<SEC-DOCUMENT>0001193125-14-197175.txt : 20140513
<SEC-HEADER>0001193125-14-197175.hdr.sgml : 20140513
<ACCEPTANCE-DATETIME>20140513164637
ACCESSION NUMBER:		0001193125-14-197175
CONFORMED SUBMISSION TYPE:	424B3
PUBLIC DOCUMENT COUNT:		2
FILED AS OF DATE:		20140513
DATE AS OF CHANGE:		20140513

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			DYNEX CAPITAL INC
		CENTRAL INDEX KEY:			0000826675
		STANDARD INDUSTRIAL CLASSIFICATION:	REAL ESTATE INVESTMENT TRUSTS [6798]
		IRS NUMBER:				521549373
		STATE OF INCORPORATION:			VA
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		424B3
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-195317
		FILM NUMBER:		14837997

	BUSINESS ADDRESS:	
		STREET 1:		4991 LAKE BROOK DRIVE
		STREET 2:		STE 100
		CITY:			GLEN ALLEN
		STATE:			VA
		ZIP:			23060
		BUSINESS PHONE:		8042175800

	MAIL ADDRESS:	
		STREET 1:		4991 LAKE BROOK DRIVE
		STREET 2:		STE 100
		CITY:			GLEN ALLEN
		STATE:			VA
		ZIP:			23060

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	RESOURCE MORTGAGE CAPITAL INC/VA
		DATE OF NAME CHANGE:	19930722

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	RESOURCE MORTGAGE INVESTMENT CORP
		DATE OF NAME CHANGE:	19930505

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	RAC MORTGAGE INVESTMENT CORP /VA/
		DATE OF NAME CHANGE:	19930505
</SEC-HEADER>
<DOCUMENT>
<TYPE>424B3
<SEQUENCE>1
<FILENAME>d701301d424b3.htm
<DESCRIPTION>424B3
<TEXT>
<HTML><HEAD>
<TITLE>424B3</TITLE>
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">Filed Pursuant to Rule 424(b)(3) </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">Registration No. 333-195317 </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>PROSPECTUS </B></FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>


<IMG SRC="g701301g63r15.jpg" ALT="LOGO">
 </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="6"><B>Dynex Capital, Inc. </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="4"><B>DIVIDEND REINVESTMENT AND SHARE PURCHASE PLAN </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="5"><B>4,450,000 Shares of Common Stock </B></FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Dividend
Reinvestment and Share Purchase Plan, or the Plan, is designed to provide current holders of our common stock, par value $0.01 per share, and other interested investors with a convenient and economical method to invest funds and reinvest dividends
in shares of our common stock. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">By participating in the Plan, you may purchase additional shares of our common stock by
reinvesting some or all of the cash dividends that you receive on your shares of our common stock. If you elect to participate in the Plan, you may also make optional cash purchases of shares of our common stock of between $100 and $10,000 per
transaction at prevailing market prices as determined under the Plan and, with our prior approval, in excess of $10,000 per transaction. Shares of our common stock purchased directly from us under the Plan in excess of $10,000 or through the
reinvestment of cash dividends may be acquired at discounts from the prevailing market price as determined by us from time to time in our sole discretion. The Plan highlights include: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Any holder of shares of our common stock may elect to participate in the Plan. </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Interested new investors who are not currently holders of our common stock may make their initial purchase through the Plan.
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Full or partial dividend reinvestment options. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Up to a 3% discount, in our sole discretion, on purchases of shares through the reinvestment of cash dividends purchased directly from us under the
Plan. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Up to a 3% discount, in our sole discretion, on optional cash purchases of shares in excess of $10,000 per transaction purchased directly from us under
the Plan. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Optional cash purchases of between $100 and $10,000 per transaction and, with our prior approval, optional cash purchases in excess of $10,000 per
transaction. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Shares purchased will be maintained in your name in book-entry form at no charge to you. </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Detailed recordkeeping and reporting will be provided at no charge to you. </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Optional automatic investment withdrawals from your U.S. bank account. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">This prospectus relates to the offer and sale of up to 4,450,000 authorized but unissued shares of our common stock under the Plan.
Participants should retain this prospectus for future reference. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The New York Stock Exchange, or NYSE, lists our common stock
under the symbol &#147;DX.&#148;&nbsp;On April 15, 2014, the closing price of our common stock was $8.58 per share. </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">To assist
us in qualifying as a real estate investment trust, or REIT, for U.S. federal income tax purposes, no person may own more than 9.8% by number of shares of our outstanding shares of capital stock, unless our board of directors waives this limitation.
</FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our principal office is located at 4991 Lake Brook Drive, Suite 100, Glen Allen, VA 23060. Our telephone number is <FONT
STYLE="white-space:nowrap">(804)&nbsp;217-5800.</FONT> </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Investing in
our securities involves risk. You should carefully consider the information referred to under the heading &#147;<A HREF="#tx164877_5">Risk Factors</A>,&#148; beginning on page 6, before you invest. </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. </B></FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P><center>
<P STYLE="line-height:6px;margin-top:0px;margin-bottom:2px;border-bottom:1pt solid #000000;width:21%">&nbsp;</P></center> <P STYLE="margin-top:6px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>The date of
this prospectus is May 9, 2014. </B></FONT></P>

<p Style='page-break-before:always'>
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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="toc"></A>TABLE OF CONTENTS </B></FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx164877_1">IMPORTANT INFORMATION ABOUT THIS PROSPECTUS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">1</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx164877_2">CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">2</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx164877_3">DYNEX CAPITAL, INC.</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">4</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx164877_4">SUMMARY OF DIVIDEND REINVESTMENT AND SHARE PURCHASE PLAN</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">5</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
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<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx164877_5">RISK FACTORS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">6</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
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<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx164877_6">USE OF PROCEEDS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">8</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
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<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx164877_7">DESCRIPTION OF THE PLAN</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">9</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx164877_8">U.S. FEDERAL INCOME TAX CONSIDERATIONS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">24</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
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<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx164877_9">PLAN OF DISTRIBUTION</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">41</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx164877_10">LEGAL MATTERS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">42</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx164877_11">EXPERTS</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">43</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
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<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx164877_12">WHERE YOU CAN FIND MORE INFORMATION</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">44</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
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<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
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<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2"><A HREF="#tx164877_13">INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE</A></FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">45</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">i </FONT></P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx164877_1"></A>IMPORTANT INFORMATION ABOUT THIS PROSPECTUS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">This prospectus is part of a registration statement on Form <FONT STYLE="white-space:nowrap">S-3</FONT> that we filed with the Securities
and Exchange Commission, or Commission.&nbsp;This prospectus does not contain all of the information set forth in the registration statement, portions of which we have omitted as permitted by the rules and regulations of the
Commission.&nbsp;Statements contained in this prospectus as to the contents of any contract or other document are not necessarily complete.&nbsp;If the Commission&#146;s rules and regulations require that a contract or document be filed as an
exhibit to the registration statement, we refer you to the copy of the contract or document filed as an exhibit to the registration statement for a complete description.&nbsp;You should rely only on the information in our prospectus and the
documents that are incorporated by reference.&nbsp;We have not authorized anyone else to provide you with different information.&nbsp;We are not offering these securities in any jurisdiction where the offer is prohibited by law.&nbsp;You should not
assume that the information in our prospectus or any incorporated document is accurate as of any date other than the date of the document.</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">When used in this prospectus, the terms &#147;Dynex&#148;, &#147;company,&#148; &#147;issuer,&#148; &#147;we,&#148; &#147;our,&#148; and &#147;us&#148; refer to Dynex Capital, Inc. and its consolidated
subsidiaries, unless otherwise specified. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">1 </FONT></P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx164877_2"></A>CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
</B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Certain statements we make in this prospectus, and in our other filings with the Commission that are incorporated herein
by reference, that are not historical facts constitute &#147;forward-looking statements&#148; within the meaning of Section 27A of the Securities Act of 1933, as amended (the &#147;Securities Act&#148;), and Section 21E of the Securities Exchange
Act of 1934, as amended (the &#147;Exchange Act&#148;). Statements contained or incorporated by reference in this prospectus addressing expectations, assumptions, beliefs, projections, future plans and strategies, future events, developments that we
expect or anticipate will occur in the future, and future operating results are forward-looking statements. Forward-looking statements are based upon management&#146;s beliefs, assumptions, and expectations regarding future events and operating
performance as of the date of the document in which they appear, taking into account all information available to us as of such date, and are applicable only as of such date. Forward-looking statements generally can be identified by use of words
such as &#147;believe&#148;, &#147;expect&#148;, &#147;anticipate&#148;, &#147;estimate&#148;, &#147;plan&#148; &#147;may&#148;, &#147;will&#148;, &#147;intend&#148;, &#147;should&#148;, &#147;could&#148; or similar expressions. We caution readers
not to place undue reliance on our forward-looking statements, which are not historical facts and may be based on projections, assumptions, expectations, and anticipated events that do not materialize. Except as required by law, we are not obligated
to, and do not intend to, update or revise any forward-looking statement whether as a result of new information, future events, or otherwise. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">We make forward-looking statements in this prospectus, or in our other filings with the Commission that are incorporated herein by reference, regarding, among other things: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our business and investment strategy including our ability to generate acceptable risk-adjusted returns and our target investment allocations;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Monetary policy of the Board of Governors of the Federal Reserve System (the &#147;Federal Reserve&#148;); </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our financing and hedging strategy, including our target leverage ratios, anticipated trends in financing costs, changes to the derivative instruments
to which we are a party, and changes to government regulation of hedging instruments and our use of these instruments; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our investment portfolio composition and target investments; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our investment portfolio performance, including the fair value, yields, and forecasted prepayment speeds of our investment portfolio;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our liquidity and ability to access financing, and the anticipated availability and cost of financing; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our use of and restrictions on using our tax net operating loss (&#147;NOL&#148;) carryfoward; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">The status of pending litigation; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Estimates of future interest expenses related to our derivative instruments; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">The status of regulatory rule-making or review processes and the status of reform efforts in the repurchase agreement financing market;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Market, industry and economic trends; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Interest rates. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Forward-looking statements are inherently subject to risks, uncertainties and other factors that could cause our actual results to differ materially from historical results or from any results expressed
or implied by such forward-looking statements. Not all of these risks and other factors are known to us. New risks and uncertainties arise over time, and it is not possible to predict those events or how they may affect us. The projections,
assumptions, expectations or beliefs upon which the forward-looking statements are based can also change as a result of these risks or other factors. If such a risk or other factor materializes in future periods, our business, financial condition,
liquidity and results of operations may vary materially from those expressed or implied in our forward-looking statements. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">2 </FONT></P>


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<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">While it is not possible to identify all factors, some of the factors that may cause actual
results to differ from historical results or from any results expressed or implied by forward-looking statements, or that may cause our projections, assumptions, expectations or beliefs to change, include the following: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the risks and uncertainties referenced in this prospectus, or in our other filings with the Commission that are incorporated herein by reference,
particularly those set forth under the heading &#147;Risk Factors&#148; herein and in our most recent Annual Report on Form 10-K under Part I, Item 1A, &#147;Risk Factors&#148;; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">our ability to find suitable reinvestment opportunities; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">changes in economic conditions; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">changes in interest rates and interest rate spreads, including the repricing of interest-earning assets and interest-bearing liabilities;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">our investment portfolio performance particularly as it relates to cash flow, prepayment rates and credit performance; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">actual or anticipated changes in Federal Reserve monetary policy; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">adverse reactions in financial markets related to the budget deficit or national debt of the United States government; potential or actual default by
the United States government on Treasury securities; and potential or actual downgrades to the sovereign credit rating of the United States; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the cost and availability of financing, including the future availability of financing due to changes to regulation of, and capital requirements
imposed upon, financial institutions; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the cost and availability of new equity capital; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">changes in our use of leverage; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the quality of performance of third-party servicer providers of our loans and loans underlying our securities; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the level of defaults by borrowers on loans we have securitized; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">changes in our industry; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">increased competition; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">changes in government regulations affecting our business; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">changes in the repurchase agreement financing markets and other credit markets; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">changes to the market for interest rate swaps and other derivative instruments, including changes to margin requirements on derivative instruments;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">government initiatives to support the U.S financial system and U.S. housing and real estate markets; or to reform the U.S. housing finance system
including by imposing standards for originating residential mortgage loans; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">government-sponsored entity reform or other government policies and actions; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">ownership shifts under Section 382 of the Internal Revenue Code of 1986, as amended, that further limit the use of our tax NOL carryforward.
</FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We are including this cautionary statement in this prospectus to make applicable and take advantage of the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by us or on our behalf.&nbsp;Any forward-looking statements should be considered in context with the various disclosures made by
us about our businesses in our public filings with the Commission, including without limitation the risk factors described above and those described in &#147;Risk Factors&#148; beginning on page&nbsp;6. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">3 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx164877_3"></A>DYNEX CAPITAL, INC. </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We are an internally managed mortgage real estate investment trust, or mortgage REIT, which invests in mortgage assets on a leveraged
basis. Our objective is to provide attractive risk-adjusted returns to our shareholders over the long term that are reflective of a leveraged, high quality fixed income portfolio with a focus on capital preservation. We seek to provide returns to
our shareholders through regularly quarterly dividends and through capital appreciation. Our common stock is listed on the New York Stock Exchange under the symbol &#147;DX&#148;. We also have two series of preferred stock outstanding, our 8.50%
Series A Cumulative Redeemable Preferred Stock (the &#147;Series A Preferred Stock&#148;) which is traded on the New York Stock Exchange under the symbol &#147;DXPRA&#148;, and our 7.625% Series B Cumulative Redeemable Preferred Stock (the
&#147;Series B Preferred Stock&#148;) which is traded on the New York Stock Exchange under the symbol &#147;DXPRB&#148;. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We
were formed in 1987 and commenced operations in 1988. Beginning with our inception through 2000, our operations largely consisted of originating and securitizing various types of loans, principally single-family and commercial mortgage loans and
manufactured housing loans. Since 2000, we have been investing in Agency and non-Agency mortgage-backed securities (&#147;MBS&#148;), and we are no longer originating or securitizing mortgage loans. MBS consist of residential MBS (&#147;RMBS&#148;)
and commercial MBS (&#147;CMBS&#148;), including CMBS interest-only (&#147;IO&#148;) securities. Agency MBS have a guaranty of principal payment by an agency of the U.S. government or a U.S. government-sponsored entity such as Fannie Mae and Freddie
Mac. Non-Agency MBS have no such guaranty of payment. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our primary source of income is net interest income, which is the
excess of the interest income earned on our investments over the cost of financing these investments. We invest our capital pursuant to our Operating Policies as approved by our board of directors which include an Investment Policy and Investment
Risk Policy. Our Investment Policy permits investments in any type of Agency MBS and investment grade non-Agency MBS, legacy securitized mortgage loans, and legacy whole loans. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Since 2008 we have invested primarily in higher credit quality and shorter duration investments. When we have purchased longer duration
investments, we have generally reduced the duration risk on these investments through our hedging strategy. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We finance our
investments primarily through the use of recourse repurchase agreements, and to a lesser extent, non-recourse collateralized financing. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Our address and telephone number are 4991 Lake Brook Drive, Suite 100, Glen Allen, Virginia 23060 and <FONT STYLE="white-space:nowrap">(804)&nbsp;217-5800.</FONT> </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">4 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx164877_4"></A>SUMMARY OF DIVIDEND REINVESTMENT AND SHARE PURCHASE PLAN
</B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Plan provides holders of record of our common stock an opportunity to automatically reinvest all or a portion of
their cash dividends received on common stock in additional shares of our common stock as well as to make optional cash payments to purchase shares of our common stock. Persons who are not already shareholders may also make their initial purchase of
our common stock under the Plan through initial cash payments. The Administrator (as defined below) will buy, at our option, newly issued common stock directly from us or common stock in the open market or in negotiated transactions with third
parties. Our common stock purchased directly from us under the Plan may be priced at prevailing market value, as determined under the Plan, or, in connection with the reinvestment of dividends or optional cash purchases in excess of $10,000, may be
priced at a discount from market prices at the time of the investment (determined in accordance with the Plan) ranging from 0% to 3% as determined by us from time to time in our sole discretion. We refer to the date on which the Administrator
purchases whole and fractional shares with your cash dividend, or initial and subsequent optional cash purchases, as being the Investment Date. Any discount established by us for any Investment Date may be adjusted or suspended for any subsequent
Investment Date. Please see &#147;Description of the Plan&#148; beginning on page 9 of this prospectus. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Plan will be
administered by the Administrator, which will be Computershare Trust Company, N.A., or any successor bank or trust company that we may from time to time designate. Certain of the administrative support to the Administrator may be performed by its
designated affiliates. Inquiries regarding the Plan may be directed to the Administrator as indicated below (for additional information about contacting the Administrator, see Question&nbsp;23 below): </FONT></P>
<P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="10%"></TD>
<TD VALIGN="bottom" WIDTH="3%"></TD>
<TD WIDTH="87%"></TD></TR>


<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Internet:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2"><U>www.computershare.com/investor</U></FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Telephone:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">1-866-280-0407 (for calls within the U.S. and Canada)</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">1-201-680-6578 (for international calls)</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="2"></TD></TR>
<TR>
<TD VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">Writing:</FONT></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">Computershare Trust Company, N.A.</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">P.O. Box 30170</FONT></TD></TR>
<TR>
<TD VALIGN="top"></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">College Station, TX 77842-3170</FONT></TD></TR>
</TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">5 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx164877_5"></A>RISK FACTORS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Investing in our common stock involves risks. You should carefully consider the risks described below and under &#147;Risk Factors&#148;
in our most recent Annual Report on Form <FONT STYLE="white-space:nowrap">10-K</FONT> (which descriptions are incorporated by reference herein), as well as the other information contained or incorporated by reference in this prospectus before making
a decision to invest in our common stock. See &#147;Where You Can Find More Information,&#148; below. Please also see Question 25, &#147;<I>What other risks will I face through my participation in the Plan?</I>&#148; </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Risks Related to our Common Stock </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>The market price and trading volume of our common stock may be volatile. </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The market price of our common stock may become highly volatile and subject to wide fluctuations. In addition, trading volume in our
common stock may fluctuate and cause significant price variations to occur. Some of the factors that could result in fluctuations in the price or trading volume of our common stock include, among other things: actual or anticipated changes in our
current or future financial performance, changes in market interest rates and general market and economic conditions. We cannot assure you that the market price of our common stock will not fluctuate or decline significantly. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>We have not established a minimum dividend payment level for our common stockholders and there are no assurances of our ability to pay
dividends to them in the future. </B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We intend to pay dividends and to make distributions to our common stockholders in
amounts such that all or substantially all of our taxable income in each year, subject to certain adjustments including adjustments for tax loss carryforwards, is distributed. This, along with other factors, should enable us to qualify for the tax
benefits accorded to a REIT under the Internal Revenue Code of 1986, as amended. We have not established a minimum dividend payment level for our common stockholders. Further, our ability to pay dividends may be harmed by the risk factors described
herein and in our Annual Report on Form <FONT STYLE="white-space:nowrap">10-K</FONT> for the fiscal year ended December&nbsp;31, 2013. All distributions to our common stockholders will be made at the discretion of our board of directors and will
depend on our earnings, our financial condition, maintenance of our REIT status and such other factors as our board of directors may deem relevant from time to time. There are no assurances of our ability to pay dividends in the future. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Future offerings of debt securities, which would rank senior to our common stock upon our liquidation, and future offerings of equity
securities, which would dilute our existing stockholders and may be senior to our common stock for the purposes of dividend and liquidating distributions, may adversely affect the market price of our common stock. </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In the future, we may attempt to increase our capital resources by making offerings of debt or additional offerings of equity securities,
including commercial paper, medium-term notes, senior or subordinated notes and classes of preferred stock or common stock. Upon liquidation, holders of our debt securities and lenders with respect to our other borrowings will receive a distribution
of our available assets prior to the holders of our common stock. In addition, upon liquidation, holders of shares of our preferred stock will receive a distribution of our available assets prior to the holders of our common stock. Additional equity
offerings may dilute the holdings of our existing stockholders or reduce the market price of our common stock, or both. Moreover, any future issuance of preferred stock by us may have a preference on liquidating distributions and on dividend
payments that could limit our ability to make a dividend distribution to the holders of our common stock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we
cannot predict or estimate the amount, timing or nature of our future offerings. Thus, holders of our common stock bear the risk of our future offerings reducing the market price of our common stock and diluting their stock holdings in us.
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">6 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Future sales of our common stock could have an adverse effect on our stock price.
</B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We cannot predict the effect, if any, of future sales of common stock, or the availability of shares for future sales, on
the market price of our common stock. Sales of substantial amounts of common stock, or the perception that such sales could occur, may adversely affect prevailing market prices for our common stock. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">7 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx164877_6"></A>USE OF PROCEEDS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We intend to primarily use the net proceeds from the sale of the common stock offered by this prospectus for the purchase of Agency and <FONT
STYLE="white-space:nowrap">non-Agency</FONT> RMBS and CMBS. In addition, we may also use the net proceeds to repay outstanding debt and for general corporate purposes. We have no basis for estimating the number of shares of common stock that will
ultimately be purchased from us under the Plan, if any, the prices at which such shares will be acquired or the total net proceeds that we will receive. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">8 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx164877_7"></A>DESCRIPTION OF THE PLAN </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Plan offers a variety of convenient, <FONT STYLE="white-space:nowrap">low-cost</FONT> services to make it easier for you to invest in
our common stock. The Plan, which is described in this section, has various features and you can choose the Plan features that meet your investment needs. The Plan is designed for long-term investors who wish to invest and build their share
ownership over time. Unlike an individual stock brokerage account, the timing of purchases and sales is subject to the provisions of the Plan, as discussed below. In addition, the Plan will provide us with a means of raising additional capital
through the sale of common stock under the Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">You can participate in the Plan if you are a registered holder of our common
stock. If you do not own our common stock, you can become a participant by making your initial purchase directly through the Plan. The Plan offers you the opportunity to reinvest dividends and provides an alternative to traditional methods of
buying, holding and selling our common stock. The Administrator administers the Plan and certain administrative support will be provided by its designated affiliate. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Key Features of the Plan </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Anyone can participate </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If you currently own our common stock registered in your name you may participate in the Plan. If you do not own any of our common stock,
you can participate in the Plan by making your initial investment in common stock through the Plan with an initial investment of at least $1,000 and, unless we approve a Request for Waiver, not more than $10,000. We may change these minimum and
maximum amounts at any time in our sole discretion. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Automatic dividend reinvestment </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">You can reinvest your dividends in additional shares of our common stock. Your dividends will be used to buy additional shares of our
common stock at the prevailing market price on the dividend reinvestment date. The discount, if any, on purchases through reinvestment of cash dividends will range from 0% to 3% and will be established from time to time at our sole discretion, along
with any other terms, after a review of current market conditions, the level of participation in the Plan, the attractiveness of obtaining such funds through the sale of common stock as compared to other sources of funds and our current and
projected capital needs. As of the date of this prospectus, there is no discount set for purchases through reinvestment of cash dividends. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Optional cash purchases up to $10,000 </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">You can make monthly investments of as little as $100 or, in the case of an initial investment, from $1,000 to as much as $10,000, and you can pay either by check (in U.S. dollars and drawn against a U.S.
bank) or by automatic deduction from your U.S. bank account. We may change these minimum and maximum amounts at any time in our sole discretion. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I>Optional cash purchases in excess of $10,000 </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Optional cash
purchases in excess of $10,000 per transaction may be made, with our prior approval, pursuant to a written request and are not subject to a predetermined maximum limit on the amount of the investment. The discount, if any, on optional cash purchases
in excess of $10,000 made pursuant to such requests will range from 0% to 3% and will be established from time to time at our sole discretion, along with any other terms, after a review of current market conditions, the level of participation in the
Plan, the attractiveness of obtaining such funds through the sale of common stock as compared to other sources of funds and our current and projected capital needs. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">9 </FONT></P>


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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Convenient share sales </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">You can sell our common stock acquired through the Plan through the Administrator and pay fees that may be lower than those typically
charged by stockbrokers for small transactions. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Full investment </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Full investment of your funds is possible because you will be credited with both whole shares and fractional shares. Dividends will be
paid not only on whole shares but also proportionately on fractional shares. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Share safekeeping </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">You can deposit your common stock certificates with the Administrator for safekeeping, at no cost to you. You can request withdrawal of
any or all of your whole shares of our common stock. A certificate for those shares will be sent to you, free of charge. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Gifts and
other share transfers </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">You can make gifts to others of our common stock in your Plan account. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Transaction reporting </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">You will receive a notice after each transaction showing the details and the share balance in your Plan account. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Questions and Answers Describing Terms and Conditions of the Plan </B></FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>1.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Can I participate in the Plan? </I></B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B>If you already own our common stock and the shares are registered in your name, you may participate immediately. If your shares are held for you in a brokerage account, you may make
arrangements with your stockbroker to have some or all of the shares of our common stock registered directly in your name. Please note that participation will only apply to the number of shares registered in your name.&nbsp;If you do not currently
own any of our common stock, you can participate by making an initial investment in our common stock through the Plan. Please see Question 8 for details regarding an initial investment. If you live outside the United States, you should first
determine if there are any laws or governmental regulations that would prohibit your participation in the Plan. We reserve the right to terminate participation of any shareholder if we deem it advisable under any domestic or foreign laws or
regulations then in effect. <B><I> </I></B></FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>2.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>How do I get started? </I></B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%;padding-bottom:0px; "><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B>Enrollment is available <FONT STYLE="white-space:nowrap">on-line</FONT> through www.computershare.com/investor. Alternatively, you can get started in the Plan by completing an enrollment
form and mailing it to the Administrator. Your participation will begin promptly after your authorization is received. Once you have enrolled, your participation continues automatically, until you notify us otherwise. <B><I> </I></B></FONT></P>
<P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>3.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>How do I reinvest dividends? </I></B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">You can choose to reinvest all or a portion of the cash dividends paid on shares of our common stock you own in additional shares of our common stock. To be effective with respect to a particular
dividend, notice of your election must be received on or before the record date for that dividend. A record date for a dividend normally precedes the payment of the dividend by approximately four weeks. You may change your election at any time by
notifying the Administrator. To be effective with respect to a particular dividend, any such change </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">10 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
must be received by the Administrator on or before the record date for that dividend. If you elect to reinvest your dividends, you must choose one of the following options: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Full dividend reinvestment</I>. You may purchase additional shares of our common stock by reinvesting all of your cash dividends.
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Partial dividend reinvestment</I>. You may purchase additional shares of our common stock by reinvesting some of your dividends.&nbsp;If you select
this option, a portion of your cash dividends will be paid to you in cash, and the remaining portion of your dividends will be automatically reinvested to purchase additional shares of our common stock. If you choose partial reinvestment, you must
specify on the enrollment form the number of whole shares on which you wish to continue to receive cash dividends by check or to have directly deposited into your designated U.S. bank account. The remaining dividends will be automatically
reinvested. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">If you do not choose to reinvest any cash dividends paid on shares of our common stock, you will receive cash
dividends by check or direct deposit into your designated U.S. bank account. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>4.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>When are dividends reinvested? </I></B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">If you have chosen the dividend reinvestment feature and notice of such change has been received by the Administrator on or before the record date for that dividend, the Administrator will generally
invest dividends in additional shares of our common stock purchased on the open market or directly from us on the dividend payment date. If the dividend payment date falls on a day that is not a NYSE trading day, then the Investment Date will be the
next trading day.&nbsp;If the Administrator acquires shares from parties other than us through open market transactions, such purchases will occur during a period beginning on the dividend payment date, and continue on any succeeding trading days
necessary to complete the order. In the unlikely event that, due to unusual market conditions, the Administrator is unable to invest the funds within 30 days, the Administrator will remit the funds to you by check. No interest will be paid on funds
held by the Administrator pending investment. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>5.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>What is the source of shares to be purchased under the Plan? </I></B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">All dividends reinvested through the Plan and all optional cash purchases will be used to purchase, in our sole discretion, either newly-issued shares directly from us or shares on the open market or a
combination thereof. Shares purchased directly from us will consist of authorized but unissued shares of common stock. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>6.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>At what price will shares be purchased? </I></B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The purchase price of shares purchased through the reinvestment of cash dividends will be determined as follows: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">If the shares are purchased in the open market, the purchase price will be the weighted average purchase price per share of the shares of our common
stock purchased by the Administrator. We will pay all trading fees in connection with open market purchases. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">If the shares are purchased from us, the purchase price will be the unsolicited volume weighted average price, rounded to four decimal places, of our
common stock as reported by the NYSE only, obtained from Bloomberg, LP for the trading hours from 9:30 a.m. to 4:00 p.m., Eastern time (including the last trade on the NYSE even if reported after 4:00 p.m.) on the Investment Date. The purchase price
may be reduced by the Dividend Reinvestment Discount (defined below), if any, that we have provided, in our sole discretion, for reinvested dividends on a particular Investment Date. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><I>Dividend Reinvestment Discount</I><B><I></I></B>. At least 5 calendar days prior to the applicable Investment Date, we
may, in our sole discretion, establish a discount from the market price applicable to reinvestments of cash dividends. These discounts, or the Dividend Reinvestment Discounts, may be between 0% and 3% of the purchase price,<B><I>
</I></B></FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">11 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>
</I></B>and may vary for each Investment Date. However, no Dividend Reinvestment Discounts will be available for common stock purchased in the open market or in privately negotiated transactions.
As of the date of this prospectus, there is no Dividend Reinvestment Discount. <B><I> </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Dividend Reinvestment
Discounts will be established at our sole discretion after a review of current market conditions, the level of participation in the Plan, the attractiveness of obtaining such additional funds through the sale of common stock as compared to other
sources of funds and current and projected capital needs. Dividend Reinvestment Discounts, if any, will be established by our board of directors and will be posted to our website at <I>www.dynexcapital.com </I>at least one week prior to the dividend
record date. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Setting a Dividend Reinvestment Discount for a particular Investment Date shall not affect the setting of
Dividend Reinvestment Discounts for any subsequent Investment Date. The Dividend Reinvestment Discounts will apply only to purchases through the reinvestment of cash dividends. The setting of Waiver Discounts (defined below), if any, shall not
affect the setting of Dividend Reinvestment Discounts, if any, and Waiver Discounts and Dividend Reinvestment Discounts may be different percentages at any given time, at our sole discretion. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The purchase price of shares for optional cash purchases not exceeding $10,000 will be determined as follows: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">If the shares are purchased in the open market, the purchase price will be the weighted average purchase price per share of the shares of our common
stock purchased by the Administrator. We will pay all trading fees in connection with open market purchases. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">If the shares are purchased from us, the purchase price will be the unsolicited volume weighted average price, rounded to four decimal places, of our
common stock as reported by the NYSE only, obtained from Bloomberg, LP for the trading hours from 9:30 a.m. to 4:00 p.m., Eastern time (including the last trade on the NYSE even if reported after 4:00 p.m.) on the Investment Date.
</FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Please see Question 10 for information about the purchase price for optional cash purchases in excess of
$10,000. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>7.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>When will shares be purchased under the Plan? </I></B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The Investment Date is the date or dates on which the Administrator purchases shares of our common stock for the Plan, as described below. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Dividend Reinvestments</I>. If the Administrator acquires shares directly from us, it will combine the dividend funds of all Plan
participants whose dividends are automatically reinvested and will generally invest such dividend funds on the dividend payment date. If the dividend payment date falls on a day that is not a NYSE trading day, then the Investment Date will be the
next trading day. If the Administrator acquires shares from parties other than us through open market transactions, such purchases will occur during a period beginning on the dividend payment date, and continue on any succeeding trading days
necessary to complete the order. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Initial and Optional Cash Purchases up to $10,000</I>. If the Administrator acquires
shares directly from us, then the Investment Date for optional cash purchases up to $10,000 will be on the last business day of each month. If the Administrator acquires shares from third parties other than us through open market transactions, it
will attempt to buy our common stock in the open market through a registered broker-dealer. Such purchases will begin on the last business day of each month, and will be completed no later than thirty days following such date, except where
completion at a later date is necessary or advisable under any applicable federal or state securities laws or regulations. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">For automatic optional monthly purchases, the amounts you have authorized will be withdrawn from your U.S. bank account on the
twenty-fifth day of each month, or on the next succeeding business day if the twenty-fifth falls on a weekend or a holiday, and shares will be purchased in the manner described immediately above. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">12 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In the unlikely event that, due to unusual market conditions, the Administrator is unable to
invest the funds within thirty days, the Administrator will return the funds to you by check. No interest will be paid on funds held by the Administrator pending investment. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B>To be effective with respect to a particular Investment Date, initial investments and optional cash purchases must be received by the Administrator prior to the applicable Investment Date.
<B><I> </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Initial and Optional Cash Purchases in Excess of $10,000</I>. The Investment Dates for optional cash
purchases in excess of $10,000 are discussed in response to Question 10. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>8.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>How do I make an initial investment?</I></B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">If you do not own our common stock in a Plan account, you can make an initial cash purchase for as little as $1,000, but your initial cash purchase cannot exceed $10,000 unless we approve a Request for
Waiver as discussed in response to Question 10. Your initial cash purchase can be made: </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Via
<FONT STYLE="white-space:nowrap">on-line</FONT> enrollment by: </B></FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Authorizing a one time deduction (minimum of $1,000) from your U.S. bank account; or </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Using the Enrollment Form and: </B></FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Making one payment (minimum of $1,000) by check (in U.S. dollars and drawn against a U.S. bank) payable to Computershare/Dynex Capital, Inc.
</FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We may change the minimum and maximum amounts at any time in our sole discretion. In addition, in certain
instances, we may permit optional cash purchases in excess of the maximum amount established by us. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">All Plan accounts that we
believe to be under common control or management or to have common ultimate beneficial ownership may be aggregated for purposes of determining compliance with the maximum purchase requirement limit. Unless we have determined that reinvestment of
dividends and optional cash purchases for each such account would be consistent with the purposes of the Plan, we will have the right to aggregate all such accounts and to return, without interest, within thirty days of receipt, any amounts in
excess of the investment limitations applicable to a single account received in respect of all such accounts. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>9.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>How do I make optional cash purchases of less than $10,000? </I></B></FONT></TD></TR></TABLE>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%;padding-bottom:0px; "><FONT STYLE="font-family:Times New Roman" SIZE="2">If you already own our common stock and are enrolled in the Plan and want to make additional purchases, you can
authorize an individual deduction from your U.S. bank account through www.computershare.com/investor or send a check (in U.S. dollars and drawn against a U.S. bank) to the Administrator for each purchase. If you choose to submit a check, please be
sure to include the transaction form from your Plan statement and mail it to the address specified on the statement. Or, if you wish to make regular monthly purchases, you may authorize automatic monthly deductions from your U.S. bank account. This
feature enables you to make ongoing investments in an amount that is comfortable for you, without having to write a check. Additional cash purchases are subject to a minimum purchase requirement of $100 per investment and a transaction maximum of
$10,000. The Administrator will not accept cash, traveler&#146;s checks, money orders or third party checks. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In the event
that any check or other deposit is returned unpaid for any reason or your pre-designated U.S. bank account does not have sufficient funds for an automatic withdrawal, the Administrator will consider the request for investment of that purchase null
and void. The Administrator will immediately remove from your Plan account any shares of common stock already purchased in anticipation of receiving those funds and will sell such shares. If the net proceeds from the sale of those shares of common
stock are insufficient to satisfy the balance of the uncollected amounts, the Administrator may sell additional shares from your Plan account as </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">13 </FONT></P>



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necessary to satisfy the uncollected balance. There is a $35.00 charge for any check, electronic fund transfer or other deposit that is returned unpaid by your bank. This fee will be collected by
the Administrator through the sale of the number of shares of common stock from your Plan account necessary to satisfy the fee. You will be responsible for customary fees incurred in connection with any such sale. </FONT></P>
<P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>10.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>How do I make optional cash purchases in excess of $10,000? </I></B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">You may ascertain whether we are accepting requests to make optional cash purchases in excess of $10,000 by telephoning the Administrator at 1-866-280-0407. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Request for Waiver</I>. If you wish to make an optional cash purchase in excess of $10,000 (or other maximum amount established by
us), you must obtain our prior written approval and a copy of such written approval must accompany any such optional cash purchase. We refer to such a request as being a Request for Waiver. We have sole discretion to grant any approval for optional
cash purchases in excess of the current allowable $10,000 maximum amount. Unless you have complied with these procedures, any amount you submit for investment over $10,000 will be returned to you without interest. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">You may make a Request for Waiver by contacting the Administrator at <FONT STYLE="white-space:nowrap">1-866-280-0407.</FONT> Completed
Request for Waiver forms should be submitted to the Administrator no later than two business days prior to the applicable Pricing Period (as defined below). </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The Administrator will notify you as to whether your Request for Waiver has been granted or denied, either in whole or in part, within one business day of the receipt of your request. If your full Request
for Waiver is granted in part, the Administrator will advise you of the maximum amount that will be accepted from you in connection with your purchase. If your request is approved, the Administrator must receive the funds for your purchase prior to
or on the applicable date specified by the Administrator for the relevant Pricing Period (which typically will be one business day prior to the applicable Pricing Period). If you do not receive a response from the Administrator in connection with
your Request for Waiver, you should assume that we have denied your request. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We may alter, amend, supplement or waive, in our
sole discretion, the time periods and/or other parameters relating to optional cash purchases in excess of $10,000 made by one or more participants in the Plan or new investors, at any time and from time to time, prior to the granting of any Request
for Waiver. For more information regarding a particular Pricing Period (including applicable Pricing Period start dates), please contact the Administrator at <FONT STYLE="white-space:nowrap">1-866-280-0407.</FONT> </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><I>Purchase Price of Shares for Optional Cash Purchases in Excess of $10,000</I><B><I></I></B>. Shares purchased pursuant
to an approved Request for Waiver will be purchased directly from us as described herein, including the establishment of a &#147;Threshold Price&#148; as more fully described below. The purchase price may be reduced by the Waiver Discounts, if any,
that we have provided on each Investment Date. If we grant your request to purchase shares pursuant to a Request for Waiver, we, in our sole discretion, will establish a Pricing Period, which will generally consist of one to fourteen separate days
during which trading of our common stock is reported on the NYSE during the applicable Pricing Period. Each of these separate days will be an Investment Date, and an equal proportion of your optional cash purchase will be invested on each trading
day during such Pricing Period, subject to the qualifications listed below. The purchase price for shares acquired on a particular Investment Date will be equal to 100% (subject to change as provided below) of the unsolicited volume weighted average
price,<B><I> </I></B>rounded to four decimal places, of our common stock as reported by the NYSE only, obtained from Bloomberg, LP for the trading hours from 9:30 a.m. to 4:00 p.m., Eastern time, for that Investment Date (including the last trade on
the NYSE even if reported after 4:00 p.m.). With respect to optional cash purchases in excess of $10,000, we will not set an Investment Date to be the same date as a dividend payment date. <B><I> </I></B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Administrator will apply all optional cash purchases made pursuant to a Request for Waiver for which good funds are received on or
before the first business day before the Pricing Period to the purchase of shares of our common stock on each Investment Date of the applicable Pricing Period. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">14 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Threshold Price</I>. We may establish for a Pricing Period a minimum price (or the
Threshold Price) applicable to optional cash purchases made pursuant to a Request for Waiver. At least one business day prior to the first day of the applicable Pricing Period, we will determine whether to establish a Threshold Price, and if the
Threshold Price is established, its amount, and will so notify the Administrator. This determination will be made by us in our discretion after a review of current market conditions, the level of participation in the Plan, the attractiveness of
obtaining such funds through the sale of common stock as compared to other sources of funds and current and projected capital needs. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">If established for any Pricing Period, the Threshold Price will be stated as a dollar amount that the unsolicited volume weighted average price, rounded to four decimal places, of our common stock as
reported on the NYSE, obtained from Bloomberg, LP for the trading hours from 9:30 a.m. to 4:00 p.m., Eastern time, for each trading day of such Pricing Period (not adjusted for discounts, if any) must equal or exceed. Except as provided below, we
will exclude from the Pricing Period any trading day that the unsolicited volume weighted average price is less than the Threshold Price. We also will exclude from the Pricing Period and from the determination of the purchase price any day in which
no trades of common stock are made on the NYSE. For example, if the Threshold Price is not met for two of the trading days in a 10 day Pricing Period, then we will return 20% of the funds you submitted in connection with your Request for Waiver
unless we have activated the pricing period extension feature for the Pricing Period which is described below. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Pricing
Period Extension Feature</I>. We may elect to activate for any particular Pricing Period the pricing period extension feature which will provide that the initial Pricing Period will be extended by the number of days that the Threshold Price is not
satisfied, or on which there are no trades of our common stock reported by the NYSE, subject to a maximum of five trading days. If we elect to activate the pricing period extension feature and the Threshold Price is satisfied for any additional day
that has been added to the initial Pricing Period, that day will be included as one of the trading days for the Pricing Period in lieu of the day on which the Threshold Price was not met or trades of our common stock were not reported. For example,
if the determined Pricing Period is 10 days, and the Threshold Price is not satisfied for three out of those 10 days in the initial Pricing Period, and we had previously announced at the time of the Request for Waiver acceptance that the pricing
period extension feature was activated, then the Pricing Period will automatically be extended, and if the Threshold Price is satisfied on the next three trading days (or a subset thereof), then those three days (or a subset thereof) will become
Investment Days in lieu of the three days on which the Threshold Price was not met. As a result, because there were 10 trading days during the initial and extended Pricing Period on which the Threshold Price was satisfied, all of the optional cash
purchase will be invested. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Return of Unsubscribed Funds</I>. We will return a portion of each optional cash purchase in
excess of $10,000 for each trading day of a Pricing Period or extended Pricing Period, if applicable, for which the Threshold Price is not met or for each day in which no trades of common stock are reported on the NYSE, referred to as the
Unsubscribed Funds. Any Unsubscribed Funds will be returned within five business days after the last day of the Pricing Period or, if applicable, the extended Pricing Period, without interest. The amount returned will be based on the number of days
during which the Threshold Price was not met with compared to the number of days in the Pricing Period or extended Pricing Period. For example, the returned amount in a 10 day Pricing Period will equal
<FONT STYLE="white-space:nowrap">one-tenth</FONT> (1/10)&nbsp;of the total amount of such optional cash purchase (not just the amount exceeding $10,000) for each trading day that the Threshold Price is not met or for each trading day in which sales
are not reported. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The establishment of the Threshold Price and the possible return of a portion of the investment applies
only to optional cash purchases in excess of $10,000. Setting a Threshold Price for a Pricing Period will not affect the setting of a Threshold Price for any other Pricing Period. We may waive our right to set a Threshold Price for any particular
Pricing Period. Neither we nor the Administrator is required to give you notice of the Threshold Price for any Pricing Period. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><I>Waiver Discount</I><B><I></I></B>. At least one business day prior to the first day of the applicable Pricing Period,
the same time the Threshold Price is determined, we may, in our sole discretion, establish discounts from the market price applicable to optional cash purchases made pursuant to a Request for Waiver. These discounts (or the Waiver<B><I>
</I></B></FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">15 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>
</I></B>Discounts) may be between 0% and 3% of the purchase price, and may vary for each Pricing Period and, within a<B><I> </I></B>given Pricing Period, for each purchaser. However, no Waiver
Discounts will be available for common stock purchased in the open market or in privately negotiated transactions. <B><I> </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The Waiver Discounts will be established at our sole discretion after a review of current market conditions, the level of participation in the Plan, the attractiveness of obtaining such additional funds
through the sale of common stock as compared to other sources of funds and current and projected capital needs. You may inquire as to the Waiver Discounts, if any, applicable to the next Pricing Period by contacting the Administrator at <FONT
STYLE="white-space:nowrap">1-866-280-0407.</FONT> </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Setting Waiver Discounts for a particular Pricing Period or for a
particular purchaser shall not affect the setting of Waiver Discounts for any subsequent Pricing Period or for any other purchaser. The Waiver Discounts will apply only to optional cash purchases of more than $10,000 (or other applicable maximum
transaction amount). The Waiver Discounts will apply to the entire optional cash purchase and not just the portion of the optional cash purchase that exceeds $10,000. The setting of Dividend Reinvestment Discounts, if any, shall not affect the
setting of Waiver Discounts, if any, and Waiver Discounts and Dividend Reinvestment Discounts may be different percentages at any given time, at our sole discretion. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><I></I></B><I>Settlement</I><B><I></I></B>. Newly issued shares purchased pursuant to a Request for Waiver will be posted to your account within three business days following the end of the applicable
Pricing Period. Alternatively, we may elect, in our sole discretion, to activate the continuous settlement feature, pursuant to which shares will be posted to your account within three business days of each separate Investment Date beginning on the
first Investment Date in the relevant Pricing Period and ending on the final Investment Date in the relevant Pricing Period, with an equal amount being invested on each day, subject to the qualifications set forth above. Anytime we propose to grant
Requests for Waiver for one or more investments, we may elect to activate the continuous settlement feature for such investments by announcing in the <FONT STYLE="white-space:nowrap">bid-waiver</FONT> form that we will be doing so. Under the
continuous settlement feature, we would have a separate settlement of each Investment Dates&#146; purchases, each based on the unsolicited volume weighted average price for the trading day (as described above) relating to each of the Investment
Dates during the Pricing Period. <B><I> </I></B></FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>11.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Will I automatically receive certificates for shares purchased? </I></B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">No, because the Plan provides for share safekeeping. For your convenience, the Administrator will maintain shares purchased under the Plan in your name in
<FONT STYLE="white-space:nowrap">non-certificated</FONT> form. You may, however, request a stock certificate from the Administrator at any time, free of charge. Please see Question 13 for information about how to request a stock certificate.
</FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>12.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>What is safekeeping? </I></B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Shares of our common stock that you buy under the Plan will be maintained in your Plan account in <FONT STYLE="white-space:nowrap">non-certificated</FONT> form for safekeeping, unless you request a stock
certificate as described in Question 13. Safekeeping protects your shares against loss, theft or accidental destruction and also provides a convenient way for you to keep track of your shares. Only shares held in safekeeping may be sold through the
Plan. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If you own our common stock in certificate form, you may deposit your certificates for those shares with the
Administrator, free of charge. Stock certificates can be mailed to Computershare Trust Company, N.A. at 211 Quality Circle, Suite 210, College Station, TX 77845, by USPS registered mail or by any overnight courier service, and properly insured.
</FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>13.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Can I get stock certificates if I want them? </I></B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Yes. If you should ever want a stock certificate for all or a portion of the whole shares of our common stock in your Plan account, the Administrator will send one to you, upon your request, within two
days of the receipt of </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">16 </FONT></P>



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your instructions. Once the Administrator sends you a stock certificate, you cannot sell the shares of stock represented by such certificate through the Plan&#146;s sale feature unless you
deposit the certificate with the Administrator for safekeeping. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>14.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>How can I transfer or give gifts of shares? </I></B></FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Please visit the Computershare Transfer Wizard at <U>www.computershare.com/transferwizard</U>. The Transfer Wizard will guide you through the transfer process, assist you in completing the transfer form
and identify other necessary documentation you may need to provide. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>15.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>How do I sell shares? </I></B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">You may request that the Administrator sell your uncertificated Plan shares held via share safekeeping at any time as described below. If the Administrator sends you a stock certificate at your request,
you cannot sell the shares of stock represented by such certificate through the Plan&#146;s sale feature unless you deposit the certificate with the Administrator for safekeeping. The market price of our shares of common stock may decline between
the time you request to sell shares and the actual time of sale. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Market Order. </I>A market order is a request to sell
shares of our common stock promptly at the current market price. Market order sales are only available at www.computershare.com/investor, through Investor Centre, or by calling the Administrator directly at 1-866-280-0407. Market order sale requests
received at www.computershare.com/investor, through Investor Centre, or by telephone will be placed promptly upon receipt during market hours (normally 9:30 a.m. to 4:00 p.m. Eastern Standard Time). Any orders received outside of market hours will
be submitted to the Administrator&#146;s broker on the next day the market is open. Sales proceeds will equal the market price of the sale obtained by the Administrator&#146;s broker, net of taxes and fees. The Administrator will use commercially
reasonable efforts to honor requests by participants to cancel market orders placed outside of market hours. Depending on the number of shares being sold and current trading volume in the shares, a market order may only be partially filled or not
filled at all on the trading day in which it is placed, in which case the order, or remainder of the order, as applicable, will be cancelled at the end of such day. To determine if your shares were sold, you should check your account online at
www.computershare.com/investor or call the Administrator directly at 1-866-280-0407. If your market order sale was not filled and you still want the shares to be sold, you will need to re-enter the sale request. The price will be the market price of
the sale obtained by the Administrator&#146;s broker, less a service fee of $25.00 and a processing fee of $0.12 per share sold. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><I>Batch Order. </I>A batch order is an accumulation of all sale requests for shares of our common stock submitted together as a collective request. Batch orders are submitted on each market day, assuming
there are sale requests to be processed. Sale instructions for batch orders received by the Administrator will be processed no later than five business days after the date on which the order is received (except where deferral is required under
applicable federal or state laws or regulations), assuming the applicable market is open for trading and sufficient market liquidity exists. All sale requests received in writing will be submitted as batch order sales, unless such requests specify
otherwise. Batch order sales may only be requested in writing. In every case of a batch order sale, the price will be the weighted average sale price obtained by the Administrator&#146;s broker, less a service fee of $15.00 and a processing fee of
$0.12 per share sold. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Day Limit Order. </I>A day limit order is an order to sell shares of our common stock when and if
they reach a specific trading price on a specific day. The order is automatically cancelled if the price is not met by the end of that day (or, for orders placed after-market hours, the next day the market is open). Depending on the number of shares
of our common stock being sold and the current trading volume in the shares, such an order may only be partially filled, in which case the remainder of the order will be cancelled. The order may be cancelled by the applicable stock exchange, by the
Administrator at its sole discretion or, if the Administrator&#146;s broker has not filled the order, at your request made online at www.computershare.com/investor or by calling the Administrator directly at 1-866-280-0407. A service fee of $25.00
and a processing fee of $0.12 per share sold will be deducted from the sale proceeds. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">17 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Good-Til-Cancelled (&#145;&#145;GTC&#146;&#146;) Limit Order. </I>A GTC limit order is an
order to sell shares of our common stock when and if the shares reach a specific trading price at any time while the order remains open (generally up to 30 days). Depending on the number of shares being sold and current trading volume in the shares,
sales may be executed in multiple transactions and over more than one day. If an order remains open for more than one day during which the market is open, a separate fee will be charged for each such day. The order (or any unexecuted portion
thereof) is automatically cancelled if the trading price is not met by the end of the order period. The order may be cancelled by the applicable stock exchange, by the Administrator at its sole discretion or, if the Administrator&#146;s broker has
not filled the order, at your request made online at www.computershare.com/investor or by calling the Administrator directly at 1-866-280-0407. A service fee of $25.00 and a processing fee of $0.12 per share sold will be deducted from the sale
proceeds. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>General</I><I>. </I>All per share fees described in &#145;&#145;How do I sell shares?&#146;&#146; include any
brokerage commissions the Administrator is required to pay. All sales requests processed over the telephone by a customer service representative, or CSR, entail an additional fee of $15.00. Fees are deducted from the proceeds derived from the sale.
The Administrator may, under certain circumstances, require a transaction request to be submitted in writing. Please contact the Administrator to determine if there are any limitations applicable to your particular sale request. Alternatively, you
may choose to sell shares of common stock in your Plan account through a broker of your choice, in which case you should contact your broker about transferring shares from your Plan account to your brokerage account. </FONT></P>
<P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>16.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>What are the costs for participation in the Plan? </I></B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The following fees apply to your participation in the Plan. The Administrator will deduct the applicable fees for the sale of shares from the proceeds from the sale. We reserve the right to amend or
modify this Plan Service Fee schedule at any time and from time to time. </FONT></P> <P STYLE="font-size:12px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE CELLSPACING="0" CELLPADDING="0" WIDTH="84%" BORDER="0" STYLE="BORDER-COLLAPSE:COLLAPSE" ALIGN="center">


<TR>
<TD WIDTH="54%"></TD>
<TD VALIGN="bottom" WIDTH="4%"></TD>
<TD></TD>
<TD></TD>
<TD></TD></TR>


<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Enrollment Fee for New Investors:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">No Charge</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Reinvestment of Dividends:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">No Charge</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Initial Purchase of Shares:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">No Charge</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Purchase of Shares with Optional Cash:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">By Check</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">$5.00</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">By Electronic Debit or Recurring Periodic Debit</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">$2.00</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Sale of Shares:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD>
<TD VALIGN="bottom"></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Batch&nbsp;Order</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">$15.00&nbsp;per&nbsp;transaction&nbsp;&#43;&nbsp;$0.12&nbsp;per&nbsp;share</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Market&nbsp;Order</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">$25.00&nbsp;per&nbsp;transaction&nbsp;&#43;&nbsp;$0.12&nbsp;per&nbsp;share</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Day&nbsp;Limit&nbsp;Order</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">$25.00&nbsp;per&nbsp;transaction&nbsp;&#43;&nbsp;$0.12&nbsp;per&nbsp;share</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:3.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">GTC&nbsp;Limit&nbsp;Order</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD NOWRAP VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">$25.00&nbsp;per&nbsp;transaction&nbsp;&#43;&nbsp;$0.12&nbsp;per&nbsp;share</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">CSR assisted sale:</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">$15.00&nbsp;per&nbsp;transaction</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
<TR>
<TD HEIGHT="8"></TD>
<TD HEIGHT="8" COLSPAN="4"></TD></TR>
<TR>
<TD VALIGN="top"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT STYLE="font-family:Times New Roman" SIZE="2">Returned Checks or Debits for Insufficient Funds or Rejected Automatic Withdrawals</FONT></P></TD>
<TD VALIGN="bottom"><FONT SIZE="1">&nbsp;&nbsp;</FONT></TD>
<TD VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;</FONT></TD>
<TD VALIGN="bottom" ALIGN="right"><FONT STYLE="font-family:Times New Roman" SIZE="2">$35.00 per item</FONT></TD>
<TD NOWRAP VALIGN="bottom"><FONT STYLE="font-family:Times New Roman" SIZE="2">&nbsp;&nbsp;</FONT></TD></TR>
</TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">18 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>


<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>17.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>How can I vote my shares? </I></B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">You will receive proxy material for all whole shares in your Plan account. Fractional shares may not be voted. The proxy will be voted in accordance with your direction. The Administrator may vote your
shares in certain cases if you do not return a proxy to the Administrator. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>18.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>If there is a rights offering related to the common stock, how will a shareholder&#146;s entitlement be computed? </I></B></FONT></TD></TR></TABLE>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Your entitlement in a rights offering related to the common stock will be based upon the number of whole shares credited to your Plan
account. Rights based on a fraction of a share credited to your Plan account will be sold for that account and the net proceeds will be invested as an optional cash purchase on the next Investment Date. In the event of a rights offering, transaction
processing may be curtailed or suspended by the Administrator for a short period of time following the record date for such action to permit the Administrator to calculate the rights allocable to each account. </FONT></P>
<P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>19.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>How will I keep track of my investments? </I></B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The simplest way to keep track of your investments is by logging into your Plan account at www.computershare.com/investor. There you will be able to see sales, purchases, balances, prices, dividends
reinvested, cost basis and other information. Additionally, you will periodically receive account statements and, if applicable, transaction advices. If you continue to participate in the Plan, but have no transactions, the Administrator will send
you an annual statement after the end of the calendar year detailing the status of your holdings of our common stock in your Plan account. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">These statements are a continuing record of the cost basis of your purchases and should be retained for income tax purposes. For shares acquired in the Plan after January 1, 2011, the statement will
include specific cost basis information in accordance with applicable law. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>20.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>How would I terminate my participation in the Plan? </I></B></FONT></TD></TR></TABLE>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%;padding-bottom:0px; "><FONT STYLE="font-family:Times New Roman" SIZE="2">You may discontinue the reinvestment of your dividends at any time by giving notice to the Administrator. Notice may
be made through the Internet at www.computershare.com/investor, by telephone, or in writing. To be effective for a given dividend payment, the Administrator must receive notice on or before the record date for that dividend. The Administrator will
continue to hold your shares unless you request a certificate for any full shares and a check for any fractional share (see Question 13 for information on requesting stock certificates). You may also request the sale of all or part of any such
shares or have the Administrator transfer your shares to your brokerage account (see Question 15 for information on selling shares). If your Plan account balance falls below one full share, the Administrator reserves the right to liquidate the
fraction and remit the proceeds, less any applicable fees, to you at your address of record. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>21.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Can the Plan be amended, modified, suspended or terminated? </I></B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">We reserve the right to amend, modify, suspend or terminate the Plan at any time and in any manner. You will receive written notice of any such amendment, modification, suspension or termination. We and
the Administrator also reserve the right to change any administrative procedures of the Plan. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>22.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>What are the responsibilities of Dynex Capital and of the Administrator? </I></B></FONT></TD></TR></TABLE>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Neither we nor the Administrator will be liable for any act we or they do in good faith or for any good faith omission to act including,
in the case of the Administrator, liability arising out of (i)&nbsp;failure to terminate a participant&#146;s account upon such participant&#146;s death or adjudicated incompetence, prior to the receipt of notice in
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">19 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
writing of such death or adjudicated incompetence, (ii)&nbsp;the prices at which shares are purchased for the participant&#146;s account, (iii)&nbsp;the times when purchases are made, or
(iv)&nbsp;fluctuations in the market value of our common stock. The payment of dividends is at the discretion of our board of directors and will depend upon future earnings, our financial condition and other factors. Our board of directors may
change the amount and timing of dividends at any time without notice. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>23.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>What if I have questions about the Plan? </I></B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Enrollment, purchase or sale of share requests and other transactions or services offered by the Plan should be directed to the Administrator through the following: </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Internet </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%;padding-bottom:0px; "><FONT
STYLE="font-family:Times New Roman" SIZE="2">You can enroll in the Plan, obtain information, and perform certain transactions on your Dynex Capital, Inc. account <FONT STYLE="white-space:nowrap">on-line</FONT> via www.computershare.com/investor.
</FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Telephone </I></B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Telephone shareholder customer service, including sale of shares, is available toll-free within the U.S. and Canada: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><FONT STYLE="white-space:nowrap"><FONT STYLE="white-space:nowrap"><FONT STYLE="white-space:nowrap">1-866-280-0407</FONT></FONT></FONT> </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">For international telephone inquiries: </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px" ALIGN="center"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B><FONT STYLE="white-space:nowrap"><FONT STYLE="white-space:nowrap"><FONT STYLE="white-space:nowrap">1-201-680-6578</FONT></FONT></FONT> </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">An automated voice response system is available 24 hours a day, 7 days a week. Customer Service Representatives are available from 9:00
a.m. to 7:00 p.m., Eastern time, Monday through Friday (except holidays). </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>In Writing </I></B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">You may also write to the Administrator at the following address: </FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; margin-left:8%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Computershare Trust Company, N.A. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">P.O. Box 30170 </FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; margin-left:8%"><FONT STYLE="font-family:Times New Roman" SIZE="2">College Station, TX 77842-3170 </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">Be sure to include your name, address, daytime phone number, account number and a reference to Dynex Capital, Inc. on all correspondence. </FONT></P>
<P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>24.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Will interest be paid on Plan accounts? </I></B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">No.&nbsp;Interest will not be paid on Plan accounts or on any amounts held pending investment. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>25.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>What other risks will I face through my participation in the Plan? </I></B></FONT></TD></TR></TABLE> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Your investment in shares purchased under the Plan is no different from any investment in shares you hold directly. Neither we nor the Administrator can assure a profit or protect you against a loss on
shares purchased. You bear the risk of loss and enjoy the benefits of any gain from market price changes with respect to shares purchased under the Plan. This Plan is designed for the long-term investor and does not afford the same
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">20 </FONT></P>



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flexibility as a stockbroker&#146;s account. Per share fees may be paid to a broker-dealer that is affiliated with the Administrator. Investors must make independent investment decisions based
upon their own judgment and research. Our common stock is listed on the NYSE and trades under the ticker symbol &#147;DX.&#148; </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The following summary identifies several of the most important risks that you may face by virtue of your participation in the Plan. There
may be additional risks that are not listed below, and you should consult your financial, tax, legal and other advisors prior to determining whether to participate in the Plan. </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>The purchase price for shares purchased or sold under the Plan will vary.</I> The purchase price for any shares that you purchase or sell under the
Plan will vary and cannot be predicted. You may purchase or sell shares at a purchase price that is different from (more or less than) the price that you would face if you acquired or sold shares on the open market on the related dividend payment
date or the date or dates on which the Administrator purchases shares of our common stock for the Plan, or sale date, as appropriate. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>There is no price protection for your shares in the Plan.</I> Your investment in the shares held in the Plan will be exposed to changes in market
conditions and changes in the market value of the shares. Your ability to liquidate or otherwise dispose of shares in the Plan is subject to the terms of the Plan and the withdrawal procedures thereunder. You may not be able to withdraw or sell your
shares in the Plan in time to react to market conditions.&nbsp;Plan accounts are not insured or protected by the Securities Investor Protection Corporation or any other entity and are not guaranteed by the Federal Deposit Insurance Corporation or
any government agency. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>We may not be able to pay dividends or we may choose not to pay dividends.</I> In order to qualify as a REIT, we generally must distribute to our
shareholders at least 90% of our REIT taxable income each year after giving consideration to tax NOL carryforwards. This distribution requirement limits our ability to maintain future dividend payments if earnings decline. In addition, we could
utilize our tax NOL carryforward to offset our REIT distribution requirement and retain our earnings. The requirements to qualify for REIT tax status are complex and technical, and we may not be able to qualify for reasons beyond our control. If we
are unable to qualify for REIT tax status, then we may not be able to make distributions to our shareholders. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>No discount may be available for any or all investments, and discounts may vary between purchasers.</I> While a discount from market prices of up to
3% may be established from time to time, at our sole discretion, for purchases in excess of $10,000 or purchases through the reinvestment of cash dividends, a discount for one transaction will not ensure the availability of a discount or the same
discount in future transactions. In addition, with respect to Waiver Discounts for purchases in excess of $10,000, we may, in our sole discretion, grant different discounts to different purchasers in the same Pricing Period. We may change or
eliminate the discount without giving you prior notice. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>The market price for our common stock varies, and you should purchase shares for long-term investment only.</I> Although our common stock currently
is traded on the NYSE, we cannot assure you that there will, at any time in the future, be an active trading market for our common stock. Even if there is an active trading market for our common stock, we cannot assure you that you will be able to
sell all of your shares at one time or at a favorable price, if at all. As a result, you should participate in the Plan only if you are capable of, and seeking, to make a long-term investment in our common stock. </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>You will not receive interest on funds submitted to the Administrator. </I>No interest will be paid by us or the Administrator on dividends or
optional cash payments held pending reinvestment or investment.&nbsp;In addition, optional cash payments of less than applicable minimum amounts and that portion of any optional cash payment which exceeds the maximum transaction purchase limit of
$10,000 (unless this upper limit has been waived), are subject to return to you without interest.&nbsp;Moreover, purchases above the $10,000 limit that have been granted a waiver will also be subject to return to you without interest in the event
that the Threshold Price, if any (see Question 10), is not met. </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">21 </FONT></P>



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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>You may not know the actual number of shares of common stock that you have purchased until after the applicable Investment Date.</I>
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Shares purchased through reinvestment of cash dividends with a Dividend Reinvestment Discount may give rise to a U.S. federal income tax
liability.</I> Although the treatment of dividend reinvestment programs is not entirely clear, it is expected that your participation in the Plan will result in your being treated, for U.S. federal income tax purposes, as having received a
distribution equal to the fair market value (and not the actual purchase price, whether or not discounted) of the common stock on the date actually acquired from us.&nbsp;To the extent you receive a Dividend Reinvestment Discount from the market
price for our common stock when you acquire shares directly from us with reinvested cash dividends, the fair market value of the common stock received likely will exceed the amount of cash dividends that otherwise would be paid to you.&nbsp;Such
distributions will be taxable as dividends to the extent of our earnings and profits.&nbsp;These dividends may give rise to a liability for the payment of income tax without providing you with the immediate cash to pay the tax when it becomes due.
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>The Plan involves transaction fees</I>. Sales of common stock through the Plan will involve a nominal fee per transaction to be deducted from the
proceeds of the sale by the Administrator (if you request the Administrator to make such sale), plus any trading fee and any applicable stock transfer taxes on the sales.&nbsp;(See Question 16.) </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>The Plan uses volume weighted average prices to establish purchase prices</I>. Because the purchase price for stock purchased directly from us under
the Plan is based on the unsolicited volume weighted average price of our stock on the NYSE on the applicable Investment Date, it is possible that the actual purchase price you pay for common stock purchased under the Plan may be higher than the
amount for which the common stock could have been purchased in the open market on the Investment Date. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>You cannot pledge common stock deposited in your Plan account until the shares are withdrawn from the Plan.</I> </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Please see &#147;Risk Factors&#148; above for other important factors and risks. You are encouraged to review these risk factors
carefully. </FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>26.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>What are the U.S. federal income tax consequences of participation in the Plan? </I></B></FONT></TD></TR></TABLE>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The following is a summary of certain material U.S. federal income tax consequences of participation in the Plan. This summary is for
general information only and does not constitute tax advice. This summary does not reflect every possible tax outcome or consequence that could result from participation in the Plan. Also, this summary does not discuss your tax consequences if you
are not a U.S. citizen or a resident alien. We advise you to consult your own tax advisors to determine the tax consequences particular to your situation, including any applicable state, local or foreign income and other tax consequences that may
result from your participation in the Plan and your subsequent sale of shares acquired pursuant to the Plan. Any state tax consequences will vary from state to state, and any tax consequences to you if you reside outside of the U.S. will vary from
jurisdiction to jurisdiction. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Shareholders subject to U.S. federal income taxation who elect to participate in the Plan will
incur a tax liability for distributions allocated to them even though they have elected not to receive their distributions in cash but rather to have their distributions reinvested pursuant to the Plan. Specifically, Plan participants will be
treated as if they received the distribution from us and then applied such distribution to purchase the shares in the Plan. To the extent that a shareholder purchases shares through the Plan at a discount to fair market value, the shareholders will
be treated for tax purposes as receiving an additional distribution equal to the amount of such discount. A participant will be taxed on the amount of such distribution as ordinary income to the extent such distribution is from our current or
accumulated earnings and profits, unless we have designated all or a portion of the distribution as a capital gain dividend or as a &#147;qualified dividend&#148;. In such case, such designated portion of the distribution will be taxed as a capital
gain. To the extent that we make a distribution in excess of our current </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">22 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
or accumulated earnings and profits, the distribution will be treated first as a tax-free return of capital, reducing the tax basis in your common stock, and any distribution in excess of such
basis will be taxable as a gain realized from the sale of your common stock. Any income with respect to the Plan will be included in a participant&#146;s net investment income for purposes of the new Medicare tax, discussed under the heading
&#147;U.S. Federal Income Tax Considerations &#151; Medicare Tax.&#148; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">All costs of administering the Plan, except for fees
related to your voluntary selling of shares, purchases of shares with optional cash and returned check and similar fees, will be paid by us. Consistent with the conclusion reached by the Internal Revenue Service, or IRS, in certain private letter
rulings, we intend to take the position that these administrative costs do not constitute a distribution which is either taxable to you or which would reduce your basis in your shares of common stock. However, because the private letter rulings were
not issued to us, we have no legal right to rely on their conclusions. Thus, it is possible that the IRS might view your share of the costs as constituting a taxable distribution to you and/or a distribution which reduces the basis in your shares.
For this or other reasons, we may in the future take a different position with respect to these costs. With respect to shares of common stock purchased in open market transactions or in negotiated transactions with third parties, the IRS has
indicated that the amount of the distribution received by you would include any per share fees or other related charges paid by us in connection with the Administrator&#146;s purchase of shares on our behalf. Per share fees include any applicable
brokerage commissions the Administrator is required to pay. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If you make optional cash investments, without any discount, you
will not recognize income for U.S. federal income tax purposes by virtue of the purchase of common stock with the optional cash purchase. However, in the event we decide to offer shares at a discount, you will be treated as receiving a taxable
dividend to the extent of any discount you receive. The tax cost and basis of shares purchased with optional cash investments is the amount you paid for such shares. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">The holding period for shares purchased under the Plan generally will begin on the day following the date on which common shares are credited to your Plan account. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>Tax consequences will vary depending on your specific circumstances. You should discuss specific tax questions regarding your
participation in the Plan with your own tax advisor. </I></B></FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>We urge you to save your account statements in order to
calculate your tax basis per share of common stock. The Administrator will charge you a fee for copies of past account statements. </I></B></FONT></P> <P STYLE="font-size:18px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>27.</I></B></FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><I>What provision is made for shareholders subject to income tax withholding? </I></B></FONT></TD></TR></TABLE>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If you are a <FONT STYLE="white-space:nowrap">non-U.S.</FONT> shareholder whose dividends or distributions are subject to U.S. income tax
withholding, or a domestic shareholder whose dividends or distributions are subject to backup withholding taxes, the Administrator will reinvest an amount equal to the dividend or distribution less the amount of any tax required to be withheld. The
respective participants will be advised of the amounts withheld. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><FONT STYLE="white-space:nowrap">Non-U.S.</FONT>
shareholders who elect to make optional cash investments only will receive cash dividends or distributions on shares registered in their names in the same manner as if they were not participating in this Plan. Funds for optional cash investments
must be in U.S. dollars and will be invested in the same way as payments from other participants. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">23 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx164877_8"></A>U.S. FEDERAL INCOME TAX CONSIDERATIONS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The following discussion is a summary of certain material U.S. federal income tax considerations that may be relevant to a prospective
holder of securities. This summary is for general information only, and does not purport to address all aspects of U.S. federal income taxation that may be relevant to particular investors in light of their personal investment or tax circumstances,
or to certain types of investors that are subject to special treatment under the U.S. federal income tax laws, such as insurance companies, financial institutions or broker-dealers, <FONT STYLE="white-space:nowrap">tax-exempt</FONT> organizations,
foreign corporations and persons who are not citizens or residents of the United States (except to the limited extent discussed in &#147;&#151; Taxation of <FONT STYLE="white-space:nowrap">Non-U.S.</FONT> Holders&#148;), investors who hold or will
hold securities as part of hedging or conversion transactions or other integrated investment, investors subject to federal alternative minimum tax, investors holding their interest through a partnership or other pass-through entities, investors that
have a principal place of business or &#147;tax home&#148; outside the United States and investors whose functional currency is not the United States dollar. This summary assumes that stockholders will hold our capital stock as capital assets.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The statements of law in this discussion are based on the Internal Revenue Code of 1986, as amended, or the &#147;Code,&#148;
existing temporary, proposed and final Treasury regulations promulgated thereunder, current administrative interpretations, practices and rulings, and judicial decisions, all as currently in effect and all of which are subject to differing
interpretations. In addition, no assurance can be given that future legislative, judicial, or administrative actions or decisions, which may be retroactive in effect, will not affect the accuracy of any statements in this prospectus with respect to
the transactions entered into or contemplated prior to the effective date of such changes. No assurance can be given that the IRS would not assert, or that a court of competent jurisdiction would not sustain, a position contrary to any tax
consequences described below. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>We urge you to consult your own tax advisor regarding the specific tax consequences to you
of ownership of our securities and of our election to be taxed as a REIT. Specifically, we urge you to consult your own tax advisor regarding the federal, state, local, foreign, and other tax consequences of such ownership and election and regarding
potential changes in applicable tax laws. </B></FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Taxation of Our Company </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We are currently taxed as a REIT under the U.S. federal income tax laws. We believe that we are organized and operate in such a manner as
to qualify for taxation as a REIT under the Code, and we intend to continue to operate in such a manner, but no assurance can be given that we will operate in a manner so as to continue to qualify as a REIT. This section discusses the laws governing
the U.S. federal income tax treatment of a REIT and its investors. These laws are highly technical and complex. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We have
received opinions of Troutman Sanders LLP to the effect that, commencing with our taxable year ended December&nbsp;31, 2006, we have been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the
Code, and our proposed method of operation will enable us to meet the requirements for qualification and taxation as a REIT under the Code. It must be emphasized that the opinion of Troutman Sanders LLP is based on various assumptions relating to
our organization and operation, including that all factual representations and statements set forth in all relevant documents, records and instruments are true and correct, all actions described in this prospectus are completed in a timely fashion
and that we will at all times operate in accordance with the method of operation described in our organizational documents and this prospectus. Investors should be aware that Troutman Sanders LLP&#146;s opinion will be based upon customary
assumptions, is conditioned upon the accuracy of certain representations made by us as to factual matters, including representations regarding the nature of our assets and the future conduct of our business, and will not be binding upon the Internal
Revenue Service, or IRS, or any court. In addition, Troutman Sanders LLP&#146;s opinion will be based on existing U.S. federal income tax law governing qualification as a REIT, which is subject to change either prospectively or retroactively.
Moreover, our continued qualification and taxation as a REIT depend upon our ability to meet on a continuing basis, through actual annual operating results, </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">24 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
certain qualification tests set forth in the U.S. federal tax laws. Those qualification tests include the percentage of income that we earn from specified sources, the percentage of our assets
that falls within specified categories, the diversity of our share ownership, and the percentage of our earnings that we distribute. While Troutman Sanders LLP will review those matters in connection with rendering the foregoing opinion, Troutman
Sanders LLP will not review our compliance with those tests on a continuing basis. Accordingly, no assurance can be given that the actual results of our operation for any particular taxable year will satisfy such requirements. For a discussion of
the tax consequences of our failure to qualify as a REIT, see &#147;&#151; Failure to Qualify.&#148; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If we qualify as a REIT,
we generally will not be subject to U.S. federal income tax on the taxable income that we distribute to our stockholders. The benefit of that tax treatment is that it avoids the &#147;double taxation,&#148; or taxation at both the corporate and
stockholder levels, that generally results from owning stock in a corporation. However, we will be subject to U.S. federal tax in the following circumstances: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">We will pay U.S. federal income tax at regular corporate rates on taxable income, including net capital gain, that we do not distribute to our
stockholders during, or within a specified time period after, the calendar year in which the income is earned, to the extent we cannot otherwise offset such income with our NOL carryforward. </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Under certain circumstances, we may be subject to the &#147;alternative minimum tax&#148; on items of tax preference. </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">We will pay income tax at the highest corporate rate on (1)&nbsp;net income from the sale or other disposition of property acquired through foreclosure
(&#147;foreclosure property&#148;) that we hold primarily for sale to customers in the ordinary course of business and (2)&nbsp;other <FONT STYLE="white-space:nowrap">non-qualifying</FONT> income from foreclosure property.
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">We will pay a 100% tax on net income from sales or other dispositions of property, other than foreclosure property, that we hold primarily for sale to
customers in the ordinary course of business. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">If we fail to satisfy the 75% gross income test or the 95% gross income test, as described below under &#147;&#151; Income Tests,&#148; and nonetheless
continue to qualify as a REIT because we meet other requirements, we will pay a 100% tax on (1)&nbsp;the gross income attributable to the greater of the amounts by which we fail the 75% and 95% gross income tests, multiplied by (2)&nbsp;a fraction
intended to reflect our profitability. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">After consideration of our loss carryforwards, if we fail to distribute during a calendar year at least the sum of (1)&nbsp;85% of our REIT ordinary
income for such year, (2)&nbsp;95% of our REIT capital gain net income for such year, and (3)&nbsp;any undistributed taxable income from prior periods, we will pay a 4% excise tax on the excess of this required distribution over the sum of the
amount we actually distributed, plus any retained amounts on which income tax has been paid at the corporate level. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">We may elect to retain and pay income tax on our net long-term capital gain. In that case a U.S. holder, as defined below under &#147;&#151;Taxation of
U.S. Holders,&#148; would be taxed on its proportionate share of our undistributed long-term capital gain (to the extent that a timely designation of such gain is made by us to the stockholder) and would receive a credit or refund for its
proportionate share of the tax we paid. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">If we acquire any asset from a C corporation, or a corporation that generally is subject to full corporate-level tax, in a merger or other transaction
in which we acquire a basis in the asset that is determined by reference to the C corporation&#146;s basis in the asset, we will pay tax at the highest regular corporate rate applicable if we recognize gain on the sale or disposition of such asset
during the <FONT STYLE="white-space:nowrap">10-year</FONT> period after we acquire such asset. The amount of gain on which we will pay tax generally is the lesser of: (1)&nbsp;the amount of gain that we recognize at the time of the sale or
disposition; or (2)&nbsp;the amount of gain that we would have recognized if we had sold the asset at the time we acquired the asset. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">We will incur a 100% excise tax on transactions with a taxable REIT subsidiary (&#147;TRS&#148;) that are not conducted on an arm&#146;s-length basis.
</FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">25 </FONT></P>



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<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">If we fail to satisfy certain asset tests due to reasonable cause, described below under &#147; &#151;Asset Tests&#148; and nonetheless continue to
qualify as a REIT because we meet certain other requirements, we will be subject to a tax of the greater of $50,000 or at the highest corporate rate on the net income generated by the <FONT STYLE="white-space:nowrap">non-qualifying</FONT> assets.
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">We may be subject to a $50,000 tax for each failure if we fail to satisfy certain REIT qualification requirements, other than income tests or asset
tests, and the failure is due to reasonable cause and not willful neglect. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">If we recognize &#147;excess inclusion income&#148; and have stockholders who are &#147;disqualified organizations,&#148; we may have to pay tax at the
highest corporate rate on the portion of the excess inclusion income allocable to the stockholders that are disqualified organizations. See &#147; &#151;Taxable Mortgage Pools&#148; below. </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">We may be required to pay monetary penalties to the IRS in certain circumstances, including if we fail to meet record-keeping requirements intended to
monitor our compliance with votes relating to the composition of our stockholders. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In addition,
notwithstanding our qualification as a REIT, we may also have to pay certain state and local income taxes, because not all states and localities treat REITs in the same manner that they are treated for U.S. federal income tax purposes. Moreover, as
further described below, any TRS in which we own an interest will be subject to U.S. federal and state corporate income tax on its taxable income. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Requirements for Qualification </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">A REIT is a corporation, trust, or
association that meets the following requirements: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">1.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">it is managed by one or more trustees or directors; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">2.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">its beneficial ownership is evidenced by transferable shares or by transferable certificates of beneficial interest; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">3.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">it would be taxable as a domestic corporation but for the REIT provisions of the U.S. federal income tax laws; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">4.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">it is neither a financial institution nor an insurance company subject to special provisions of the U.S. federal income tax laws; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">5.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">at least 100 persons are beneficial owners of its shares or ownership certificates; </FONT></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">6.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">no more than 50% in value of its outstanding shares or ownership certificates is owned, directly or indirectly, by five or fewer individuals, as defined in the U.S.
federal income tax laws to include certain entities, during the last half of each taxable year; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">7.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">it elects to be a REIT, or has made such election for a previous taxable year, which election has not been revoked or terminated, and satisfies all relevant filing and
other administrative requirements established by the IRS that must be met to elect and maintain REIT status; </FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">8.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">it uses a calendar year for U.S. federal income tax purposes and complies with the recordkeeping requirements of the U.S. federal income tax laws; and
</FONT></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="4%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="4%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">9.</FONT></TD>
<TD ALIGN="left" VALIGN="top"><FONT STYLE="font-family:Times New Roman" SIZE="2">it meets certain other qualification tests, described below, regarding the nature of its income and assets and the amount of its distributions.
</FONT></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We must meet requirements 1 through 4 during our entire taxable year and must meet requirement 5 during at
least 335&nbsp;days of a taxable year of 12&nbsp;months, or during a proportionate part of a taxable year of less than 12&nbsp;months. If we comply with all the requirements for ascertaining the ownership of our outstanding shares in a taxable year
and have no reason to know that we violated requirement 6, we will be deemed to have satisfied </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">26 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
requirement 6 for such taxable year. For purposes of determining share ownership under requirement 6, an &#147;individual&#148; generally includes a supplemental unemployment compensation
benefits plan, a private foundation, or a portion of a trust permanently set aside or used exclusively for charitable purposes. An &#147;individual,&#148; however, generally does not include a trust that is a qualified employee pension or profit
sharing trust under the U.S. federal income tax laws, and beneficiaries of such a trust will be treated as holding shares of our stock in proportion to their actuarial interests in the trust for purposes of requirement 6. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We have issued sufficient stock with enough diversity of ownership to satisfy requirements 5 and 6 set forth above. In addition, our
articles of incorporation restrict the ownership and transfer of the stock so that we should continue to satisfy requirements 5 and 6. The provisions of our charter restricting the ownership and transfer of the stock are described in
&#147;Description of Our Capital Stock &#151; Restrictions on Ownership and Transfer.&#148; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If we comply with regulatory
rules pursuant to which we are required to send annual letters to holders of our stock requesting information regarding the actual ownership of our stock, and we do not know, or exercising reasonable diligence would not have known, whether we failed
to meet requirement 6 above, we will be treated as having met the requirement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In addition, we must satisfy all relevant
filing and other administrative requirements established by the IRS that must be met to elect and maintain REIT qualification. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Effect of
Subsidiary Entities </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Qualified REIT Subsidiaries.</I> A corporation that is a &#147;qualified REIT subsidiary&#148; is
not treated as a corporation separate from its parent REIT for U.S. federal income tax purposes. All assets, liabilities, and items of income, deduction, and credit of a qualified REIT subsidiary are treated as assets, liabilities, and items of
income, deduction, and credit of the REIT. A &#147;qualified REIT subsidiary&#148; is a corporation, other than a TRS, all of the capital stock of which is owned by the REIT. Thus, in applying the requirements described in this section, any
&#147;qualified REIT subsidiary&#148; that we own will be ignored for U.S. federal income tax purposes, and all assets, liabilities, and items of income, deduction, and credit of that subsidiary will be treated as our assets, liabilities, and items
of income, deduction, and credit. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Investments in Partnerships.</I> In the case of a REIT that is a partner in a
partnership or a member in a limited liability company treated as a partnership for U.S. federal income tax purposes, the REIT is treated as owning its proportionate share of the assets of the partnership or limited liability company and as earning
its allocable share of the gross income of the entity for purposes of the applicable REIT qualification tests. The assets and gross income of the partnership or limited liability company retain the same character in the hands of the REIT. For
purposes of the 10% value test (as described below under &#147;&#151;Asset Tests&#148;), our proportionate share is based on our proportionate interest in the equity interests and certain debt securities issued by the partnership. For all of the
other asset and income tests, our proportionate share is based on our proportionate interest in the capital interests in the partnership. Our proportionate share of the assets, liabilities, and items of income of any partnership, joint venture, or
limited liability company that is treated as a partnership for U.S. federal income tax purposes in which we own or will acquire an interest, directly or indirectly, are treated as our assets and gross income for purposes of applying the various REIT
qualification requirements. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Taxable REIT Subsidiaries.</I> Subject to restrictions on the value of TRS securities held by
the REIT, a REIT is permitted to own up to 100% of the stock of one or more TRS. A TRS is a fully taxable corporation. The TRS and the REIT must jointly elect to treat the subsidiary as a TRS. A corporation of which a TRS directly or indirectly owns
more than 35% of the voting power or value of the stock will be automatically treated as a TRS. Overall, no more than 25% of the value of a REIT&#146;s assets may consist of TRS securities. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">27 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We may own stock of a TRS. A TRS is a fully taxable corporation for which a TRS election is
properly made. A corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the stock will automatically be treated as a TRS. Overall, no more than 25% of the value of our assets may consist of securities of
one or more TRSs, and no more than 25% of the value of our assets may consist of the securities of TRSs and other assets that are not qualifying assets for purposes of the 75% asset test. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The TRS rules limit the deductibility of interest paid or accrued by a TRS to us to assure that the TRS is subject to an appropriate
level of corporate taxation. Further, the rules impose a 100% excise tax on transactions between a TRS and us or our tenants, if any, that are not conducted on an arm&#146;s-length basis. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We have formed and made a timely election with respect to one TRS presently owned. Additionally, we may form or acquire additional TRSs
in the future. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Gross Income Tests </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">We must satisfy two gross income tests annually to maintain our qualification as a REIT. First, at least 75% of our gross income for each taxable year must consist of defined types of income that we
derive, directly or indirectly, from investments relating to real property or mortgages on real property or qualified temporary investment income, excluding gross income from sales of inventory or dealer property in &#147;prohibited
transactions.&#148; Qualifying income for purposes of that 75% gross income test generally includes: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">rents from real property; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">interest on debt secured by mortgages on real property or on interests in real property; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">dividends and gain from the sale of shares in other REITs; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">gain from the sale of real estate assets; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">income derived from the temporary investment of new capital or &#147;qualified temporary investment income,&#148; that is attributable to the issuance
of our stock or a public offering of our debt with a maturity date of at least five years and that we receive during the one year period beginning on the date on which we received such new capital. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Second, in general, at least 95% of our gross income, excluding gross income from prohibited transactions, for each taxable year must
consist of income that is qualifying income for purposes of the 75% gross income test above, other types of dividends and interest, gain from the sale or disposition of stock or securities, or any combination of these. Generally, income and gain
from &#147;hedging transactions,&#148; as defined in &#147;&#151;Hedging Transactions,&#148; that we enter into to hedge indebtedness incurred or to be incurred to acquire or carry real estate assets and that are clearly and timely identified as
such will not constitute gross income for purposes of the 75% and 95% gross income tests, and will therefore be excluded for purposes of these tests. The following paragraphs discuss the specific application of the gross income tests to us.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Rents from Real Property</I>. Rent that we receive from any real property that we might own and lease to tenants will
qualify as &#147;rents from real property,&#148; which is qualifying income for purposes of the 75% and 95% gross income tests, only if the several conditions are met, including the following: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">First, the rent must not be based, in whole or in part, on the income or profits of any person but may be based on a fixed percentage or percentages of
gross receipts or gross sales. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Second, neither we nor a direct or indirect owner of 10% or more of our shares of stock may own, actually or constructively, 10% or more of a tenant
other than a TRS from whom we receive rent. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Third, if the rent attributable to personal property leased in connection with a lease of any real property that we might own exceeds 15% of the total
rent received under the lease, then the portion of rent attributable to that personal property will not qualify as &#147;rents from real property.&#148; </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">28 </FONT></P>



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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Fourth, we generally must not operate or manage any real property or furnish or render services to tenants, other than through an &#147;independent
contractor&#148; who is adequately compensated, from whom we do not derive revenue, and who does not, directly or through its stockholders, own more than 35% of our shares of stock, taking into consideration the applicable ownership attribution
rules. However, we need not provide services through an &#147;independent contractor,&#148; but instead may provide services directly to any such tenants, if the services are &#147;usually or customarily rendered&#148; in the geographic area in
connection with the rental of space for occupancy only and are not considered to be provided for the tenants&#146; convenience. In addition, we may provide a minimal amount of &#147;non-customary&#148; services to the tenants of a property, other
than through an independent contractor, as long as our income from the services (valued at not less than 150% of our direct cost of performing such services) does not exceed 1% of our income from the related property. Furthermore, we may own up to
100% of the stock of a TRS which may provide customary and noncustomary services to tenants without tainting our rental income from the related properties. See &#147;&#151; Taxable REIT Subsidiaries.&#148; </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Interest</I>. The term &#147;interest,&#148; as defined for purposes of both the 75% and 95% gross income tests, generally does not
include any amount received or accrued, directly or indirectly, if the determination of such amount depends in whole or in part on the income or profits of any person. However, an amount received or accrued generally will not be excluded from the
term &#147;interest&#148; solely by reason of being based on a fixed percentage or percentages of receipts or sales. Furthermore, to the extent that interest from a loan that is based on the residual cash proceeds from the sale of the property
securing the loan constitutes a &#147;shared appreciation provision,&#148; income attributable to such participation feature will be treated as gain from the sale of the secured property. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In Revenue Procedure <FONT STYLE="white-space:nowrap">2003-65,</FONT> the IRS established a safe harbor under which interest from loans
secured by a first priority security interest in ownership interests in a partnership or limited liability company owning real property will be treated as qualifying income for both the 75% and 95% gross income tests, provided several requirements
are satisfied. Although the Revenue Procedure provides a safe harbor on which taxpayers may rely, it does not prescribe rules of substantive tax law. Moreover, although we anticipate that most or all of any mezzanine loans that we make or acquire
will qualify for the safe harbor in Revenue Procedure <FONT STYLE="white-space:nowrap">2003-65,</FONT> it is possible that we may make or acquire some mezzanine loans that do not qualify for the safe harbor. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Foreclosure Property</I>. We will be subject to tax at the maximum U.S. federal corporate income tax rate on any income from
foreclosure property, other than income that would be qualifying income for purposes of the 75% gross income test, less expenses directly connected with the production of such income. However, gross income from such foreclosure property will qualify
for purposes of the 75% and 95% gross income tests. &#147;Foreclosure property&#148; is any real property, including interests in real property, and any personal property incident to such real property: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">that is acquired by a REIT as the result of such REIT having bid on such property at foreclosure, or having otherwise reduced such property to
ownership or possession by agreement or process of law, after there was a default or default was imminent on a lease of such property or on an indebtedness that such property secured; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">for which the related loan or lease was acquired by the REIT at a time when the REIT had no intent to evict or foreclose or the REIT did not know or
have reason to know that default would occur; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">for which such REIT makes a proper election to treat such property as foreclosure property. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">However, a REIT will not be considered to have foreclosed on a property where the REIT takes control of the property as a <FONT
STYLE="white-space:nowrap"><FONT STYLE="white-space:nowrap">mortgagee-in-possession</FONT></FONT> and cannot receive any profit or sustain any loss except as a creditor of the mortgagor. Property generally ceases to be foreclosure property with
respect to a REIT at the end of the third taxable year following the taxable year in which the REIT acquired such property, or longer if an extension is </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">29 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
granted by the Secretary of the Treasury. The foregoing grace period is terminated and foreclosure property ceases to be foreclosure property on the first day: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">on which a lease is entered into with respect to such property that, by its terms, will give rise to income that does not qualify for purposes of the
75% gross income test or any amount is received or accrued, directly or indirectly, pursuant to a lease entered into on or after such day that will give rise to income that does not qualify for purposes of the 75% gross income test;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">on which any construction takes place on such property, other than completion of a building, or any other improvement, where more than 10% of the
construction of such building or other improvement was completed before default became imminent; or </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">which is more than 90&nbsp;days after the day on which such property was acquired by the REIT and the property is used in a trade or business which is
conducted by the REIT, other than through an independent contractor from whom the REIT itself does not derive or receive any income. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">As a result of the rules with respect to foreclosure property, if a lessee defaults on its obligations under a percentage lease, we terminate the lessee&#146;s leasehold interest, and we are unable to
find a replacement lessee for the property within 90&nbsp;days of such foreclosure, gross income from operations conducted by us from such property could cease to qualify for the 75% and 95% gross income tests unless we are able to hire an
independent contractor to manage and operate the property. In such event, we might be unable to satisfy the 75% and 95% gross income tests and, thus, might fail to qualify as a REIT. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Hedging Transactions</I>. From time to time, we may enter into hedging transactions with respect to one or more of our assets or
liabilities. Our hedging activities may include entering into interest rate swaps, caps, and floors, options to purchase such items, and futures and forward contracts. To the extent that we enter into an interest rate swap or cap contract, option,
futures contract, forward rate agreement, or any similar financial instrument to hedge our indebtedness incurred or to be incurred to acquire or carry &#147;real estate assets,&#148; including mortgage loans, or to hedge certain foreign currency
risks, any periodic income or gain from the disposition of that contract is disregarded for purposes of the 75% and 95% gross income tests. We are required to identify clearly any such hedging transaction before the close of the day on which it was
acquired, originated, or entered into and satisfy other identification requirements. To the extent that we hedge for other purposes, or to the extent that a portion of our loans are not secured by real estate assets (as described under
&#147;&#151;Asset Tests&#148;) or in other situations, the income from those transactions will likely be treated as non-qualifying income for purposes of both gross income tests. We intend to structure any hedging transactions in a manner that does
not jeopardize our status as a REIT. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Failure to Satisfy Gross Income Tests</I>. We intend to monitor our sources of income
so as to ensure our compliance with the gross income tests. If we fail to satisfy one or both of the gross income tests for any taxable year, we nevertheless may qualify as a REIT for such year if we qualify for relief under certain provisions of
the U.S. federal income tax laws. Those relief provisions generally will be available if: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">our failure to meet such tests is due to reasonable cause and not due to willful neglect; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">following our identification of the failure to meet one or both gross income tests for a taxable year, a description of each item of our gross income
included in the 75% or 95% gross income tests is set forth in a schedule for such taxable year filed as specified by Treasury regulations. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">We cannot predict, however, whether in all circumstances we would qualify for the relief provisions. In addition, as discussed above in &#147;&#151; Taxation of Our Company,&#148; even if the relief
provisions apply, we would incur a 100% tax on the gross income attributable to the greater of the amounts by which we fail the 75% and 95% gross income tests, multiplied by a fraction intended to reflect our profitability. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">30 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Asset Tests </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">To maintain our qualification as a REIT, we also must satisfy the following asset tests at the close of each quarter of each taxable year: </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">First, at least 75% of the value of our total assets must consist of: </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">cash or cash items, including certain receivables; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">U.S. government securities; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">interests in real property, including leaseholds and options to acquire real property and leaseholds; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">interests in mortgages on real property; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">stock in other REITs; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">investments in stock or debt instruments during the <FONT STYLE="white-space:nowrap">one-year</FONT> period following our receipt of new capital that
we raise through equity offerings or offerings of debt with at least a five-year term. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Second, of our investments not included in the 75% asset class, the value of our interest in any one issuer&#146;s securities may not exceed 5% of the
value of our total assets. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Third, of our investments not included in the 75% asset class, we may not own more than 10% of the voting power or value of any one issuer&#146;s
outstanding securities. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Fourth, no more than 25% of the value of our total assets may consist of the securities of one or more TRSs. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">For purposes of the second and third asset tests, the term &#147;securities&#148; does not include stock in another REIT, equity or debt
securities of a qualified REIT subsidiary or TRS, or equity interests in a partnership. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">For purposes of the 10% value test,
the term &#147;securities&#148; does not include: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#147;Straight debt&#148; securities, which is defined as a written unconditional promise to pay on demand or on a specified date a sum certain in
money if (i)&nbsp;the debt is not convertible, directly or indirectly, into stock, and (ii)&nbsp;the interest rate and interest payment dates are not contingent on profits, the borrower&#146;s discretion, or similar factors. &#147;Straight
debt&#148; securities do not include any securities issued by a partnership or a corporation in which we or any controlled TRS (i.e., a TRS in which we own directly or indirectly more than 50% of the voting power or value of the stock) hold non
&#147;straight debt&#148; securities that have an aggregate value of more than 1% of the issuer&#146;s outstanding securities. However, &#147;straight debt&#148; securities include debt subject to the following contingencies:
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">a contingency relating to the time of payment of interest or principal, as long as either (i)&nbsp;there is no change to the effective yield of the
debt obligation, other than a change to the annual yield that does not exceed the greater of 0.25% or 5% of the annual yield, or (ii)&nbsp;neither the aggregate issue price nor the aggregate face amount of the issuer&#146;s debt obligations held by
us exceeds $1&nbsp;million and no more than 12 months of unaccrued interest on the debt obligations can be required to be prepaid; and </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="9%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">a contingency relating to the time or amount of payment upon a default or prepayment of a debt obligation, as long as the contingency is consistent
with customary commercial practice. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Any loan to an individual or an estate. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Any &#147;section 467 rental agreement,&#148; other than an agreement with a related party tenant. </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Any obligation to pay &#147;rents from real property.&#148; </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Certain securities issued by governmental entities. </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">31 </FONT></P>



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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Any security issued by a REIT. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Any debt instrument of an entity treated as a partnership for U.S. federal income tax purposes to the extent of our interest as a partner in the
partnership. </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Any debt instrument of an entity treated as a partnership for U.S. federal income tax purposes not described in the preceding bullet points if at least
75% of the partnership&#146;s gross income, excluding income from prohibited transactions, is qualifying income for purposes of the 75% gross income test described above in &#147;&#151;Income Tests.&#148; </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We will monitor the status of our assets for purposes of the various asset tests and will seek to manage our assets to comply at all
times with such tests. There can be no assurances, however, that we will be successful in this effort. In this regard, to determine our compliance with these requirements, we will need to estimate the value of the real estate securing our mortgage
loans at various times. In addition, we will have to value our investment in our other assets to ensure compliance with the asset tests. Although we will seek to be prudent in making these estimates, there can be no assurances that the IRS might not
disagree with these determinations and assert that a different value is applicable, in which case we might not satisfy the 75% and the other asset tests and would fail to qualify as a REIT. If we fail to satisfy the asset tests at the end of a
calendar quarter, we will not lose our REIT qualification if: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">we satisfied the asset tests at the end of the preceding calendar quarter; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the discrepancy between the value of our assets and the asset test requirements arose from changes in the market values of our assets and was not
wholly or partly caused by the acquisition of one or more non qualifying assets. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If we did not satisfy the
condition described in the second item, above, we still could avoid disqualification by eliminating any discrepancy within 30&nbsp;days after the close of the calendar quarter in which it arose. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In the event that we violate the second or third asset tests described above at the end of any calendar quarter, we will not lose our
REIT qualification if (i)&nbsp;the failure is de minimis (up to the lesser of 1% of our assets or $10&nbsp;million) and (ii)&nbsp;we dispose of assets or otherwise comply with the asset tests within six months after the last day of the quarter in
which we identified such failure. In the event of a more than de minimis failure of any of the asset tests, as long as the failure was due to reasonable cause and not to willful neglect, we will not lose our REIT qualification if we (i)&nbsp;dispose
of assets or otherwise comply with the asset tests within six months after the last day of the quarter in which we identified such failure, (ii)&nbsp;file a schedule with the IRS describing the assets that caused such failure in accordance with
regulations promulgated by the Secretary of Treasury and (iii)&nbsp;pay a tax equal to the greater of $50,000 or 35% of the net income from the nonqualifying assets during the period in which we failed to satisfy the asset tests. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Distribution Requirements </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Each taxable year, in order to qualify as a REIT we must distribute dividends, other than capital gain dividends and deemed distributions
of retained capital gain, to our stockholders in an aggregate amount at least equal to: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the sum of (1)&nbsp;90% of our &#147;REIT taxable income,&#148; computed without regard to the dividends paid deduction and net capital gains, and
(2)&nbsp;90% of our <FONT STYLE="white-space:nowrap">after-tax</FONT> net income, if any, from foreclosure property; minus </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the sum of certain items of <FONT STYLE="white-space:nowrap">non-cash</FONT> income and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">any net operating loss or capital loss carryforward that we have available and elect to apply. </FONT></P></TD></TR></TABLE>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">These distributions must be paid in the taxable year to which they relate or in the following taxable year if such distributions are
declared in October, November or December of the taxable year, are payable to </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">32 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
stockholders of record on a specified date in any such month and are actually paid before the end of January of the following year. Such distributions are treated as both paid by us and received
by each stockholder on December&nbsp;31 of the year in which they are declared. In addition, at our election, a distribution for a taxable year may be declared before we timely file our tax return for the year and be paid with or before the first
regular dividend payment after such declaration, provided that such payment is made during the <FONT STYLE="white-space:nowrap">12-month</FONT> period following the close of such taxable year. These distributions are taxable to our stockholders in
the year in which paid, even though the distributions relate to our prior taxable year for purposes of the 90% distribution requirement. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">In order for distributions to be counted towards our distribution requirement and to give rise to a tax deduction by us, they must not be &#147;preferential dividends.&#148; A dividend is not a
preferential dividend if it is pro rata among all outstanding shares of stock within a particular class and is in accordance with the preferences among different classes of stock as set forth in the organizational documents. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We will pay U.S. federal income tax at ordinary corporate tax rates on taxable income, including net capital gain, that we do not
distribute to our stockholders. Furthermore, we must distribute during a calendar year, or by the end of January following such calendar year in the case of distributions with declaration and record dates falling in the last three months of the
calendar year, at least the sum of: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">85% of our REIT ordinary income for such year; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">95% of our REIT capital gain income for such year; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">any undistributed taxable income from prior periods. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">If we fail to distribute such amounts within the proscribed timeframe, then we will incur a 4% nondeductible excise tax on the excess of such required distribution over the amounts we actually
distributed. We may elect to retain and pay income tax on the net long-term capital gain we receive in a taxable year. See &#147;&#151; Taxation of Taxable U.S. Holders of Stock.&#148; If we so elect, we will be treated as having distributed any
such retained amount for purposes of the 4% excise tax described above. We intend to make timely distributions sufficient to satisfy the annual distribution requirements. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">It is possible that, from time to time, we may experience timing differences between (1)&nbsp;the actual receipt of income and actual payment of deductible expenses, and (2)&nbsp;the inclusion of that
income and deduction of such expenses in arriving at our REIT taxable income. In addition, we may not deduct recognized net capital losses from our &#147;REIT taxable income.&#148; As a result of the foregoing, we may have less cash than is
necessary to distribute all of our taxable income and thereby avoid corporate income tax and the excise tax imposed on certain undistributed income. In such a situation, we may need to borrow funds or issue additional common or preferred shares.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We have an NOL carryforward as of December 31, 2013 of approximately $142.3 million. The NOL carryforward expires
substantially beginning in 2020. To the extent that we have taxable income that is not distributed by us to our shareholders, we may offset such taxable income with our NOL carryforwards and would not have to pay income tax and which would not
impact our REIT status. As a result, we are not necessarily required to distribute 90% or more of our earnings to maintain our REIT status. See further discussion above under &#147;&#151;Distribution Requirements.&#148; </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Under certain circumstances, we may be able to correct a failure to meet the distribution requirement for a year by paying
&#147;deficiency dividends&#148; to our stockholders in a later year. We may include such deficiency dividends in our deduction for dividends paid for the earlier year. Although we may be able to avoid income tax on amounts distributed as deficiency
dividends, we will be required to pay interest to the IRS based upon the amount of any deduction we take for deficiency dividends. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">33 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Recordkeeping Requirements </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">To avoid a monetary penalty, we must request on an annual basis information from our stockholders designed to disclose the actual ownership of our outstanding shares of stock. We intend to comply with
such requirements. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Prohibited Transactions </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">A REIT will incur a 100% tax on the net income derived from any sale or other disposition of property, other than foreclosure property, that the REIT holds primarily for sale to customers in the ordinary
course of a trade or business. Whether a REIT holds an asset &#147;primarily for sale to customers in the ordinary course of a trade or business&#148; depends on the facts and circumstances in effect from time to time, including those related to a
particular asset. We do not own assets that are held primarily for sale to customers. We will attempt to comply with the terms of safe-harbor provisions in the U.S. federal income tax laws prescribing when an asset sale will not be characterized as
a prohibited transaction. We cannot provide assurance, however, that we can comply with such safe-harbor provisions or that we or our subsidiaries will avoid owning property that may be characterized as property held &#147;primarily for sale to
customers in the ordinary course of a trade or business.&#148; </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Failure to Qualify </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If we fail to satisfy one or more requirements for REIT qualification, other than the gross income tests and the asset tests, we could
avoid disqualification if our failure is due to reasonable cause and not to willful neglect and we pay a penalty of $50,000 for each such failure. In addition, there are relief provisions for a failure of the gross income tests and asset tests, as
described in &#147;&#151;Income Tests&#148; and &#147;&#151;Asset Tests.&#148; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If we were to fail to qualify as a REIT in any
taxable year, and no relief provision applied, we would be subject to U.S. federal income tax on our taxable income at regular corporate rates and any applicable alternative minimum tax. In calculating our taxable income in a year in which we failed
to qualify as a REIT, we would not be able to deduct amounts paid out to stockholders. In fact, we would not be required to distribute any amounts to stockholders in such year. In such event, to the extent of our current and accumulated earnings and
profits, all distributions to stockholders would be taxable as regular corporate dividends. The excess inclusion income rules (which are described under &#147;Taxable Mortgage Pools&#148; below) will not apply to the distributions we make. Subject
to certain limitations of the U.S. federal income tax laws, corporate stockholders might be eligible for the dividends received deduction and individual and certain non corporate trust and estate stockholders may be eligible for the reduced U.S.
federal income tax rate of 15% on such dividends. Unless we qualified for relief under specific statutory provisions, we also would be disqualified from taxation as a REIT for the four taxable years following the year during which we ceased to
qualify as a REIT. We cannot predict whether in all circumstances we would qualify for such statutory relief. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Taxation of U.S. Holders
</B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The term &#147;U.S. holder&#148; means a holder of our securities that for U.S. federal income tax purposes is:
</FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">a citizen or resident of the United States; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the
United States, any of its states, or the District of Columbia; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">an estate whose income is subject to U.S. federal income taxation regardless of its source; or </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">any trust if (1)&nbsp;a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the
authority to control all substantial decisions of the trust or (2)&nbsp;it has a valid election in place to be treated as a U.S. person. </FONT></P></TD></TR></TABLE>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">34 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If a partnership, entity or arrangement treated as a partnership for U.S. federal income tax
purposes holds our securities, the U.S. federal income tax treatment of a partner in the partnership generally will depend on the status of the partner and the activities of the partnership. If you are a partner in a partnership holding our
securities, you should consult your tax advisor regarding the consequences of the purchase, ownership and disposition of our securities by the partnership. The following section addresses the treatment of a U.S. holder that holds our stock; the
treatment of a U.S. holder that holds our debt securities is discussed below under &#147;&#151;Holders of Debt Securities.&#148; </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Taxation
of Taxable U.S. Holders of Stock </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">As long as we qualify as a REIT, a taxable U.S. holder of our stock must report as
ordinary income, distributions or retained long-term capital gain that are made out of our current or accumulated earnings and profits and that we do not designate as capital gain dividends. Dividends paid to a corporate U.S. holder of our stock
will not qualify for the dividends received deduction generally available to corporations. In addition, dividends paid to a U.S. holder generally will not qualify for the capital gains tax rate for &#147;qualified dividend income.&#148; However, our
ordinary REIT dividends may qualify as qualified dividend income, if they are (1)&nbsp;attributable to dividends received by us from <FONT STYLE="white-space:nowrap">non-REIT</FONT> corporations, such as our TRSs, and (2)&nbsp;attributable to income
upon which we have paid corporate income tax (e.g., to the extent that we distribute less than 100% of our taxable income). In general, to qualify for the reduced tax rate on qualified dividend income, a stockholder must hold our stock for more than
60&nbsp;days during the <FONT STYLE="white-space:nowrap">121-day</FONT> period beginning on the date that is 60&nbsp;days before the date on which our stock becomes <FONT STYLE="white-space:nowrap">ex-dividend.</FONT> </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">A U.S. holder generally will report distributions that we designate as capital gain dividends as long-term capital gain without regard to
the period for which the U.S. holder has held our stock. A corporate U.S. holder, however, may be required to treat up to 20% of certain capital gain dividends as ordinary income. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We may elect to retain and pay income tax on the net long-term capital gain that we receive in a taxable year. In that case, a U.S.
holder would be taxed on its proportionate share of our undistributed long-term capital gain, to the extent that we designate such amount in a timely notice to such stockholder. The U.S. holder would receive a credit or refund for its proportionate
share of the tax we paid. The U.S. holder would increase the basis in its stock by the amount of its proportionate share of our undistributed long-term capital gain, minus its share of the tax we paid. </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">To the extent that we make a distribution in excess of our current and accumulated earnings and profits, such distribution will not be
taxable to a U.S. holder to the extent that it does not exceed the adjusted tax basis of the U.S. holder&#146;s stock. Instead, such distribution will reduce the adjusted tax basis of such stock. To the extent that we make a distribution in excess
of both our current and accumulated earnings and profits and the U.S. holder&#146;s adjusted tax basis in its stock, such stockholder will recognize long-term capital gain, or short-term capital gain if the stock has been held for one year or less,
assuming the stock is a capital asset in the hands of the U.S. holder. The IRS has ruled that if total distributions for two or more classes of stock are in excess of current and accumulated earnings and profits, dividends must be treated as having
been distributed to those stockholders having a priority under the corporate charter before any distribution to stockholders with lesser priority. If we declare a dividend in October, November, or December of any year that is payable to a U.S.
holder of record on a specified date in any such month, such dividend shall be treated as both paid by us and received by the U.S. holder on December&nbsp;31 of such year, provided that we actually pay the dividend during January of the following
calendar year. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Stockholders may not include in their individual income tax returns any of our net operating losses or capital
losses. Instead, we would carry over such losses for potential offset against our future income generally. Taxable distributions from us and gain from the disposition of our stock will not be treated as passive activity income, and, therefore,
stockholders generally will not be able to apply any &#147;passive activity losses,&#148; such as losses from certain types of limited partnerships in which the stockholder is a limited partner, against such income. In addition, taxable
distributions from us and gain from the disposition of the stock generally will be treated as investment income for purposes of the investment interest limitations. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">35 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We will notify stockholders after the close of our taxable year as to the portions of the
distributions attributable to that year that constitute ordinary income, return of capital, and capital gain. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Taxation of
U.S. Holders on the Disposition of Stock</I>. In general, a U.S. holder who is not a dealer in securities must treat any gain or loss realized upon a taxable disposition of our stock as long-term capital gain or loss if the U.S. holder has held the
stock for more than one year and otherwise as short-term capital gain or loss. However, a U.S. holder must treat any loss upon a sale or exchange of stock held by such stockholder for six months or less as a long-term capital loss to the extent of
any actual or deemed distributions from us that such U.S. holder previously has characterized as long-term capital gain. All or a portion of any loss that a U.S. holder realizes upon a taxable disposition of the stock may be disallowed if the U.S.
holder purchases the same type of stock within 30&nbsp;days before or after the disposition. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Capital Gains and Losses</I>.
A taxpayer generally must hold a capital asset for more than one year for gain or loss derived from its sale or exchange to be treated as long-term capital gain or loss. The highest marginal individual income tax rate is 39.6%. The maximum tax rate
on long-term capital gain applicable to <FONT STYLE="white-space:nowrap">non-corporate</FONT> taxpayers is 20% for sales and exchanges of assets held for more than one year. The maximum tax rate on long-term capital gain from the sale or exchange of
&#147;section 1250 property,&#148; or depreciable real property, is 25% to the extent that such gain would have been treated as ordinary income if the property were &#147;section 1245 property.&#148; With respect to distributions that we designate
as capital gain dividends and any retained capital gain that we are deemed to distribute, we generally may designate whether such a distribution is taxable to our <FONT STYLE="white-space:nowrap">non-corporate</FONT> stockholders at a 20% or 25%
rate. Thus, the tax rate differential between capital gain and ordinary income for <FONT STYLE="white-space:nowrap">non-corporate</FONT> taxpayers may be significant. In addition, the characterization of income as capital gain or ordinary income may
affect the deductibility of capital losses. A <FONT STYLE="white-space:nowrap">non-corporate</FONT> taxpayer may deduct capital losses not offset by capital gains against its ordinary income only up to a maximum annual amount of $3,000. A <FONT
STYLE="white-space:nowrap">non-corporate</FONT> taxpayer may carry forward unused capital losses indefinitely. A corporate taxpayer must pay tax on its net capital gain at ordinary corporate rates. A corporate taxpayer may deduct capital losses only
to the extent of capital gains, with unused losses being carried back three years and forward five years. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2"><I>Information
Reporting Requirements and Backup Withholding</I>. We will report to our stockholders and to the IRS the amount of distributions we pay during each calendar year and the amount of tax we withhold, if any. Under the backup withholding rules, a
stockholder may be subject to backup withholding at the rate of 28% with respect to distributions unless such holder: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact; or </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">provides a taxpayer identification number, certifies as to no loss of exemption from backup withholding, and otherwise complies with the applicable
requirements of the backup withholding rules. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">A stockholder who does not provide us with its correct
taxpayer identification number also may be subject to penalties imposed by the IRS. Any amount paid as backup withholding will be creditable against the stockholder&#146;s income tax liability. In addition, any stockholders who fail to certify their
<FONT STYLE="white-space:nowrap">non-foreign</FONT> status to us may be subject to withholding on a portion of capital gain distributions. See &#147;&#151; Taxation of <FONT STYLE="white-space:nowrap">Non-U.S.</FONT> Holders.&#148; </FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a
credit against such U.S. holder&#146;s U.S. federal income tax liability, provided the required information is timely furnished to the IRS. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Taxation of Tax-Exempt U.S. Entities </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Tax-exempt U.S. entities, including qualified employee pension and profit sharing trusts and individual retirement accounts, generally are exempt from U.S. federal income taxation, thus typically
dividends received by such entities are not subject to taxation when received. However, these entities or accounts are subject to </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">36 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2">
taxation on any unrelated business taxable income generated. While many investments in real estate generate unrelated business taxable income, the IRS has issued a published ruling that dividend
distributions from a REIT to an exempt employee pension trust do not constitute unrelated business taxable income, provided that the exempt employee pension trust does not otherwise use the shares of the REIT in an unrelated trade or business of the
pension trust. Based on that ruling, amounts that we distribute to tax-exempt stockholders generally should not constitute unrelated business taxable income. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">However, if a tax-exempt stockholder were to finance its acquisition of our stock with debt, a portion of the income that it receives from us would constitute unrelated business taxable income pursuant to
the &#147;debt-financed property&#148; rules. Furthermore, social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, and qualified group legal services plans that are exempt from taxation under special
provisions of the federal income tax laws are subject to different unrelated business taxable income rules, which generally will require them to characterize distributions that they receive from us as unrelated business taxable income. Finally, if
we are a &#147;pension-held REIT,&#148; a qualified employee pension or profit sharing trust that owns more than 10% of our shares of stock is required to treat a percentage of the dividends that it receives from us as unrelated business taxable
income. That percentage is equal to the gross income that we derive from an unrelated trade or business, if any, determined as if we were a pension trust, divided by our total gross income for the year in which we pay the dividends. That rule
applies to a pension trust holding more than 10% of our shares of stock only if: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TR>
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<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the percentage of our dividends that the tax-exempt trust would be required to treat as unrelated business taxable income is at least 5%;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">we qualify as a REIT by reason of the modification of the rule requiring that no more than 50% of our stock be owned by five or fewer individuals that
allows the beneficiaries of the pension trust to be treated as holding our stock in proportion to their actuarial interests in the pension trust (see &#147;&#151; Requirements for Qualification&#148; above); and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">either (1) one pension trust owns more than 25% of the value of our stock or (2) a group of pension trusts each individually holding more than 10% of
the value of our stock collectively owns more than 50% of the value of our stock. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The ownership and
transfer restrictions in our charter reduce the risk that we may become a &#147;pension-held REIT.&#148; </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">A tax-exempt entity
may also be required to treat any excess inclusion income as unrelated business taxable income as described in &#147;&#151;Taxable Mortgage Pools.&#148; </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT
STYLE="font-family:Times New Roman" SIZE="2"><B>Taxation of <FONT STYLE="white-space:nowrap">Non-U.S.</FONT> Holders </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The
rules governing U.S. federal income taxation of nonresident alien individuals, foreign corporations, foreign partnerships, and other holders of our securities that are not U.S. persons (collectively, &#147;non-U.S. holders&#148;) are complex. This
section is only a summary of such rules as they apply to <FONT STYLE="white-space:nowrap">non-U.S.</FONT> holders of our stock; a summary of such rules as they apply to <FONT STYLE="white-space:nowrap">non-U.S.</FONT> holders of our debt securities
is discussed below under &#147;&#151;Holders of Debt Securities.&#148; We urge <FONT STYLE="white-space:nowrap">non-U.S.</FONT> holders to consult their own tax advisors to determine the impact of U.S. federal, state, and local income tax laws on
ownership of our stock, including any reporting requirements. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">A <FONT STYLE="white-space:nowrap">non-U.S.</FONT> holder that
receives a distribution that is not attributable to gain from our sale or exchange of U.S. real property interests, as defined below, and that we do not designate as a capital gain dividend will recognize ordinary income to the extent that we pay
such distribution out of our current or accumulated earnings and profits. A withholding tax equal to 30% of the gross amount of the distribution ordinarily will apply to such distribution unless an applicable tax treaty reduces or eliminates the
tax. Under some treaties, however, lower rates generally applicable to dividends do not apply to dividends from REITs. In general, <FONT STYLE="white-space:nowrap">non-U.S.</FONT> holders are </FONT></P>

 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">37 </FONT></P>



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not considered to be engaged in a U.S. trade or business solely as a result of their ownership of our stock. However, if a distribution is treated as effectively connected with the <FONT
STYLE="white-space:nowrap">non-U.S.</FONT> holder&#146;s conduct of a U.S. trade or business, the <FONT STYLE="white-space:nowrap">non-U.S.</FONT> holder generally will be subject to U.S. federal income tax on the distribution at graduated rates, in
the same manner as U.S. holders are taxed with respect to such distributions. A <FONT STYLE="white-space:nowrap">non-U.S.</FONT> holder that is a corporation also may be subject to the 30% branch profits tax with respect to the distribution.
Generally, a <FONT STYLE="white-space:nowrap">non-U.S.</FONT> holder will be subject to U.S. income tax withholding at the rate of 30% on the gross amount of any such distribution paid to a <FONT STYLE="white-space:nowrap">non-U.S.</FONT> holder
unless either: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">a lower treaty rate applies and the <FONT STYLE="white-space:nowrap">non-U.S.</FONT> holder files an IRS Form
<FONT STYLE="white-space:nowrap">W-8BEN</FONT> or successor form evidencing eligibility for that reduced rate with the payor; or </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">the <FONT STYLE="white-space:nowrap">non-U.S.</FONT> holder files an IRS Form <FONT STYLE="white-space:nowrap">W-8ECI</FONT> or successor form with the
payor claiming that the distribution is effectively connected income. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Generally, a <FONT
STYLE="white-space:nowrap">non-U.S.</FONT> holder will not incur tax on a distribution in excess of our current and accumulated earnings and profits if the excess portion of such distribution does not exceed the adjusted basis of its stock. Instead,
the excess portion of such distribution will reduce the adjusted basis of such stock. A <FONT STYLE="white-space:nowrap">non-U.S.</FONT> holder will be subject to tax on a distribution that exceeds both our current and accumulated earnings and
profits and the adjusted basis of its stock, if the <FONT STYLE="white-space:nowrap">non-U.S.</FONT> holder otherwise would be subject to tax on gain from the sale or disposition of its stock, as described below. Because we generally cannot
determine at the time we make a distribution whether or not the distribution will exceed our current and accumulated earnings and profits, the entire amount of any distribution will be subject to withholding as a taxable dividend. However, a <FONT
STYLE="white-space:nowrap">non-U.S.</FONT> holder may obtain a full or partial refund, as appropriate, of amounts that are withheld if we later determine that a distribution in fact exceeded our current and accumulated earnings and profits.
</FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Unless we are a &#147;domestically-controlled REIT,&#148; as defined below, withholding at a rate of 10% is required on any
distribution that exceeds our current and accumulated earnings and profits. Consequently, although withholding at a rate of 30% on the entire amount of any distribution is generally required, withholding at a rate of 10% may be required on any
portion of a distribution not subject to withholding at a rate of 30%. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">For any year in which we qualify as a REIT, a <FONT
STYLE="white-space:nowrap">non-U.S.</FONT> holder may incur tax on distributions that are attributable to gain from any sale or exchange of &#147;United States real property interests&#148; under special provisions of the U.S. federal income tax
laws referred to as &#147;FIRPTA.&#148; The term &#147;United States real property interests&#148; includes certain interests in real property and stock in corporations at least 50% of whose assets consists of interests in real property. Under those
rules, a <FONT STYLE="white-space:nowrap">non-U.S.</FONT> holder is taxed on distributions attributable to gain from sales of United States real property interests as if such gain were effectively connected with a United States business of the <FONT
STYLE="white-space:nowrap">non-U.S.</FONT> holder. A <FONT STYLE="white-space:nowrap">non-U.S.</FONT> holder thus would be taxed on such a distribution at the normal capital gains rates applicable to U.S. holders, subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of a nonresident alien individual. A <FONT STYLE="white-space:nowrap">non-U.S.</FONT> corporate holder not entitled to treaty relief or exemption also may be subject to the 30% branch
profits tax on such a distribution. Except as described below with respect to regularly traded stock, withholding is required at a rate of 35% of any distribution that we could designate as a capital gain dividend. A
<FONT STYLE="white-space:nowrap">non-U.S.</FONT> holder may receive a credit against its tax liability for the amount we withhold. Any distribution with respect to any class of stock which is regularly traded on an established securities market
located in the United States, such as our stock, shall not be treated as gain recognized from the sale or exchange of a United States real property interest if the <FONT STYLE="white-space:nowrap">non-U.S.</FONT> holder did not own more than 5% of
such class of stock at any time during the taxable year within which the distribution is received. The distribution will be treated as an ordinary dividend to the <FONT STYLE="white-space:nowrap">non-U.S.</FONT> holder and taxed as an ordinary
dividend that is not a capital gain. A <FONT STYLE="white-space:nowrap">non-U.S.</FONT> holder is not required to file a U.S. federal income tax return by reason of receiving such a distribution, and the branch profits tax no longer applies to such
a distribution. However, the distribution will be subject to U.S. federal income tax withholding as an ordinary dividend as described above. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">38 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">A <FONT STYLE="white-space:nowrap">non-U.S.</FONT> holder generally will not incur tax under
FIRPTA with respect to gain realized upon a disposition of our stock as long as we are a &#147;domestically-controlled REIT.&#148; A domestically controlled REIT is a REIT in which, at all times during a specified testing period, less than 50% in
value of its shares are held directly or indirectly by non U.S. holders. We cannot assure you that that test will be met. However, a <FONT STYLE="white-space:nowrap">non-U.S.</FONT> holder that owned, actually or constructively, 5% or less of our
stock at all times during a specified testing period will not incur tax under FIRPTA with respect to any such gain if the stock is &#147;regularly traded&#148; on an established securities market. To the extent that our stock is regularly traded on
an established securities market, a <FONT STYLE="white-space:nowrap">non-U.S.</FONT> holder will not incur tax under FIRPTA unless it owns more than 5% of our stock. If the gain on the sale of the stock were taxed under FIRPTA, a <FONT
STYLE="white-space:nowrap">non-U.S.</FONT> holder would be taxed in the same manner as U.S. holders with respect to such gain, subject to applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien
individuals. Furthermore, a <FONT STYLE="white-space:nowrap">non-U.S.</FONT> holder generally will incur tax on gain not subject to FIRPTA if (1)&nbsp;the gain is effectively connected with the <FONT STYLE="white-space:nowrap">non-U.S.</FONT>
holder&#146;s U.S. trade or business, in which case the <FONT STYLE="white-space:nowrap">non-U.S.</FONT> holder will be subject to the same treatment as U.S. holders with respect to such gain, or (2)&nbsp;the
<FONT STYLE="white-space:nowrap">non-U.S.</FONT> holder is a nonresident alien individual who was present in the U.S. for 183&nbsp;days or more during the taxable year and has a &#147;tax home&#148; in the United States, in which case the <FONT
STYLE="white-space:nowrap">non-U.S.</FONT> holder will incur a 30% tax on his capital gains. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Taxable Mortgage Pools </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">A taxable mortgage pool is any entity (or in certain cases, a portion of an entity) other than a REMIC that has the following
characteristics: </FONT></P> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
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<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Substantially all (generally, more than 80%) of the assets of such entity consist of debt obligations and more than 50% of such debt obligations are
real estate mortgages; </FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
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<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Such entity issues two or more classes of debt obligations having different maturities; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">The timing and amount of payments or projected payments on the debt obligations issued by the entity are determined in large part by the timing and
amount of payments the entity receives on the debt obligations it holds as assets. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">If a REIT is a taxable
mortgage pool, or if a REIT owns a qualified REIT subsidiary that is a taxable mortgage pool, then a portion of the REIT&#146;s income will be treated as excess inclusion income and a portion of the dividends the REIT pays to its stockholders will
be considered to be excess inclusion income. You cannot offset excess inclusion income with net operating losses or otherwise allowable deductions. Moreover, if you are a <FONT STYLE="white-space:nowrap">tax-exempt</FONT> stockholder, such as a
domestic pension fund, you must treat excess inclusion income as unrelated business taxable income. If you are not a U.S. holder, your dividend distributions may be subject to withholding tax, without regard to any exemption or reduction in rate
that might otherwise apply, with respect to your share of excess inclusion income. The manner in which excess inclusion income would be allocated among shares of different classes of our stock or how such income is to be reported to stockholders is
not clear under current law. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Several of our investments are contained in securitization trusts which are considered taxable
mortgage pools. To the extent that these taxable mortgage pools have excess inclusion income, we will report these amounts annually. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Medicare Tax </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Certain
net investment income earned by U.S. holders that are U.S. citizens, resident aliens or certain estates or trusts is subject to a 3.8% Medicare tax. Net investment income includes, among other things, dividends on and capital gains from the sale or
other disposition of shares of stock. Holders of shares of our common stock should consult their tax advisors regarding the effect, if any, of this tax on their ownership and disposition of such shares. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">39 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Foreign Accounts </B></FONT></P> <P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Withholding taxes may apply to certain types of payments made to &#147;foreign financial institutions&#148; (as specially defined in the Code) and certain other non-U.S. entities. A withholding tax of 30%
generally will be imposed on dividends on, and gross proceeds from the sale or other disposition of, our common stock paid to (a) a foreign financial institution unless such foreign financial institution agrees to verify, report and disclose its
U.S. accountholders and meets certain other specified requirements or (b) a nonfinancial foreign entity that is the beneficial owner of the payment unless such entity certifies that it does not have any substantial U.S. owners or furnishes
identifying information regarding each substantial U.S. owner and such entity meets certain other specified requirements. Applicable Treasury Regulations and IRS guidance provide that these rules generally will apply to payments of dividends on our
common stock made after June 30, 2014 and generally will apply to payments of gross proceeds from a sale or other disposition of our common stock after December 31, 2016. We will not pay any additional amounts in respect of any amounts withheld.
U.S. holders are encouraged to consult their tax advisors regarding the particular consequences to them of this legislation and guidance. </FONT></P>
<P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>State and Local Taxes </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We and/or you may be subject to state and local tax in various states and localities, including those states and localities in which we or
you transact business, own property, or reside. The state and local tax treatment in such jurisdictions may differ from the U.S. federal income tax treatment described above. Consequently, you should consult your own tax advisor regarding the effect
of state and local tax laws upon an investment in our securities. </FONT></P> <P STYLE="margin-top:18px;margin-bottom:0px"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B>Legislative or Other Actions Affecting REITs </B></FONT></P>
<P STYLE="margin-top:6px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The rules dealing with U.S.&nbsp;federal income taxation are constantly under review by persons involved in the legislative process and by
the IRS and the U.S.&nbsp;Treasury Department. No assurance can be given as to whether, when, or in what form, U.S.&nbsp;federal income tax laws applicable to us and our shareholders may be enacted, possibly with retroactive effect. Changes to the
U.S.&nbsp;federal income tax laws and interpretations of U.S.&nbsp;federal income tax laws could adversely affect an investment in our shares of common stock. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">40 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx164877_9"></A>PLAN OF DISTRIBUTION </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">In connection with the administration of the Plan, we may be requested to approve investments made pursuant to Requests for Waiver by or
on behalf of participants or other investors who may be engaged in the securities business. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">Persons who acquire shares of our
common stock through the Plan and resell them shortly after acquiring them, including coverage of short positions, under certain circumstances, may be participating in a distribution of securities that would require compliance with Regulation M
under the Exchange Act and may be considered to be underwriters within the meaning of the Securities Act. We will not extend to any such person any rights or privileges other than those to which they would be entitled as a participant in the Plan,
nor will we enter into any agreement with any such person regarding the resale or distribution by any such person of the shares of our common stock so purchased. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">Our common stock may not be available under the Plan in all states or jurisdictions. We are not making an offer to sell our common stock in any jurisdiction where the offer or sale is not permitted.
</FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">41 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx164877_10"></A>LEGAL MATTERS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The validity of the securities offered hereby and certain U.S. federal income tax matters are being passed upon for us by Troutman
Sanders LLP. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">42 </FONT></P>



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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx164877_11"></A>EXPERTS </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The consolidated financial statements as of December&nbsp;31, 2013 and 2012 and for each of the three years in the period ended
December&nbsp;31, 2013 incorporated in this prospectus by reference from our Annual Report on Form <FONT STYLE="white-space:nowrap">10-K</FONT> for the year ended December&nbsp;31, 2013, and management&#146;s assessment of the effectiveness of
internal control over financial reporting as of December&nbsp;31, 2013 incorporated by reference in this prospectus have been so incorporated in reliance on the reports of BDO USA,&nbsp;LLP, an independent registered public accounting firm, as
incorporated herein by reference, given on the authority of such firm as an expert in accounting and auditing. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">43 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx164877_12"></A>WHERE YOU CAN FIND MORE INFORMATION </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We file annual, quarterly and current reports, proxy statements and other information with the Commission. The public may read and copy
any materials we file with the Commission at the Commission&#146;s Public Reference Room at 100 F Street, N.E, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the Commission at <FONT
STYLE="white-space:nowrap"><FONT STYLE="white-space:nowrap"><FONT STYLE="white-space:nowrap">1-800-SEC-0330.</FONT></FONT></FONT> The Commission maintains an Internet site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the Commission. The address of that site is <U>http://www.sec.gov</U>. Our common stock, Series A Preferred Stock and Series B Preferred Stock are listed on the NYSE under the symbols
&#147;DX&#148;, &#147;DXPRA&#148; and &#147;DXPRB&#148;, respectively, and all such reports, proxy statements and other information filed by us with the NYSE may be inspected at the NYSE&#146;s offices at 20 Broad Street, New York, New York 10005.
Finally, we maintain an Internet site where you can find additional information. The address of our Internet site is <U>http://www.dynexcapital.com</U>. All internet addresses provided in this prospectus are for informational purposes only and are
not intended to be hyperlinks. In addition, the information on our Internet site, or any other Internet site described herein, is not a part of, and is not incorporated or deemed to be incorporated by reference in, this prospectus or other offering
materials. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We have filed a registration statement, of which this prospectus is a part, covering the securities offered
hereby. As allowed by Commission rules, this prospectus does not contain all of the information set forth in the registration statement and the exhibits thereto. We refer you to the registration statement and the exhibits thereto for further
information. This prospectus is qualified in its entirety by such other information. </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">44 </FONT></P>



<p Style='page-break-before:always'>
<HR  SIZE="3" style="COLOR:#999999" WIDTH="100%" ALIGN="CENTER">
<h5 align="left"><a href="#toc">Table of Contents</a></h5>

 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2"><B><A NAME="tx164877_13"></A>INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE </B></FONT></P>
<P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">The Commission&#146;s rules allow us to &#147;incorporate by reference&#148; information into this prospectus, which means that we can
disclose important information to you by referring you to another document filed separately with the Commission. The information incorporated by reference is deemed to be part of this prospectus from the date of filing those documents.&nbsp;Any
reports filed by us with the Commission on or after the date of this prospectus will automatically update and, where applicable, supersede any information contained in this prospectus or incorporated by reference in this prospectus. We have filed
the documents listed below with the Commission under the Exchange Act, and these documents are incorporated herein by reference (other than information in such documents that is furnished and not deemed to be filed): </FONT></P>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our Annual Report on Form <FONT STYLE="white-space:nowrap">10-K</FONT> for the year ended December&nbsp;31, 2013, filed on March&nbsp;4, 2014;
</FONT></P></TD></TR></TABLE> <P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">Our Current Report on Form <FONT STYLE="white-space:nowrap">8-K</FONT> filed on January 27, 2014; and </FONT></P></TD></TR></TABLE>
<P STYLE="font-size:6px;margin-top:0px;margin-bottom:0px">&nbsp;</P>
<TABLE STYLE="BORDER-COLLAPSE:COLLAPSE" BORDER="0" CELLPADDING="0" CELLSPACING="0" WIDTH="100%">
<TR>
<TD WIDTH="5%"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD WIDTH="2%" VALIGN="top" ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">&#149;</FONT></TD>
<TD WIDTH="1%" VALIGN="top"><FONT SIZE="1">&nbsp;</FONT></TD>
<TD ALIGN="left" VALIGN="top"> <P ALIGN="left"><FONT STYLE="font-family:Times New Roman" SIZE="2">The description of our capital stock included in our Registration Statement on Form <FONT STYLE="white-space:nowrap">8-A,</FONT> filed pursuant to
Section&nbsp;12(b) of the Exchange Act on January&nbsp;17, 1989, including any amendment or report filed for the purpose of updating that description. </FONT></P></TD></TR></TABLE> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT
STYLE="font-family:Times New Roman" SIZE="2">All documents we file pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act on or after the date of this prospectus and prior to the termination of the offering of the securities to which
this prospectus relates (other than information in such documents that is furnished and not deemed to be filed) shall be deemed to be incorporated by reference into this prospectus and to be part hereof from the date of filing of those documents.
All documents we file pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of the initial registration statement that contains this prospectus and prior to the effectiveness of the registration statement shall be deemed
to be incorporated by reference into this prospectus and to be part hereof from the date of filing those documents. </FONT></P> <P STYLE="margin-top:12px;margin-bottom:0px; text-indent:4%"><FONT STYLE="font-family:Times New Roman" SIZE="2">We will
provide to each person, including any beneficial owner, to whom a copy of this prospectus is delivered, a copy of any or all of the information that has been incorporated by reference in this prospectus but not delivered with this prospectus (other
than the exhibits to such documents which are not specifically incorporated by reference therein); we will provide this information at no cost to the requester upon written or oral request to Investor Relations Officer, Dynex Capital, Inc., 4991
Lake Brook Drive, Suite 100, Glen Allen, Virginia 23060; Tel.: <FONT STYLE="white-space:nowrap">(804)&nbsp;217-5800.</FONT> </FONT></P>
 <p STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT STYLE="font-family:Times New Roman" SIZE="2">45 </FONT></P>


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`
end
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
