-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E+oSEe+FUlsV10YY3bjdO4e6P6ApTUXhUjX5LFDP/QqtNNn0Kc9al5dTZQ1Gd5Pw H9k16Js2urFxdWCdwa2g6Q== 0000950136-00-000078.txt : 20000203 0000950136-00-000078.hdr.sgml : 20000203 ACCESSION NUMBER: 0000950136-00-000078 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20000127 GROUP MEMBERS: BRACEBRIDGE CAPITAL LLC GROUP MEMBERS: BRACEBRIDGE CAPITAL, L.P. GROUP MEMBERS: FIXED INCOME ASSOCIATES INC GROUP MEMBERS: FIXED INCOME ASSOCIATES, INC. GROUP MEMBERS: NANCY G. ZIMMERMAN SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CAPSTEAD MORTGAGE CORP CENTRAL INDEX KEY: 0000766701 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 752027937 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-37849 FILM NUMBER: 514824 BUSINESS ADDRESS: STREET 1: 8401 NORTH CENTRAL EXPRESSWAY STREET 2: STE 800 CITY: DALLAS STATE: TX ZIP: 75225 BUSINESS PHONE: 2148742323 MAIL ADDRESS: STREET 1: 8401 NORTH CENTRAL EXPRESSWAY STREET 2: STE 800 CITY: DALLAS STATE: TX ZIP: 75225 FORMER COMPANY: FORMER CONFORMED NAME: LOMAS MORTGAGE CORP DATE OF NAME CHANGE: 19891105 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: FIXED INCOME ASSOCIATES INC CENTRAL INDEX KEY: 0001101193 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 043222917 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 1000 MASSACHUSETTS AVENUE CITY: CAMBRIDGE STATE: MA ZIP: 02138 BUSINESS PHONE: 6173492000 MAIL ADDRESS: STREET 1: 1000 MASSACHUSETTS AVENUE CITY: CAMBRIDGE STATE: MA ZIP: 02138 SC 13D/A 1 AMENDMENT NO. 2 TO SCHEDULE 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. 2)* Capstead Mortgage Corporation --------------------------------- (Name of Issuer) Common Stock ------------------------------ (Title of Class of Securities) 14067 E 10 0 ---------------- (CUSIP Number) Bracebridge Capital With a copy to: Ms. Nancy G. Zimmerman Scott M. Zimmerman, Esq. Fixed Income Associates, Inc. Swidler Berlin Shereff Friedman, LLP 1000 Massachusetts Avenue 405 Lexington Avenue Cambridge, Massachusetts 02138 New York, New York 10174 (617) 349-2000 (212) 973-0111 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) January 25, 2000 --------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this statement because of Rule 13d-1(e), (f) or (g), check the following: [ ]. Note: One copy and an EDGAR version of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-7(b) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D - ---------------------- ---------------------- CUSIP No. 14067 E 10 0 Page 2 of 12 Pages - ---------------------- ---------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Fixed Income Associates, Inc. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[X] (b)[ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES -------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 1,641,132 EACH -------------------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH -------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 1,641,132 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,641,132 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 3.5% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. SCHEDULE 13D - ---------------------- ---------------------- CUSIP No. 14067 E 10 0 Page 3 of 12 Pages - ---------------------- ---------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Bracebridge Capital, L.P. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[X] (b)[ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES -------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 1,641,132 EACH -------------------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH -------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 1,641,132 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,641,132 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 3.5% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* PN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. SCHEDULE 13D - ---------------------- ---------------------- CUSIP No. 14067 E 10 0 Page 4 of 12 Pages - ---------------------- ---------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Bracebridge Capital LLC - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[X] (b)[ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Massachusetts - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES -------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 544,518 EACH -------------------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH -------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 544,518 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 544,518 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 1.2% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* 00 - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. SCHEDULE 13D - ---------------------- ---------------------- CUSIP No. 14067 E 10 0 Page 5 of 12 Pages - ---------------------- ---------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Nancy G. Zimmerman - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a)[X] (b)[ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* OO - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF SHARES -------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY 1,641,132 EACH -------------------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER PERSON WITH -------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 1,641,132 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,641,132 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 3.5% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IN - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. SCHEDULE 13D This Amendment No. 2 to the Statement on Schedule 13D (as defined below) amends and supplements the Statement on Schedule 13D relating to the event date of December 10, 1999 (the "Schedule 13D") and Amendment No. 1 to the Schedule 13D relating to the event date of December 27, 1999, filed by Fixed Income Associates, Inc., a Delaware corporation ("FIA"), Bracebridge Capital, L.P. ("BCLP"), a Delaware limited partnership of which FIA is the general partner, Bracebridge Capital LLC ("BCLLC"), a Massachusetts limited liability company of which FIA is the managing member, and Nancy G. Zimmerman, the sole shareholder of FIA ("Zimmerman" and together with FIA, BCLP and BCLLC, the "Reporting Persons") relating to the common stock (the "Common Stock") of Capstead Mortgage Corporation (the "Issuer"). Capitalized terms used and not defined herein shall have the meanings assigned thereto in the Schedule 13D. The business address of each FIA, BCLP, BCLLC and Zimmerman is 1000 Massachusetts Avenue, Cambridge, MA 02138. The address of the Issuer is 8401 North Central Expressway, Suite 800, Dallas, Texas 75225. ITEM 3. SOURCE AND AMOUNT OF FUNDS Item 3 is hereby amended to add the following: Since December 30, 1999, FIFI II L.P. ("FIFI"), a Delaware limited partnership of which BCLP is the general partner, purchased an aggregate of 107,100 shares of Cumulative Convertible Preferred Stock, Series B of the Company (the "Series B Shares") at an aggregate cost of $1,016,249 using its own funds. The Series B Shares are convertible into 80,721 shares of Common Stock. See Item 5. ITEM 4. PURPOSE OF TRANSACTION Item 4 is hereby amended by replacing the last paragraph of Item 4 with the following: Attached hereto as Exhibit B are certain letters from Bracebridge Capital to the Chairman of the Board of Directors of the Company addressing certain concerns and requesting certain additional information with respect to the recently announced series of transactions between the Company and an affiliate of Fortress Investment Group LLC. Attached hereto as Exhibit C is a shareholder proposal and supporting statement, detailing a proposed program of liquidation and distribution, sent by FIFI to the Company to be submitted for shareholder vote at the upcoming special meeting of the holders of the Company's Common Stock. Except for the foregoing, no Reporting Person has any present plans or proposals which relate to or would result in any of the actions or events described in paragraphs (a) through 6 (j) of Item 4 of Schedule 13D. However, the Reporting Persons retain their respective rights to modify their plans with respect to the transactions described in this Item 4, to acquire or dispose of securities of the Company and to formulate plans and proposals that could result in the occurrence of any such events, subject to applicable laws and regulations. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER Item 5 is hereby amended and restated in its entirety as follows: (a) and (b) BCLP, as the general partner of FIFI, has the power to vote and to direct the voting of and the power to dispose and direct the disposition of the 1,096,614 shares of Common Stock deemed to be owned by FIFI. Accordingly, BCLP may be deemed to be the beneficial owner of 1,096,614 shares of Common Stock, or 2.4% of the outstanding shares of Common Stock. BCLP and BCLLC, as the sole directors of FFI, have the power to vote and direct the voting of and power to dispose and direct the disposition of the 544,518 shares of Common Stock deemed to be owned by FFI. Accordingly, BCLP and BCLLC may together be deemed to be the beneficial owner of 544,518 shares of Common Stock, or 1.2% of the outstanding shares of Common Stock. As the General Partner of BCLP, FIA has the power to vote and to direct the voting of and the power to dispose and direct the disposition of the 1,096,614 shares of Common Stock deemed to be owned by FIFI. As the General Partner of BCLP and the managing member of BCLLC, FIA has the power to vote and to direct the disposition of the 544,518 shares of Common Stock deemed to be beneficially owned by FFI. As the sole shareholder of FIA, Zimmerman may be deemed to have the power to vote and to direct the voting of and power to dispose and direct the disposition of the 1,096,614 shares of Common Stock deemed to be beneficially owned by FIFI and the 544,518 shares of Common Stock owned by FFI. Accordingly, Zimmerman may be deemed to be the beneficial owner of 1,641,132 shares of Common Stock, or 3.5% of the outstanding shares of Common Stock. The number of shares beneficially owned by each of the Reporting Persons and the percentage of outstanding shares represented thereby, have been computed in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended. The percentage ownership of the Reporting Persons is based on 46,235,875 outstanding shares of Common Stock, such amount representing the sum of (i) 45,717,405 outstanding shares of Common Stock (which is equal to the 56,854,405 shares of Common Stock outstanding as of December 7, 1999, as reported in the Company's Schedule 13E-4 Issuer Tender Offer Statement filed with the Commission on December 7 10, 1999 minus the 11,137,000 shares of Common Stock repurchased in the tender offer, as reported in the Company's press release of January 18, 2000 and (ii) 518,470 shares of Common Stock issuable upon conversion of the Series B Shares deemed to be beneficially owned by such Reporting Persons. (c) The transactions in the Common Stock by the Reporting Persons during the past 60 days are set forth on Annex A hereto. (d) Not Applicable. (e) Not Applicable. 8 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: January 27, 2000 FIXED INCOME ASSOCIATES, INC. By: /s/ Nancy G. Zimmerman ------------------------------------- Name: Nancy G. Zimmerman Title: President 9 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: January 27, 2000 BRACEBRIDGE CAPITAL, L.P. By: FIXED INCOME ASSOCIATES, INC., its General Partner By: /s/ Nancy G. Zimmerman ------------------------------------- Name: Nancy G. Zimmerman Title: President 10 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: January 27, 2000 BRACEBRIDGE CAPITAL LLC By: FIXED INCOME ASSOCIATES, INC., its Managing Member By: /s/ Nancy G. Zimmerman ------------------------------------- Name: Nancy G. Zimmerman Title: President 11 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: January 27, 2000 /s/ Nancy G. Zimmerman ----------------------------------------- NANCY G. ZIMMERMAN 12 ANNEX A Transactions in Shares of Common Stock and Series B Preferred Stock within the Last 60 Days(1) Aggregate Aggregate Price Per Common Preferred Date Share Share Amount Share Amount FIFI II L.P. FFI Fund Ltd. - ---- ----- ------------ ------------ ------------ ------------- 12/6/99 9.69 800 602 12/6/99 3.75 12,200 12,200 12/7/99 9.61 30,200 22,761 12/7/99 3.75 25,000 25,000 12/8/99 9.25 10,000 7,537 12/8/99 3.75 25,000 25,000 12/9/99 3.75 25,000 25,000 12/10/99 9.25 2,200 1,658 12/10/99 3.98 75,000 50,000 25,000 12/13/99 4.26 161,500 80,750 80,750 12/14/99 4.25 62,400 32,400 30,000 12/15/99 4.29 253,900 100,000 153,900 12/16/99 4.25 27,800 13,800 14,000 12/17/99 4.31 323,200 123,200 200,000 12/20/99 4.31 30,000 15,000 15,000 12/20/99 9.56 7,900 5,954 12/21/99 4.31 35,000 15,000 20,000 12/22/99 4.31 120,700 60,000 60,700 12/23/99 4.25 42,600 21,000 21,600 12/27/99 4.25 68,200 34,100 34,100 12/29/99 4.12 15,200 15,200 12/29/99 9.56 15,000 11,306 12/30/99 9.50 10,600 7,989 1/3/00 9.50 12,500 9,421 1/4/00 9.49 14,500 10,928 1/6/99 9.50 18,800 14,169 1/7/00 9.50 6,300 4,748 1/10/00 9.50 3,900 2,939 1/12/00 9.50 1,300 979 1/13/00 9.50 14,800 11,154 - ------------------- (1) Except as otherwise noted, all transactions in shares of Common Stock, as well as Series B Preferred Stock, that were effected during the past sixty days have been open market purchases. 13 1/14/00 9.38 14,000 10,551 1/18/00 9.56 2,700 2,034 1/19/00 9.56 900 678 1/20/00 9.56 5,900 4,446 1/21/00 9.56 900 678 1/24/00(2) 4.43 1,200 1,200 1/25/00(3) 4.55 2,728,938 1,405,556 1,323,382 - ------------------- 2 Open market sale. 3 Represents shares purchased by the Company in a tender offer pursuant to the Company's Schedule 13E-4 Issuer Tender Offer Statement filed with the Commission on December 10, 1999. The number of shares indicated for each of FIFI and FFI is equal to the number of shares tendered by each such entity, multiplied by 70.9626 percent, the final proration factor for the tender offer as reported in the Company's press release of January 24, 2000. 14 EXHIBIT C SHAREHOLDER PROPOSAL: RESOLVED, that the stockholders recommend to the Board of Directors that the Company promptly undertake a program to liquidate substantially all of the Company's available-for-sale portfolio and to use the liquidation proceeds to pay down short-term borrowings, redeem at least 80% of the outstanding shares of the Company's Series A and Series B preferred stock, call - to the extent permissible - the outstanding shares of the Company's Series C and Series D preferred stock, establish reasonable reserves, and distribute remaining proceeds to the common shareholders; and that each quarter the Board publicly report to the stockholders the status of such program of liquidation and distribution. SUPPORTING STATEMENT: Between December 31, 1997 and December 3, 1999, the Company's per share book value declined from $11.42 to $6.56. The common shares have traded at a significant discount to book value for a considerable period, worsening the negative impact on shareholders. The Company's common share price declined from $27.6875 on September 17, 1997 to $4.375 on January 24, 2000. The Board of Directors has proposed a reverse split of the common shares due to the precipitous decline in the Company's share price. The Company recently issued convertible Series C and Series D preferred shares at a price which significantly diluted common shareholders. At the time, the Company had "substantial liquidity" according to its own filings and no evident need for a cash infusion. Despite the subsequent self-tender, the dilutive damage had already been done. Capstead shareholders do not need management to sell control to Fortress on a preferential basis in order to invest in a Fortress-controlled company. Shareholders could independently purchase shares in Impac Commercial Holdings, a Fortress-controlled company whose shares trade at an even larger discount to book value than those of Capstead. Shareholders strongly desire to realize the fair value of their equity interests, but there is little prospect that shareholders will substantially recover the losses they have suffered, even with new management and a new investment strategy. According to its filings, on September 30, 1999 the Company had untapped liquidity of $374.7 million, representing 62% of total stockholders' equity of $608.0 million, and potential total liquidity of $536 million (88% of total stockholders' equity) if it sold its "available-for-sale" portfolio at the "fair value estimate" and paid down short-term borrowings. Of the assets in the "available-for-sale" portfolio, 98% are highly liquid agency securities and 2% are liquid non-agency securities. Were these securities sold in an orderly way, transaction costs should be less than $25 million. Cash liquidity should have exceeded $511 million had this portfolio 15 been sold in such a fashion around September 30, 1999. We see no practical considerations preventing the Company from selling its available-for-sale portfolio and returning capital to shareholders. The Company will incur transaction costs from asset sales whether it reallocates or distributes the proceeds. Common shareholders should be able to realize upwards of 80% of book value in cash quickly, and substantially all the book value over time as the held-to-maturity portfolio matures. 16 -----END PRIVACY-ENHANCED MESSAGE-----