. Harlan and Lindner. Mr. Lindner serves as
Chairman. The Nominating Committee assists the Board of Directors in
establishing processes for director nominations, including the criteria for
selecting nominees, and identifies and recommends nominees for election to the
Board of Directors. During 1999, nomination matters were handled in the course
of regular Board meetings in which the members of the Nominating Committee
participated. Accordingly, the Nominating Committee held no separate meetings
during 1999.
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Compensation of Directors
The Company pays its independent directors an annual fee of $20,000, plus a fee
of $1,000 for each additional meeting of the Board of Directors attended in
person after the first four meetings. In addition, an annual fee of $2,000 is
paid to the Chair of any committee of the Board. Directors who are directors,
officers or employees of FBRIM or any of its affiliates do not receive separate
compensation from the Company. The Company reimburses all directors, including
affiliated directors, for the costs and expenses of attending all Board of
Directors and committee meetings.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Because of its extensive involvement in real estate securities, FBR Group may
have material direct and indirect interests in, or relationships with,
companies in which the Company also has an interest. FBR Group's interests may
conflict with the Company's interests. For example, the Company may purchase
equity securities of a company whose securities have been or will be
underwritten by Friedman, Billings, Ramsey & Co., Inc. or of a company about
which Friedman, Billings, Ramsey & Co., Inc. provides ongoing research, in
whose securities Friedman, Billings, Ramsey & Co., Inc. makes a market or to
which Friedman, Billings, Ramsey & Co., Inc. provides financial advisory
services. Any investment in one of these companies by the Company creates a
conflict because it may indirectly benefit FBR Group and its directors,
officers, and owners.
Since 1994, FBR Group, through Friedman, Billings, Ramsey & Co., Inc., has
provided underwriting and other investment banking services to Prime Group Inc.
and its affiliates. Since January 1, 1997, Friedman, Billings, Ramsey & Co.,
Inc. has acted as lead underwriter or co-manager, or provided advisory services
to affiliates of Prime Group Inc., in connection with $710.5 million of capital
raising and $973.1 million of merger transactions.
. From September 7 to October 18, 1998, the Company acquired 123,500
common shares of Prime Retail, Inc., an affiliate of Prime Group Inc.,
in open-market transactions at an average price per share of $9.73. The
closing price of shares of Prime Retail on April 24, 2000, was $1.69 per
share. On April 21, 1999, the Company acquired 78,400 shares of Prime
Retail's Series A 10.5% preferred stock in open-market transactions at
$18.55 per share. The closing price of those shares on April 24, 2000,
was $9.75 per share. On September 29, 1999, the Company also loaned
Prime Retail $20 million. The note bears interest at a rate of 15% per
annum and is due on June 10, 2000, with an option for a six month
extension subject to certain conditions.
. On December 23, 1997, the Company entered into an interim financing and
security agreement with Prime Capital Holding, LLC, an affiliate of
Prime Group Inc., for up to $20 million. This loan was paid in full on
November 16, 1999. On September 29, 1999, the Company made an additional
$7.0 million loan to Prime Capital to enable Prime Capital to finance
its remaining mortgage loans pending liquidation. This loan bore
interest at an annual rate of 12% until November 29, 1999, at which time
the interest rate increased to 17%. The maturity date for the loan was
originally January 29, 2000, but the Company subsequently extended the
maturity date to March 31, 2000. The maturity date was again extended
and the interest rate increased to 20% to enable Prime Capital to
liquidate its remaining two mortgage loans. The current balance of the
loan is approximately $4.6 million. The Company may permit Prime Capital
to retain approximately $1.8 million of proceeds from the sale of one of
its two mortgage loans,
-9-
provided Prime Group, Inc. arranges for the Company to be granted a
second mortgage on a parking garage located in Chicago, Illinois, which
garage is owned by an affiliate of Prime Group, Inc.
. Friedman, Billings, Ramsey & Co., Inc. was the co-managing underwriter
in November 1997 of an initial public offering by Prime Group Realty
Trust, another affiliate of Prime Group Inc., of 12,380,000 common
shares at a public offering price of $20.00 per share. Friedman,
Billings, Ramsey & Co., Inc. was the co-managing underwriter in May 1998
of an offering by Prime Group Realty of 4,000,000 preferred shares at an
offering price of $25.00 per share. On February 5, 1999, the Company
loaned Prime Group Realty $7 million. The loan was secured by real
property and was due and payable on August 5, 1999. The loan bore
interest at a rate of 15% per annum and was repaid on July 14, 1999.
The Company has made the following additional investments in companies with
which FBR Group or one or more of its affiliates has a relationship:
. Friedman, Billings, Ramsey & Co., Inc. was the lead underwriter in
October 1997 of an initial public offering by Imperial Credit Commercial
Mortgage Investment Corporation of 30 million shares of common stock at
a public offering price of $15 per share. The underwriting discount was
7%. Beginning in December 1997, the Company purchased in open-market
transactions 900,000 shares of Imperial Credit common stock at an
average price per share of $14.50. As of September 16, 1999, shares of
Imperial Credit were selling for $10.63 per share. On June 30, 1999, the
Company purchased 400,000 shares of Series B 14.5% cumulative preferred
stock of Imperial Credit Industries, Inc., an affiliate of Imperial
Credit, in a privately negotiated transaction for $25 per share. On July
22, 1999, Imperial Credit Industries, Inc. and Imperial Credit
Commercial Mortgage Investment Corporation entered into a merger
agreement under which Imperial Credit Industries would acquire all of
the outstanding capital stock of Imperial Credit Commercial Mortgage for
a cash purchase price of $11.50 per share, subject to increase under
certain circumstances. On March 31, 2000, in connection with the
completion of the merger of Imperial Credit Commercial Mortgage with
Imperial Credit Industries, the Company received a cash payment of
$10,417,792, or $11.57 per share, for its investment in Imperial Credit
Commercial Mortgage Investment Corporation.
. In connection with the organization of Building One Services
Corporation, the Company acquired 500,000 shares of Building One for
$10,000,000, or $20 per share. At the time of the acquisition, the
Company was a wholly-owned subsidiary of FBR Group. Friedman, Billings,
Ramsey & Co., Inc. was the lead underwriter of a $480 million initial
public offering by Building One that closed in December 1997. The public
offering price was $20 per share and the underwriting discount was 7%.
W. Russell Ramsey, one of FBRIM's executive officers, served as a
director of Building One until June 30, 1999. On May 11, 1999, Building
One announced the results of a self tender offer that expired on April
29, 1999. Pursuant to Building One's tender offer, the Company sold
297,341 of its Building One common shares for a price of $22.50 per
share, or $6.7 million. The Company sold an additional 67,800 shares of
Building One during the first quarter 2000 on the open market at an
average price of $9.78 per share. The Company retained 124,858 shares of
Building One's common stock, which was converted into 168,573 shares of
the common stock of Encompass Service Corporation in a
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merger at an exchange ratio of 1.25 to 1. The closing price of Encompass
Service Corporation's common stock on April 24, 2000, was $4.69 per
share.
. Friedman, Billings, Ramsey & Co., Inc. was the lead underwriter in
February 1998 of an initial public offering by Capital Automotive REIT
of 20 million shares at a public offering price of $15 per share. The
underwriting discount was 7%. In a privately negotiated transaction that
closed at the same time, the Company purchased from Capital Automotive
1,792,115 shares for $25 million, or $13.95 per share. William R.
Swanson, one of the Company's directors and executive officers, is a
director of Capital Automotive. The closing price of shares of Capital
Automotive common stock on April 24, 2000, was $13.00 per share.
. Friedman, Billings, Ramsey & Co., Inc. was the lead underwriter in April
1998 of an initial public offering by Chastain Capital Corporation of
7,380,000 common shares at a public offering price of $15 per share. The
underwriting discount was 7%. In a privately negotiated transaction that
closed at the same time, the Company purchased from Chastain 700,000
shares for $9,765,000, or $13.95 per share. In the fourth quarter of
1998, the Company recorded a charge to operations in the amount of
$6,615,000 to reflect management's determination that the decline in the
value of Chastain's stock was other than temporary. On May 14, 1999,
Chastain announced that its board of directors had voted to sell all of
Chastain's assets, either through a plan of liquidation or through a
sale of the company. On December 15, 1999, the Company received a
liquidating distribution from Chastain in the amount of $5,215,000. The
Company sold its remaining position in Chastain during the first quarter
of 2000 on the open market at an average price of $0.87 per share.
. In June 1998, Friedman, Billings, Ramsey & Co., Inc. entered into an
agreement with Kennedy-Wilson Inc. to underwrite an offering of common
shares of Kennedy-Wilson to obtain capital for the expansion of its
business. At the same time, the Company loaned Kennedy-Wilson $10
million at an interest rate of 12% per annum that was due and payable in
December 1998 and entitled the Company to five-year warrants to acquire
131,096 shares of Kennedy-Wilson stock at a price of $7.5526 per share.
In December 1998, Kennedy-Wilson paid $2.5 million in principal on the
loan, and the term of the $7.5 million balance was extended to June 3,
1999, at an interest rate of 17% per annum. The entire outstanding
balance of this loan was repaid from the proceeds of an equity offering
by Kennedy-Wilson underwritten by Friedman, Billings, Ramsey & Co.,
Inc., with a 7% underwriting discount, on May 17, 1999. The closing
price of shares of Kennedy-Wilson common stock on April 24, 2000, was
$4.81 per share.
. On June 30, 1998, the Company purchased 520,000 common shares of East-
West Bancorp, Inc. from selling shareholders for a purchase price of
$5.2 million, or $10 per share, in a $237.8 million private transaction.
FBR acted as placement agent in the transaction and for its services
received a private placement fee equal to 7%. The Company sold its
position in East-West Bancorp, Inc. during the third and fourth quarters
of 1999 at an average price of $11.52 per share.
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The Management Agreement
The Company and FBRIM entered into a Management Agreement on December 17, 1997,
which expired and was renewed for an additional 12 month term and amended on
December 17, 1999. FBRIM performs portfolio management services on behalf of
the Company. Such services include among others:
. consulting with the Company on purchase and sale opportunities,
. collection of information and submission of reports pertaining to the
Company's assets, and
. periodic review and evaluation of the performance of the Company's
portfolio of assets.
FBRIM previously engaged BlackRock Financial Management, Inc. ("BlackRock"), a
subsidiary of The PNC Financial Services Group, Inc. which owns 4.9% of the
outstanding common stock of FBR Group, to advise it on the management of the
Company's mortgage portfolio. As compensation for rendering services, BlackRock
was entitled to share the management fees of FBRIM, calculated based on the
average gross asset value managed by BlackRock, with a minimum annual fee of
$100,000 payable quarterly. FBRIM terminated its agreement with BlackRock on
February 14, 2000 and entered into a new agreement with Fixed Income Discount
Advisory Company, Inc. ("FIDAC") at that time to manage the Company's mortgage
portfolio as a sub-advisor. FBRIM may enter into subcontracts with other
parties, including affiliates of FBR Group, to provide other services to the
Company.
The Management Fee
Base Management Fee
FBRIM is entitled to receive a quarterly base management fee equal to the sum
of:
. 0.25% per annum of the average book value of the Company's mortgage
assets during each calendar quarter, and
. 0.75% per annum of the average book value of the remainder of the
Company's invested assets during each calendar quarter.
FBRIM also received options to purchase 1,021,900 shares of the Company's
common stock at $20 per share. The estimated value of these options is
$909,492, based on a discounted Black-Scholes valuation, and was amortized over
the initial term of the Management Agreement. FBRIM assigned options to acquire
51,045 shares to BlackRock in connection with the Company's previous engagement
of BlackRock as a sub-adviser. In addition, FBRIM agreed to the rescission of
options to purchase 155,000 common shares in connection with the establishment
of the Company's stock incentive plan.
Incentive Compensation
FBRIM is also entitled to receive incentive compensation based on the Company's
performance. For each calendar quarter, FBRIM is entitled to receive 25% of the
"Incentive Calculation Amount" for the 12 month period ending with the end of
that calendar quarter.
-12-
The "Incentive Calculation Amount" for any 12 month period means an amount
equal to the product of
(A) 25% of the dollar amount by which
(1) (a) the Company's Funds from Operations (before the incentive
fee) per share of common stock, based on the weighted average number of
shares outstanding, (b) plus gains or minus losses from debt
restructuring and sales of property per share, based on the weighted
average number of shares outstanding, exceed
(2) an amount equal to (a) the weighted average of the price per
share at the initial offering price ($20) and the price per share at
any secondary offerings by the Company multiplied by (b) the 10-Year
U.S. Treasury Rate plus five percent per annum, multiplied by
(B) the weighted average number of common shares outstanding during the
applicable period.
"Funds from Operations" as defined by the National Association of Real Estate
Investment Trusts means net income computed in accordance with generally
accepted accounting principles, excluding gains or losses from debt
restructuring and sales of property, plus depreciation and amortization on real
estate assets, and after adjustments for unconsolidated partnerships and joint
ventures. Funds from Operations does not represent cash generated from
operating activities in accordance with generally accepted accounting
principles and should not be considered as an alternative to net income as an
indication of the Company's performance or to cash flows as a measure of
liquidity or ability to make distributions.
As used in calculating FBRIM's compensation, the term "10-Year U.S. Treasury
Rate" means the arithmetic average of the weekly average yield to maturity for
actively traded current coupon U.S. Treasury fixed-rate securities, adjusted to
constant maturities of ten years, published by the Federal Reserve Board during
a quarter. The average 10-Year U.S. Treasury Rate for the year ended December
31, 1999, was 5.65%.
No incentive compensation had been earned by FBRIM as of December 31, 1999.
STOCK OPTIONS
The Company has adopted the FBR Asset Investment Corporation Stock Incentive
Plan that provides for the grant of both tax-qualified incentive stock options
and non-qualified stock options. The Company's Board of Directors, or a
committee appointed by the Board, administers the stock incentive plan, which
is designed to promote the success and enhance the value of the Company by
linking the interests of those who provide services to the Company with the
interests of the Company's shareholders, and by providing those persons with an
incentive for outstanding performance. The stock incentive plan is further
intended to provide flexibility to the Company in its ability to motivate,
attract and retain persons upon whose judgment, interest, and special efforts
the Company's successful operation is largely dependent.
Officers, employees, and directors of the Company and FBR, as well as other
persons who provide services to the Company, are eligible to participate in the
stock incentive plan. The Board of Directors or a committee of the Board of
Directors determines which officers, employees, and service providers will
participate in the plan and sets the terms of these persons' awards.
-13-
The stock incentive plan provides that the total number of shares of common
stock available for issuance under the plan may not exceed 155,000 shares. The
options granted under the stock incentive plan will be exercisable in whole or
in part at any time before December 17, 2007, at an option price of $20 per
share. A participant exercising an option may pay the exercise price in full in
cash or by forfeiting options with a value equal to the exercise price of the
exercised option, or, if approved by the Board of Directors, with previously
acquired shares of common stock, or a combination of the foregoing.
The Company's Board of Directors may at any time terminate, amend, or modify
the stock incentive plan; provided that no termination, amendment, or
modification may impair the rights of award holders, and no amendment may be
made without shareholders' approval to the extent such approval is required by
law or stock exchange rules.
On May 28, 1999, the Company's Board of Directors granted options to acquire an
aggregate of 155,000 shares of the Company's common stock to persons it deemed
to be key personnel. Information about the grants is set forth in the following
table:
Individual Grants
---------------------------
Potential Realizable Value
Number of % of Total at Assumed Annual Rates of
Shares Options Stock Price Appreciation for
Underlying Granted to Per Share Option Term(/1/)
Options Individuals in Exercise Expiration -----------------------------
Name Granted(/2/) Fiscal Year Price Date 10%
---- ------------ -------------- --------- ---------- 5% ---------------
Stephen D. Harlan....... 15,000 9.68% $20 12/17/07 $ 17,169 $ 182,082
Russell C. Lindner...... 15,000 9.68% $20 12/17/07 $ 17,169 $ 182,082
William R. Swanson...... 100,000 64.51% $20 12/17/07 $ 114,460 $ 1,213,883
Elaine M. Clancy........ 25,000 16.13% $20 12/17/07 $ 28,615 $ 303,471
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(/1/) The amounts shown as potential realizable value on options are based on
assumed amortized rates of appreciation in the price of the Company's
common stock of 5% and 10% over the term of the options, as required by
the rules of the SEC. Actual gains, if any, on the stock option exercises
are dependent on future performance of the common stock. There can be no
assurance that the potential realizable values reflected in this table
will be realized.
(/2/) All options are fully vested.
EXECUTIVE COMPENSATION
The Company does not have any employees. The Company is managed by FBRIM
pursuant to the Management Agreement between the Company and FBRIM. All of the
Company's executive officers are employees of FBR Group or one or more of its
affiliates. The Company has not paid, and does not intend to pay, any annual
compensation to its executive officers.
-14-
PERFORMANCE GRAPH
The following graph compares the change in the Company's shareholder cumulative
total return on the common stock for the period September 29, 1999, which was
the first day the Company's common stock actually traded on the American Stock
Exchange, through December 31, 1999, with the changes in the Standard & Poor's
500 Stock Index and the Morgan Stanley REIT Index for the same period, assuming
a base share price of $100 for the common stock and each index for comparative
purposes. Total return equals appreciation in stock price plus dividends paid,
and assumes that all dividends are reinvested. The information herein has been
obtained from sources believed to be reliable, but neither its accuracy nor its
completeness is guaranteed. The performance graph is not necessarily indicative
of future investment performance.
The Company's common stock was originally issued on December 11, 1997, in a
private placement of 10,415,827 shares at a purchase price of $20.00 per share.
Based on market conditions in the public REIT sector, the Board of Directors
authorized a stock repurchase program on September 8, 1998. From that date
through September 28, 1999, the Company repurchased 3,303,991 shares of its
common stock at an average price of $13.01 per share. From September 29, 1999
through December 31, 1999, the Company repurchased 1,305,500 shares of its
common stock at an average price of $13.96 per share.
[GRAPH]
FBR Asset Investment Corporation
FBR Morgan Stanley S&P 500
Date Indexed Reit Index Reinv
9/29/99 100 100 100
Sep-99 96 101 101
Oct-99 97 99 107
Nov-99 117 97 109
Dec-99 126 100 115
-15-
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report on Form 10-K is enclosed with this Proxy Statement.
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
A shareholder who wishes to introduce a proposal for consideration at the
Company's 2001 annual meeting of shareholders may seek to have that proposal
included in the Company's proxy statement pursuant to U.S. Securities and
Exchange Commission ("SEC') Rule 14a-8. To qualify for this, the proposal must
be submitted to the Company not later than December 29, 2000, and must satisfy
the other requirements of Rule 14a-8. The submission of a shareholder proposal
does not guarantee that it will be included.
A shareholder may otherwise propose business for consideration or nominate
persons for election to the Board of Directors in compliance with applicable
state law and the Company's Bylaws. The Company's Bylaws provide that a
proposal or nomination must be in writing and must be delivered to the
Secretary of the Company at its executive offices by personal delivery or
United States mail not later than 90 days in advance of the 2001 annual
meeting. Any such notice must satisfy the other requirements with respect to
such proposals and nominations contained in the Company's Bylaws. If a
shareholder fails to meet the deadlines specified by SEC Rule 14a-8 and the
Company's Bylaws or fails to comply with the requirements of SEC Rule 14a-4,
the Company may exercise discretionary voting authority under proxies it
solicits to vote on any such proposal.
OTHER MATTERS
The Board of Directors knows of no other business to be brought before the
annual meeting. If any other matters properly comes before the annual meeting,
the proxies will be voted on such matters in accordance with the judgment of
the persons named as proxies therein, or their substitutes, present and acting
at the meeting.
The expenses of preparing, printing and assembling the materials used in the
solicitation of proxies will be borne by the Company. In addition to the
solicitation of proxies by use of the mails, the Company may utilize the
services of certain officers and employees of FBR Group or its affiliates (who
will receive no compensation therefor in addition to their regular salaries) to
solicit proxies personally and by mail, telephone and facsimile from brokerage
houses and other stockholders. The Company will, upon request, reimburse
brokerage firms and others for their reasonable expenses in forwarding proxy
materials to beneficial owners of the Company's common stock. Also, the Company
has retained D.F. King & Co., Inc. to aid in the solicitation of proxies. D.F.
King & Co., Inc. will receive a fee and reimbursement of expenses estimated not
to exceed $4,500 in the aggregate, all of which will be paid by the Company.
No person is authorized to give any information or to make any representation
not contained in this Proxy Statement, and, if given or made, such information
or representation should not be relied upon as having been authorized. This
Proxy Statement does not constitute the solicitation of a proxy, in any
jurisdiction, from any person to whom it is unlawful to make such proxy
solicitation in such jurisdiction. The delivery of this Proxy Statement shall
not, under any circumstances, imply that there has not been any change in the
information set forth herein since the date of the Proxy Statement.
-16-
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FBR ASSET INVESTMENT CORPORATION
Potomac Tower
1001 Nineteenth Street North
Arlington, Virginia 22209
- --------------------------------------------------------------------------------
Revocable Proxy
- --------------------------------------------------------------------------------
ANNUAL MEETING OF SHAREHOLDERS
JUNE 15, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FBR ASSET
INVESTMENT CORPORATION FOR USE ONLY AT THE ANNUAL MEETING OF SHAREHOLDERS TO BE
HELD ON JUNE 15, 2000, AND ANY ADJOURNMENTS THEREOF.
The undersigned hereby appoints Kurt R. Harrington, Mary A. Sheehan, John M.
Blassingame or any one of them, with full power of substitution in each, proxies
(and if the undersigned is a proxy, substitute proxies) to vote all common stock
of the undersigned in FBR Asset Investment Corporation (the "Company") at the
Annual Meeting of Shareholders to be held at the Key Bridge Marriott Hotel 1401
Lee Highway, Arlington, Virginia, on Thursday, June 15, 2000 at 10:00 a.m., and
at any adjournments thereof.
PLEASE MARK, DATE AND SIGN THIS PROXY ON THE REVERSE SIDE
- --------------------------------------------------------------------------------
Please date, sign and mail your
proxy card back as soon as possible!
Annual Meeting of Shareholders
FBR ASSET INVESTMENT CORPORATION
JUNE 15, 2000
Please Detach and Mail in the Envelope Provided
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A [X] Please mark your
vote as in this
example.
WITHHOLD
AUTHORITY
FOR NOMINEES TO VOTE FOR ALL
LISTED AT RIGHT NOMINEES LISTED
FOR AGAINST ABSTAIN
1.ELECTION OF [_] [_] NOMINEES: Eric F. Billings 2. PROPOSAL TO RATIFY THE APPOINTMENT [_] [_] [_]
DIRECTORS Emanuel J. Friedman OF ARTHUR ANDERSEN LLP AS INDEPENDENT
Stephen D. Harland AUDITORS FOR THE FISCAL YEAR ENDED
(INSTRUCTION: To withhold authority to vote Russell C. Lindner DECEMBER 31, 2000
for any individual nominee, strike a line William R Swanson
through the nominee's name on the list at 3. In their discretion, the proxies (and if the undersigned is a
right) proxy, any substitute proxies) are authorized to vote upon such
other business as may properly come before the meeting or any
adjournments thereof.
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder. If no direction is
made, this proxy will be voted FOR the election of each nominee for
director and FOR ratification of the appointment of the Company's
independent auditors.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING
THE ENCLOSED ENVELOPE.
PLEASE MARK HERE IF YOUR ADDRESS HAS
CHANGED AND NOTE CORRECTION BELOW: [_]
Signature_________________________________________Title____________________________________Dated________________________, 2000
NOTE: Please sign name exactly as it appears above. When shares are held by joint tenants, both should sign. When signing as
attorney, as executor, administrator, trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by a duly authorized officer. If a partnership, please sign in partnership name by
authorized person.
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