Two Harbors Investment Corp. Announces Tax Basis Information for the Distribution of Silver Bay Realty Trust Corp. Common Stock
New York, April 29, 2013 – Two Harbors Investment Corp. (NYSE: TWO; NYSE MKT: TWO.WS) today announced information concerning the special dividend distribution of Silver Bay Realty Trust Corp. (“Silver Bay”) common stock. On April 24, 2013, the company distributed (the “Distribution”) on a pro rata basis its shares of Silver Bay common stock to the Two Harbors’ stockholders of record as of the close of business on April 2, 2013 (the “Record Date”). Based on the shares outstanding on the Record Date, stockholders were entitled to receive 0.048825853 shares of Silver Bay common stock for each share of Two Harbors common stock held on that date.
Tax Treatment of the Distribution
Two Harbors intends to report the Distribution of Silver Bay common stock as a dividend distribution for U.S. federal income tax purposes. Stockholders will be treated as receiving a dividend distribution equal to the fair market value of the Silver Bay common stock (and cash in lieu of fractional shares of such common stock) received in the Distribution and will take an adjusted basis, for federal income tax purposes, in such shares equal to the “fair market value” of such shares based on the market price on the date of the Distribution. For federal income tax purposes, the fair market value of the Silver Bay common stock is the closing price on April 24, 2013, which was $19.40 per share.
The company intends to distribute cash in 2013 that is equal to its current and accumulated earnings and profits through December 31, 2013 (which includes the company’s annual 2013 taxable income), in addition to the distribution of Silver Bay common stock. We expect that the cumulative quarterly 2013 distributions of cash and Silver Bay common stock that are in excess of the current and accumulated earnings and profit will be treated as a “nondividend distribution” for U.S. federal income tax purposes, which will have the effect of reducing the basis of a stockholder’s shares of Two Harbors common stock. If a stockholder has fully recovered his, her or its basis in their Two Harbors common stock, a nondividend distribution may be treated as a capital gain.
We expect that each quarterly distribution during 2013 will be characterized for tax purposes as having the same percentage allocation that is designated as ordinary, capital gain, and nondividend distribution. The percentage allocation is based on the total cash and the fair market value of property distributed relative to the annual 2013 taxable income. Therefore, the nondividend distribution component will be allocated on a Form 1099 for federal income tax purposes to each dividend paid during 2013.
Consult Your Tax Advisor
The tax laws require stockholders to retain records with respect to the Distribution, including information regarding the amount, basis and fair market value relating to the Silver Bay common stock distributed. Stockholders may have additional reporting obligations to the Internal Revenue Service and/or other tax authorities.
The U.S. federal income tax treatment of holding Two Harbors common stock to any particular stockholder will depend on the stockholder’s particular tax circumstances. You are urged to consult your tax advisor regarding the U.S. federal, state, local and foreign income and other tax consequences to you, in light of your particular investment or tax circumstances, of acquiring, holding and disposing of Two Harbors common stock.
Two Harbors Investment Corp.
Two Harbors Investment Corp., a Maryland corporation, is a real estate investment trust that invests in residential mortgage-backed securities, residential mortgage loans and other financial assets. Two Harbors is headquartered in Minnetonka, Minnesota, and is externally managed and advised by PRCM Advisers LLC, a wholly-owned subsidiary of Pine River Capital Management L.P. Additional information is available at www.twoharborsinvestment.com.
This press release includes “forward-looking statements” within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Actual results may differ from expectations, estimates and projections and, consequently, readers should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “target,” “assume,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believe,” “predicts,” “potential,” “continue,” and similar expressions are intended to identify such forward-looking statements. These forward looking statements made in this release include, but may not be limited to, expectations around the company’s plans to distribute current and accumulated earnings in 2013, tax treatment and characterization of distributions made by the company in 2013, adjustments to terms of outstanding warrants to purchase the company’s common stock and timing and content of any announcements made with respect thereto.
Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. The company does not undertake or accept any obligation to release publicly any updates or revisions to any forward-looking statement to reflect any change in its expectations or any change in events, conditions or circumstances on which any such statement is based. Additional information concerning these and other risk factors is contained in the company’s most recent filings with the Securities and Exchange Commission. All subsequent written and oral forward looking statements concerning the company or matters attributable to the company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above.
Stockholders and warrant holders of Two Harbors, and other interested persons, may find additional information regarding the company at the Securities and Exchange Commission’s Internet site at www.sec.gov or by directing requests to: Two Harbors Investment Corp., 601 Carlson Parkway, Suite 1400, Minnetonka, MN 55305, telephone 612-629-2500.
Investors: July Hugen, Investor Relations, Two Harbors Investment Corp., 612-629-2514, firstname.lastname@example.org.