SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10- K/A

|[X] | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
|--- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2000

OR

|[  ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
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Commission file number: 1-13563

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LASER MORTGAGE MANAGEMENT, INC.(Exact name of the Registrant as specified in its charter)

| | Maryland
(State or other jurisdiction of
incorporation or organization) | 22-3535916
(I.R.S. Employer
Identification No.)
| | ----------------------------------------------------------------------- | -----------------------------------------------

(Address of principal executive offices) (Zip Code)
c\o Mariner Mortgage Management, L.L.C.
65 East 55th Street, New York, New York 10022

Registrant's telephone number, including area code: (212)
758-2024

Securities registered pursuant to Section 12(b) of the
Act:

| | Title of each class: | Name of each exchangeon which registered:
| | -------------------- | -----------------------------------------

| | Common Stock, $.001 par value | New York Stock Exchange
| | ----------------------------- | -----------------------

Securities registered pursuant to Section 12(g) of the Act:
none

Indicate by
check mark whether the Registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No

Indicate by
check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of the
Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [   ]

At April 2,
2001, the aggregate market value of the voting stock held by non-affiliates of
the Registrant was approximately $55,033,000, based upon the closing sale price
of the Common Stock on the New York Stock Exchange on that date. At April 2,
2001, the Registrant had outstanding 14,038,983 shares of Common Stock.

GENERAL

LASER Mortgage
Management, Inc. ("LASER" or the "Company") hereby amends its Annual Report on
Form 10-K for the fiscal year ended December 31, 2000, (1) by amending its
response for Item 1, "BusinessRecent Developments" and "BusinessManagement
Agreement with Mariner Mortgage Management, L.L.C." to give effect to the
announcement on April 25, 2001 that the Board of Directors unanimously approved
the liquidation and dissolution of the Company and (2) by deleting its responses
for Items 10, 11, 12 and 13 contained in its Annual Report on Form 10-K filed
April 2, 2001 and replacing such Items as set forth in this amendment.

PART I

Item 1. Business.

Reference
is made to the Glossary commencing on page 40 of the Form 10-K as originally
filed for definitions of terms used in the following description of the
Company's business.

General

LASER Mortgage
Management, Inc. (the "Company"), a Maryland corporation, is a specialty finance
company, organized in September 1997, that invests primarily in mortgage-backed
securities and mortgage loans. The mortgage-backed securities include mortgage
pass-through certificates, collateralized mortgage obligations, other securities
representing interests in, or obligations backed by, pools of mortgage loans and
mortgage derivative securities (collectively, the "Mortgage Securities"). The
mortgage loans are secured by first or second liens on single-family
residential, multi-family residential, commercial or other real property (the
"Mortgage Loans" and, together with the Mortgage Securities, the "Mortgage
Assets"). See "Description of Assets." Mariner Mortgage Management, L.L.C.
("Mariner"), an affiliate of Mariner Investment Group, Inc., manages the
Company's day-to-day operations.

The Company has
elected to be taxed and intends to continue to qualify as a real estate
investment trust (a "REIT") under the Internal Revenue Code of 1986, as amended
(the "Code"), commencing with its short taxable year ended December 31, 1997,
and such election has not been revoked. The Company has qualified as a REIT for
the taxable years since its inception, and generally will not be subject to
federal income tax provided that it distributes its income to its stockholders
and maintains its qualification as a REIT. See "Federal Income Tax
Considerations."

As of December
31, 2000, based upon "available for sale" fair value accounting treatment, the
Company's net asset value per outstanding share was $4.52 per share.

Recent Developments

On March 7, 2001,
the Company announced that its Board of Directors had authorized management and
legal counsel to prepare a plan of liquidation. If the Board of Directors
approves the plan of liquidation, the Company expects that these materials will
be submitted to shareholders for approval at the annual meeting scheduled to be
held during the second or third quarter of 2001. Concurrent with the preparation
of the plan of liquidation, the Board has authorized the Company's management to
engage a financial advisor to consider a sale or merger of the Company as an
alternative to liquidation. As presently envisioned, the plan of liquidation
would provide for an initial distribution, after obtaining shareholder approval,
of approximately $3.00 per share, with additional distributions of the Company's
remaining assets expected to occur during the following three years. A final
decision, however, has not been made and the amounts and timing of the actual
distributions may be changed before the Board approves the plan of
liquidation.

On April 25,
2001, the Company announced that its Board of Directors unanimously approved the
liquidation and dissolution of the Company. The Company expects that a plan of
liquidation and dissolution will be submitted to shareholders for approval at
the annual meeting scheduled to be held during the next three months. As
presently envisioned, the plan of liquidation and dissolution would provide for
an initial cash distribution, after obtaining approval of the Delaware Court of
Chancery, of approximately $3.00 per share, with additional cash distributions
resulting from the disposition of the Company's remaining assets expected to
occur within the following three years, after providing for expenses.

Mariner will
continue to serve as the Company's manager pursuant to the existing management
agreement. The term of the management agreement ends on November 1, 2001,
however, the Company has the right to terminate the management agreement with 30
days' notice and Mariner has the right to terminate the management agreement
with 90 days' notice without cause or penalty. The Board of Directors' adoption
of the resolutions approving the liquidation and dissolution of the Company
triggered the payment of a fee based on the Company's stock price to Mariner
under the management agreement, which the Company expects to be approximately
$1.2 million. Mariner will continue to receive its base fee under the management
agreement of $50,000 a month until the management agreement ends or is
terminated.

In 2001, in
contemplation of either a liquidation or sale of the Company, Mariner has been
reducing the portfolio of Mortgage Securities and the leverage financing used to
maintain the portfolio.

Investment Strategy

The Company was
organized to create and manage an investment portfolio, principally of Mortgage
Assets, that, in combination with financing and hedging activities, would
generate income for distribution to its stockholders while preserving the
Company's capital base.

The Company
maintained a portfolio at its peak of approximately $3.8 billion of Mortgage
Assets in June 1998. From June 1998 through March 2000, the Company delevered
its portfolio by selling certain securities and repaying borrowings in an
attempt to reduce the portfolio's susceptibility to basis and interest rate risk
and to create additional liquidity. In November 1999, the Company announced that
its Board of Directors authorized management to conduct a competitive sale of
its less liquid portfolio assets as part of its ongoing program to reduce the
volatility of the Company's assets. As of December 31, 2000, the remaining
carrying value of these assets amounted to $1.8 million. During the six months
ended December 31, 2000, the Company, in an effort to increase its return on
stockholders' equity without exposing itself to substantial credit and interest
rate risk, increased its portfolio of Agency Certificates and Mortgage
Derivatives to $306.5 million at December 31, 2000 from $73.4 million at
December 31, 1999. As a result, the financing used to maintain this portfolio
was increased to $230.4 million at December 31, 2000 from $41.0 million at
December 31, 1999.

The Company is
authorized to acquire the following types of investments:


          fixed and adjustable
rate mortgage pass-through certificates ("Pass-Through Certificates"), which are
securities collateralized by pools of Mortgage Loans issued and sold to
investors by private, non-governmental issuers ("Privately-Issued Certificates")
or by various U.S. government agencies or instrumentalities, such as the Federal
Home Loan Mortgage Corporation ("FHLMC"), the Federal National Mortgage
Association ("FNMA") and the Government National Mortgage Association ("GNMA")
(collectively, "Agency Certificates");


          collateralized
mortgage obligations ("CMOs"), including regular interests in real estate
mortgage investment conduits ("REMICs"), which are fixed and adjustable rate
debt obligations collateralized by Mortgage Loans or Pass-Through
Certificates;


          Mortgage Loans;


          mortgage derivative
securities ("Mortgage Derivatives"), including interest-only securities ("IOs")
which receive only certain interest payments from a pool of Mortgage Securities
or Mortgage Loans;


          subordinate
interests ("Subordinate Interests"), which are classes of Mortgage Securities
junior to other classes of Mortgage Securities in the right to receive payments
from the underlying Mortgage Loans; and


          other fixed-income
securities in an amount not to exceed 5% of total assets.


          Consistent with the
Company's policy of maintaining its status as a REIT for federal income tax
purposes, substantially all of the Company's assets consist of assets of the
type described in Section 856(c)(5)(b) of the Code ("Qualified Real Estate
Assets"). See "Description of Assets" and "Management's Discussion and
Analysis of Financial Condition and Results of OperationsFinancial
ConditionInvestments."


          The Company is
required to invest at least 70% of its total assets (the "70% Asset Group")
in:


          securities which are
rated within one of the two highest ratings categories by one of the nationally
recognized rating agencies but not guaranteed by the U.S. government or an
agency or instrumentality thereof, such as FHLMC and FNMA Certificates,


          securities which are
unrated but are guaranteed by the U.S. government or an agency or
instrumentality thereof, or


          Mortgage Loans to
borrowers who would otherwise meet FHLMC, FNMA or GNMA guidelines, except with
respect to the size of the loans.

At December 31,
2000, 97% of the Company's total assets were in the 70% Asset Group.

The remainder of
the Company's assets, not to exceed 30% of its total assets (the "30% Asset
Group"), may consist of Mortgage Loans (other than those included in the 70%
Asset Group), retained Subordinate Interests and fixed-income securities (other
than those included in the 70% Asset Group) that are primarily Qualified Real
Estate Assets but also include non-investment grade high yield corporate debt.
To attempt to minimize the potentially higher level of credit and liquidity risk
of these securities, the Company has attempted to limit its investments in, and
diversify its portfolio of, securities in the 30% Asset Group. At December 31,
2000, 3% of the Company's total assets were in the 30% Asset Group.

References to
ratings of Mortgage Assets apply only at the time a transaction is entered into
by the Company. Any subsequent change in a rating assigned to a Mortgage Asset
or change in the percentage of Company assets invested in certain Mortgage
Assets or other instruments resulting from market fluctuations or other changes
in the Company's total assets will not require the Company to dispose of an
investment. If different rating agencies assign different ratings to the same
Mortgage Assets, the Company will determine which rating it believes most
accurately reflects the Mortgage Asset's quality and risk at that time taking
into account numerous factors, including the price of the security, available
public information regarding the issuer and liquidity concerns. A rating is not
a recommendation to buy, sell or hold a security, inasmuch as such rating does
not comment as to the market price of the security or the suitability of the
security for a particular investor. There is no assurance that a rating will
continue for any given period of time or that a rating will not be lowered or
withdrawn entirely by a rating agency if, in its judgment, circumstances so
warrant.

As a requirement
for maintaining REIT status, the Company intends to distribute to stockholders
aggregate distributions equaling at least 95% (90% after 2000) of its Taxable
Income. See "Federal Income Tax Considerations." As described above, the
Company anticipates making additional distributions of capital to stockholders
from time to time, including in connection with a plan of liquidation if adopted
by the Company's Board of Directors and stockholders. See "Recent
Developments." Subject to the limitations of applicable state securities and
corporation laws, the Company may distribute capital by making purchases of its
own capital stock or making distributions in excess of earnings.

Operating Policies and Strategies

The Company
adopted compliance guidelines, including restrictions on acquiring, holding and
selling assets, to ensure that the Company continues to qualify as a REIT.
Before acquiring any asset, the Company determines whether such asset would
constitute a Qualified Real Estate Asset. Substantially all of the assets that
the Company intends to acquire are expected to be Qualified Real Estate Assets.
The Company regularly monitors purchases of Mortgage Assets and the income
generated from such assets, including income from its hedging activities, in an
effort to ensure that at all times the Company maintains its qualification as a
REIT and its exemption under the Investment Company Act of 1940, as amended.
Mariner, in conjunction with a nationally recognized independent public
accounting firm, has developed internal accounting and testing procedures for
the Company and monitors and conducts quarterly compliance reviews to determine
compliance with the REIT Provisions of the Code.

Capital and
Leverage Policies

The Company's
operations were leveraged approximately 5.2 to 1 at December 31, 2000. At
December 31, 2000, the Company's equity-to-assets ratio was approximately 19%,
and ranged from a high of 62% to a low of 18% during 2000. Initially, the
Company financed its acquisition of Mortgage Assets through proceeds of its
initial public offering in December 1997 and several concurrent private
placements, and subsequently financed any acquisitions primarily by borrowing
against or "leveraging" its existing portfolio and using the proceeds to acquire
additional Mortgage Assets. The Company's target for its equity-to-assets ratio
depends on market conditions and other relevant factors.

The
equity-to-assets ratio is total stockholders' equity as a percentage of total
assets. The Company's total stockholders' equity, for purposes of this
calculation, equals the Company's stockholders' equity determined in accordance
with GAAP. For purposes of calculating the equity-to-assets ratio, the Company's
total assets include the value of the Company's investment portfolio on a
marked-to-market-basis. For purchased Mortgage Assets, the Company obtains
market quotes for its Mortgage Assets from independent broker-dealers that make
markets in securities similar to those in the Company's portfolio. The Board of
Directors has discretion to deviate from or change the Company's indebtedness
policy at any time. However, the Company endeavors to maintain an adequate
capital base to protect against interest rate environments in which the
Company's financing and hedging costs might exceed interest income from its
Mortgage Assets. These conditions could occur, for example, when, due to
interest rate fluctuations, interest income on the Company's Mortgage Assets
(which occur during periods, such as the first three quarters of 1998, of
rapidly rising interest rates or during periods when the Mortgage Loans in the
portfolio are prepaying rapidly) lags behind interest rate increases in the
Company's variable rate borrowings.

Short-Term
Borrowing

Mortgage Assets,
are financed primarily at short-term borrowing rates through repurchase
agreements. Repurchase agreements are sales of pledged securities to a lender at
discounted prices in return for an agreement by the lender to resell the same or
substantially similar securities to the borrower on some future date at an
agreed price.

Repurchase
agreements are structured as sale and repurchase obligations that allow a
borrower to pledge purchased Mortgage Assets as collateral securing short-term
loans to finance the purchase of such Mortgage Assets. Typically, the lender in
a repurchase arrangement makes a loan in an amount equal to a percentage of the
market value of the pledged collateral. At maturity, the borrower is required to
repay the loan and the pledged collateral is released. Pledged Mortgage Assets
continue to pay principal and interest to the borrower.

Repurchase
agreements are expected to continue to be the principal means of leveraging the
Company's Mortgage Assets. The Company enters into repurchase agreements with
financially sound institutions, including broker-dealers, commercial banks and
other lenders.

Repurchase
agreements also require the Company to deposit additional collateral (a "margin
call") or reduce its borrowings thereunder, if the market value of the pledged
collateral declines. This may require the Company to sell Mortgage Assets to
provide such additional collateral or to reduce the amount borrowed. If these
sales were made at prices lower than the carrying value of the Mortgage Assets,
the Company would experience losses. For example, during the third quarter of
1998, the Company was subject to numerous margin calls and was forced to sell
Mortgage Assets to reduce the amount borrowed, which resulted in losses to the
Company. See " Management's Discussion and Analysis of Financial Condition
and Results of OperationsResults of OperationsYear Ended December
31, 1999 Compared to Year Ended December 31, 1998Net Loss
SummaryLosses from Investment Activities."

The Company has
met every margin call to date initiated by its lenders. As of December 31, 2000,
the Company's cash and cash equivalents balance was $3.5 million and the Company
believes that it has sufficient assets to meet potential margin calls.

Interest Rate
Risk Management Strategy and Hedging Activities

The Company
follows an interest rate risk management strategy designed to protect against
the adverse effects of major interest rate changes. The Company may enter into
hedging transactions which include interest rate swaps, interest rate collars,
caps, floors and options. These instruments are used to hedge as much of the
interest rate risk of the Company as Mariner determines is in the best interest
of the stockholders, given the cost of such hedges and the need to maintain the
Company's status as a REIT.

Hedging
instruments often are not traded on regulated exchanges, guaranteed by an
exchange or its clearing house, or regulated by any U.S. or foreign governmental
authorities. Consequently, there are no requirements with respect to
recordkeeping, financial responsibility or segregation of customer funds and
positions. The business failure of a counterparty with which the Company has
entered into a hedging transaction will most likely result in a default. The
default of a counterparty with which the Company has entered into a hedging
transaction may result in the loss of unrealized profits and force the Company
to cover its resale commitments, if any, at the then current market price.
Although generally the Company seeks to reserve for itself the right to
terminate its hedging positions, it may not always be possible to dispose of or
close out a hedging position without the consent of the counterparty, and the
Company may not be able to enter into an offsetting contract in order to cover
its risk. There can be no assurance that a liquid secondary market will exist
for hedging instruments purchased or sold, and the Company may be required to
maintain a position until exercise or expiration, which could result in
losses.

Hedging activity
involves transaction costs, and such costs can increase significantly as the
period covered by such activity increases. Therefore, the Company may be
prevented from effectively hedging all of its interest rate risk. Certain losses
incurred in connection with hedging activities may be capital losses that would
not be deductible to offset ordinary REIT income. In such a situation, the
Company would have incurred an economic loss of capital that would not be
deductible to offset the ordinary income from which dividends must be paid.

In particular,
when the Company earns income under such instruments, it will seek advice from
Stroock & Stroock & Lavan LLP, its Special Tax Counsel, as to whether
such income constitutes qualifying income for purposes of the 95% Gross Income
Test and as to the proper characterization of such arrangements for purposes of
the REIT Asset Tests. The "95% Gross Income Test" means the requirement for each
taxable year that at least 95% of the Company's gross income for each taxable
year must be derived from certain specified real estate sources including
interest income and gain from the disposition of Qualified Real Estate Assets or
"qualified temporary investment income" (i.e., income derived from "new capital"
within one year of the receipt of such capital), dividends, interest and gains
from the sale of stock or other securities (including certain interest rate swap
or cap agreements, options, forward rate agreements and similar financial
instruments entered into to reduce the interest rate risk with respect to debt
incurred to acquire Qualified Real Estate Assets) not held for sale in the
ordinary course of business. See "Federal Income Tax
ConsiderationsRequirements for QualificationGross Income Tests."
This determination may result in the Company electing to bear a level of
interest rate risk that could otherwise be hedged when Mariner believes, based
on all relevant facts, that bearing such risk is advisable to maintain the
Company's status as a REIT.

Prior Losses
on Hedging Strategies

In December 1997,
the Company entered into interest rate swaps with an aggregate notional amount
of $1,035 million. The Company used these interest rate swaps to hedge its
available-for-sale portfolio of fixed-rate Agency Certificates. The primary
objective of this hedging strategy was to change the interest rate
characteristics of these securities from fixed to variable rates, to better
correspond to the maturity and repricing characteristics of the short-term
repurchase agreements used by the Company to fund these investments. This
primary objective was the basis for the Company's hedge accounting treatment.
The Company continually monitored the swaps to ensure that they were effective
at changing the interest rate characteristics of the securities. A secondary
objective was to offset fluctuations in the fair value of the securities caused
by fluctuations in market interest rates.

In September
1998, the Company experienced margin calls and believed it prudent to increase
its liquidity and, therefore, liquidated a large portion of its Agency
Certificates. In conjunction with the liquidation of these securities positions,
the Company also discontinued hedge accounting for the related swaps with an
aggregate notional amount of $485 million. The Company recognized the unrealized
loss on these swaps as an element of the overall loss on the liquidation of the
securities of $(26.0) million. In October 1998, the Company liquidated Agency
Certificates in response to continued margin calls and the need for liquidity.
The overall October 1998 loss on the liquidation of Agency Certificates,
including losses recognized upon suspension of hedge accounting for the
remaining swap with a notional amount of $550 million, totaled $(35.0) million.
On the day of each suspension of hedge accounting, the affected swaps were
closed out without additional gain or loss.

The valuations
and other information previously used by the Company to monitor the
effectiveness of its interest rate swap hedging strategy were obtained through
multiple independent dealer quotes. This same information was used to record the
investments and swaps in the Company's financial statements and to determine the
Company's net asset value. The Company has never purchased or written options to
enter into swaps.

The Company did
not enter into any interest rate swaps during the years ended December 31, 1999
and 2000, after having used them extensively in 1997 and 1998.

In May 2000, the
Company purchased a cap with a notional amount of $100 million for a premium of
$3.0 million to reduce the risk of rising interest rates on the cost of the
short-term repurchase agreements used to finance its investments. The cap
agreement has a term of three years and provides for monthly payments of
interest to the Company to the extent that the one-month London Interbank
Offered Rate ("LIBOR") exceeds 6.54% as applied to the notional amount. At
December 31, 2000, the cap had an estimated fair value of $0.4 million and the
Company recorded an unrealized loss of $(2.6) million in the statement of
operations. As a result of the subsequent reduction in interest rates, the
Company closed out the cap in January 2001 for $0.3 million and recognized an
additional loss of $(0.1) million in the statement of operations.

Description of Assets

The Company is
permitted to acquire the following types of investments subject to the operating
restrictions described in "Operating Policies and Strategies."

Pass-through
Certificates

The Company's
investments in Mortgage Securities are concentrated in Pass-Through
Certificates. The Pass-Through Certificates the Company acquires consist
primarily of fixed and adjustable rate Agency Certificates and Privately-Issued
Certificates and represent interests in Mortgage Loans primarily secured by
liens on single-family residential, multi-family residential and commercial real
properties, but also may be secured by liens on other types of real property. As
of December 31, 2000, 86% of the Company's portfolio consisted of Pass-Through
Certificates.

FHLMC
Certificates. FHLMC is a privately-owned, government-sponsored
enterprise created pursuant to an act of Congress. FHLMC purchases conventional
conforming Mortgage Loans or participation interests therein and resells the
loans and participations so purchased in the form of guaranteed, mortgage-backed
securities. FHLMC guarantees to each holder of FHLMC Certificates the timely
payment of interest at the applicable pass-through rate and ultimate collection
of the holder's pro rata share of the unpaid principal balance of the related
Mortgage Loans, but does not guarantee the timely payment of scheduled principal
of the underlying Mortgage Loans. The obligations of FHLMC under its guarantees
are solely those of FHLMC and are not backed by the full faith and credit of the
U.S. government. If FHLMC were unable to satisfy such obligations, distributions
to holders of FHLMC Certificates would consist solely of payments and other
recoveries on the underlying Mortgage Loans and, accordingly, monthly
distributions to holders of FHLMC Certificates would be affected by delinquent
payments and defaults on such Mortgage Loans.

FHLMC
Certificates may be backed by pools of Mortgage Loans secured by single-family
or multi-family residential properties. Such underlying Mortgage Loans may have
original terms to maturity of up to 40 years. FHLMC Certificates may pay
interest at a fixed or adjustable rate. The interest rate paid on FHLMC
adjustable rate mortgage ("ARM") certificates adjusts periodically within 60
days prior to the month in which the interest rates on the underlying Mortgage
Loans adjust. The interest rates paid on FHLMC ARM Certificates issued under
FHLMC's standard ARM programs adjust in relation to the Treasury Index. Other
specified indices used in FHLMC ARM programs include the 11th District Cost of
Funds Index published by the Federal Home Loan Bank of San Francisco (the "11th
District Index") and LIBOR. Interest rates paid on fully-indexed FHLMC ARM
Certificates equal the applicable index rate plus a specified number of basis
points ranging typically from 125 to 250 basis points.

FNMA
Certificates. FNMA is a privately-owned, federally chartered corporation
that provides funds to the mortgage market primarily by purchasing Mortgage
Loans (with respect to residential properties) from local lenders, thereby
replenishing their funds for additional lending. FNMA guarantees to each
registered holder of a FNMA Certificate that it will distribute amounts
representing scheduled principal and interest at the rate provided by the FNMA
Certificate on the Mortgage Loans in the pool underlying the FNMA Certificate
whether or not received, and the full principal amount of any such Mortgage Loan
foreclosed or otherwise finally liquidated, whether or not the principal amount
is actually received. The obligations of FNMA under its guarantees are solely
those of FNMA and are not backed by the full faith and credit of the U.S.
government. If FNMA were unable to satisfy such obligations, distributions to
holders of FNMA Certificates would consist solely of payments and other
recoveries on the underlying Mortgage Loans and, accordingly, monthly
distributions to holders of FNMA Certificates would be affected by delinquent
payments and defaults on such Mortgage Loans.

FNMA Certificates
may be backed by pools of Mortgage Loans secured by single-family or
multi-family residential properties. The original terms to maturities of the
Mortgage Loans generally do not exceed 40 years. FNMA Certificates may pay
interest at a fixed rate or adjustable rate. Each series of FNMA ARM
Certificates bears an initial interest rate and margin tied to an index based on
all loans in the related pool, less a fixed percentage representing servicing
compensation and FNMA's guarantee fee. The specified index used in each such
series has included the Treasury Index, the 11th District Index and LIBOR.
Interest rates paid on fully-indexed FNMA ARM Certificates equal the applicable
index rate plus a specified number of basis points ranging typically from 125 to
250 basis points.

GNMA
Certificates. GNMA is a wholly-owned corporate instrumentality of the
United States within the Department of Housing and Urban Development ("HUD").
GNMA guarantees the timely payment of the principal of and interest on
certificates which represent an interest in a pool of mortgages insured by the
United States Federal Housing Authority (the "FHA") and other loans eligible for
inclusion in mortgage pools underlying GNMA certificates. GNMA certificates are
general obligations of the U.S. government.

GNMA certificates
may pay a fixed or adjustable coupon rate. At present, most GNMA certificates
issued under GNMA's standard ARM program adjust annually in relation to the
Treasury Index. Interest rates paid on GNMA ARM Certificates typically equal the
index rate plus 150 basis points. Adjustments in the interest rate are generally
limited to an annual increase or decrease of 100 basis points and to a lifetime
cap of 500 basis points over the initial coupon rate.

Privately-Issued
Certificates. Privately-Issued Certificates are structured similarly to
Agency Certificates and are issued by originators of, and investors in, Mortgage
Loans, including savings and loan associations, savings banks, commercial banks,
mortgage banks, investment banks and special purpose subsidiaries of such
institutions. Privately-Issued Certificates are usually backed by a pool of
fixed or adjustable rate Mortgage Loans and are generally structured with one or
more types of credit enhancement, including mortgage pool insurance or
subordination. However, Privately-Issued Certificates are typically not
guaranteed by an entity having the credit status of FHLMC, FNMA or GNMA.

Subordinate
Interests

The Company is
permitted to acquire Subordinate Interests in pools of Mortgage Loans
securitized by others. The credit quality of Mortgage Loans and Mortgage
Securities collateralized by underlying Mortgage Loans depends on a number of
factors, including their loan-to-value ratio, their terms and the geographic
diversification of the properties securing the Mortgage Loans and, in the case
of multi-family and commercial properties, the creditworthiness of tenants. As
of December 31, 2000, 2% of the Company's portfolio consisted of Subordinate
Interests.

In a
securitization, payments of principal of and interest on the underlying Mortgage
Loans may be allocated among several classes of Mortgage Securities issued in
the securitization in many ways, and the credit quality of a particular class of
Mortgage Securities depends primarily on its payment priority. In a typical
securitization, the Subordinate Interests absorb losses from defaults or
foreclosures on the Mortgage Loan collateral before such losses are allocated to
more senior classes, providing credit protection to more senior classes. As a
result, Subordinate Interests carry significant credit risks. Subordinate
Interests in a typical securitization are subject to a substantially greater
risk of non-payment than more senior classes. Accordingly, Subordinate Interests
are assigned lower credit ratings, or no rating at all. Neither the Subordinate
Interests nor the underlying mortgages are guaranteed by agencies, or
instrumentalities of the U.S. government.

As a result of
the typical "senior-subordinated" securitization structure, Subordinate
Interests are extremely sensitive to losses on the underlying Mortgage Loans.
For example, if the Company owns a $10 million Subordinate Interest in an
issuance of Mortgage Securities consisting of $100 million of Mortgage Loan
collateral, a 7% loss on the underlying Mortgage Loans will result in a 70% loss
on the Subordinate Interest. Accordingly, the holder of the Subordinate Interest
is particularly interested in minimizing the loss frequency (the percentage of
the Mortgage Loan balance that defaults over the life of the Mortgage Loan
collateral) and the loss severity (the amount of loss on a defaulted Mortgage
Loan, i.e., the principal amount of the Mortgage Loan unrecovered after applying
any recovery to the expenses of foreclosure and accrued interest) on the
underlying Mortgage Loans. The loss frequency on a pool of Mortgage Loans will
depend upon a number of factors, most of which will be beyond the control of the
Company or the applicable Master Servicer.

Many of the
Subordinate Interests acquired by the Company will not have been registered
under the Securities Act, but instead, will have initially been sold in private
placements. Such unregistered Subordinate Interests will be subject to certain
restrictions on resale and, accordingly, will have more limited marketability
and illiquidity than registered Securities. Although there are some exceptions,
most issuers of multi-class Mortgage Securities elect to be treated, for federal
income tax purposes, as REMICs. Although the Company sought to purchase
Subordinate Interests at a price designed to return the Company's investment and
generate a profit thereon, there can be no assurance that such goal will be met
or that the Company's investment in a Subordinate Interest will be returned in
full or at all.

Mortgage
Derivatives

The Company is
permitted to invest in Mortgage Derivatives, including IOs, Inverse IOs, Sub IOs
and floating rate derivatives. Mortgage Derivatives provide for the holder to
receive interest only, principal only, or interest and principal in amounts that
are disproportionate to those payable on the underlying Mortgage Loans. Payments
on Mortgage Derivatives are highly sensitive to the rate of prepayments on the
underlying Mortgage Loans. If the actual prepayment rate on such Mortgage Loans
is more rapid than anticipated, the rates of return on Mortgage Derivatives
representing the right to receive interest only or a disproportionately large
amount of interest, i.e., IOs, would be likely to decline. Conversely, the rates
of return on Mortgage Derivatives representing the right to receive principal
only or a disproportionate amount of principal, i.e., POs, would be likely to
increase in the event of rapid prepayments. As of December 31, 2000, 10% of the
Company's portfolio consisted of Mortgage Derivatives, all of which were
IOs.

Some IOs in which
the Company is permitted to invest, such as Inverse IOs, bear interest at a
floating rate that varies inversely with (and often at a multiple of) changes in
a specific index. The yield to maturity of an Inverse IO is extremely sensitive
to changes in the related index. The Company also is permitted to invest in
inverse floating rate Mortgage Derivatives which are similar in structure and
risk to Inverse IOs, except inverse floating rate Mortgage Derivatives are
generally issued with a greater stated principal amount than Inverse IOs.

Other IOs in
which the Company is permitted to invest, such as Sub IOs, have the
characteristics of a Subordinate Interest. A Sub IO is not entitled to any
payments of principal; moreover, interest on a Sub IO often is withheld in a
reserve fund or spread account to fund required payments of principal and
interest to more senior tranches of Mortgage Securities. Once the balance in the
spread account reaches a certain level, excess funds are paid to the holders of
the Sub IO. These Sub IOs provide credit support to the senior classes and thus
bear substantial credit risks. In addition, because a Sub IO receives only
interest payments, its yield is extremely sensitive to the rate of prepayments
(including prepayments as a result of defaults) on the underlying Mortgage
Loans.

IOs can be an
effective hedging device because they generally increase in value as fixed rate
Mortgage Securities decrease in value. The Company also is permitted to invest
in other types of derivatives currently available in the market and other
Mortgage Derivatives that may be developed in the future.

CMOS

The Company is
permitted to invest in CMOs, including adjustable rate and fixed rate CMOs
issued by private issuers or FHLMC, FNMA or GNMA. CMOs are a series of bonds or
certificates ordinarily issued in multiple classes, each of which consists of
several classes with different maturities and often complex priorities of
payment, secured by a single pool of Mortgage Loans, Pass-Through Certificates,
other CMOs or other Mortgage Assets. Principal prepayments on collateral
underlying a CMO may cause it to be retired substantially earlier than the
stated maturities or final distribution dates. Interest is paid or accrues on
all interest bearing classes of a CMO on a monthly, quarterly or semi-annual
basis. The principal and interest on underlying Mortgage Loans may be allocated
among the several classes of a series of a CMO in many ways, including pursuant
to complex internally leveraged formulas that make the CMO class especially
sensitive to interest rate or prepayment risk. As of December 31, 2000, the
Company did not own any CMOs. The Company does not intend to purchase CMOs.

CMOs may be
subject to certain rights of issuers thereof to redeem such CMOs prior to their
stated maturity dates, which may have the effect of diminishing the Company's
anticipated return on its investment. Privately-issued single-family,
multi-family and commercial CMOs are supported by private credit enhancements
similar to those used for Privately-Issued Certificates and are often issued as
senior-subordinated Mortgage Securities.

Mortgage
Loans

The Company is
permitted to invest in fixed and adjustable-rate Mortgage Loans secured by first
or second liens on single-family (one-to-four unit) residential, multi-family
residential, commercial or other real property as part of its investment
strategy. As of December 31, 2000, 1% of the Company's portfolio consisted of
Mortgage Loans.

The Company may
acquire Mortgage Loans directly from Mortgage Sellers which include originators,
and entities holding Mortgage Loans originated by others throughout the United
States, such as savings and loan associations, banks, mortgage bankers, home
builders, insurance companies and other mortgage lenders. The Board of Directors
of the Company has not established any limits upon the geographic concentration
of Mortgage Loans to be acquired by the Company or the credit quality of the
Mortgage Sellers.

Other
Fixed-Income Assets

The Company is
permitted to invest in fixed-income securities that are not Mortgage Assets,
including securities issued by corporations or issued or guaranteed by the U.S.
government or its agencies or instrumentalities, loan participations,
non-investment grade high yield corporate debt and collateralized bond
obligations, denominated in U.S. dollars and foreign currencies. In connection
with the Company's investment in such securities, particularly collateralized
loan obligations and collateralized bond obligations, the Company is permitted
to pay fees to unrelated third-party managers. A portion of these assets will be
securities which are included in the 30% Asset Group. The Company will invest no
more than 5% of its assets in such fixed-income securities. As of December 31,
2000, 1% of the Company's portfolio consisted of other fixed-income assets.

The Company also
is permitted to invest in non-investment grade high yield corporate debt rated
below investment grade, commonly known as junk bonds. Junk bonds are generally
unsecured, may be subordinated to other obligations of the issuer and generally
have greater credit and liquidity risk than is typically associated with
investment grade corporate obligations.

The Company also
is permitted to acquire interests in non-real estate loans. Such loan interests
may be purchased either directly (by way of assignment from the selling
institution) or indirectly (by way of the purchase of a participation interest
from the selling institution). The purchaser of an assignment of an interest in
a loan typically succeeds to all rights and obligations of the assigning selling
institution and becomes a lender under the loan agreement. Participations
typically result in a contractual relationship only with the selling
institution, not with the borrower.

In addition, the
Company is permitted to invest in asset-backed securities which have structural
characteristics similar to Mortgage Securities but relate to assets other than
Mortgage Assets, including credit card, automobile and other receivables.
Asset-backed securities may be rated or unrated and, if rated, may be above or
below investment grade. They may bear coupons at a fixed or floating interest
rate and also may be subject to prepayment risk.

Management Agreement with Mariner Mortgage Management, L.L.C.

Effective
November 1, 1999, Mariner agreed to serve for one year as the external manager
of the Company and be responsible for day-to-day management of the Company's
investments and operations. William J. Michaelcheck, the Chairman of Mariner,
was appointed President and Chief Executive Officer of the Company. Upon
completion of the transition to Mariner, the Company terminated its consulting
arrangement with BlackRock Financial Management, Inc. ("BlackRock") and Robert
J. Gartner, who was Vice President of the Company and responsible for day-to-day
investment decisions for the Company, resigned.

Under the current
management agreement, which was entered into on November 1, 2000, Mariner is
entitled to receive a (1) base management fee of $50,000 per month payable in
cash and (2) an annual incentive fee payable in cash. The incentive fee will
equal the number of shares outstanding on November 1, 2001, multiplied by:


          10% of the
difference between the 15-day average closing market price (plus any
distributions per share other than Common Stock) of the Company's Common Stock
preceding November 1, 2001 (or such earlier date, as set forth in the agreement)
and $3.317 per share (which approximates the average closing price of the
Company's Common Stock for the fifteen days ended October 31, 2000) up to the
equivalent of $3.50 per share;


          15% of the
difference over $3.50 per share up to $4.00 per share; and


          20% of the
difference over $4.00 per share.

The current
management agreement terminates on November 1, 2001, but is terminable by the
Company without cause or penalty on 30 days' notice and by Mariner on 90 days'
notice. In addition, under the terms of the current management agreement,
Mariner is no longer entitled to receive a minimum fee if the Company adopts a
plan of liquidation.

Pursuant to the
terms of the Mariner management agreement in effect during the year ended
December 31, 2000, the Company incurred base fees of $294,193 and no incentive
fee. The Board of Directors' adoption on April 25, 2001 of the resolutions
approving the liquidation and dissolution of the Company triggered the payment
of a fee based on the Company's stock price to Mariner under the management
agreement, which the Company expects to be approximately $1.2 million.

Events Leading to Termination of Management Agreement with LASER Advisers
Inc. and Adoption of Portfolio Management Strategy

In late June
1998, the Company's Board of Directors was advised by LASER Advisers Inc. (the
"Former Manager") of certain pricing and other irregularities in connection with
Shetland Fund Ltd., one of the private investment funds (the "Affiliated Funds")
advised and managed by the Former Manager which invested in Mortgage Securities.
The reported irregularities included the failure to obtain dealer quotes for
securities, the failure to obtain more than a single quote in certain instances,
mispricing bids, misplaced records, missing records and improperly identified
securities in the portfolio. In July 1998, the Company's Board of Directors was
informed by the Former Manager that the irregularities detected in the
Affiliated Fund did not affect the portfolio of securities held by the Company
and that certain procedural deficiencies existed at the Former Manager which
allowed for the irregularities. On July 29, 1998, the Former Manager announced
certain administrative changes, including the resignation of Michael L. Smirlock
as Chief Executive Officer of the Former Manager and the removal of Mr. Smirlock
from trading and day-to-day participation in the Former Manager's activities.
Mr. Smirlock continued as Chairman of the Board and a majority stockholder of
the Former Manager.

On July 30, 1998,
the Company's Board of Directors terminated the employment of Michael L.
Smirlock as Chief Executive Officer and President of the Company and removed Mr.
Smirlock as Chairman of the Board of the Company. Mr. Smirlock remained a
director of the Company through September 1999, although the Board of Directors
requested his resignation. The day-to-day portfolio management decisions for the
Former Manager on behalf of the Company from July 30, 1998 through March 2, 1999
were made jointly by Peter T. Zimmermann (until his earlier resignation
described below) and Robert J. Gartner, then officers of the Former Manager. On
July 30, 1998, the Company also accepted the resignation of two of its
directors, David A. Tepper and William Marshall, effective that day. Both Mr.
Tepper and Mr. Marshall advised the Company that they had resigned due to other
commitments. Mr. Tepper remained a director and minority stockholder of the
Former Manager. The Board elected Jonathan Ilany as a member of the Company's
Board of Directors.

On October 2,
1998, the Company's Board of Directors authorized its financial advisor, Lehman
Brothers Inc. ("Lehman Brothers"), promptly to solicit offers to acquire the
Company or all, or substantially all, of its assets. Lehman Brothers, after
soliciting offers to acquire the Company, did not receive any firm bids. Lehman
Brothers no longer is actively soliciting bids on behalf of the Company,
although it will receive for evaluation bids from interested persons. Also on
October 2, 1998, the Company's Board of Directors engaged BlackRock as its
consultant to review the Company's portfolio and to make recommendations
designed to reduce the portfolio's susceptibility to basis and interest rate
risk and to create additional liquidity. BlackRock recommended to the Company
that the Former Manager delever the Company's portfolio by selling certain
Mortgage Assets.

On December 15,
1998, the Company was informed by the Former Manager of its resignation as
investment adviser to four of the Affiliated Funds, Steed Finance LDC, Quarter
Horse Finance Ltd., Shetland Fund Ltd. and Trakehner Fund L.P., and that it
would continue to manage investments for Mustang Investment Limited Partnership.
All references to the Affiliated Funds herein relate to Mustang Investment
Limited Partnership and the other four Affiliated Funds previously managed by
the Former Manager.

On March 2, 1999,
the Company announced that the Company and the Former Manager terminated the
agreement under which the Former Manager served as the external manager of the
Company, and that the Company had become advised internally by Mr. Gartner, Vice
President of the Company. Mr. Gartner had been actively engaged in the
management of the Company's portfolio by the Former Manager since the Company's
inception and had resigned his post at the Former Manager to become a full-time
employee of the Company. The Company also announced that BlackRock had agreed to
extend its consulting engagement with the Company; that Thomas Jonovich, Chief
Financial Officer and Treasurer of the Company, and Jonathan Green, General
Counsel of the Company, resigned effective March 2, 1999; that Peter T.
Zimmermann, Vice President and Chief Operating Officer of the Company, resigned
effective January 11, 1999; and that the Former Manager agreed to assist the
Company with the transfer of the advisory function to the Company. Mr. Smirlock
subsequently resigned as Director of the Company in September 1999.

For the year
ended December 31, 1999, consulting fees paid to BlackRock were $1.1 million and
management fees paid to the Former Manager were $0.5 million.

Federal Income Tax Considerations

General

Since its
inception, the Company has elected to be taxed as a REIT under the REIT
Provisions of the Code for federal income tax purposes, and such election has
not been revoked. The Company currently expects that it will continue to operate
in a manner that permits the Company to maintain its qualification as a REIT.
This treatment will permit the Company to deduct dividend distributions to its
stockholders for federal income tax purposes, thus effectively eliminating the
"double taxation" that generally results when a corporation earns income and
distributes that income to its stockholders in the form of dividends.

There can be no
assurance, however, that the Company will qualify as a REIT in any particular
taxable year, given the highly complex nature of the rules governing REITs, the
ongoing importance of factual determinations and the possibility of future
changes in the circumstances of the Company. If the Company were not to qualify
as a REIT in any particular year, it would be subject to federal income tax as a
regular, domestic corporation, and its stockholders would be subject to tax in
the same manner as stockholders of such corporation. In this event, the Company
could be subject to potentially substantial income tax liability in respect of
each taxable year that it fails to qualify as a REIT, and the amount of earnings
and cash available for distribution to its stockholders could be significantly
reduced or eliminated. In addition in any year, the Company may be subject to a
4% federal excise tax to the extent the Company does not distribute 85% of its
REIT ordinary income for such year and 95% of its REIT capital gain net income
for such year.

Requirements for Qualification

The following is
a brief summary of certain technical requirements that the Company must meet on
an ongoing basis in order to qualify, and remain qualified, as a REIT under the
Code:

Stock
Ownership Tests

The capital stock
of the Company must be transferable stock held by at least 100 persons during at
least 335 days of a taxable year of 12 months (or during a proportionate part of
a taxable year of less than 12 months), and no more than 50% of the value of
such capital stock may be owned, directly or indirectly, by five or fewer
individuals (as defined in the Code to include certain entities) at any time
during the last half of the taxable year. If the Company did not know, or have
reason to know, that its capital stock was owned directly or indirectly by five
or fewer individuals, it will be treated as having more than five owners as long
as it complied with Treasury regulations that provide rules on ascertaining
actual ownership. Tax-exempt entities, other than private foundations, certain
unemployment compensation trusts and certain charitable trusts generally are not
treated as individuals for these purposes. In addition, the Charter provides
restrictions regarding the transfer of the Company's shares to assist in meeting
the stock ownership requirements.

Asset
Tests

The Company must
generally meet the following asset tests (the "REIT Asset Tests") at the close
of each quarter of each taxable year:

(a)          at least 75% of
the value of the Company's total assets must consist of Interests in Real
Property (as defined below), regular or residual interests in a REMIC (except
that, if less than 95% of the assets of a REMIC consists of real estate assets
(determined as if the Company held such assets), the Company will be treated as
holding directly its proportionate share of the assets of such REMIC), shares of
other REITs, government securities and temporary investments in stock or debt
instruments during the one year period following the Company's receipt of
certain new capital, cash, and cash items (the "75% Asset Test"). For purposes
of the 75% Asset Test, the term "Interest in Real Property" includes an interest
in Mortgage Loans (to the extent the principal balance of a mortgage does not
exceed the fair market value of the associated real property); and

(b)          the securities
held by the Company but not taken into account for purposes of the 75% Asset
Test must not exceed (1) 5% of the value of the Company's total assets in the
case of securities of any one issuer, or (2) 10% of the vote or value of the
securities of any one issuer.

The Company
expects that any Subordinate Interests, IOs, Inverse IOs, and temporary
investments that it acquires generally will be treated as qualifying assets for
purposes of the 75% Asset Test, except to the extent that less than 95% of the
assets of a REMIC in which the Company owns an interest consists of real estate
assets and the Company's proportionate share of those assets includes assets
that are nonqualifying assets for purposes of the 75% Asset Test. In addition,
the Company does not expect that the value of any security of any one entity
would exceed 5% of the Company's total assets, and the Company does not expect
to own more than 10% of any one issuer's securities. The Company also may
purchase regular interests in a Financial Asset Securitization Investment Trust
(a "FASIT") which will be treated as qualifying assets for purposes of the 75%
Asset Test, except to the extent that less than 95% of the assets of a FASIT
consists of real estate assets, in which case the Company's proportionate share
of the FASIT's nonqualifying assets will be treated as nonqualifying assets for
purposes of the 75% Asset Test.

The Company will
attempt to monitor the status of the assets that it acquires to assure
compliance with the REIT Asset Tests.

If the Company
should fail to satisfy the REIT Asset Tests at the end of a calendar quarter,
such a failure would not cause it to lose its REIT status if (1) it satisfied
the REIT Asset Tests at the close of the preceding calendar quarter and (2) the
discrepancy between the value of the Company's assets and the REIT Asset Test
requirements arose from changes in the market values of its assets and was not
wholly or partly caused by the acquisition of one or more nonqualifying assets.
If the condition described in clause (2) of the preceding sentence was not
satisfied, the Company still could avoid disqualification by eliminating any
discrepancy within 30 days after the close of the calendar quarter in which it
arose.

Gross Income
Tests

The Company must
generally meet the following gross income tests (the "REIT Gross Income Tests")
for each taxable year:

(a)          at least 75% of
the Company's gross income must be derived from certain specified real estate
sources including interest income on Mortgage Loans and gain from the
disposition of Qualified Real Estate Assets or "qualified temporary investment
income," (i.e., income derived from "new capital" within one year of the receipt
of such capital) (the "75% Gross Income Test"); and

(b)          at least 95% of
the Company's gross income must consist of income which qualifies for the 75%
Gross Income Test, as well as other interest and gains from the sale of stock or
other securities (including certain interest rate swap or cap agreements,
options, futures contracts, forward rate agreements, and similar financial
instruments entered into to reduce the interest rate risk with respect to debt
incurred to acquire Qualified Real Estate Assets) not held for sale in the
ordinary course of business (the "95% Gross Income Test").

For purposes of
determining whether the Company complies with the 75% and 95% Gross Income
Tests, gross income does not include gross income from "prohibited
transactions." A "prohibited transaction" is one involving a sale of dealer
property, other than foreclosure property. Net income from "prohibited
transactions" is subject to a 100% tax. If the Company sells Mortgage Securities
that it creates through Mortgage Loan securitizations, the Company may recognize
income that, if sufficient to cause the Company to be treated as a dealer in
Mortgage Securities for federal income tax purposes, could constitute
"prohibited transaction" income. See "Taxation of the Company."

Interest on
obligations secured by mortgages on real property or on Interests in Real
Property is qualifying income for purposes of the 75% Gross Income Test. Any
amount includible in gross income with respect to a regular or residual interest
in a REMIC or a regular interest in a FASIT generally is treated as interest on
an obligation secured by a mortgage on real property. If, however, less than 95%
of the assets of a REMIC or a FASIT consists of real estate assets (determined
as if the Company held such assets), the Company will be treated as receiving
directly its proportionate share of the income of the REMIC or the FASIT. In
addition, if the Company receives interest income with respect to a mortgage
loan that is secured by both real property and other property and the highest
principal amount of the loan outstanding during a taxable year exceeds the fair
market value of the real property on the date the Company purchased the mortgage
loan, the interest income will be apportioned between the real property and the
other property, which apportionment may cause the Company to recognize income
that is not qualifying income for purposes of the 75% Gross Income Test.

Most of the
income that the Company recognizes with respect to its investments in Mortgage
Loans will be qualifying income for purposes of both the 75% and 95% Gross
Income Tests. This generally will include interest, original issue discount, and
market discount income that the Company derives from its investments in
Subordinate Interests, IOs and Inverse IOs.

The Company may
originate or acquire Mortgage Loans and securitize such loans through the
issuance of non-REMIC CMOs. As a result of any such transactions, the Company
will retain an equity ownership interest in the Mortgage Loans that has economic
characteristics similar to those of a Subordinate Interest. In addition, the
Company may resecuritize Mortgage Securities (or REMIC or non-REMIC CMOs)
through the issuance of non-REMIC CMOs, retaining an equity interest in the
Mortgage Securities used as collateral in the resecuritization transaction. Such
transactions will not cause the Company to fail to satisfy the Gross Income
Tests. Further, the Company intends to structure any such securitizations in a
manner which does not result in treatment of the REIT or issuing entity as a
"taxable mortgage pool."

The Company may
receive income that is nonqualifying income for either the 75% Gross Income Test
or both the 75% and 95% Gross Income Tests. For example, (1) the loan amount of
a Mortgage Loan may exceed the value of the real property securing the loan,
which will result in a portion of the income from the loan being classified as
qualifying income for purposes of the 95% Gross Income Test, but not for
purposes of the 75% Gross Income Test, (2) the Company may hold an interest in a
REMIC or in a FASIT less than 95% of the assets of which consists of real estate
assets (determined as if the Company held such assets), in which case the
Company's proportionate share of the income of the REMIC or FASIT may include
income that is not qualifying income for purposes of the 75% or 95% Gross Income
Tests and (3) the Company may recognize foreign currency gain from non-dollar
denominated loans which will not be qualifying income for purposes of the 75%
and 95% Gross Income Tests.

The Company has
in the past entered into, and it is possible that from time to time the Company
will continue to enter into, hedging transactions with respect to one or more of
its assets or liabilities. Any such hedging transactions could take a variety of
forms, including interest rate swap contracts, interest rate cap or floor
contracts, forward contracts, and options. To the extent that the Company enters
into a contract to hedge indebtedness incurred to acquire or carry real estate
assets, any periodic income or gain from the disposition of such contract should
be qualifying income for purposes of the 95% Gross Income Test, but not the 75%
Gross Income Test. To the extent that the Company hedges its capital assets, it
is not clear how the income from those transactions will be treated for purposes
of the Gross Income Tests.

Distribution Requirement

To avoid
subjecting its income to tax at regular corporate rates (without a deduction for
dividends paid), the Company generally must distribute to its stockholders an
amount equal to at least 95% (90% after 2000) of the Company's REIT taxable
income (before deductions of dividends paid), excluding net capital gain and
certain non-cash income including original issue discount and cancellation of
indebtedness income.

The Company
intends to make distributions to its stockholders to comply with the
Distribution Requirement. However, differences in timing between the recognition
of taxable income and the actual receipt of cash could require the Company to
borrow funds or sell assets on a short-term basis to satisfy the Distribution
Requirement. The requirement to distribute a substantial portion of the
Company's net taxable income could cause the Company to (1) sell assets in
adverse market conditions, (2) distribute amounts that represent a return of
capital, or (3) distribute amounts that would otherwise be spent on future
investments or repayment of debt.

Distributions by
the Company will be treated as ordinary dividend income to the extent of the
Company's current or accumulated earnings and profits (but not less than its
distribution requirement under Section 4981 of the Code, as described below).
The dividends are not eligible for any corporate dividends received deduction.
To the extent a distribution exceeds the amount treated as a dividend, such
distribution will be treated as a return of capital to the extent of the
shareholder's basis, and then as gain from the sale or exchange of such
shareholder's stock.

Taxation of the Company

In any year in
which the Company qualifies as a REIT, the Company generally will not be subject
to federal income tax on the portion of its REIT taxable income or capital gain
which is distributed to its stockholders. The Company will, however, be subject
to federal income tax at normal corporate income tax rates upon any
undistributed taxable income or capital gain. Stockholders will be entitled to a
credit against their federal income tax for their allocable share of tax paid by
the Company on undistributed long-term capital gains so designated in a notice
by the Company (which are treated as having been distributed to and subject to
tax in the hands of the stockholders).

Revenue Procedure
99-17 provided securities and commodities traders with the ability to elect
mark-to-market treatment for 1998 by including a statement with their timely
filed 1998 tax return. The election applies for all future years as well unless
revoked with the consent of the Internal Revenue Service (the "IRS"). The
Company elected mark-to-market treatment as a securities trader, and
accordingly, will recognize gains and losses prior to the actual disposition of
its securities. Moreover, some if not all of these constructive gains and
losses, as well as some if not all gains or losses from actual dispositions of
securities, for both 1998 and beyond, will be treated as ordinary in nature, and
not capital, as they would be in the absence of this election. There is no
assurance, however, that the Company's election will not be challenged on the
ground that it is not in fact a trader in securities, or that it is only a
trader with respect to some, but not all, of its securities. As such, there is a
risk that the Company will not be able to mark to market its securities, or that
it will be limited in its ability to recognize certain losses.

Notwithstanding
its qualification as a REIT, the Company also may be subject to tax in certain
other circumstances. If the Company fails to satisfy either the 75% or the 95%
Gross Income Test, but nonetheless maintains its qualification as a REIT because
certain other requirements are met, it generally will be subject to a 100% tax
on the greater of the amount by which the Company fails either the 75% or the
95% Gross Income Test. The Company also will be subject to a tax of 100% on net
income derived from a "prohibited transaction," and if the Company has (i) net
income from the sale or other disposition of "foreclosure property" which is
held primarily for sale to customers in the ordinary course of business or (ii)
other non-qualifying income from foreclosure property, it will be subject to
Federal income tax on such income at the highest corporate income tax rate. In
addition, pursuant to Section 4981 of the Code, if the Company in any calendar
year (current or prior) fails to distribute at least the sum of (i) 85% of its
REIT ordinary income for such year and (ii) 95% of its REIT capital gain net
income for such year, the Company would, in the current year, be subject to a 4%
Federal excise tax on the excess of the sum of such required distribution for
the current year and any undistributed amount of ordinary and capital gain net
income from the preceding taxable years over the sum of the amounts actually
distributed during the current taxable year and the income of the Company
subject to tax in the current year. The Company also may be subject to the
corporate alternative minimum tax, as well as other taxes in certain situations
not presently contemplated.

Further, if the
Company were to sell to customers Mortgage Assets or hedging instruments on a
regular basis, there is a substantial risk that such assets would be deemed
"dealer property" and that all of the profits from such sales would be subject
to tax at the rate of 100% as income from prohibited transactions.

If the Company
fails to qualify as a REIT in any taxable year and certain relief provisions of
the Code do not apply, the Company would be subject to Federal income tax
(including any applicable alternative minimum tax) on its taxable income at the
regular corporate income tax rates and may be subject to a 4% federal excise
tax.

Information Reporting Requirements and Backup Withholding

The Company
reports to its U.S. stockholders and to the IRS the amount of distributions paid
during each calendar year, and the amount of tax withheld, if any. Under the
backup withholding rules, a stockholder may be subject to backup withholding at
the rate of 31% with respect to distributions paid unless such holder (i) is a
corporation or comes within certain other exempt categories and, when required,
demonstrates this fact, or (ii) 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. A
stockholder who does not provide the Company with his 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's
income tax liability. The Treasury Department has issued regulations regarding
the backup withholding rules as applied to non-U.S. stockholders that unify and
tighten current certification procedures and forms and clarify reliance
standards. These regulations are generally effective with respect to
distributions made after December 31, 2000.

State and Local Taxes

The Company and
its stockholders may be subject to state and local tax in various states and
localities, including those states and localities in which it or they transact
business, own property, or reside. The state and local tax treatment of the
Company and its stockholders in such jurisdictions may differ from the federal
income tax treatment described above. Consequently, stockholders should consult
their own tax advisors regarding the effect of state and local tax laws on
ownership of the Common Stock.

Repurchase of Shares and Restrictions on Transfer

Two of the
requirements of qualification for the tax benefits afforded by the REIT
Provisions of the Code are that (i) during the last half of each taxable year
not more than 50% in value of the outstanding shares may be owned directly or
indirectly by five or fewer individuals (the "5/50 Rule") and (ii) there must be
at least 100 stockholders during 335 days of each taxable year of 12 months.

So that the
Company may meet these requirements at all times, the Charter prohibits any
person from acquiring or holding, directly or indirectly, shares of Common Stock
in excess of 9.8% (in value or in number of shares, whichever is more
restrictive) of the aggregate of the outstanding shares of Common Stock of the
Company. For this purpose, the term "ownership" is defined in accordance with
the REIT Provisions of the Code and the constructive ownership provisions of
Section 544 of the Code, as modified by Section 856(h)(1)(B) of the Code.

For purposes of
the 5/50 Rule, the constructive ownership provisions applicable under Section
544 of the Code attribute ownership of securities owned by a corporation,
partnership, estate or trust proportionately to its stockholders, partners or
beneficiaries, attribute ownership of securities owned by family members and
partners to other members of the same family, treat securities with respect to
which a person has an option to purchase as actually owned by that person, and
set forth rules as to when securities constructively owned by a person are
considered to be actually owned for the application of such attribution
provisions (i.e., "reattribution"). Thus, a person will be treated as owning not
only shares of Common Stock actually or beneficially owned, but also any shares
of Common Stock attributed to such person under the attribution rules described
above. Accordingly, under certain circumstances, shares of Common Stock owned by
a person who individually owns less than 9.8% of the shares outstanding
nevertheless may be in violation of the ownership limitations set forth in the
Charter. Ownership of shares of the Company's Common Stock through such
attribution is generally referred to as constructive ownership. The 100
stockholder test is determined by actual, and not constructive, ownership.

The Charter
further provides that any transfer of shares of Common Stock that would result
in disqualification of the Company as a REIT or that would (a) create a direct
or constructive ownership of shares of stock in excess of the Ownership Limit,
or (b) from and after December 2, 1997 (the "One Hundred Stockholder Date"),
result in the shares of stock being beneficially owned (within the meaning
Section 856(a) of the Code) by fewer than 100 persons (determined without
reference to any rules of attribution), or (c) result in the Company being
"closely held" within the meaning of Section 856(h) of the Code, will be null
and void, and the intended transferee (the "purported transferee") will acquire
no rights to such shares. Any purported transfer of shares that would result in
a person owning (directly or constructively) shares in excess of the Ownership
Limit (except as otherwise waived by the Board of Directors) due to the
unenforceability of the transfer restrictions set forth above will constitute
"Excess Securities." Excess Securities will automatically be deemed to have been
transferred by operation of law to a trust to be established by the Company for
the exclusive benefit of a charitable organization, until such time as the
trustee of the trust, which shall be a banking institution designated as trustee
by the Company, which is unaffiliated with either the Company or the purported
transferee, retransfers the Excess Securities. Subject to the Ownership Limit,
Excess Securities may be transferred by the trust to any person (if such
transfer would not result in Excess Securities) at a price not to exceed the
price paid by the purported transferee, the fair market value of the Excess
Securities on the date of the purported transfer, at which point the Excess
Securities will automatically cease to be Excess Securities. See
"Requirements for Qualification."

Subject to
certain limitations, the Board of Directors may increase or decrease the
Ownership Limit. In addition, to the extent consistent with the REIT Provisions
of the Code, the Board of Directors has the right, in its sole discretion,
pursuant to the Company's Charter to waive the Ownership Limit for, and at the
request of, a purchaser of the Common Stock. In connection with any such waiver,
the Company may require that the stockholder requesting such a waiver enter into
an agreement with the Company providing for the repurchase by the Company of
shares from the stockholder under certain circumstances to ensure compliance
with the REIT Provisions of the Code. Such repurchase would be at fair market
value as set forth in the agreement between the Company and such stockholder.
The consideration received by the stockholder in such repurchase might be
characterized as the receipt by the stockholder of a dividend from the Company,
and any stockholder entering into such an agreement with the Company should
consult its tax advisor in connection with its entering into such an
agreement.

The Board of
Directors waived the Ownership Limit for: (1) Highfields Capital Ltd., which, at
February 16, 1999, reported its ownership of 3,275,900 shares of Common Stock,
(2) Ellington Management Group, L.L.C., which, at November 5, 1999, reported its
ownership of 1,475,000 shares of Common Stock, and (3) Kingdon Capital
Management L.L.C., which, at January 11, 2000, reported its ownership of
1,617,600 shares of Common Stock. Any subsequent transfer of the shares held by
Highfields Capital, Ellington Management and Kingdon Capital will be subject to
the Ownership Limit, unless specifically exempted by the Company's Board of
Directors.

Every owner of
more than five percent (or such lower percentage as required by the Code or the
regulations promulgated thereunder) of all classes or series of the Company's
stock, within 30 days after the end of each taxable year, is required by the
Company's Charter to give written notice to the Company stating the name and
address of such owner, the number of shares of each class and series of stock of
the Company beneficially owned and a description of the manner in which such
shares are held. Each such owner shall provide to the Company such additional
information as the Company may request in order to determine the effect, if any,
of such beneficial ownership on the Company's status as a REIT and to ensure
compliance with the ownership limitations.

The provisions
described above may inhibit market activity and the resulting opportunity for
the holders of the Company's Common Stock to receive a premium for their shares
or warrants that might otherwise exist in the absence of such provisions. Such
provisions also may make the Company an unsuitable investment vehicle for any
person seeking to obtain ownership of more than 9.8% of the outstanding shares
of Common Stock.

Employees

The Company has
no employees. Mariner employs the executive officers of the Company, serves as
the Company's investment manager and provides various administrative services to
the Company as agreed upon.

PART III

Item 10. Directors of the Registrant.

Directors

The Company's
Charter and bylaws provide that the Board of Directors will consist of five
directors, divide the Board of Directors into three classes, Class I, II and
III, with the classes serving staggered three-year terms, and provide that the
number of directors may be changed by a majority vote of the entire Board of
Directors. The Company's bylaws provide that, except in the case of a vacancy, a
majority of the members of the Board of Directors will at all times be
independent directors that are not affiliated directly or indirectly with
Mariner Mortgage Management, L.L.C., the Company's investment manager
("Mariner"), and that any vacancies may be filled by a majority vote of the
remaining directors.

Our directors are
as follows:

`NAME                                     AGE     POSITION                             DIRECTOR SINCE

Ronald J. Artinian..................     54      Director - Class II                  2000
Mark W. Hobbs.......................     45      Director - Class I                   2000
Arthur House........................     58      Director - Class II                  2000
Jonathan Ilany......................     47      Director - Class III                 1998
William J. Michaelcheck.............     54      Chief Executive Officer,
                                                 Chairman and Director - Class III    1999`

The Company is
not aware of any family relationship between any director or executive
officer.

Ronald J.
Artinian is a private investor in First Real Estate Investment Trust of New
Jersey and, since 1992, has been a member of its Board of Trustees and a member
of its Executive and Audit Committees. Before his involvement with First Real
Estate Investment Trust of New Jersey, Mr. Artinian held various positions at
Smith Barney Inc. from 1989 to 1998, including Senior Managing Director -
National Manager of Taxable Fixed Income, and was the Executive Vice President -
National Manager of Taxable Fixed Income for Lehman Brothers Inc. from 1976 to
1989.

Mark W.
Hobbs has been a director of LASER since October 2000, and is currently
President and Chief Operating Officer of J Net Enterprises, Inc., a NYSE-listed
company. From 1995 until his appointment to J Net Enterprises in June 2000, Mr.
Hobbs was a partner in Mariner Investment Group, Inc., an affiliate of Mariner.
Prior to Mariner Investment Group, Inc., Mr. Hobbs was involved in private
investing and financial consulting from 1991 to 1995. From 1982 to 1991, Mr.
Hobbs was President of Rosewood Financial, Inc., a private investment management
company.

Arthur
House has been a director of LASER since October 2000, and is currently
President and Chief Executive Officer of Meridian Worldwide LLC, an
international public affairs firm. Mr. House was formerly Senior Vice President,
Corporate Affairs at Tenneco Inc., from June 1992 to September 1997.

Jonathan
Ilany has been a director of the Company since 1998 and an employee of
Mariner Investment Group, Inc. since September 2000. Prior to joining Mariner
Investment Group, Inc., Mr. Ilany was the Chief Executive Officer and a director
of Angiosonics, Inc., a private medical device company with operations in the
United States and Israel. Before joining Angiosonics, Inc. in 1996, Mr. Ilany
had been, since 1987, a Senior Managing Director of Bear, Stearns & Co. Inc.
("Bear Stearns") and served on the Board of Directors of The Bear Stearns
Companies Inc. until 1995.

William
J. Michaelcheck has been the President and Chief Executive Officer of the
Company since November 1999 and the Chairman and sole member of Mariner since
its inception in October 1999. Mr. Michaelcheck has been the Chairman and sole
stockholder of Mariner Investment Group, Inc. since 1992. Formerly, he was
Executive Vice President of The Bear Stearns Companies and a Senior Managing
Director of Bear Stearns, where he was co-head of the Fixed-Income Department
and also responsible for a large segment of the firm's trading activities
and risk management. Mr. Michaelcheck joined Bear Stearns in 1979 as co-creator
of the Government Bond Department, becoming a General Partner in 1981 and a
Senior Managing Director when Bear Stearns became a publicly-held corporation.
He was named Executive Vice President in 1987, and served on the firm's
Executive Committee and Management and Compensation Committee until leaving Bear
Stearns in October 1992.

Executive Officers

See the
information appearing under the caption "Executive Officers" of the Registrant
in Part I of the Form 10-K.

Information Regarding the Board of Directors

The Board of
Directors has two standing committees: the Audit Committee and the Compensation
Committee. Messrs. Artinian, Hobbs and House currently are independent directors
and serve on the Audit Committee and the Compensation Committee. The Audit
Committee is responsible for assisting the Board of Directors in fulfilling its
oversight responsibilities by recommending independent auditors and reviewing
the Company's financial reports and other financial information, the audit plan,
the Company's systems of internal controls regarding accounting, finance, legal
compliance and ethics, the audit report, the management letter and the Company's
auditing, accounting and financial reporting process generally. The Compensation
Committee is responsible for recommending to the Board of Directors the
Company's executive compensation policies for the Company's executive officers
and for administering the Company's Stock Incentive Plan.

During 2000,
there were six meetings of the Board of Directors and three meetings of the
Audit Committee. Because the Company has no employees and our executive officers
are employed by Mariner, the Compensation Committee did not need to hold any
meetings in 2000.

Compliance with Section 16(a) of the Securities Exchange Act of
1934

Section 16(a) of
the Securities Exchange Act of 1934 (the "Exchange Act") requires the Company's
executive officers and directors, and persons who own more than 10% of the
Company's common stock to file reports of ownership and changes in ownership
with the SEC and the New York Stock Exchange. Officers, directors and greater
than ten-percent stockholders are required by SEC regulations to furnish the
Company with copies of all such reports they file.

Based solely on a
review of the copies of such reports furnished to the Company, or written
representations that no Form 5 was required, the Company believes that all
Section 16(a) filing requirements applicable to its officers, directors and
greater than ten-percent beneficial owners were complied with through December
31, 2000, except that Mr. Artinian failed to file timely a Form 3 for June 2000
and a Form 4 for July 2000 and Messrs. Hobbs and House failed to file timely
a Form 3 for October 2000.

Item 11. Executive Compensation.

Executive Compensation

The Company's
executive officers are employed by Mariner and, accordingly, LASER did not pay
any annual compensation to them for their services as executive officers in
2000. LASER did not enter into any employment agreements with its executive
officers in 2000.

Grants of Awards

During 2000, no
deferred stock awards were granted. No stock options or stock appreciation
rights were outstanding as of December 31, 2000 and none were owned by any of
the Company's executive officers during 2000.

Compensation of Directors

The Company pays
each independent director compensation of $10,000 per annum and a fee of $500
for each meeting of the Board of Directors that he attends. The directors may be
granted awards from time to time pursuant to the Company's 1997 Stock Incentive
Plan. The Company reimburses each director for ordinary and necessary expenses
related to such director's attendance at Board of Directors and committee
meetings. During 2000, no options were granted to any directors under the 1997
Stock Incentive Plan.

Compensation Committee Interlocks and Insider Participation

No interlocking
relationship exists between members of the Company's Board of Directors or the
Compensation Committee or officers responsible for compensation decisions and
the Board of Directors or compensation committee of any other company, nor has
such interlocking relationship existed in the past.

Performance Graph

The following
graph presents a comparison of cumulative total returns for the Company's common
stock since the commencement of trading of the Company's common stock on
November 27, 1997 through March 31, 2001 with the S&P 500 index and the
Bloomberg L.P. BBREIT Mortgage Index ("MREIT"), a capitalization-weighted index
of infinite life mortgage REITs having a market capitalization of $15 million or
greater. The total return reflects stock price changes and the value of
dividends and distributions for the Company's common stock and for each of the
comparative indices. The graph assumes that the value of an investment in the
Company's common stock and each index was $100 on November 26, 1997, and that
all dividends were reinvested. The stock price performance on the graph is not
necessarily indicative of future price performance.

`------------------ ---------------- ---------------- --------------- ---------------- ---------------- ---------------
                     11/26/1997       12/31/1997       12/31/1998      12/31/1999       12/31/2000       3/31/2001
------------------ ---------------- ---------------- --------------- ---------------- ---------------- ---------------
LASER                  $100.00          $100.00          $49.97          $58.67           $49.65           $56.61
------------------ ---------------- ---------------- --------------- ---------------- ---------------- ---------------
Bloomberg              $100.00          $89.46           $73.06          $76.72           $85.71          $108.25
Mortgage REIT
Index
------------------ ---------------- ---------------- --------------- ---------------- ---------------- ---------------
S&P 500                $100.00          $102.12         $131.30          $158.92          $144.46         $127.34
------------------ ---------------- ---------------- --------------- ---------------- ---------------- ---------------`

Item 12. Security Ownership of Certain Beneficial Owners and
Management.

Security Ownership of Certain Beneficial Owners and Management

The following
table sets forth certain information known to the Company with respect to
beneficial ownership of its common stock as of April 13, 2001, by (i) each
executive officer, director and nominee for director, (ii) any person known to
the Company to be the beneficial owner of five percent or more of the common
stock and (iii) all directors and executive officers as a group. Unless
otherwise indicated in the footnotes to the table, the beneficial owners named
have, to the knowledge of the Company, sole voting and investment power with
respect to the shares beneficially owned, subject to community property laws
where applicable.

`SHARES
                                                                             ------
                                                                       BENEFICIALLY OWNED
                                                                       ------------------
 NAME AND ADDRESS OF BENEFICIAL OWNER (1)                           NUMBER
                                                                   OF SHARES         PERCENT

 William J. Michaelcheck (2) ...............................         836,900           5.96%
 Charles R. Howe II (2).....................................         836,900           5.96%
 Jonathan Ilany (2).........................................         836,900           5.96%
 Ronald J. Artinian*........................................           6,000           0.04%
 Mark W. Hobbs..............................................               0               *
 Arthur House...............................................               0               *
 Highfields Capital Management L.P. (3).....................       3,275,900          23.33%
 Legg Mason, Inc. (4).......................................       1,938,330          13.81%
 New Ellington Partners LP (5)..............................       1,475,000          10.51%
 Kingdon Capital Management LLC (6).........................       1,117,600           7.96%
 SLS Management (7).........................................       1,097,838           7.81%
 Warren E. Buffett (8)......................................         979,900           6.98%
 K Capital Partners LLC (9).................................         924,500           6.59%
 Jay Buck (10)..............................................         899,500           6.41%
 Mariner Investment Group, Inc. (2).........................         836,900           5.96%
 All directors and executive officers as a group (6 persons)         836,900           6.00%
_______________
*  Less than one percent`

|(1) | The address of each of the executive officers, directors and
nominees for director of LASER is c/o LASER Mortgage Management, Inc., 65 East
55th Street, New York, New York 10022. The address of Highfields Capital
Management L.P. is 200 Clarendon Street, 51st Floor, Boston, Massachusetts
02117. The address of Legg Mason, Inc. is 100 Light Street, Baltimore, Maryland
21202. The address of New Ellington Partners LP is 53 Forest Avenue, Old
Greenwich, Connecticut 06870. The address of Kingdon Capital Management LLC is
152 West 57th Street, New York, New York 10019. The address of SLS Management,
LLC is 140 West 57th Street, New York, New York 10019. The address of Warren E.
Buffett is 1440 Kiewit Plaza, Omaha, Nebraska 68131. The address of K Capital
Partners LLC is 441 Stuart Street, Boston, Massachusetts 02116. The address of
Jay Buck is 104 Field Point Road, Greenwich, Connecticut 06830. The address of
Mariner Investment Group, Inc. is 65 East 55th Street, New York, New York
10022.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Based on Schedule 13D filed on November 12, 1999. Includes all of
the shares of common stock owned beneficially by clients advised by Mariner
Investment Group, Inc., of which Mr. Michaelcheck is the sole stockholder, Mr.
Howe is the Chief Financial Officer and Mr. Ilany is an employee.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Based on Schedule 13G filed on February 16, 1999.
|--- | -------------------------------------------------

|(4) | Based on Schedule 13G filed on February 12, 1999. Includes all of the shares of
common stock owned beneficially by certain mutual funds advised by Legg Mason,
Inc.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Based on Schedule 13D filed on November 5, 1999.
|--- | ------------------------------------------------

|(6) | Based on Schedule 13G/A filed on February 13, 2001
|--- | --------------------------------------------------

|(7) | Based on Schedule 13G/A filed on February 14, 2001.
|--- | ---------------------------------------------------

|(8) | Based on Schedule 13G filed on April 13, 2001.
|--- | ----------------------------------------------

|(9) | Based on Schedule 13G filed on September 17, 1999.
|--- | --------------------------------------------------

|(10) | Based on Schedule 13G filed on July 24, 2000.
|---- | ---------------------------------------------

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Since November 1,
1999, Mariner has served as the external manager of LASER and is responsible for
day-to-day management of its investments and operations. William J.
Michaelcheck, the Chairman of Mariner, was appointed LASER's President and Chief
Executive Officer. Upon completion of the transition to Mariner, the Company
terminated its consulting arrangement with BlackRock Financial Management and
Robert J. Gartner, who was its Vice President and responsible for its day-to-day
investment decisions, resigned.

Under the current
management agreement, which was entered into on November 1, 2000, Mariner is
entitled to receive a (1) base management fee of $50,000 per month payable in
cash and (2) an annual incentive fee payable in cash. The incentive fee will
equal the number of shares outstanding on November 1, 2001, multiplied by:


          10% of the
difference between the 15-day average closing market price (plus any
distributions per share other than Common Stock) of LASER's common stock
preceding November 1, 2001 (or such earlier date, as set forth in the agreement)
and $3.317 per share (which approximates the average closing price of LASER's
common stock for the fifteen days ended October 31, 2000) up to the equivalent
of $3.50 per share;


          15% of the
difference over $3.50 per share up to $4.00 per share; and


          20% of the
difference over $4.00 per share.

The current
management agreement terminates on November 1, 2001, but is terminable by the
Company without cause or penalty on 30 days' notice and by Mariner on 90 days'
notice. In addition, under the terms of the current management agreement,
Mariner is no longer entitled to receive a minimum fee if the Company adopts a
plan of liquidation.

Pursuant to the
terms of the Mariner management agreement in effect during the year ended
December 31, 2000, the Company incurred base fees of $294,193 and no incentive
fee. The Board of Directors' adoption on April 25, 2001 of the resolutions
approving the liquidation and dissolution of the Company triggered the payment
of a fee based on the Company's stock price to Mariner under the management
agreement, which the Company expects to be approximately $1.2 million.

In January 2000,
Charles R. Howe II, the Chief Financial Officer of the Manager, was appointed
LASER's Vice President, Treasurer and Secretary. In September 2000, Jonathan
Ilany became an employee of Mariner Investment Group, Inc. and ceased to be an
independent director.

Stuart H.
Coleman, a partner in the law firm of Stroock & Stroock & Lavan LLP, was
a director of LASER until he resigned in October 2000. That firm and Mr. Coleman
perform legal services for the Company.

SIGNATURES

Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment to the Annual Report on Form 10-K/A to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, State of New York.

| | LASER MORTGAGE MANAGEMENT, INC.
By: /s/ CHARLES R. HOWE II
      Charles R. Howe II
      Chief Financial Officer and Treasurer
| | -------------------------------------------------------------------------------------------------------------------------------

Dated: April 30, 2001

Pursuant to the
requirements of the Securities Exchange Act of 1934, this Amendment to the
Annual Report on Form 10-K/A has been signed below by the following persons in
the capacities and on the date indicated.

`SIGNATURE                          TITLE                                                 DATE
---------                          -----                                                 ----


/S/ WILLIAM J. MICHAELCHECK        Chief Executive Officer, Chairman and Director        April 30, 2001
---------------------------
William J. Michaelcheck            (Principal Executive Officer)

/S/ CHARLES R. HOWE II             Chief Financial Officer                               April 30, 2001
----------------------
Charles R. Howe II                 (Principal Financial and Accounting Officer)

/S/ RONALD J. ARTINIAN             Director                                              April 30, 2001
----------------------
Ronald J. Artinian

/S/ MARK W. HOBBS                  Director                                              April 30, 2001
-----------------
Mark Hobbs

/S/ ARTHUR HOUSE                   Director                                              April 30, 2001
----------------
Arthur House

/S/ JONATHAN  ILANY                Director                                              April 30, 2001
-------------------
Jonathan Ilany`