Organization and Business Description

6 Months Ended

Jun. 30, 2014

Organization and Business Description

1.       Organization and Business Description

Hatteras Financial Corp. (the “Company”) was incorporated in Maryland on September 19, 2007.  The Company invests primarily in single-family residential mortgage assets, such as mortgage-backed securities (“MBS”), issued or guaranteed by the U.S. Government, such as Ginnie Mae, or by the U.S. Government sponsored enterprises, such as Fannie Mae and Freddie Mac (“agency securities”).  The Company is externally managed by Atlantic Capital Advisors LLC (“ACA”).  

The Company has elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Code”).  As a result, the Company does not pay federal income taxes on taxable income distributed to shareholders if certain REIT qualification tests are met.  It is the Company’s policy to distribute 100% of its taxable income, after application of available tax attributes, within the time limits prescribed by the Code, which may extend into the subsequent taxable year.  However, the Company may conduct certain activities that cause it to earn income which will not be qualifying income for REIT purposes.  The Company has designated certain of its subsidiaries as taxable REIT subsidiaries (“TRSs”) as defined in the Code to engage in such activities, and the Company may in the future form additional TRSs.