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Lluís Companys Lluís Companys i Jover (Catalan pronunciation: [ʎuˈis kumˈpaɲs]; 21 June 1882 – 15 October 1940) was a Spanish politician from Catalonia who served as president of Catalonia from 1934 and during the Spanish Civil War.\nCompanys was a lawyer close to labour movement and one of the most prominent leaders of the Republican Left of Catalonia (ERC) political party, founded in 1931.
Passeig de Lluís Companys, Barcelona Passeig de Lluís Companys (Catalan pronunciation: [pəˈsɛdʒ də ʎuˈis kumˈpaɲs]) is a promenade in the Ciutat Vella and Eixample districts of Barcelona, Catalonia, Spain, and can be seen as an extension of Passeig de Sant Joan. It was named after President Lluís Companys, who was executed in 1940.
Estadi Olímpic Lluís Companys Estadi Olímpic Lluís Companys (Catalan pronunciation: [əsˈtaði uˈlimpiɡ ʎuˈis kumˈpaɲs], formerly known as the Estadi Olímpic de Montjuïc and Estadio de Montjuic) is a stadium in Barcelona, Catalonia, Spain. Originally built in 1927 for the 1929 International Exposition in the city (and Barcelona's bid for the 1936 Summer Olympics, which were awarded to Berlin), it was renovated in 1989 to be the main stadium for the 1992 Summer Olympics and 1992 Summer Paralympics.
Company A company, abbreviated as co., is a legal entity representing an association of people, whether natural, legal or a mixture of both, with a specific objective. Company members share a common purpose and unite to achieve specific, declared goals.
Conxita Julià Conxita Julià i Farrés (Catalan pronunciation: [kuɲˈʃitə ʒuliˈa j fəˈres]; 11 June 1920 – 9 January 2019), also known as Conxita de Carrasco, was a Catalan woman noted for her dealings with Lluís Companys, President of Catalonia, in the 1930s, and for her poetry. Julià died in January 2019 at the age of 98.
El Tarròs El Tarròs (Spanish: Tarrós) is a small village in Tornabous municipality, in the province of Lleida, in Catalonia, Spain. In 2008 it had 100 inhabitants.
The Walt Disney Company The Walt Disney Company, commonly known as Disney (), is an American multinational mass media and entertainment conglomerate headquartered at the Walt Disney Studios complex in Burbank, California.\nDisney was originally founded on October 16, 1923, by brothers Walt and Roy O. Disney as the Disney Brothers Cartoon Studio; it also operated under the names the Walt Disney Studio and Walt Disney Productions before changing its name to the Walt Disney Company in 1986.
Holding company A holding company is a company whose primary business is holding a controlling interest in the securities of other companies. A holding company usually does not produce goods or services itself.
Amazon (company) Amazon.com, Inc. ( AM-ə-zon) is an American multinational technology company which focuses on e-commerce, cloud computing, digital streaming, and artificial intelligence.
Normal distribution In statistics, a normal distribution (also known as Gaussian, Gauss, or Laplace–Gauss distribution) is a type of continuous probability distribution for a real-valued random variable. The general form of its probability density function is\n\n \n \n \n f\n (\n x\n )\n =\n \n \n 1\n \n σ\n \n \n 2\n π\n \n \n \n \n \n \n e\n \n −\n \n \n 1\n 2\n \n \n \n \n (\n \n \n \n x\n −\n μ\n \n σ\n \n \n )\n \n \n 2\n \n \n \n \n \n \n {\displaystyle f(x)={\frac {1}{\sigma {\sqrt {2\pi }}}}e^{-{\frac {1}{2}}\left({\frac {x-\mu }{\sigma }}\right)^{2}}}\n The parameter \n \n \n \n μ\n \n \n {\displaystyle \mu }\n is the mean or expectation of the distribution (and also its median and mode), while the parameter \n \n \n \n σ\n \n \n {\displaystyle \sigma }\n is its standard deviation.
Probability distribution In probability theory and statistics, a probability distribution is the mathematical function that gives the probabilities of occurrence of different possible outcomes for an experiment. It is a mathematical description of a random phenomenon in terms of its sample space and the probabilities of events (subsets of the sample space).For instance, if X is used to denote the outcome of a coin toss ("the experiment"), then the probability distribution of X would take the value 0.5 (1 in 2 or 1/2) for X = heads, and 0.5 for X = tails (assuming that the coin is fair).
Shareholder A shareholder (in the United States often referred to as stockholder) of a corporation is an individual or legal entity (such as another corporation, a body politic, a trust or partnership) that is registered by the corporation as the legal owner of shares of the share capital of a public or private corporation. Shareholders may be referred to as members of a corporation.
Equity (finance) In finance, equity is ownership of assets that may have debts or other liabilities attached to them. Equity is measured for accounting purposes by subtracting liabilities from the value of the assets.
Annual general meeting An annual general meeting (AGM, also known as the annual meeting) is a meeting of the general membership of an organization.\nThese organizations include membership associations and companies with shareholders.
Market trend A market trend is a perceived tendency of financial markets to move in a particular direction over time. These trends are classified as secular for long time frames, primary for medium time frames, and secondary for short time frames.
Stock market A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include securities listed on a public stock exchange, as well as stock that is only traded privately, such as shares of private companies which are sold to investors through equity crowdfunding platforms. Investment is usually made with an investment strategy in mind.
East India Company The East India Company (EIC) was an English, and later British, joint-stock company founded in 1600. It was formed to trade in the Indian Ocean region, initially with the East Indies (the Indian subcontinent and Southeast Asia), and later with East Asia.
The Honest Company The Honest Company, Inc. is an American consumer goods company, founded by actress Jessica Alba.
The Longaberger Company The Longaberger Company is an American manufacturer and distributor of handcrafted maple wood baskets and other home and lifestyle products. The company opened in 1973, was acquired in 2013 by CVSL, Inc., and closed in 2018.
Real estate investing Real estate investing involves the purchase, management and sale or rental of real estate for profit. Improvement of realty property as part of a real estate investment strategy is generally considered to be a sub-specialty of real estate investing called real estate development.
Real estate investment trust A real estate investment trust (REIT) is a company that owns, and in most cases operates, income-producing real estate. REITs own many types of commercial real estate, including office and apartment buildings, warehouses, hospitals, shopping centers, hotels and commercial forests.
Stockholder of record Stockholder of record is the name of an individual or entity shareholder that an issuer carries in its shareholder register as the registered holder (not necessarily the beneficial owner) of the issuer's securities. Dividends and other distributions are paid only to shareholders of record.
Jessica Stockholder Jessica Stockholder (born 1959) is a Canadian-American artist known for site-specific installation works and sculptures that are often described as "paintings in space." She came to prominence in the early 1990s with monumental works that challenged boundaries between artwork and display environment as well as between pictorial and physical experience. Her art often presents a "barrage" of bold colors, textures and everyday objects, incorporating floors, walls and ceilings and sometimes spilling out of exhibition sites.
Derivative suit A shareholder derivative suit is a lawsuit brought by a shareholder on behalf of a corporation against a third party. Often, the third party is an insider of the corporation, such as an executive officer or director.
Friedman doctrine The Friedman doctrine, also called shareholder theory or stockholder theory, is a normative theory of business ethics advanced by economist Milton Friedman which holds that the social responsibility of business is to increase its profits. This shareholder primacy approach views shareholders as the economic engine of the organization and the only group to which the firm is socially responsible.
U.S. Securities and Exchange Commission The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929. The primary purpose of the SEC is to enforce the law against market manipulation.: 2 \nIn addition to the Securities Exchange Act of 1934, which created it, the SEC enforces the Securities Act of 1933, the Trust Indenture Act of 1939, the Investment Company Act of 1940, the Investment Advisers Act of 1940, the Sarbanes–Oxley Act of 2002, and other statutes.
UEFA Champions League The UEFA Champions League (abbreviated as UCL) is an annual club football competition organised by the Union of European Football Associations (UEFA) and contested by top-division European clubs, deciding the competition winners through a round robin group stage to qualify for a double-legged knockout format, and a single leg final. It is one of the most prestigious football tournaments in the world and the most prestigious club competition in European football, played by the national league champions (and, for some nations, one or more runners-up) of their national associations.
Investment Investment is the dedication of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort.
Common stock Common stock is a form of corporate equity ownership, a type of security. The terms voting share and ordinary share are also used frequently outside of the United States.
Fidelity Investments Fidelity Investments Inc., commonly referred to as Fidelity, earlier as Fidelity Management & Research or FMR, is an American multinational financial services corporation based in Boston, Massachusetts. The company was established in 1946 and is one of the largest asset managers in the world with $4.5 trillion in assets under management, now as of December 2021 their assets under administration amounts to $11.8 trillion.
Foreign direct investment A foreign direct investment (FDI) is an investment in the form of a controlling ownership in a business in one country by an entity based in another country. It is thus distinguished from a foreign portfolio investment by a notion of direct control.
Ariel Investments Ariel Investments is an investment company located in Chicago, Illinois. It specializes in small and mid-capitalized stocks based in the United States.
Fisher Investments Fisher Investments is an independent money management firm headquartered in Camas, Washington.\n\n\n== History ==\nKen Fisher founded the firm in 1979, incorporated in 1986, then served as CEO until July 2016, when he was succeeded by long-time Fisher Investments employee Damian Ornani.
Risk Factors
AMERICA FIRST APARTMENT INVESTORS INC Item 1A Risk Factors
The financial condition and results of operations of the Company and its ability to pay dividends are affected by various factors, many of which are beyond the Company’s control
These include the following: The Company’s financial results are substantially dependent upon the performance of the multifamily apartment complexes
The performance of the multifamily apartment complexes is affected by a number of factors, some of which are beyond the Company’s control
These include general and local economic conditions, the relative supply of apartments and other homes in the market area, interest rates on single family mortgages and its effect on home buying, the need for and costs of repairs and maintenance of the properties, government regulations and the cost of complying with them, property tax rates imposed by local taxing authorities, utility rates and property insurance rates
If interest rates on single-family mortgages continue to remain low, it could further increase home buying and continue to reduce the number of quality tenants available
In addition, the financing costs, operating costs and the costs of any necessary improvements and repairs to the apartment properties may exceed expectations
As a result, the amount of cash available for distribution to the shareholders could decrease and the market price of the Company’s common stock could decline
The Company is not completely insured against damages to its properties
The Company owns several apartment complexes and other properties that are in areas that are prone to damage from hurricanes and other major storms, including five apartment complexes and one commercial property located in Florida
Due to the significant losses incurred by insurance companies on policies written on properties in Florida damaged by hurricanes, property and casualty insurers in Florida have modified their approach to underwriting policies
As a result, the Company assumes the risk of first loss on a larger percentage of the value of its Florida real estate
If any of these properties were damaged in a hurricane or other major storm, the losses incurred could be significant
The Company’s current policies carry a 3prca deductible on the insurable value of the properties
The current insurable value of the Florida properties is approximately dlra44dtta2 million
Additionally, the Company does not carry flood insurance for those properties located outside of designated flood zones
The Company also does not carry specific insurance for losses resulting from acts of terrorism and such losses may be excluded from coverage under its existing insurance policies
The Company is subject to the risk normally associated with debt financing
The Company’s real estate investments are financed with mortgage debt and this subjects it to the risk that the cash flow may not be sufficient to meet required payments of principal and interest on the debt
In addition, the terms of some of the mortgage debt does not require that the principal of the debt be repaid prior to maturity
Therefore, it is likely that the Company will need to refinance at least a portion of this debt as it matures
There is a risk that the terms of any such refinancing will not be as favorable as the existing debt
In addition, the Company may not be able to refinance the entire amount of the existing debt
This could happen, for example, if the collateral value of the financed real estate has declined or if lenders require a lower loan to value ratio at the time of refinancing
The Company’s obligations to make principal debt service payments, which are not treated as deductions for federal income tax purposes, does not relieve it from the obligation of distributing at least 90prca of its REIT taxable income to the stockholders
In addition, the Company’s borrowings will be secured by first mortgages on the Company’s real estate assets and security interests in the agency securities and other assets
This exposes the Company to a risk of losing its interests in the assets given as collateral for secured borrowings if it is unable to make the required principal and interest payments when due
In addition, pledged assets may not be available to stockholders in the event of the liquidation of the Company to the extent that they are used to satisfy the amounts due to creditors
The ability to pay dividends to the shareholders is subordinated to the payment of debt service on the Company’s debt and other borrowings
Real estate financed with tax-exempt debt is subject to certain restrictions
A number of the Company’s multifamily apartment complexes are financed with tax-exempt bond financing
This type of financing is designed to promote the supply of affordable rental housing and, accordingly, it subjects the financed property to certain restrictive covenants, including a requirement that a percentage of the apartment units in each property be occupied by residents whose income does not exceed a percentage of the median income for the area in which the property is located
4 _________________________________________________________________ [42]Table of Contents It is possible that such covenants may cause the rents charged by these properties to be lowered, or rent increases foregone, in order to attract enough residents meeting the income requirements
In the event the Company does not comply with these restrictions, the interest on the bonds could become subject to federal and state income tax, which would result in either an increase in the interest rate on the bonds or an early redemption of these bonds that would force the Company to obtain alternative financing or sell the property financed by the bond
Fluctuating interest rates may affect earnings
The short-term rate on this variable rate mortgage debt is tied to an index that is reset on a weekly basis
Increases in the short-term interest rates increases interest expense on these borrowings
Likewise, the borrowings under repurchase agreements bear interest at short-term fixed rates
An increase in market interest rates would cause the interest rates of the obligations to increase when and if they are renewed upon maturity
If interest rates increase, the Company will have to pay more interest on its debt, but would not necessarily be able to increase rental income from the multifamily apartment properties
In addition, even though the single family mortgages underlying the agency securities also bear interest at adjustable rates, the interest payable on the agency securities may not adjust upward as quickly as the interest on the repurchase agreements used to finance the agency securities
This will result in a narrowing of the spread between the average interest rate earned on agency securities and the average interest paid to finance the Agency Securities
As this spread narrows, our earnings will decline
Therefore, an increase in interest rates may reduce earnings and this may reduce the amount of funds that the Company has available for distribution to stockholders
This may also affect the market price of the common stock
The use of derivatives to mitigate interest rate risks may not be effective
The Company’s policies permit it to enter into interest rate swaps, caps and floors and other derivative transactions to help mitigate interest rate risks
No hedging strategy, however, can completely insulate the Company from the interest rate risks to which it is exposed
Furthermore, certain of the federal income tax requirements that the Company must satisfy in order to qualify as a REIT limit its ability to hedge against such risks
Multifamily apartment properties are illiquid and their value may decrease
A substantial amount of the Company’s assets consist of investments in multifamily apartment properties
These investments are relatively illiquid
The ability to sell these assets, and the price received upon sale are affected by a number of factors including the number of potential and interested buyers, the number of competing properties on the market in the area and a number of other market conditions
As a result, the Company may not be able to recover its entire investment in an apartment complex upon sale
The Company is subject to risks associated with investments in agency securities that differ from those involved with owning multifamily apartment properties
Prepayments are the primary feature of agency securities that distinguishes them from other types of fixed income investments and can occur when a homeowner sells or refinances his home
Prepayments usually can be expected to increase when mortgage interest rates decrease significantly and decrease when mortgage interest rates increase, although such effects are not entirely predictable
While a certain percentage of the pool of mortgage loans underlying agency securities are expected to prepay during a given period of time, the prepayment rate can, and often does, vary significantly from the anticipated rate of prepayment
Prepayments generally have a negative impact on the Company’s financial results, the effects of which depends on, among other things, the amount of unamortized premium on the securities, the reinvestment lag and the reinvestment opportunities
The Company’s financing strategy for its portfolio of agency securities uses a leverage rate of approximately eight times equity capital and by borrowing against a substantial portion of the market value of the agency securities in the form of repurchase agreements
If interest income on the agency securities purchased with borrowed funds fails to cover the cost of the borrowings, the Company will experience net interest expense
The return earned on the agency securities may be reduced if the interest rates on the underlying mortgage loans do not adjust as quickly or as much as necessary in order to match interest rate increases that may occur on the borrowings used to finance the agency securities
In addition, fluctuations in the market value of the agency securities may result from changing interest rates
Accordingly, investments in agency securities may result in lower earnings per share or losses and, as a result, could reduce the amount of cash available for distribution to stockholders
There are risks associated with making mezzanine investments that differ from those involved with owning multifamily apartment properties
In general, mezzanine level financing provided by the Company will be subordinate to senior lenders on the financed properties
Accordingly, in the event of a default on investments of this type, senior lenders will have a first right to the proceeds from the sale of the property securing their loan and this may result in the Company receiving less than all principal and interest it is owed on the mezzanine level financing
5 _________________________________________________________________ [43]Table of Contents Also, since mezzanine level financings are expected to participate in the cash flow or sale proceeds from a financed property, they may carry a base interest rate different than a non-participating financing
However, there can be no assurance that an apartment complex financed with such a participating feature will generate excess cash flow or sale proceeds that will require any payments over the base return payable on the mezzanine financing
Accordingly, investments in mezzanine financings will not necessarily generate any additional earnings and may result in lower earnings or losses and, as a result, the amount of cash available for distribution to stockholders and the market price of the common stock could decline
The Company may not be able to successfully implement its business plan
There can be no assurance that the Company will be able to successfully implement its business plan of raising capital and making additional investments in multifamily apartment properties, agency securities and other residential real estate assets
Among other things, it may not be able to locate additional real estate assets that can be acquired on acceptable terms, and it may not be able to raise additional equity capital or obtain additional debt financing on terms that would be acceptable in order to finance the acquisition of additional real estate assets
If additional equity capital is raised, but the Company is not able to invest it in additional apartment complexes, agency securities or other real estate assets that generate net income at least equivalent to the levels generated by other then existing assets, earnings per share could decrease
In that case, the level of dividends that the Company is able to pay may be reduced and the market price of the common stock may decline
Because of competition, the Company may not be able to acquire investment assets
In acquiring investment assets, the Company competes with a variety of other investors including other REITs and real estate companies, insurance companies, mutual funds, pension funds, investment banking firms, banks and other financial institutions
Many of the entities with which the Company competes have greater financial and other resources
In addition, many of the Company’s competitors are not subject to REIT tax compliance and may have greater flexibility to make certain investments
As a result, the Company may not be able to acquire apartment complexes, agency securities or other investment assets or it may have to pay more for these assets than it otherwise would
Company policies may be changed without stockholder approval
The Board of Directors establishes all of the Company’s fundamental operating policies; including the investment, financing and distribution policies, and any revisions to such policies would require the approval of the Board
Although the Board of Directors has no current plans to do so, it may amend or revise these policies at any time without a vote of the stockholders
Policy changes could adversely affect the Company’s financial condition, results of operations, the market price of the common stock or the Company’s ability to pay dividends or distributions
The Company has not established a minimum dividend payment level
The Company intends to pay dividends on its common stock in an amount equal to at least 90prca of its REIT taxable income (determined with regard to the dividends paid deduction and by excluding net capital gains) in order to maintain its status as a REIT for federal income tax purposes
Dividends will be declared and paid at the discretion of the Board of Directors and will depend on earnings, financial condition, maintenance of REIT status and such other factors as the Board of Directors may deem relevant from time to time
The Company has not established a minimum dividend payment level and its ability to pay dividends may be adversely affected for the reasons set forth in this section
The concentration of real estate in a geographical area may make the Company vulnerable to adverse changes in local economic conditions
The Company does not have specific limitations on the total percentage of real estate investments that may be located in any one geographical area
Consequently, real estate investments that it owns may be located in the same or a limited number of geographical regions
As a result, adverse changes in the economic conditions of the geographic regions in which the real estate investments are concentrated may have an adverse effect on real estate values, rental rates and occupancy rates
Any of these could reduce the income earned from, or the market value of, these real estate investments
Owning real estate may subject the Company to liability for environmental contamination
The owner or operator of real estate may become liable for the costs of removal or remediation of hazardous substances released on the Company’s property
Various federal, state and local laws often impose such liability without regard to whether the owner or operator knew of, or was responsible for, the release of such hazardous substances
The Company cannot make any assurances that the multifamily apartment properties which it currently owns, or those it may acquire in the future, will not be contaminated
The costs associated with the remediation of any such contamination may be significant and may exceed the value of the property causing the Company to lose its entire investment
In addition, environmental laws may materially limit the use of the properties underlying the real estate investments and future laws, or more stringent interpretations or enforcement policies of existing environmental requirements, may increase the Company’s exposure to environmental liability
6 _________________________________________________________________ [44]Table of Contents Compliance with the requirements of Governmental Laws and Regulations could be costly
Many laws and governmental regulations are applicable to our properties and changes in these laws and regulations, or their interpretation by agencies and the courts, occur frequently
Under the Americans with Disabilities Act of 1990 (the “ADA”), all places of public accommodation are required to meet certain federal requirements related to access and use by disabled persons
These requirements became effective in 1992
Compliance with the ADA requires removal of structural barriers to handicapped access in certain public areas where such removal is “readily achievable
” The ADA does not, however, consider residential properties, such as apartment communities, to be public accommodations or commercial facilities, except to the extent portions of such facilities, such as a leasing office, are open to the public
A number of additional federal, state and local laws exist which also may require modifications to the properties, or restrict certain further renovations thereof, with respect to access thereto by disabled persons
For example, the Fair Housing Amendments Act of 1988 (the “FHAA”) requires apartment communities first occupied after March 13, 1990 to be accessible to the handicapped
Noncompliance with the ADA or the FHAA could result in the imposition of fines or an award of damages to private litigants
The issuance of additional shares of stock could cause the price of the Company’s stock to decline
The Company has the authority to issue additional equity
These may be shares of common stock or shares of one or more classes of preferred stock
Shares of preferred stock, if any, would have rights and privileges different from common stock, which may include preferential rights to receive dividends
The issuance of additional common stock or other forms of equity could cause dilution of the existing shares of common stock and a decrease in the market price of the common stock
There are a number of risks associated with being taxed as a REIT The Company’s status as a REIT subjects it and its stockholders to a number of risks, including the following: • Failure to qualify as a REIT would have adverse tax consequences
In order to maintain its status as a REIT, the Company must meet a number of requirements
These requirements are highly technical and complex and often require an analysis of various factual matters and circumstances that may not be totally within the Company’s control
Even a technical or inadvertent mistake could jeopardize the Company’s status as a REIT Furthermore, Congress and the Internal Revenue Service (the “IRS”) might make changes to the tax laws and regulations, and the courts might issue new rulings, that make it more difficult or impossible to remain qualified as a REIT If the Company fails to qualify as a REIT, it would be subject to federal income tax at regular corporate rates
Therefore, it could have less funds available for investments and for distributions to the stockholders and it would no longer be required to make any distributions to the stockholders
This may also have a significant adverse effect on the market value of the common stock
In general, the Company would not be able to elect REIT status for four years after a year in which it loses that status as a result of a failure to comply with one or more of the applicable requirements
• If the Company fails to qualify as a REIT, the dividends will not be deductible, and the Company’s income will be subject to taxation
If the Company were to fail to qualify as a REIT in any taxable year, it would not be allowed a deduction for distributions to the stockholders in computing taxable income and would be subject to federal income tax (including any applicable alternative minimum tax) on taxable income at regular corporate rates
Unless entitled to relief under certain provisions of the Code, the Company would also be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost
As a result, amounts available for distribution to stockholders would be reduced for each of the years involved
Although the Company currently intends to operate in a manner designed to qualify as a REIT, it is possible that future economic, market, legal, tax or other considerations could cause it to revoke its election to be taxed as a REIT 7 _________________________________________________________________ [45]Table of Contents • Failure to make required distributions would subject the Company to income taxation
In order to qualify as a REIT, each year the Company must distribute to stockholders at least 90prca of REIT taxable income (determined without regard to the dividend paid deduction and by excluding net capital gains)
To the extent that the Company satisfies the distribution requirement, but distributes less than 100prca of taxable income, it will be subject to federal corporate income tax on the undistributed income
In addition, the Company will incur a 4prca nondeductible excise tax on the amount, if any, by which the distributions in any year are less than the sum of: o 85prca of ordinary income for that year; o 95prca of capital gain net income for that year; and o 100prca of undistributed taxable income from prior years
Differences in timing between the recognition of income and the related cash receipts or the effect of required debt amortization payments could require the Company to borrow money or sell assets to pay out enough of the taxable income to satisfy the distribution requirement and to avoid corporate income tax and the 4prca nondeductible excise tax in a particular year
Loss of Investment Company Act exemption would adversely affect the Company
The Company intends to conduct its business so as not to become regulated as an investment company under the Investment Company Act
If it fails to qualify for this exemption, the Company’s ability to use borrowings would be substantially reduced and it would be unable to conduct its business
The Investment Company Act exempts entities that are primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate
Under the current interpretation of the SEC staff, in order to qualify for this exemption, the Company must maintain at least 55prca of its assets directly in these qualifying real estate interests
Mortgage-backed securities that do not represent all the certificates issued with respect to an underlying pool of mortgages may be treated as securities separate from the underlying mortgage loans and, thus, may not qualify for purposes of the 55prca requirement
Therefore, the ownership of these mortgage-backed securities is limited by the provisions of the Investment Company Act
In meeting the 55prca requirement under the Investment Company Act, the Company treats, as qualifying interests, mortgage-backed securities issued with respect to an underlying pool as to which the Company holds all issued certificates
If the SEC or its staff adopts a contrary interpretation, the Company could be required to sell a substantial amount of its mortgage-backed securities under potentially adverse market conditions
Further, in order to insure that the Company at all times qualifies for the exemption from the Investment Company Act, it may be precluded from acquiring mortgage-backed securities whose yield is somewhat higher than the yield on mortgage-backed securities that could be purchased in a manner consistent with the exemption
The net effect of these factors may be to lower net income