##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
 Form 10-K
 ANNUAL REPORT PURSUANT TO
    SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)  OF
    THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number:
    001-32958
 Crystal River Capital,
    Inc.
 (Exact name of registrant as
    specified in its charter)
  Maryland

20-2230150(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)Three World Financial
    Center,
    200 Vesey Street, 10th Floor New York, NY

10281-1010(Address of principal executive
    offices)

(Zip Code)   Registrants telephone number, including area code:
 (212) 549-8400
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each
    Class

Name of Each
    Exchange on Which RegisteredCommon Stock, $0.001 par value

New York Stock Exchange   Securities registered pursuant to Section 12(g) of the
    Act:
    None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
 Large accelerated
    filer o     Accelerated
    filer o     Non-accelerated
    filer þ
  Rule 12b-2 o þ
  MARKET
    VALUE
    OUTSTANDING
    STOCK
    DOCUMENTS
    INCORPORATED BY REFERENCE




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##### 



CRYSTAL RIVER
    CAPITAL, INC.
  PART IItem 1.

Business


2Item 1A.

Risk
    Factors


24Item 1B.

Unresolved Staff
    Comments


53Item 2.

Properties


53Item 3.

Legal
    Proceedings.


53Item 4.

Submission of
    Matters to a Vote of Security Holders


53PART IIItem 5.

Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities


54Item 6.

Selected Financial
    Data


56Item 7.

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


58Item 7A.

Quantitative and
    Qualitative Disclosures About Market Risk


82Item 8.

Financial
    Statements and Supplementary Data


87Item 9.

Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


87Item 9A.

Controls and
    Procedures


88Item 9A(T)

Controls and
    Procedures


88Item 9B.

Other
    Information


88PART IIIItem 10.

Directors,
    Executive Officers and Corporate Governance


89Item 11.

Executive
    Compensation


89Item 12.

Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


89Item 13.

Certain
    Relationships and Related Transactions, and Director
    Independence


89Item 14.

Principal
    Accounting Fees and Services


89PART IVItem 15.

Exhibits, Financial
    Statement Schedules


89Signatures




S-1Index to
    Consolidated Financial Statements and Schedule


F-1EX-3.1: ARTICLES OF AMENDMENTS AND RESTATEMENTEX-21.1: SUBSIDIARIESEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION   i




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EXPLANATORY
    NOTE
  Except where the context suggests otherwise in this report,
    the terms Crystal River, we,
    us and our refer to Crystal River
    Capital, Inc. and its subsidiaries; Hyperion Brookfield
    Crystal River and our Manager refer to our
    external manager, Hyperion Brookfield Crystal River Capital
    Advisors, LLC; Hyperion Brookfield refers to
    Hyperion Brookfield Asset Management, Inc., the parent company
    of Hyperion Brookfield Crystal River; Brookfield
    Sub-Advisor
    refers to Brookfield Crystal River Capital L.P., a
    sub-advisor
    that has been retained by us and Hyperion Brookfield Crystal
    River; Brookfield refers to Brookfield Asset
    Management Inc., formerly known as Brascan Corporation, the
    indirect parent company of Hyperion Brookfield and Brookfield
    Sub-Advisor,
    together with its subsidiaries; and Ranieri &
    Co. refers to Ranieri & Co., Inc., another
    sub-advisor
    that has been retained by us and Hyperion Brookfield Crystal
    River.
  FORWARD-LOOKING
    INFORMATION
  Form 10-K,
   1




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PART I  Item 1.
    Business.  Overview
  and/or
         2




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Our
    Manager
  day-to-day sub-advisors Sub-Advisor, 17-year
    sub-advisors day-to-day sub-advisory sub-advisors, sub-advisors
  sub-advisors
 3




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Our Business
    Strengths
  
    Access to a Top-Ranked Investment Advisor with a Superior Track
    Record
    Access to Complementary Investment Skills of Leading
    Sub-Advisors
    Experienced Professionals and Senior Management Team
    Diversified Investment Strategy
    Access to Hyperion Brookfields Infrastructure
    Relationships and Deal Flow of Hyperion Brookfield and Our
    Sub-Advisors
    Alignment of Interests of Hyperion Brookfield Crystal River and
    Our Stockholders  Our Investment
    Strategy
  Relative Value
    Philosophy
   4




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loan-to-value step-down),
      Our Target
    Asset Classes
    Asset
    Class



Principal
    InvestmentsMBS RMBS



Agency ARMs

Non-Agency ARMs

Other RMBS 5




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Asset
    Class



Principal
    Investments CMBS



Investment Grade CMBS (Senior and
    Subordinated)

Below-Investment Grade CMBS (Rated
    and Non-Rated)Mortgages and Other Real Estate
    Debt



Mortgage Loans

Bridge Loans

B Notes

Mezzanine Loans

Land Loans

Construction Loans

Construction Mezzanine LoansCommercial Real Estate



Direct Property Ownership

REIT Common and Preferred Stock
    investment

Preferred Equity Investments

Joint VenturesOther Asset-Backed Securities



CDOs

Net Interest Margin Securities,
    Residual Securities

Consumer ABS

Aircraft ABSAlternative Assets



Hydroelectric, Gas- and Coal-Fired
    Power Generating Facilities

Timber

Other Equity Investments         Residential Mortgage Backed
    Securities.
 6




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Commercial Mortgage Backed
    Securities.
  Whole Mortgage Loans and Bridge
    Loans.
 7




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Commercial Real Estate Subordinated
    Loans.
  Mezzanine Loans. and/or
  Construction Loans and Construction Mezzanine
    Loans.
 8




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Direct Real Property Ownership. triple-net 10-year
  Preferred Equity Investments.
  REIT Common and Preferred Stock
    Investments.
  Net Interest Margin Securities. sub-prime sub-prime
  Consumer Asset-Backed Securities.
 9




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Collateralized Debt Obligations.
  Power and Timber.
  Other Equity Investments.
 10




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Other Investments.
  High Yield Corporate Bonds, Investment Grade
    Corporate Bonds and Related Derivatives.
  Government Bonds and Related
    Derivatives. non-U.S. governments
  Other Fixed Income-Related
    Instruments. over-the-counter
    Investment
    Sourcing
  Sub-Advisor
    Sub-Advisor,
 11




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Investment
    Process
    Sub-Advisor.
  Sub-Advisor, Sub-Advisor
  Sub-Advisor, Sub-Advisor
  Sub-Advisor
 12




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Our
    Portfolio
     Estimated


Percent of


Weighted
    Average


ConstantAsset


Total





Months to


Yield to


PrepaymentValue(1)


Investments


Coupon


Reset(2)


Maturity


Rate(3)(In
    thousands)Commercial Real Estate Debt:Investment grade CMBS

$
231,116



6.4
%


5.63
%






6.06
%Below investment grade CMBS


241,456



6.7



4.97







11.98Real estate loans


237,670



6.6



6.93







6.79Total commercial real estate debt


710,242



19.7



5.68







8.32RMBS:Non-Agency Prime MBS:5/1 adjustable rate























%Investment grade


15,872



0.4



5.67



52.15



6.88



36.53Below investment grade


151,660



4.2



7.21



15.69



24.34



43.57Non-Agency
    Sub-prime
    MBS:Investment grade


73,426



2.0



7.24



8.42



9.29



29.74Below investment grade


46,285



1.3



7.53



3.29



15.99



29.46Agency:3/1 hybrid adjustable rate


617,334



17.2



5.19



24.51



4.79



30.445/1 hybrid adjustable rate


1,914,767



53.2



5.55



47.49



4.96



22.20Total RMBS


2,819,344



78.3



5.68



38.66



6.27



25.95CDO Preferred Stock


4,560



0.1











Other ABS:Aircraft ABS


46,132



1.3



5.81







8.14Other investments


20,133



0.6



0.12







Total investments

$
3,600,411



100.0
%


5.78
%






6.67     (1)
    
    Real estate loans are presented at
    amortized cost. All other investments listed in this chart are
    presented at their estimated fair value.(2)
    
    Represents number of months before
    conversion to floating rate.(3)
    
    Represents the estimated percentage
    of principal that will be prepaid over the next 12 months
    based on historical principal paydowns.    non-U.S. dollar mark-to-market
 13




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2005-1 2006-1.
  10-year
  Risk
    Management
    Our Financing
    Strategy
  Leverage Strategy.
 14




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
    The CDOs that Hyperion Brookfield co-structures and manages are
    significantly leveraged vehicles. The principal amount of the
    debt securities issued by the CDOs is much greater than the
    equity tranches, which function as a first loss
    piece.
    Hyperion Brookfield uses total return swaps, which are leveraged
    instruments, to enhance investment returns.
    For its closed-end bond fund, Hyperion Brookfield trades various
    derivative instruments that are inherently leveraged, such as
    interest rate futures, options and swaps.  Repurchase Agreements.
      Warehouse Facilities.
       15




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Term Financing  CDOs.
  2005-1
  2005-1
  2006-1. 2006-1 2006-1. 2006-1 2006-1.
  Total Return Swaps.
     16




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Our Hedging and
    Interest Rate Risk Management Strategy
        
    puts and calls on securities or indices of securities;
    Eurodollar futures contracts and options on such contracts;
    interest rate swaps
    and/or
    swaptions; and
    other similar transactions.    de minimis
  10-year
  Resolution of
    Potential Conflicts of Interest in Allocation of Investment
    Opportunities
   17




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Sub-Advisor Sub-Advisors
          
    Split price executions.  These are
    situations where Hyperion Brookfield places an order for
    multiple clients and the order is executed at different prices.
    Hyperion Brookfields policy is that the executions are to
    be allocated to the participating accounts so that each account
    receives the same average price.
    Cross trades.  These are trades where
    Hyperion Brookfield places an order for a client account to buy
    (or sell) a particular security and places a simultaneous or
    virtually simultaneous order for another client account to sell
    (or buy) the same security. In such case, under Hyperion
    Brookfields policies, the pair of transactions must be
    approved by 18




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the chief investment officer and executed at the prevailing
    market price as determined by an independent broker-dealer.  
    Principal transactions.  Under the terms
    of our management agreement with Hyperion Brookfield Crystal
    River, we have agreed not to acquire an investment from, sell an
    investment to or make any co-investment with any proprietary
    account of Hyperion Brookfield, Brookfield or any of their
    respective affiliates, which we refer to as related persons, or
    any account advised by any related person, borrow funds from or
    lend funds to any related person, or invest in any investment
    vehicle advised by any related person unless the transaction is
    on terms no less favorable than can be obtained on an arms
    length basis from unrelated third parties based on prevailing
    market prices, other reliable indicators of fair market value or
    an independent valuation or appraisal and has been approved in
    advance by a majority of our independent directors. If we invest
    in an investment vehicle advised by a related person, including,
    for example, a private investment fund managed by an affiliate
    of Brookfield, and the asset class of such investment is one
    that we are professionally staffed to underwrite, we expect,
    although no assurance can be given, that our Manager
    and/or such
    affiliate would waive any base and incentive management fees
    relating to such investment in excess of the base and incentive
    management fees that we would owe our Manager in respect of such
    investment had we made the investment directly and not through
    such affiliate.  sub-advisors and/or and/or sub-advisor sub-advisor,
  Policies with
    Respect to Certain Other Activities
         19




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Operating and
    Regulatory Structure
        Sub-Advisor sub-advisor sub-advisor sub-advisor
  Exclusion from
    Regulation Under the Investment Company Act
       20




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loan-to-value loan-to-value
         21




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Competition
    sub-advisors
  Government
    Regulation
    Employees
    Code of Business
    Conduct and Ethics and Corporate Governance Documents
   22




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http://www.crystalriverreit.com. 10281-1010.
  Website Access to
    Reports
  http://www.crystalriverreit.com. Form 10-K, 10-Q, Form 8-K, http://www.sec.gov
 23




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Item 1A.
    Risk
    Factors.  Risks Related to
    Our Business and Investment Strategy
  We have a
    limited operating history and limited experience as a REIT, and
    we may not be able to successfully operate our business or
    generate sufficient revenue to make or sustain dividends to
    stockholders.
    We are
    dependent on Hyperion Brookfield Crystal River and our
    sub-advisors
    and may not find suitable replacements if Hyperion Brookfield
    Crystal River terminates the management agreement.
  sub-advisors,
  Hyperion
    Brookfield Crystal River has limited prior experience managing a
    REIT and we cannot assure you that Hyperion Brookfield Crystal
    Rivers past experience will be sufficient to successfully
    manage our business as a REIT.
    We are
    dependent upon Hyperion Brookfields key personnel and the
    resources of our
    sub-advisors
    for our success and the departure of any of these key personnel
    or the elimination of resources of our
    sub-advisors
    could negatively affect our performance.
   24




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sub-advisors
  Our base
    management fee is payable regardless of our performance, which
    could lead to conflicts of interest with our
    Manager.
    Hyperion
    Brookfield Crystal Rivers incentive fee may induce it to
    make certain investments, including speculative investments,
    that increase the risk of our investment
    portfolio.
    Hyperion
    Brookfield Crystal River manages our portfolio pursuant to very
    broad investment guidelines and our board of directors does not
    approve each investment decision made by Hyperion Brookfield
    Crystal River, which may result in our making riskier
    investments with which you do not agree and which could cause
    our operating results and the value of our common stock to
    decline.
  sub-advisors Sub-Advisor, Sub-Advisor. Sub-Advisor
   25




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We may change
    our investment strategy and asset allocation without stockholder
    consent, which may result in riskier investments.
    There are
    conflicts of interest in our relationship with Hyperion
    Brookfield Crystal River, which could result in decisions that
    are not in the best interests of our stockholders.
  day-to-day and/or
    
    unsatisfactory performance by Hyperion Brookfield Crystal River
    that is materially detrimental to us or
    a determination that the management fee payable to Hyperion
    Brookfield Crystal River is not fair, subject to Hyperion
    Brookfield Crystal Rivers right to prevent such a
    termination by accepting a mutually acceptable reduction of
    management fees.  12-month
     26




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Hyperion
    Brookfield and our
    sub-advisors
    are not contractually obligated to dedicate their time to us and
    may engage in other activities that compete with us, which may
    result in conflicts of interest that could cause our results of
    operations to be lower or result in increased risk to the value
    of our investment portfolio.
  Sub-Advisor Sub-Advisor sub-advisor Sub-Advisor Sub-Advisor Sub-Advisor 15-year sub-advisor Sub-Advisor Sub-Advisor
  We may compete
    with existing and future investment vehicles for access to
    Hyperion Brookfield and our
    sub-advisors
    and their affiliates, which may reduce investment opportunities
    available to us.
   27




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sub-advisors
  Our investment
    portfolio is heavily concentrated in agency adjustable-rate RMBS
    and we cannot assure you that we will be successful in achieving
    a more diversified portfolio.
    We leverage
    our investments, which may negatively affect our return on our
    investments and may reduce cash available for
    distribution.
     28




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Our failure to
    manage future growth effectively may have a material negative
    impact on our business, financial condition and results of
    operations.
      We may acquire
    investments from Hyperion Brookfield and Brookfield or their
    affiliates or otherwise participate in investments in which they
    have an interest or for which they have a related investment,
    which could result in conflicts of interest.
    We operate in
    a highly competitive market for investment opportunities and we
    may not be able to identify and make investments that are
    consistent with our investment objectives.
   29




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Failure to
    procure adequate capital and funding would negatively affect our
    results and may, in turn, negatively affect the market price of
    shares of our common stock and our ability to distribute
    dividends.
    If we issue
    senior securities, we will be subject to additional restrictive
    covenants and limitations on our operating flexibility, which
    could materially decrease cash available for distribution to our
    stockholders.
    We may not be
    able to successfully complete securitization transactions, which
    could inhibit our ability to grow our business and could
    negatively affect our results of operations.
   30




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We expect that
    the use of CDO financings with over-collateralization
    requirements may have a negative impact on our cash
    flow.
  2005-1, and/or
  An increase in
    our borrowing costs relative to the interest we receive on our
    assets may negatively affect our profitability and thus our cash
    available for distribution to our stockholders.
    We may not be
    able to renew the total return swaps that we enter into, which
    could adversely affect our leveraging strategy.
   31




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
    increases in the providers cost of funding;
    insufficient volume of business with a particular provider;
    our desire to invest in a type of swap that the provider does
    not view as economically attractive due to changes in interest
    rates or other market factors; or
    our inability to agree with a provider on terms.    Hedging
    against interest rate exposure may adversely affect our
    earnings, which could reduce our cash available for distribution
    to our stockholders.
    
    interest rate hedging can be expensive, particularly during
    periods of rising and volatile interest rates;
    available interest rate hedges may not correspond directly with
    the interest rate risk for which protection is sought;
    the duration of the hedge may not match the duration of the
    related liability;
    the amount of income that a REIT may earn from hedging
    transactions (other than through TRSs) to offset interest rate
    losses is limited by federal tax provisions governing REITs;
    the credit quality of the party owing money on the hedge may be
    downgraded to such an extent that it impairs our ability to sell
    or assign our side of the hedging transaction; and
    the party owing money in the hedging transaction may default on
    its obligation to pay.   32




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Our failure to
    achieve adequate operating cash flow could reduce our cash
    available for distribution to our stockholders.
    Loss of
    Investment Company Act exclusion would adversely affect us and
    could cause a decline in the market price of our common stock
    and limit our ability to distribute dividends.
         33




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Rapid changes
    in the values of our MBS and other real estate related
    investments may make it more difficult for us to maintain our
    qualification as a REIT or exclusion from regulation under the
    Investment Company Act, which may cause us to change our mix of
    portfolio investments which may not produce optimal returns
    consistent with our investment strategy.
  and/or and/or
 34




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We are highly
    dependent on communications and information systems operated by
    Hyperion Brookfield or by third parties, and systems failures
    could significantly disrupt our business, which may, in turn,
    negatively affect the market price of our common stock and our
    ability to pay dividends.
    We will be
    required to comply with Section 404 of the Sarbanes-Oxley
    Act of 2002 and furnish a report on our internal control over
    financial reporting as of the end of 2007.
      Terrorist
    attacks and other acts of violence or war may affect the market
    for our common stock, the industry in which we conduct our
    operations and our profitability.
   35




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Risks Related to
    Our Investments
  Our real
    estate investments are subject to risks particular to real
    property, any of which could reduce our returns on such
    investments and limit our cash available for distribution to our
    stockholders.
    
    acts of God, including hurricanes, earthquakes, floods and other
    natural disasters, which may result in uninsured losses;
    acts of war or terrorism, including the consequences of
    terrorist attacks, such as those that occurred on
    September 11, 2001;
    adverse changes in national and local economic and market
    conditions;
    changes in governmental laws and regulations, fiscal policies
    and zoning ordinances and the related costs of compliance with
    laws and regulations, fiscal policies and ordinances;
    costs of remediation and liabilities associated with
    environmental conditions such as indoor mold; and
    the potential for uninsured or underinsured property losses.    The mortgage
    loans we invest in and the mortgage loans underlying the MBS and
    asset-backed securities we invest in are subject to delinquency,
    foreclosure and loss, which could result in losses to
    us.
   36




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and/or
  and/or
  debtor-in-possession
      sub-prime Sub-prime higher-than-average and/or sub-prime
 37




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We may not be
    able to identify satisfactory alternative investments to
    successfully balance the interest rate or
    mark-to-market
    risk inherent in our RMBS investments, which could result in
    losses to us.
  mark-to-market
  An increase in
    the yield spread of our assets may cause the market price of our
    common stock to drop.
    Our
    investments in CMBS generally are subordinated and could subject
    us to increased risk of losses.
      Our assets may
    include high yield and subordinated corporate securities that
    have greater risks of loss than secured senior loans and if
    those losses are realized, they could negatively affect our
    earnings, which could materially decrease cash available for
    distribution to our stockholders.
   38




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loan-to-value
          We may
    continue to invest in the equity securities of CDOs, and such
    investments involve various significant risks, including that
    CDO equity receives distributions from the CDO only if the CDO
    generates enough income to first pay the holders of its debt
    securities and its expenses.
    We may enter
    into warehouse agreements in connection with investments in the
    equity securities of CDOs structured for us and, if the
    investment in a CDO is not consummated, the warehoused
    collateral will be sold and we must bear any loss resulting from
    the purchase price of the collateral exceeding the sale
    price.
   39




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We may lose
    money on our repurchase transactions if the counterparty to the
    transaction defaults on its obligation to resell the underlying
    security back to us at the end of the transaction term, or if
    the value of the underlying security has declined as of the end
    of that term or if we default on our obligations under the
    repurchase agreement.
  30-90 days.
    Investments in
    mezzanine loans involve greater risks of loss than senior loans
    secured by income-producing properties.
   40




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Increases in
    interest rates could negatively affect the value of our
    investments, which could result in reduced earnings or losses
    and negatively affect the cash available for distribution to our
    stockholders.
        We remain
    subject to losses on our mortgage portfolio despite the
    significant concentration of highly-rated MBS in our
    portfolio.
    Some of our
    portfolio investments are recorded at fair value as estimated by
    management and reviewed by our board of directors and, as a
    result, there is uncertainty as to the value of these
    investments.
   41




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The value of
    investments denominated or quoted in international currencies
    may decrease due to fluctuations in the relative rates of
    exchange among the currencies of different nations and by
    exchange control regulations.
    Declines in
    the market values of our investments may adversely affect
    periodic reported results and credit availability, which may
    reduce earnings and, in turn, cash available for distribution to
    our stockholders.
  available-for-sale. available-for-sale
      The lack of
    liquidity in our investments may harm our
    business.
    Failure to
    comply with negative covenants contained in our repurchase
    facilities agreements will limit available financing under these
    agreements.
   42




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day-to-day and/or
  We may not be
    able to acquire eligible investments for a CDO issuance, or we
    may not be able to issue CDO securities on attractive terms,
    which may require us to seek more costly financing for our
    investments or to liquidate assets.
    A prolonged
    economic slowdown, a recession or declining real estate values
    could impair the performance of our investments and harm our
    operating results.
    We may be
    exposed to environmental liabilities with respect to properties
    to which we take title, which could impair the performance of
    our investments and harm our operating results.
  clean-up
 43




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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 and involve
    risks and costs that could expose us to unexpected economic
    losses in the future.
      e.g.
  Prepayment
    rates could negatively affect the value of our MBS, which could
    result in reduced earnings or losses and negatively affect the
    cash available for distribution to our
    stockholders.
   44




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Our
    Managers due diligence may not reveal all of an
    entitys liabilities and may not reveal other weaknesses in
    its business, which could lead to investment
    losses.
    We, or other
    owners of income-producing real property, may not be able to
    relet or renew leases of properties on favorable
    terms.
    Insurance on
    commercial real estate may not cover all losses.
    Any
    investments in timber assets will expose us to special
    risks.
   45




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##### Table of Contents



Any
    investments in power generation assets will expose us to special
    risks.
  intra-day
  Risks Related to
    Our Organization and Structure
  Our charter
    and bylaws contain provisions that may inhibit potential
    takeover bids that you and other stockholders may consider
    favorable, and the market price of our common stock may be lower
    as a result.
    
    There are ownership limits and restrictions on
    transferability and ownership in our
    charter.  In order to qualify as a REIT for
    each taxable year after 2005, not more than 50% of the value of
    our outstanding stock may be owned, directly or constructively,
    by five or fewer individuals during the second half of any
    calendar year and our shares must be beneficially owned by 100
    or more persons during at least 335 days of a taxable year
    of 12 months or during a proportionate part of a shorter
    taxable year. To assist us in satisfying these tests, our
    charter generally prohibits any person from beneficially or
    constructively owning more than 9.8% in value or number of
    shares, whichever is more restrictive, of any class or series of
    our outstanding capital stock, subject to important exceptions.
    These restrictions may:  
    discourage a tender offer or other transactions or a change in
    the composition of our board of directors or control that might
    involve a premium price for our shares or otherwise be in the
    best interests of our stockholders; or
    result in shares issued or transferred in violation of such
    restrictions being automatically transferred to a trust for a
    charitable beneficiary and thereby resulting in a forfeiture of
    ownership of the additional shares.  
    Our charter permits our board of directors to issue stock
    with terms that may discourage a third party from acquiring
    us.  Our charter permits our board of
    directors to amend the charter without stockholder approval to
    increase the total number of authorized shares of stock or the
    number of shares of any class or series and to issue common or
    preferred stock having preferences, conversion or other rights,
    voting powers, restrictions, limitations as to distributions,
    qualifications, or terms or conditions of redemption as
    determined by our board of directors. Thus, our board of
    directors could authorize the issuance of stock with terms and
    conditions that could have the effect of discouraging a takeover
    or other transaction in which holders of some or a majority of
    our shares might receive a premium for their shares over the
    then-prevailing market price of our shares.
    Maryland Control Share Acquisition
    Act.  Maryland law provides that control
    shares of a corporation acquired in a control share
    acquisition will have no voting rights except to the
    extent approved by a vote of two-thirds of the votes eligible to
    be cast on the matter under the Maryland Control Share
    Acquisition Act. Control shares means 46




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##### Table of Contents



voting shares of stock that, if aggregated with all other shares
    of stock owned by the acquiror or in respect of which the
    acquiror is able to exercise or direct the exercise of voting
    power (except solely by virtue of a revocable proxy), would
    entitle the acquiror to exercise voting power in electing
    directors within one of the following ranges of voting power:
    one-tenth or more but less than one-third, one-third or more but
    less than a majority, or a majority or more of all voting power.
    A control share acquisition means the acquisition of
    control shares, subject to certain exceptions.  If voting rights or control shares acquired in a control share
    acquisition are not approved at a stockholders meeting or
    if the acquiring person does not deliver an acquiring person
    statement as required by the Maryland Control Share Acquisition
    Act, then subject to certain conditions and limitations, the
    issuer may redeem any or all of the control shares for fair
    value. If voting rights of such control shares are approved at a
    stockholders meeting and the acquiror becomes entitled to
    vote a majority of the shares of stock entitled to vote, all
    other stockholders may exercise appraisal rights. Our bylaws
    contain a provision exempting acquisitions of our shares from
    the Maryland Control Share Acquisition Act. However, our board
    of directors may amend our bylaws in the future to repeal or
    modify this exemption, in which case any control shares of our
    company acquired in a control share acquisition will be subject
    to the Maryland Control Share Acquisition Act.  
    Business combinations.  Under Maryland
    law, business combinations between a Maryland
    corporation and an interested stockholder or an affiliate of an
    interested stockholder are prohibited for five years after the
    most recent date on which the interested stockholder becomes an
    interested stockholder. These business combinations include a
    merger, consolidation, share exchange, or, in circumstances
    specified in the statute, an asset transfer or issuance or
    reclassification of equity securities. An interested stockholder
    is defined as:  
    any person who beneficially owns 10% or more of the voting power
    of the corporations shares; or
    an affiliate or associate of the corporation who, at any time
    within the two-year period prior to the date in question, was
    the beneficial owner of 10% or more of the voting power of the
    then outstanding voting stock of the corporation.      
    80% of the votes entitled to be cast by holders of outstanding
    shares of voting stock of the corporation; and
    two-thirds of the votes entitled to be cast by holders of voting
    stock of the corporation other than shares held by the
    interested stockholder with whom or with whose affiliate the
    business combination is to be effected or held by an affiliate
    or associate of the interested stockholder.  These super-majority vote requirements do not apply if the
    corporations common stockholders receive a minimum price,
    as defined under Maryland law, for their shares 47




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##### Table of Contents



in the form of cash or other consideration in the same form as
    previously paid by the interested stockholder for its shares.  The statute permits various exemptions from its provisions,
    including business combinations that are exempted by the board
    of directors prior to the time that the interested stockholder
    becomes an interested stockholder. Our board of directors has
    adopted a resolution that provides that any business combination
    between us and any other person is exempted from the provisions
    of the Act, provided that the business combination is first
    approved by the board of directors. This resolution, however,
    may be altered or repealed in whole or in part at any time. If
    this resolution is repealed, or the board of directors does not
    otherwise approve a business combination, this statute may
    discourage others from trying to acquire control of us and
    increase the difficulty of consummating any offer.  
    Staggered board.  Our board of directors
    is divided into three classes of directors. The current terms of
    the directors expire in 2007, 2008 and 2009. Directors of each
    class are chosen for three-year terms upon the expiration of
    their current terms, and each year one class of directors is
    elected by the stockholders. The staggered terms of our
    directors may reduce the possibility of a tender offer or an
    attempt at a change in control, even though a tender offer or
    change in control might be in the best interests of our
    stockholders.
    Our charter and bylaws contain other possible
    anti-takeover provisions.  Our charter and
    bylaws contain other provisions that may have the effect of
    delaying, deferring or preventing a change in control of us or
    the removal of existing directors and, as a result, could
    prevent our stockholders from being paid a premium for their
    common stock over the then-prevailing market price.  Our rights and
    the rights of our stockholders to take action against our
    directors and officers are limited, which could limit your
    recourse in the event of actions not in your best
    interests.
    
    actual receipt of an improper benefit or profit in money,
    property or services; or
    a final judgment based upon a finding of active and deliberate
    dishonesty by the director or officer that was material to the
    cause of action adjudicated.    Our access to
    confidential information may restrict our ability to take action
    with respect to some investments, which, in turn, may negatively
    affect the potential return to stockholders.
   48




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##### Table of Contents



Tax
    Risks
  Complying with
    REIT requirements may cause us to forego otherwise attractive
    opportunities.
    Certain
    financing activities may subject us to U.S. federal income
    tax.
      Failure to
    qualify as a REIT would subject us to U.S. federal income
    tax, which would reduce the cash available for distribution to
    our stockholders.
   49




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##### Table of Contents



Failure to
    make required distributions would subject us to tax, which would
    reduce the cash available for distribution to our
    stockholders.
    
    85% of our ordinary taxable income for that year;
    95% of our capital gain net income for that year; and
    100% our undistributed taxable income from prior years.      Dividends
    payable by REITs do not qualify for the reduced tax
    rates.
   50




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##### Table of Contents



Ownership
    limitation may restrict change of control or business
    combination opportunities in which our stockholders might
    receive a premium for their shares.
      Our ownership
    of and relationship with our TRS will be limited, and a failure
    to comply with the limits would jeopardize our REIT status and
    may result in the application of a 100% excise
    tax.
      Complying with
    REIT requirements may limit our ability to hedge
    effectively.
   51




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##### Table of Contents



The tax on
    prohibited transactions will limit our ability to engage in
    transactions, including certain methods of securitizing mortgage
    loans, that would be treated as sales for federal income tax
    purposes.
      We may be
    subject to adverse legislative or regulatory tax changes that
    could reduce the market price of our common stock.
    If we make
    distributions in excess of our current and accumulated earnings
    and profits, those distributions will be treated as a return of
    capital, which will reduce the adjusted basis of your stock, and
    to the extent such distributions exceed your adjusted basis, you
    may recognize a capital gain.
   52




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##### Table of Contents



Item 1B.  Unresolved
    Staff Comments.   Item 2.  Properties.  10281-1010 (212) 549-8400 http://www.crystalriverreit.com
  triple-net
 Item 3.  Legal
    Proceedings.   Item 4.  Submission
    of Matters to a Vote of Security Holders.      Votes in


Votes Opposed





BrokerProposal 1

Favor


(Withheld)


Abstentions


Non-VotesJanet Graham


22,347,599







664,896



Harald Hansen


22,346,599







665,896



Bruce K. Robertson


22,343,001







669,494



        53




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##### Table of Contents



PART II  Item 5.
    Market for
    Registrants Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities.    High


Low


Dividend2006Fourth Quarter

$
25.55


$
21.57


$
0.66Third Quarter (from July 28,
    2006)


23.00



21.30



0.60           DividendAmount


Declaration


Record


Payment


Total


DividendFiscal
    Period

per
    Share


Date


Date


Date


Distribution


Type(In
    millions)Second quarter 2005

$
0.250



06/21/2005



06/30/2005



07/13/2005


$
4.4



RegularThird quarter 2005


0.575



09/28/2005



09/30/2005



10/13/2005



10.1



RegularFourth quarter 2005


0.725



12/23/2005



12/23/2005



12/30/2005



12.7



RegularFirst quarter 2006


0.725



03/31/2006



03/31/2006



04/17/2006



12.7



RegularSecond quarter 2006


0.725



06/23/2006



06/30/2006



07/21/2006



12.7



RegularThird quarter 2006


0.600



09/22/2006



10/04/2006



10/27/2006



15.0



RegularFourth quarter 2006


0.660



12/11/2006



12/29/2006



01/26/2007



16.5



Regular    54




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##### Table of Contents



Equity
    Compensation Plan Information
    Number ofSecuritiesNumber of





Remaining
    AvailableSecurities to
    be





for Future
    IssuanceIssued upon


Weighted
    Average


under EquityExercise of


Exercise Price
    of


Compensation
    PlansOutstanding


Outstanding


(ExcludingOptions,
    Warrants


Options,
    Warrants


Securitiesand Rights


and Rights


Reflected in
    ColumnPlan
    Category

(a)


(b)


(a))Equity compensation plans approved
    by stockholders


130,000


$
25.00



1,499,250Equity compensation plans not
    approved by stockholders(c)










Total


130,000


$
25.00



1,499,250     (a)
    
    There are no outstanding warrants
    or rights.(b)
    
    Amounts exclude any securities to
    be issued upon exercise of outstanding options. Includes
    21,690 shares of common stock to be issued in respect of
    deferred stock units and restricted stock units issued to
    certain of our independent directors.(c)
    
    We do not have any equity
    compensation plans that have not been approved by stockholders.   55




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##### Table of Contents



Item 6.
    Selected
    Financial Data.  Form 10-K
  page F-1 Form 10-K.
  March 15,
    2005(commencement
    ofYear Ended


operations) toDecember 31,
    2006


December 31,
    2005(In thousands
    except share andper share
    data)Consolidated Income Statement
    Data:Net interest and dividend income:Total interest and dividend income

$
201,224


$
79,601Interest expense


(139,601
)


(48,425
)Net interest and dividend income


61,623



31,176Expenses:Management fees, related party(1)


7,922



5,448Professional fees


2,722



2,205Insurance expense


413



250Other general and administrative
    expenses(2)


1,019



533Total expenses


12,076



8,436Income before other revenues
    (expenses)


49,547



22,740Other revenues (expenses):Realized net loss on sale of real
    estate loans and securities available for sale


(2,128
)


(521
)Realized and unrealized gain
    (loss) on derivatives


10,347



(2,497
)Impairment of available for sale
    securities


(10,389
)


(5,782
)Foreign currency exchange gain


580



Other


(1,040
)


8Total other revenues (expenses)


(2,630
)


(8,792
)Net income

$
46,917


$
13,948Per share information:Net income per share of common
    stockBasic

$
2.27


$
0.80Diluted

$
2.27


$
0.80Dividends declared per share of
    common stock

$
2.71


$
1.55Weighted average shares of common
    stock outstandingBasic


20,646,637



17,487,500Diluted


20,646,637



17,487,500   56




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##### Table of Contents



As of
    December 31,2006


2005Consolidated Balance Sheet
    Data:Total assets

$
3,774,645


$
2,669,769Debt  repurchase
    agreements


2,868,449



1,994,287Debt  collateralized
    debt obligations


194,396



227,500Debt  notes payable,
    related party






35,000Stockholders equity


556,314



381,429     (1)
    
    Includes $1,024 and $627,
    respectively, of stock based compensation.(2)
    
    Includes $324 and $81,
    respectively, of stock based compensation. 57




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##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations.  Overview
    
    Real estate-related securities, principally RMBS and CMBS;
    Whole mortgage loans, bridge loans, B Notes and mezzanine loans;
    and
    Other ABS, including CDOs and consumer ABS.        
    interest rate trends,
    rates of prepayment on mortgages underlying our MBS,
    credit trends in RMBS and our commercial real estate investments,
    competition, and
    other market developments.    
    our leverage,
    our access to funding and borrowing capacity,
    our borrowing costs,
    our hedging activities,
    the market value of our investments, and
    REIT requirements and the requirements to qualify for an
    exemption from regulation under the Investment Company Act. 58




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Our Business
    Model
               59




---



##### Table of Contents



Trends
    Uncertain interest rate
    environment.
        Weakness of
    sub-prime
    MBS market. sub-prime sub-prime sub-prime sub-prime
  mark-to-market
 60




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##### Table of Contents



sub-prime sub-prime sub-prime
  Flattening/Inverting yield
    curve.
  Prepayment rates.
  Competition. loan-to-value
    Critical
    Accounting Policies
  e.g.
 61




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##### Table of Contents



Investment
    Consolidation
  Accounting for Transfers and
    Servicing of Financial Assets and Extinguishments of Liabilities Consolidation of Variable Interest
    Entities Consolidated Financial
    Statements
     62




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##### Table of Contents



Revenue
    Recognition
  99-20, Recognition of Interest Income and Impairment on Purchased
    and Retained Beneficial Interests in Securitized Financial
    Assets (EITF 99-20). EITF 99-20,
  loan-to-value
  i.e. 6-12 month
 63




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##### Table of Contents



Annual


PercentConstant
    Prepayment Rate

Yield


Income


Difference6%


5.54
%

$
57,129.30



14
%15%


5.09
%

$
52,481.09



5
%20% (base case)


4.85
%

$
49,978.37



0
%40%


3.97
%

$
40,754.16



(18
)%60%


3.06
%

$
31,394.35



(37
)%   Loan Loss
    Provisions
    Valuations of
    MBS and ABS
     available-for-sale other-than-temporary other-than-temporary other-than-temporary other-than-temporary
  other-than-temporary
  
    The length of time and the extent to which the market value has
    been less than the amortized cost;
    Whether the security has been downgraded by a rating agency; and
    Our intent to hold the security for a period of time sufficient
    to allow for any anticipated recovery in market value.  Accounting for Certain Investments in
    Debt and Equity Securities EITF 99-20.
 64




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##### Table of Contents



EITF 99-20
  Accounting For
    Derivative Financial Instruments and Hedging
    Activities
         65




---



##### Table of Contents



Accounting for Derivative
    Instruments and Hedging Activities i.e.
  i.e. and/or and/or
  Share-Based
    Compensation
  Accounting for Stock Based
    Compensation and/or
 66




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##### Table of Contents



Income
    Taxes
    Financial
    Condition
    Mortgage-Backed
    Securities
      RMBS


CMBS(In
    thousands)Amortized cost

$
2,819,982


$
469,505Unrealized gains


13,915



7,594Unrealized losses


(14,553
)


(4,527
)Fair value

$
2,819,344


$
472,572    67




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##### Table of Contents



Estimated


Percent of


Weighted
    Average


ConstantAsset


Total





Months to


Yield to


PrepaymentValue(1)


Investments


Coupon


Reset(2)


Maturity


Rate(3)(In
    thousands)RMBS:Non-Agency Prime MBS:5/1 adjustable rate

$





%



%







%



%Investment grade


15,872



0.4



5.67



52.15



6.88



36.53Below investment grade


151,660



4.2



7.21



15.69



24.34



43.57Non-Agency
    Sub-prime
    MBS:Investment grade


73,426



2.0



7.24



8.42



9.29



29.74Below investment grade


46,285



1.3



7.53



3.29



15.99



29.46Agency:3/1 hybrid adjustable rate


617,334



17.2



5.19



24.51



4.79



30.445/1 hybrid adjustable rate


1,914,767



53.2



5.55



47.49



4.96



22.20Total RMBS

$
2,819,344



78.3
%


5.68



38.66



6.27



25.95CMBS:Investment grade CMBS

$
231,116



6.4
%


5.63







6.06Below investment grade CMBS


241,456



6.7



4.97







11.98Total CMBS

$
472,572



13.1
%


5.20







9.08     (1)
    
    All securities listed in this chart
    are carried at their estimated fair value.(2)
    
    Represents number of months before
    conversion to floating rate.(3)
    
    Represents the estimated percentage
    of principal that will be prepaid over the next 12 months
    based on historical principal paydowns.        RMBS


CMBS(In thousands)AAA

$
2,532,101


$
AA






A


29,037



BBB


60,261



231,116BB


100,726



123,763B


74,413



62,970Not rated


22,806



54,723Total

$
2,819,344


$
472,572  68




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##### Table of Contents



RMBS


CMBSAmortized





AmortizedWeighted Average
    Life

Fair
    Value


Cost


Fair
    Value


Cost(In
    thousands)Less than one year

$
11,319


$
11,442


$



$
Greater than one year and less
    than five years


2,768,755



2,769,195







Greater than five years


39,270



39,345



472,572



469,505Total

$
2,819,344


$
2,819,982


$
472,572


$
469,505     Equity
    Securities
    Real Estate
    Loans
   69




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Interest and
    Principal Paydown Receivable
    Hedging
    Instruments and Derivative Activities
     70




---



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71




---



##### Table of Contents



Liabilities
     72




---



##### Table of Contents



Stockholders
    Equity
    Results of
    Operations for the Year Ended December 31, 2006 Compared to
    the Period March 15, 2005 (commencement of operations) to
    December 31, 2005
    Summary
    Net Interest
    and Dividend Income
   73




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Expenses
  start-up
    Other Revenues
    (Expenses)
    Income Tax
    Expense
   74




---



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Liquidity and
    Capital Resources
             75




---



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76




---



##### Table of Contents



30-year
  Off-Balance Sheet
    Arrangements
    Contractual
    Obligations and Commitments
  1 12
 77




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##### Table of Contents



Payment due by
    PeriodLess than








More thanContractual
    Obligations

Total


1 year


1-3 years


3-5 years


5 years(In
    thousands)Long-Term Debt
    ObligationsRepurchase obligations

$
2,868,449


$
2,868,449


$



$



$
Collateralized debt obligations


194,396



40,640



84,109



38,211



31,436Unfunded
    Loan Commitments


1,990



1,990











Total(1)

$
3,064,835


$
2,911,079


$
84,109


$
38,211


$
31,436     (1)
    
    We are also subject to interest
    rate swaps for which we can not estimate future payments due.    Weighted
    AverageMaturity ofRepurchaseRepurchase
    Agreement Counterparties

Amount at
    Risk(1)


Agreement in
    Days(In
    thousands)Banc of America Securities LLC

$
8,774



24Bear, Stearns & Co.
    Inc.


5,721



44Citigroup Global Markets Inc.


8,475



56Credit Suisse First Boston LLC


6,650



35Deutsche Bank Securities Inc.


84,711



31Greenwich Capital Markets,
    Inc.


6,401



49Lehman Brothers Inc.


15,152



38Merrill Lynch, Pierce,
    Fenner & Smith Incorporated


7,997



39Morgan Stanley & Co.
    Incorporated


3,656



32Trilon International, Inc.


14,297



29WaMu Capital Corp.


4,127



62Total

$
165,961



39   (1)
    
    Equal to the fair value of
    collateral minus repurchase agreement liabilities and accrued
    interest expense.  day-to-day
 78




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##### Table of Contents




    the NAV Floor (defined below) and
    50% of our net asset value as of December 31 of the prior
    year.    
    the NAV Floor and
    50% of our net asset value,      
    by 30% or more from the highest net asset value in the preceding
    12-month
    period then ending,
    by 20% or more from the highest net asset value in the preceding
    three-month period then ending,
    by 15% or more from the highest net asset value in the preceding
    one-month period then ending, or
    by 50% or more from the highest net asset value since the date
    of the master repurchase agreement      
    We may not permit the ratio of the sum of adjusted EBITDA (as
    defined in the master repurchase agreement) to interest expense
    to be less than 1.25 to 1.00.
    We may not permit our debt to equity ratio to be greater than
    10:1.
    We may not declare or make any payment on account of, or set
    apart assets for, a sinking or other analogous fund for the
    purchase, redemption, defeasance, retirement or other
    acquisition of any of our equity interests, or make any other
    distribution in respect thereof, either directly or indirectly,
    whether in cash or property or in our obligations, except, so
    long as there is no default, event of default or Margin
    Deficit that has occurred and is continuing. We may
    (i) make such payments solely to the extent necessary to
    preserve our status as a REIT and (ii) make additional
    payments in an amount equal to 100% of funds from operations. A
    Margin Deficit occurs when the aggregate market value of all the
    purchased securities subject to all repurchase 79




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##### Table of Contents



transactions in which a party is acting as buyer is less than
    the buyers margin amount for all transactions, which is
    the amount obtained by application of the buyers margin
    percentage to the repurchase price. The margin percentage is a
    percentage agreed to by the buyer and seller or the percentage
    obtained by dividing the market value of the purchased
    securities on the purchase date by the purchase price on the
    purchase date.  
    Our tangible net worth may not be less than the sum of
    $300.0 million plus the proceeds from all equity issuances
    subsequent to our March 2005 private offering, net of investment
    banking fees, legal fees, accountants fees, underwriting
    discounts and commissions and other customary fees and expenses
    that we actually incur.
    We may not permit the amount of our cash and cash equivalents at
    any time to be less than $10.0 million during the first
    year following the closing date of the master repurchase
    agreement or less than $15.0 million after the first year
    following the closing date, in either case after giving effect
    to any requested repurchase transaction.      REIT Taxable
    Income
    (In
    thousands)GAAP net income

$
46,917Adjustments to GAAP net income:Deferred income tax expense


900Share based compensation


187Net tax adjustments related to
    interest income


7,061Book derivative income in excess
    of tax income


(8,811
)Capital loss limitation


2,128Impairment losses not deductible
    for tax purposes


10,389Book/tax difference for foreign
    taxable REIT subsidiaries


341Foreign currency translation
    adjustment


(504
)Other


41Net adjustments from GAAP net
    income to REIT taxable income


11,732REIT taxable income

$
58,649  80




---



##### Table of Contents



(In
    thousands)GAAP net income

$
13,948Adjustments to GAAP net income:Net tax adjustments related to
    organizational costs


319Share based compensation


627Net tax adjustments related to
    interest income


2,342Book derivative income in excess
    of tax income


2,796Capital loss limitation


2,168Impairment losses not deductible
    for tax purposes


5,782Other


(24
)Net adjustments from GAAP net
    income to REIT taxable income


14,010REIT taxable income

$
27,958     Impact of
    Inflation
   81




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##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk.  held-to-maturity
    Interest Rate
    Risk
    Yield Spread
    Risk
  available-for-sale
  Effect on Net
    Interest and Dividend Income
   82




---



##### Table of Contents



Expiration
    Date

Notional
    Amount2007

$
185,0002008


716,0002009


245,0002010


62,5002011


30,0002012


50,0002013


52,0692015


54,0002016


45,0002017


55,0002018


240,4672021


42,933TOTAL

$
1,777,969     Extension
    Risk
      Hybrid
    Adjustable-Rate RMBS Interest Rate Cap Risk
   83




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##### Table of Contents



Interest Rate
    Mismatch Risk
    Form 10-K.
  Prepayment
    Risk
   84




---



##### Table of Contents



Effect on Fair
    Value
     85




---



##### Table of Contents



Interest Rates





Interest RatesFall 100





Rise 100Basis
    Points


Unchanged


Basis
    Points(Dollars in
    thousands)Mortgage assets and other
    securities available for
    sale(1)Fair value

$
3,405,891


$
3,342,608


$
3,270,065Change in fair value

$
63,283






$
(72,543
)Change as a percent of fair value


1.89
%






(2.17
)%Real estate loansFair value

$
249,866


$
235,900


$
224,500Change in fair value

$
13,966






$
(11,400
)Change as a percent of fair value


5.92
%






(4.83
)%Other investmentsFair value

$
20,133


$
20,133


$
20,133Change in fair value


n/m







n/mChange as a percent of fair value


n/m







n/mRepurchase
    agreements(2)Fair value

$
(2,868,449
)

$
(2,868,449
)

$
(2,868,449
)Change in fair value


n/m







n/mChange as a percent of fair value


n/m







n/mCDO liabilitiesFair value

$
(195,245
)

$
(194,396
)

$
(193,585
)Change in fair value

$
(849
)





$
811Change as a percent of fair value


0.44
%






(0.42
)%Designated and undesignated
    interest rate swaps and capsFair value

$
(34,207
)

$
11,296


$
56,177Change in fair value

$
(45,503
)





$
44,881Change as a percent of notional
    value


(2.71
)%






2.67
%Credit default swapsFair value

$
3,463


$
3,305


$
3,146Change in fair value

$
158






$
(159
)Change as a percent of notional
    value


0.14
%






(0.14
)%Cross currency swapFair value

$
890


$
1,980


$
3,071Change in fair value

$
(1,090
)





$
1,091Change as a percent of notional
    value


(1.79
)%






1.79
%     (1)
    
    The fair value of other
    available-for-sale
    investments that are sensitive to interest rate changes are
    included.(2)
    
    The fair value of the repurchase
    agreements would not change materially due to the short-term
    nature of these instruments.   86




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##### Table of Contents



Currency
    Risk
    non-U.S. holdings.
  Risk
    Management
    
    monitoring and adjusting, if necessary, the reset indices and
    interest rates related to our MBS and our borrowings;
    attempting to structure our borrowing agreements to have a range
    of different maturities, terms, amortizations and interest rate
    adjustment periods;
    using derivatives, financial futures, swaps, options, caps,
    floors and forward sales to adjust the interest rate sensitivity
    of our MBS and our borrowings; and
    actively managing, on an aggregate basis, the interest rate
    indices, interest rate adjustment periods, and gross reset
    margins of our MBS and the interest rate indices and adjustment
    periods of our borrowings.  Item 8.
    Financial
    Statements and Supplementary Data.  page F-1. Regulation S-K
  Item 9.
    Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure.   87




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##### Table of Contents



Item 9A.
    Controls and
    Procedures.  Evaluation of
    Disclosure Controls and Procedures
  Rule 13a-15(e)) Form 10-K
  Managements
    Annual Report on Internal Control over Financial
    Reporting
  Form 10-K
  Attestation
    Report of Registered Public Accounting Firm
  Form 10-K
  Changes in
    Internal Controls
  rule 13a-15(f)
  Item 9A(T).
    Controls and
    Procedures.    Item 9B.
    Other
    Information.   88




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##### Table of Contents



PART III
  Item 10.
    Directors,
    Executive Officers and Corporate Governance.  Regulation S-K
  Item 11.
    Executive
    Compensation.  Regulation S-K
  Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters.  Regulation S-K Form 10-K
  Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence.  Regulation S-K
  Item 14.
    Principal
    Accounting Fees and Services.   PART IV  Item 15.
    Exhibits,
    Financial Statement Schedules.  (a)(1)

Financial StatementsSee the accompanying Index to
    Financial Statement Schedule on
    page F-1.(a)(2)

Consolidated Financial Statement
    SchedulesSee the accompanying Index to
    Financial Statement Schedule on
    page F-1.(a)(3)

Exhibits  89




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##### Table of Contents



Exhibit Index
  ExhibitNumber

Description3
.1*

Articles of Amendment and
    Restatement of Crystal River Capital, Inc.3
.2

Amended and Restated Bylaws of
    Crystal River Capital, Inc. (filed as Exhibit 3.2 to the
    Companys Registration Statement on Amendment No. 1 to
    Form S-11
    (File
    No. 333-130256)
    filed on March 1, 2006 and incorporated herein by
    reference).4
.1

Form of Certificate of Common
    Stock for Crystal River Capital, Inc. (filed as Exhibit 4.1
    to the Companys Registration Statement on Amendment
    No. 3 to
    Form S-11
    (File
    No. 333-130256)
    filed on July 13, 2006 and incorporated herein by
    reference).10
.1(a)

Amended and Restated Management
    Agreement, dated as of July 11, 2006, between Crystal River
    Capital, Inc. and Hyperion Brookfield Crystal River Capital
    Advisors, LLC (filed as Exhibit 10.1(a) to the
    Companys Registration Statement on Amendment No. 3 to
    Form S-11
    (File
    No. 333-130256)
    filed on July 13, 2006 and incorporated herein by
    reference).10
.1(b)

Sub-Advisory
    Agreement, dated as of July 10, 2006, among Crystal River
    Capital, Inc., Hyperion Brookfield Crystal River Capital
    Advisors, LLC and Brookfield Crystal River Capital L.P. (filed
    as Exhibit 10.1(b) to the Companys Registration
    Statement on Amendment No. 3 to
    Form S-11
    (File
    No. 333-130256)
    filed on July 13, 2006 and incorporated herein by
    reference).10
.1(c)

Sub-Advisory
    Agreement, dated as of March 15, 2005, among Crystal River
    Capital, Inc., Hyperion Crystal River Capital Advisors, LLC and
    Ranieri & Co., Inc. (filed as Exhibit 10.1(c) to
    the Companys Registration Statement on Amendment
    No. 3 to
    Form S-11
    (File
    No. 333-130256)
    filed on July 13, 2006 and incorporated herein by
    reference).10
.2

Registration Rights Agreement,
    dated as of March 15, 2005, between Crystal River Capital,
    Inc. and Deutsche Bank Securities Inc. and Wachovia Capital
    Markets, LLC (filed as Exhibit 10.2 to the Companys
    Registration Statement on Amendment No. 1 to
    Form S-11
    (File
    No. 333-130256)
    filed on March 1, 2006 and incorporated herein by
    reference).10
.3(a)

Crystal River Capital, Inc. 2005
    Long Term Incentive Plan, as amended (filed as
    Exhibit 10.3(a) to the Companys Registration
    Statement on Amendment No. 3 to
    Form S-11
    (File
    No. 333-130256)
    filed on July 13, 2006 and incorporated herein by
    reference).10
.3(b)

Form of Restricted Stock Award
    Agreement (filed as Exhibit 10.3(b) to the Companys
    Registration Statement on Amendment No. 3 to
    Form S-11
    (File
    No. 333-130256)
    filed on July 13, 2006 and incorporated herein by
    reference).10
.3(c)

Form of Stock Option Agreement
    (filed as Exhibit 10.3(c) to the Companys
    Registration Statement on Amendment No. 3 to
    Form S-11
    (File
    No. 333-130256)
    filed on July 13, 2006 and incorporated herein by
    reference).10
.3(d)

Form of Restricted Stock Unit
    Award Agreement (filed as Exhibit 10.3(d) to the
    Companys Registration Statement on Amendment No. 3 to
    Form S-11
    (File
    No. 333-130256)
    filed on July 13, 2006 and incorporated herein by
    reference).10
.4

Master Repurchase Agreement, dated
    as of August 15, 2005, by and among Wachovia Bank, National
    Association, Crystal River Capital, Inc. and Crystal River
    Capital TRS Holdings, Inc. (filed as Exhibit 10.4 to the
    Companys Registration Statement on Amendment No. 3 to
    Form S-11
    (File
    No. 333-130256)
    filed on July 13, 2006 and incorporated herein by
    reference).10
.5(a)

Revolving Credit Agreement, dated
    as of March 1, 2006, among the lenders party thereto,
    Signature Bank, as administrative agent, and Crystal River
    Capital, Inc. (filed as Exhibit 10.5(a) to the
    Companys Registration Statement on Amendment No. 3 to
    Form S-11
    (File
    No. 333-130256)
    filed on July 13, 2006 and incorporated herein by
    reference). 90




---



##### Table of Contents



ExhibitNumber

Description10
.5(b)

First Amendment to Revolving
    Credit Agreement, dated as of April 10, 2006, by and among
    Crystal River Capital, Inc., Bank Hapoalim B.M. and Signature
    Bank (filed as Exhibit 10.5(b) to the Companys
    Registration Statement on Amendment No. 3 to
    Form S-11
    (File
    No. 333-130256)
    filed on July 13, 2006 and incorporated herein by
    reference).11
.1

Statements regarding Computation
    of Earnings per Share (Data required by Statement of Financial
    Accounting Standard No. 128, Earnings per Share, is
    provided in Note 11 to the consolidated financial
    statements contained in this report).21
.1*

Subsidiaries of Crystal River
    Capital, Inc.31
.1*

Certification of Clifford E. Lai,
    Chief Executive Officer, as adopted pursuant to Section 302
    of the Sarbanes-Oxley Act of 2002.31
.2*

Certification of Barry L.
    Sunshine, Chief Financial Officer, as adopted pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.32
.1*

Certification of Clifford E. Lai,
    Chief Executive Officer, pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002.32
.2*

Certification of Barry L.
    Sunshine, Chief Financial Officer, pursuant to 18 U.S.C.
    Section 1350, as adopted pursuant to Section 906 of
    the Sarbanes-Oxley Act of 2002     
    
    Represents a management contract or
    compensatory plan or arrangement.*
    
    Filed herewith. 91




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##### Table of Contents



Signatures      30 March
    2007Date

/s/  Clifford
    E. LaiClifford
    E. Lai
    President and Chief Executive Officer     30 March
    2007Date

/s/  Bruce
    K. RobertsonBruce
    K. Robertson
    Chairman of the Board of Directors30 March
    2007Date

/s/  Clifford
    E.
    LaiClifford
    E. Lai
    President, Chief Executive Officer and Director30 March
    2007Date

/s/  Barry
    L.
    SunshineBarry
    L. Sunshine
    Chief Financial Officer30 March
    2007Date

/s/  Rodman
    L.
    DrakeRodman
    L. Drake
    Director30 March
    2007Date

/s/  Janet
    GrahamJanet
    Graham
    Director30 March
    2007Date

/s/  Harald
    HansenHarald
    Hansen
    Director30 March
    2007Date

/s/  William
    F.
    PaulsenWilliam
    F. Paulsen
    Director30 March
    2007Date

/s/  Louis
    P.
    SalvatoreLouis
    P. Salvatore
    Director  S-1




---



##### Table of Contents



Index to
    Consolidated Financial Statements and Schedules  Managements
    Responsibility for Financial Statements


F-2Report of
    Independent Registered Public Accounting Firm


F-3Audited Financial StatementsConsolidated
    Balance Sheets as of December 31, 2006 and 2005


F-4Consolidated
    Statements of Income for the year ended December 31, 2006
    and for the period March 15, 2005 (commencement of
    operations) to December 31, 2005


F-5Consolidated
    Statements of Changes in Stockholders Equity for the year
    ended December 31, 2006 and for the period March 15,
    2005 (commencement of operations) to December 31,
    2005


F-6Consolidated
    Statements of Cash Flows for the year ended December 31,
    2006 and for the period March 15, 2005 (commencement of
    operations) to December 31, 2005


F-7Notes to
    Consolidated Financial Statements


F-8Schedule
    IV  Schedule of Mortgage Loans on Real
    Estate


F-42    F-1




---



##### Table of Contents



Managements
    Responsibility For Financial Statements  Form 10-K
         Clifford E. LaiPresident and

Barry L. SunshineChief Executive Officer

Chief Financial Officer  F-2




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm  The Board of
    Directors and Shareholders of Crystal River Capital, Inc. and
    Subsidiaries
        
    F-3




---



##### Table of Contents



CRYSTAL RIVER
    CAPITAL, INC. AND SUBSIDIARIES



CONSOLIDATED
    BALANCE SHEETS  December 31,2006


2005(In thousands,
    except share and per share data)ASSETS:Available for sale securities, at
    fair valueCommercial MBS

$
472,572


$
206,319Residential MBS 
    Non-Agency MBS


287,243



512,685 Agency MBS


2,532,101



1,663,462ABS


46,132



54,530Preferred stock


4,560



2,232Real estate loans


237,670



146,497Other investments


20,133



Cash and cash equivalents


39,023



21,463Restricted cash


79,483



18,499Receivables:Principal paydown


5,940



11,773Interest


19,380



12,091Interest purchased


875



612Swap receivable


1,948



Prepaid expenses and other assets


1,791



961Deferred financing costs, net


4,929



6,662Derivative assets


20,865



11,983Total Assets

$
3,774,645


$
2,669,769LIABILITIES AND
    STOCKHOLDERS EQUITY:Liabilities:Accounts payable, accrued expenses
    and cash collateral payable

$
11,486


$
4,173Due to Manager


2,040



486Due to broker


94,881



Dividends payable


16,514



Repurchase agreements


2,723,643



1,977,858Repurchase agreements, related party


144,806



16,429Collateralized debt obligations


194,396



227,500Note payable, related party






35,000Delayed funding of real estate loan






4,339Interest payable


19,417



12,895Derivative liabilities


11,148



9,660Total Liabilities


3,218,331



2,288,340Commitments and ContingenciesStockholders Equity:Preferred Stock, par value
    $0.001 per share, 100,000,000 shares authorized, no
    shares issued and outstanding






Common Stock, $0.001 par
    value, 500,000,000 shares authorized, 25,021,800 and
    17,487,500 shares issued and outstanding at
    December 31, 2006 and 2005, respectively


25



17Additional paid-in capital


566,285



406,311Accumulated other comprehensive
    income (loss)


13,212



(11,742
)Declared dividends in excess of
    earnings


(23,208
)


(13,157
)Total Stockholders
    Equity


556,314



381,429Total Liabilities and
    Stockholders Equity

$
3,774,645


$
2,669,769    F-4




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##### Table of Contents



CRYSTAL RIVER
    CAPITAL, INC. AND SUBSIDIARIES



CONSOLIDATED
    STATEMENTS OF INCOME  March 15,
    2005Year Ended


(commencement
    ofDecember 31,


operations) to2006


December 31,
    2005(In thousands,
    except share andper share
    data)Revenues:Net interest and dividend income:Interest income 
    available for sale securities

$
181,728


$
74,778Interest income  real
    estate loans


11,860



3,556Other interest and dividend income


7,636



1,267Total interest and dividend income


201,224



79,601Less interest expense


(139,601
)


(48,425
)Net interest and dividend income


61,623



31,176Expenses:Management fees, related party


7,922



5,448Professional fees


2,722



2,205Insurance expense


413



250Directors fees


436



141Start up costs






349Other expenses


583



43Total expenses


12,076



8,436Income before other revenues
    (expenses)


49,547



22,740Other revenues
    (expenses):Realized net loss on sale of real
    estate loans and securities available for sale


(2,128
)


(521
)Realized and unrealized gain
    (loss) on derivatives


10,347



(2,497
)Impairment of available for sale
    securities


(10,389
)


(5,782
)Foreign currency exchange gain


580



Other


(1,040
)


8Total other revenues
    (expenses)


(2,630
)


(8,792
)Net income

$
46,917


$
13,948Per share information:Net income per share of common
    stockBasic

$
2.27


$
0.80Diluted

$
2.27


$
0.80Dividends declared per share of
    common stock

$
2.71


$
1.55Weighted average shares of common
    stock outstandingBasic


20,646,637



17,487,500Diluted


20,646,637



17,487,500    F-5




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##### Table of Contents



CRYSTAL RIVER
    CAPITAL, INC. AND SUBSIDIARIES
    CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS
    EQUITY
    For the Year Ended December 31, 2006 and the Period
    March 15, 2005
     (commencement of operations) to December 31,
    2005  Accumulated


DeclaredCommon
    Stock


Additional


Other


Dividends inPar


Paid-In


Comprehensive


Excess





ComprehensiveShares


Value


Capital


Income
    (Loss)


of
    Earnings


Total


Income(In thousands,
    except share data)Net income





$



$



$



$
13,948


$
13,948


$
13,948Net unrealized holdings loss on
    securities available for sale














(23,447
)






(23,447
)


(23,447
)Unrealized gain on cash flow hedges














10,632







10,632



10,632Realized gain on cash flow hedges














1,073







1,073



1,073Comprehensive income

























$
2,206Dividends declared on common stock


















(27,105
)


(27,105
)Proceeds of issuance of common
    stock, net of offering costs


17,400,000



17



405,596











405,613Issuance of stock based
    compensation:Manager


84,000Board of directors


3,500







88











88Amortization of stock based
    compensation










627











627Balance at December 31, 2005


17,487,500



17



406,311



(11,742
)


(13,157
)


381,429Net income


















46,917



46,917


$
46,917Net unrealized holdings gain on
    securities available for sale














27,008







27,008



27,008Net unrealized loss on cash flow
    hedges














(3,463
)






(3,463
)


(3,463
)Net realized gain on cash flow
    hedges














1,719







1,719



1,719Amortization of realized cash flow
    hedge gain














(310
)






(310
)


(310
)Comprehensive income

























$
71,871Dividends declared on common stock


















(56,968
)


(56,968
)Proceeds of issuance of common
    stock, net of offering costs


7,500,000



8



158,591











158,599Issuance of stock based
    compensation:Manager and managers
    employees, net of forfeitures


30,300



















Board of directors


4,000



















Amortization of stock based
    compensation










1,383











1,383Balance at December 31, 2006


25,021,800


$
25


$
566,285


$
13,212


$
(23,208
)

$
556,314    F-6




---



##### Table of Contents



CRYSTAL RIVER
    CAPITAL, INC. AND SUBSIDIARIES



CONSOLIDATED
    STATEMENTS OF CASH FLOWS March 15,
    2005Year Ended


(commencement
    ofDecember 31,


operations) to2006


December 31,
    2005(In
    thousands)CASH FLOWS FROM OPERATING
    ACTIVITIES:Net income

$
46,917


$
13,948Adjustments to reconcile net income
    to net cash provided by operating activities:Amortization of stock based
    compensation


1,347



627Amortization of underwriting costs
    on available for sale securities and real estate loans


111



44Amortization of realized cash flow
    hedge gain


(310
)


Accretion of net discount on
    available for sale securities and real estate loans


(9,866
)


(3,816
)Deferred income tax expense


900



Writeoff of costs on real estate
    loans and available for sale securities


97



Realized net loss (gain) on sale of
    available for sale securities


2,128



(4
)Realized loss on sale of real
    estate loans






525Impairment of available for sale
    securities


10,389



5,782Accretion of interest on real
    estate loan


(1,164
)


Realized loss on derivatives


541



Payments on settlement of
    derivatives


(850
)


Unrealized (gain) loss on
    derivatives


(8,226
)


2,576Amortization of deferred financing
    costs


2,015



314Gain on foreign currency exchange


(513
)


Incentive fee paid in stock


7



Changes in operating assets and
    liabilities:Interest receivable


(7,289
)


(12,091
)Interest receivable, derivative


(1,072
)


Swap interest receivable


(1,948
)


Prepaid expenses and other assets


(1,449
)


(961
)Accounts payable and accrued
    liabilities


3,212



4,173Due to Manager


1,554



486Interest payable


6,522



12,895Interest payable, derivative


2,178



5,759Net cash provided by operating
    activities


45,231



30,257CASH FLOWS FROM INVESTING
    ACTIVITIES:Purchase of securities available
    for sale


(1,972,635
)


(2,772,900
)Purchase of interest in other
    investments


(19,509
)


Interest purchased


69



(612
)Underwriting costs on available for
    sale securities


(570
)


(941
)Underwriting costs on real estate
    loans


(174
)


(50
)Principal paydown on available for
    sale securities


534,017



297,066Principal payments on real estate
    loans


2,052



89Proceeds from the sale of available
    for sale securities


660,410



374Proceeds from the repayment/sale of
    real estate loans


48,139



32,151Funding of real estate loans


(144,547
)


(174,881
)Net cash used in investing
    activities


(892,748
)


(2,619,704
)CASH FLOWS FROM FINANCING
    ACTIVITIES:Net proceeds received (paid) on
    interest rate swaps and caps


(471
)


1,090Net change in cash collateral
    payable


1,960



Issuance of collateralized debt
    obligations






227,500Principal repayments on
    collateralized debt obligations


(33,104
)


Net deposits into restricted cash


(60,984
)


(18,499
)Payment of deferred financing costs


(282
)


(6,976
)(Repayment of) proceeds from note
    payable, related party


(35,000
)


35,000Net proceeds from repurchase
    agreements


745,785



1,977,858Net proceeds from repurchase
    agreements, related party


128,377



16,429Dividends paid


(40,423
)


(27,105
)Proceeds from issuance of common
    stock, net of offering costs


159,219



405,613Net cash provided by financing
    activities


865,077



2,610,910Net increase in cash and cash
    equivalents


17,560



21,463Cash and cash equivalents at
    beginning of period


21,463



Cash and cash equivalents at end of
    period

$
39,023


$
21,463Supplemental disclosure of cash
    flows:Cash paid during the period for
    interest

$
128,889


$
32,024Supplemental disclosure of
    noncash investing and financing activities:Delayed funding of real estate loan






4,339Dividends declared, not yet paid


16,514



Principal paydown receivable


5,940



11,773Purchase of securities available
    for sale not yet settled


94,881



Prepaid securities offering costs


619



Interest payable on interest rate
    swap


1,238



    F-7




---



##### Table of Contents



Crystal River
    Capital, Inc. and Subsidiaries
    Notes to Consolidated Financial Statements
    December 31, 2006 and 2005
    (In thousands, except share and per share data)  1.  Organization
          2.  Summary
    of Significant Accounting Policies
  Principles of
    Consolidation
    Use of
    Estimates
  e.g.
 F-8




---



##### Table of Contents



Cash and Cash
    Equivalents
    Restricted
    Cash
    Securities
  Accounting for Certain Investments in Debt and Equity
    Securities
      No. 99-20, Recognition of Interest Income and Impairment on Purchased
    and Retained Beneficial Interests in Securitized Financial
    Assets (EITF 99-20).
 F-9




---



##### Table of Contents



Real Estate
    Loans
  Accounting
    for Nonrefundable Fees and Costs Associated with Originating or
    Acquiring Loans and Initial Direct Costs of Leases
  Accounting by Creditors For Impairment of a Loan 
    an Amendment of FASB Statements No. 5 and 15
  Accounting For
    Derivative Financial Instruments and Hedging
    Activities
  Accounting for
    Derivative Instruments and Hedging Activities Amendment of Statement 133 on Derivative Instruments and
    Hedging Activities i.e.
  i.e. i.e. and/or and/or
  Dividends to
    Stockholders
   F-10




---



##### Table of Contents



Organization
    Costs
    Offering
    Costs
  paid-in-capital. paid-in-capital
  Revenue
    Recognition
  EITF 99-20.
  EITF 99-20,
      Accounting for Transfers and Servicing of Financial Assets
    and Extinguishments
 F-11




---



##### Table of Contents



of Liabilities  a replacement of FASB Statement
    No. 125
    Income
    Taxes
      Accounting for Income Taxes
    Deferred
    Financing Costs
   F-12




---



##### Table of Contents



Earnings per
    Share
  Earnings Per Share
  Variable
    Interest Entities
  Consolidation of Variable Interest Entities  An
    Interpretation of ARB No. 51
     F-13




---



##### Table of Contents



F-14




---



##### Table of Contents



Total Face


2006


2005Security Trust



Original Face


Amount of


Amortized


AmortizedDescription

Purchase
    Date

Amount
    Purchased


Issuance


Cost


CostCMBS:WBCMT 2005-C18

May 2005

$
38,902


$
1,405,372


$
21,885


$
19,577GMACC 2005-C1

June 2005


53,928



1,597,857



28,997



29,478COMM 2005-C6

August 2005


87,538



2,272,503







54,233BSCMS 2005-PWR9

September 2005


83,001



2,152,389



50,066



50,368CSMC 2006-C1

March 2006


82,833



3,005,432



53,285



Total CMBS




346,202



10,433,553



154,233



153,656RMBS:CWHL 2004-J8

March 2005


611



244,517



285



294GSR MTG
    2005-1F

March 2005


2,767



691,667



1,611



1,651HVMLT
    2005-2

March 2005


39,422



1,944,860



26,985



25,364JPMMT
    2003-A1

March 2005


809



269,635



476



478WFMBS
    2003-17

March 2005


3,002



1,000,331



1,746



1,784WFMBS
    2004-DD

March 2005


2,101



600,085



1,207



1,225WFMBS
    2005-2

March 2005


1,953



950,946



990



1,009FHASI
    2005-AR2

April 2005


39,009



281,707



1,689



34,659WAMU
    2005-AR6

April 2005


27,704



3,167,184



17,489



15,807FFML 2005-FF3

May 2005


5,080



770,271



4,724



4,615WFMBS
    2005-AR5

May 2005


2,754



500,446



1,918



1,914FHASI
    2005-AR3

June 2005


2,522



315,111



1,906



1,877JPMMT
    2005-AR3

June 2005


8,696



1,895,799



6,511



6,513FFNT 2005-FF5

July 2005


2,488



29,763



2,450



2,303WFMBS 2004-Z

July 2005


4,552



1,300,298



2,557



2,441BOAMS 2005-H

August 2005


3,888



706,792



2,647



2,612FHAMS
    2005-AA6

August 2005


6,476



575,025



4,460



4,521JPMMT
    2005-A5

August 2005


4,726



1,195,013



3,492



3,471FHASI
    2005-AR4

September 2005


2,129



425,565



1,335



1,293RFMSI 2005-SA4

September 2005


1,681



850,478



1,340



1,301FHASI
    2005-AR5

October 2005


1,082



216,253



666



647FHMT
    2006-AR1

March 2006


1,063



212,576



597



Total RMBS




164,515



18,144,322



87,081



115,779Total



$
510,717


$
28,577,875


$
241,314


$
269,435      F-15




---



##### Table of Contents



Stock Based
    Compensation
  Accounting for
    Stock-Based Compensation
  EITF 96-18, Accounting For Equity Instruments That Are Issued to Other
    Than Employees for Acquiring, or in Conjunction with Selling,
    Goods or Services
  Concentration
    of Credit Risk and Other Risks and Uncertainties
    and/or
    Other
    Comprehensive Income
    Securities
    Repurchase Agreements
   F-16




---



##### Table of Contents



Foreign
    Currency Transactions
  Foreign Currency Translation
  Recently
    Adopted Accounting Pronouncements
  Exchanges of Nonmonetary Assets, an amendment of APB Opinion
    No. 29 Opinion No. 29, Accounting for Nonmonetary
    Transactions
  Accounting Changes and Error Corrections  A
    Replacement of APB Opinion No. 20 and FASB Statement
    No. 3
  FAS 115-1, The Meaning of Other than Temporary Impairment and its
    Application to Certain Investments FAS 115-1 FAS 115-1
  Determining the Variability to be Considered in Applying FASB
    Interpretation
    No. 46(R) (FIN 46(R)-6). FIN 46(R)-6
 F-17




---



##### Table of Contents



Recently
    Issued Accounting Pronouncements Not Yet Adopted
  Accounting for Certain Hybrid Instruments
  Accounting for Servicing of Financial Assets  an
    amendment of FASB Statement No. 140
  Fair Value Measurements
  Accounting for Uncertainty in Income Taxes
 F-18




---



##### Table of Contents



The
    Fair Value Option for Financial Assets and Financial Liabilities
  Presentation
    3.  Available
    for Sale Securities
    December 31,
    2006
  Gross


GrossAmortized


Unrealized


Unrealized


EstimatedSecurity
    Description

Cost


Gains


Losses


Fair
    ValueCMBS

$
469,505


$
7,594


$
(4,527
)

$
472,572Residential MBS-Non-Agency ARMs


281,283



8,391



(2,431
)


287,243Residential MBS-Agency ARMs


2,538,699



5,524



(12,122
)


2,532,101ABS


44,708



1,673



(249
)


46,132Preferred stock


4,852







(292
)


4,560Total

$
3,339,047


$
23,182


$
(19,621
)

$
3,342,608   December 31,
    2005
  Gross


GrossAmortized


Unrealized


Unrealized


EstimatedSecurity
    Description

Cost


Gains


Losses


Fair
    ValueCMBS

$
208,703


$
1,272


$
(3,656
)

$
206,319Residential MBS-Non-Agency ARMs


520,825



1,221



(9,361
)


512,685Residential MBS-Agency ARMs


1,677,125



443



(14,106
)


1,663,462ABS


53,670



941



(81
)


54,530Preferred stock


2,352







(120
)


2,232Total

$
2,462,675


$
3,877


$
(27,324
)

$
2,439,228  F-19




---



##### Table of Contents



December 31,Pledged as
    Collateral:

2006


2005For borrowings under repurchase
    agreements

$
2,893,720


$
2,030,591For borrowings under
    collateralized debt obligations


257,814



248,361Total

$
3,151,534


$
2,278,952     December 31,
    2006


December 31,
    2005Estimated





EstimatedSecurity
    Rating

Fair
    Value


Percentage


Fair
    Value


PercentageAAA

$
2,532,101



75.75
%

$
1,916,132



78.55
%AA














A


39,586



1.19



28,992



1.19BBB


326,960



9.78



188,214



7.72BB


226,649



6.78



164,518



6.75B


137,383



4.11



97,615



4.00Not rated


79,929



2.39



43,757



1.79Total

$
3,342,608



100.00
%

$
2,439,228



100.00
%     December 31,Description:

2006


2005Face amount

$
3,607,182


$
2,662,103Net unearned discount


(268,135
)


(199,428
)Amortized cost

$
3,339,047


$
2,462,675     Commercial
    Mortgage Backed Securities (CMBS)
   F-20




---



##### Table of Contents



December 31,
    2006
  Gross
    Unrealized


Estimated


Weighted
    AverageSecurity
    Rating

Amortized
    Cost


Gains


Losses


Fair
    Value


Coupon


Yield


Term
    (yrs)AAA

$



$



$



$





%



%


AA


























A


























BBB


226,820



4,986



(690
)


231,116



5.63



6.35



9.76BB


125,566



410



(2,213
)


123,763



4.96



7.88



9.85B


63,770



389



(1,189
)


62,970



4.94



11.76



11.39Not rated


53,349



1,809



(435
)


54,723



5.00



16.49



12.31Total CMBS

$
469,505


$
7,594


$
(4,527
)

$
472,572



5.20



8.64



10.69   December 31,
    2005
  Gross
    Unrealized


Estimated


Weighted
    AverageSecurity
    Rating

Amortized
    Cost


Gains


Losses


Fair
    Value


Coupon


Yield


Term
    (yrs)AAA

$



$



$



$





%



%


AA


























A


























BBB


81,639



245



(1,215
)


80,669



5.32



6.40



11.12BB


64,314



33



(1,000
)


63,347



4.71



7.75



10.82B


36,306



540



(430
)


36,416



4.72



11.63



13.02Not rated


26,444



454



(1,011
)


25,887



4.69



20.76



13.75Total CMBS

$
208,703


$
1,272


$
(3,656
)

$
206,319



4.87



9.54



12.15   Residential
    Mortgage Backed Securities (RMBS)
   F-21




---



##### Table of Contents



December 31,
    2006
  Gross
    Unrealized


Estimated


Weighted
    AverageSecurity
    Rating

Amortized
    Cost


Gains


Losses


Fair
    Value


Coupon


Yield


Term
    (yrs)AAA

$



$



$



$





%



%


AA


























A


29,094



124



(181
)


29,037



6.74



7.39



3.33BBB


61,340



103



(1,182
)


60,261



7.07



8.56



3.26BB


99,529



1,666



(469
)


100,726



6.99



12.53



2.93B


71,190



3,697



(474
)


74,413



7.80



21.16



4.26Not rated


20,130



2,801



(125
)


22,806



6.91



49.10



3.04Total Non-Agency RMBS

$
281,283


$
8,391


$
(2,431
)

$
287,243



7.18



15.93



3.38   December 31,
    2005
  Gross
    Unrealized


Estimated


Weighted
    AverageSecurity
    Rating

Amortized
    Cost


Gains


Losses


Fair
    Value


Coupon


Yield


Term
    (yrs)AAA

$
255,086


$



$
(2,416
)

$
252,670



5.28
%


5.64
%


3.83AA


























A


17,511







(618
)


16,893



5.90



7.29



4.43BBB


66,273



28



(1,187
)


65,114



6.16



7.55



4.77BB


101,243



387



(2,691
)


98,939



6.51



11.08



4.95B


62,541



189



(1,531
)


61,199



6.64



15.28



7.61Not rated


18,171



617



(918
)


17,870



6.10



39.69



7.03Total Non-Agency RMBS

$
520,825


$
1,221


$
(9,361
)

$
512,685



5.91



9.32



5.04     December 31,
    2006
  Gross
    Unrealized


Estimated


Weighted
    AverageSecurity
    Rating

Amortized
    Cost


Gains


Losses


Fair
    Value


Coupon


Yield


Term
    (yrs)AAA

$
2,538,699


$
5,524


$
(12,122
)

$
2,532,101



5.46
%


4.94
%


1.89AA


























A


























BBB


























BB


























B


























Not rated


























Total Agency ARMS

$
2,538,699


$
5,524


$
(12,122
)

$
2,532,101



5.46



4.94



1.89  F-22




---



##### Table of Contents



December 31,
    2005
 Gross
    Unrealized


Estimated


Weighted
    AverageSecurity
    Rating

Amortized
    Cost


Gains


Losses


Fair
    Value


Coupon


Yield


Term
    (yrs)AAA

$
1,677,125


$
443


$
(14,106
)

$
1,663,462



4.75
%


5.34
%


4.07AA


























A


























BBB


























BB


























B


























Not rated


























Total Agency ARMS

$
1,677,125


$
443


$
(14,106
)

$
1,663,462



4.75



5.34



4.07   Asset-Backed
    Securities (ABS)
      December 31,
    2006
  Gross
    Unrealized


Estimated


Weighted
    AverageSecurity
    Rating

Amortized
    Cost


Gains


Losses


Fair
    Value


Coupon


Yield


Term
    (yrs)AAA

$



$



$



$





%



%


AA


























A


10,310



239







10,549



5.73



8.23



2.76BBB


34,398



1,434



(249
)


35,583



5.83



9.15



4.57BB


























B


























Not rated


























Total ABS

$
44,708


$
1,673


$
(249
)

$
46,132



5.81



8.93



4.18   December 31,
    2005
  Gross
    Unrealized


Estimated


Weighted
    AverageSecurity
    Rating

Amortized
    Cost


Gains


Losses


Fair
    Value


Coupon


Yield


Term
    (yrs)AAA

$



$



$



$





%



%


AA


























A


12,082



17







12,099



4.74



6.14



4.12BBB


41,588



924



(81
)


42,431



4.85



7.02



5.93BB


























B


























Not rated


























Total ABS

$
53,670


$
941


$
(81
)

$
54,530



4.83



6.83



5.55  F-23




---



##### Table of Contents



Other
    Securities
    Unrealized
    Losses
    Security
    Rating

Number of
    Securities


Amortized
    Cost


Fair
    Value


Unrealized
    LossAAA


68


$
1,221,778


$
1,209,656


$
(12,122
)AA














A


1



4,363



4,182



(181
)BBB


24



133,211



131,090



(2,121
)BB


41



110,688



107,814



(2,874
)B


36



60,327



58,664



(1,663
)Not rated


6



9,652



8,992



(660
)Total


176


$
1,540,019


$
1,520,398


$
(19,621
)       Security
    Rating

Number of
    Securities


Amortized
    Cost


Fair
    Value


Unrealized
    LossAAA


62


$
1,515,976


$
1,499,454


$
(16,522
)AA














A


4



17,511



16,893



(618
)BBB


23



112,402



109,919



(2,483
)BB


33



127,727



123,916



(3,811
)B


31



65,349



63,388



(1,961
)Not rated


25



25,487



23,558



(1,929
)Total


178


$
1,864,452


$
1,837,128


$
(27,324
)    F-24




---



##### Table of Contents



Other Than
    Temporary Impairments
      Sale of
    Available for Sale Securities
    4.  Real
    Estate Loans
  and/or
        F-25




---



##### Table of Contents



Weighted




WeightedNumber of








Average




Average YearsLoan
    Type

Loans


Face
    Value


Carrying
    Value


Interest
    Rate


Maturity
    Range

to
    MaturityDecember 31, 2006Whole loans


16


$
198,942


$
200,605



6.06
%

11/2009-7/2021


8.9Construction loans


2



20,052



20,056



11.48


11/2007-7/2008


1.3Mezzanine loans


2



16,923



17,009



9.75


7/2008-2/2016


6.620


$
235,917


$
237,670



6.78


11/2007-7/2021


8.1December 31, 2005Whole loans


3


$
97,323


$
97,334



6.10
%

9/2010-7/2021


10.6B Notes


2



24,890



24,915



8.53


5/2007-8/2007


1.5Construction loans


2



18,242



18,248



10.12


11/2007-7/2008


2.3Mezzanine loans


1



6,000



6,000



9.59


6/2007


1.58


$
146,455


$
146,497



7.15


5/2007-7/2021


7.6            F-26




---



##### Table of Contents



December 31,Pledged as
    Collateral:

2006


2005For borrowings under repurchase
    agreements

$
159,219


$
17,294For borrowings under
    collateralized debt obligations


18,000



48,890Total

$
177,219


$
66,184   non-U.S. dollar
  5.
    Debt and Other
    Financing Arrangements    Type of
    Debt:

2006


2005Repurchase agreements

$
2,723,643


$
1,977,858Repurchase agreements, related
    party


144,806



16,429Collateralized debt obligations


194,396



227,500Revolving credit facility






Note payable, related party






35,000Total Debt

$
3,062,845


$
2,256,787   Repurchase
    Agreements
      F-27




---



##### Table of Contents



WeightedAverageOutstanding


Fair Value


Borrowing


MaturityRepurchase
    Counterparty

Balance


of
    Collateral


Rate


Range
    (days)Related PartyTrilon International, Inc.

$
144,806


$
159,219



5.79
%


29Unrelated
    PartiesBanc of America Securities LLC


230,901



241,131



5.36



5 - 47Bear, Stearns & Co.
    Inc.


236,128



243,513



5.33



5 - 66Citigroup Global Markets Inc.


304,217



314,310



5.35



40 - 73Credit Suisse First Boston LLC


220,724



229,216



5.34



5 - 73Deutsche Bank Securities Inc.


607,052



695,756



5.48



17 - 54Greenwich Capital Markets,
    Inc.


252,368



260,389



5.32



12 - 73Lehman Brothers Inc.


232,929



249,927



5.42



12 - 73Merrill Lynch, Pierce,
    Fenner & Smith Incorporated


296,812



306,850



5.32



24 - 54Morgan Stanley & Co.,
    Incorporated


191,288



196,654



5.36



12 - 40WaMu Capital Corp.


151,224



155,974



5.30



5 - 662,723,643



2,893,720Total

$
2,868,449


$
3,052,939



5.40
%


5 - 73     Up to


31 to


Over30 days


90 days


90 days


TotalAgency RMBS

$
821,668


$
1,601,030


$



$
2,422,698Non-agency RMBS


16,937



6,285







23,222CMBS


229,605



7,143







236,748ABS


15,374



25,601







40,975Real estate loans


144,806











144,806Total

$
1,228,390


$
1,640,059


$



$
2,868,449  F-28




---



##### Table of Contents



WeightedAverageOutstanding


Fair Value


Borrowing


MaturityRepurchase
    Counterparty

Balance


of
    Collateral


Rate


Range
    (days)Related PartyTrilon International, Inc.

$
16,429


$
17,294



4.83
%


89Unrelated
    PartiesBanc of America LLC


153,183



160,180



4.44



68Bear, Stearns & Co.
    Inc.


377,993



391,847



4.31



9 - 47Credit Suisse First Boston LLC


214,653



218,519



4.42



24 - 73Deutsche Bank Securities Inc.


156,536



156,169



4.19



24 - 47Greenwich Capital Markets,
    Inc.


254,017



260,168



4.31



9 - 73Lehman Brothers Inc.


332,698



327,806



4.23



9 - 55Morgan Stanley & Co.,
    Incorporated


228,821



233,962



4.30



12 - 55Wachovia Capital Markets, LLC


242,946



257,169



5.32



9 - 73Wachovia Bank, National Association


17,011



24,771



4.41



5941,977,858



2,030,591Total

$
1,994,287


$
2,047,885



4.33
%


9 - 594     Up to


31 to


Over30 days


90 days


90 days


TotalAgency RMBS

$
538,808


$
1,051,235


$



$
1,590,043Non-agency RMBS


170,975



112,895



17,011



300,881CMBS


31,815



12,974







44,789ABS


24,630



17,515







42,145Real estate loans






16,429







16,429Total

$
766,228


$
1,211,048


$
17,011


$
1,994,287     Collateralized
    Debt Obligations (CDOs)
   2005-1, 2005-1
 F-29




---



##### Table of Contents



Revolving
    Credit Facility
    Note Payable,
    Related Party
    Restrictive
    Covenants and Maturities
      RepurchaseRepurchase


Agreements,CDO


Agreements


Related
    Party


Totals2007

$
40,640


$
2,723,643


$
144,806


$
2,909,0892008


51,758











51,7582009


32,351











32,3512010


23,096











23,0962011


15,115











15,115Thereafter


31,436











31,436$
194,396


$
2,723,643


$
144,806


$
3,062,845  F-30




---



##### Table of Contents



Interest
    Expense
    March 15,
    2005(commencementYear Ended


of operations)
    toDecember 31,


December 31,2006


2005Interest on repurchase agreements

$
135,721


$
43,230Interest on interest rate swap
    agreements


(11,884
)


3,191Interest on CDO notes


12,148



987Interest on revolving credit
    facility


617



Interest on margin borrowing


480



Interest on notes payable, related
    party


239



703Amortization of deferred financing
    costs


2,015



314Other


265



Total interest expense

$
139,601


$
48,425     December 31,


December 31,2006


2005Interest on repurchase agreements

$
18,530


$
11,660Interest on CDO notes


874



987Interest on notes payable, related
    party






248Other


13



Total interest payable

$
19,417


$
12,895   6.  Commitments
    and Contingencies
    7.  Risk
    Management Transactions
   F-31




---



##### Table of Contents



2006


2005Derivative Assets:Interest rate swaps

$
13,410


$
11,983Interest rate caps


334



Foreign currency swaps


2,744



Credit default swaps


3,305



Interest receivable 
    swap


1,072



Total derivative assets

$
20,865


$
11,983Derivative Liabilities:Interest rate swaps

$
2,448


$
Foreign currency swaps


764



308Credit default swaps






3,593Interest payable  swap


7,936



5,759Total derivative liabilities

$
11,148


$
9,660     2006


2005Interest rate swaps on reverse
    repurchase agreements

$
1,285,433


$
1,237,500Interest rate caps on reverse
    repurchase agreements


200,000



Interest rate swaps on CDO notes


52,069



53,906Interest rate swaps on CDO II
    notes (see note 15)


240,467



$
1,777,969


$
1,291,406      F-32




---



##### Table of Contents



March 15,
    2005(commencementYear Ended


of operations)
    toDecember 31,


December 31,2006


2005Unrealized gain (loss) on credit
    default swaps (CDS)

$
6,898


$
(3,593
)Unrealized gain on foreign
    currency swaps (FCS)


1,980



(308
)Unrealized gain on hedge
    ineffectiveness


386



382Unrealized gain on economic hedges
    not designated for hedge accounting


450



803Periodic payments received on CDS


1,499



299Realized gain on CDS


35



Periodic payments received on FCS


338



Realized loss on FCS


(541
)


Net realized loss on interest rate
    swaps


(698
)


(80
)Net realized and unrealized gain
    (loss) on derivatives

$
10,347


$
(2,497
)           8.  Stockholders
    Equity and Long-Term Incentive Plan
     F-33




---



##### Table of Contents



F-34




---



##### Table of Contents



2006


2005Strike price

$
25.00


$
25.00Dividend yield


10.75
%


10.5
%Expected volatility


22.0
%


20.0
%Risk free interest rate


5.0
%


5.0
%Expected life of options


6 years



6 years       Number ofShares of


Weighted
    AverageRestricted
    Stock


Fair
    ValueNon-vested stock awards,
    March 15, 2005






Granted


84,000


$
25.00Vested






Forfeited






Non-vested stock awards,
    December 31, 2005


84,000



25.00Granted


38,000



24.86Vested


(28,662
)


25.00Forfeited


(4,000
)


25.00Non-vested stock awards,
    December 31, 2006


89,338



24.94Price range of stock awards
    outstanding

$22.31 - $25.00     WeightedNumber of


Weighted
    Average


AverageOptions


Exercise
    Price


Fair
    ValueOptions outstanding at
    March 15, 2005










Granted


126,000


$
25.00


$
2.19Exercised










Forfeited










Options outstanding at
    December 31, 2005


126,000


$
25.00



2.19Granted


4,000


$
25.00



2.49Exercised










Forfeited










Options, outstanding at
    December 31, 2006


130,000


$
25.00



2.63   December 31,2006


2005Options exercisable at end of
    period


43,328



Exercise price of options
    outstanding

$
25.00


$
25.00Weighted average remaining
    contractual life


8.21 years



9.21 years  F-35




---



##### Table of Contents



Number ofDeferred Stock


Weighted
    AverageUnits


Fair
    ValueDeferred Stock Units outstanding
    at March 15, 2005






Granted






Exercised






Forfeited






Deferred Stock Units outstanding
    at December 31, 2005






Granted


21,690


$
23.73Exercised






Forfeited






Deferred Stock Units outstanding
    at December 31, 2006


21,690


$
23.73     March 15,
    2005(commencementYear Ended


of operations)
    toDecember 31,


December 31,2006


2005Net unrealized gains (losses) on
    available for sale securities

$
3,561


$
(23,447
)Net realized and unrealized gains
    on interest rate swap and cap agreements accounted for as cash
    flow hedges


9,651



11,705Total accumulated other
    comprehensive income (loss)

$
13,212


$
(11,742
)   9.
    Financial
    Risks        10.  Related
    Party Transactions
  day-to-day
 F-36




---



##### Table of Contents



F-37




---



##### Table of Contents



2006


2005Real estate loans to related
    parties

$
42,885


$
43,029Interest receivable from real
    estate loans to related parties


1,134



Interest payable on indebtedness
    to related parties


117



262Interest income from real estate
    loans to related parties


2,395



Interest expense on indebtedness
    to related parties


3,115



453    sub-advisory sub-advisory
  11.  Earnings
    Per Share
    Year Ended
    December 31, 2006


Period Ended
    December 31, 2005Weighted








WeightedAverage








AverageNumber








Numberof Shares


Per Share





of Shares


Per ShareNet
    Income


Outstanding


Amount


Net
    Income


Outstanding


AmountBasic EPS:Net earnings per share of common
    stock

$
46,917



20,646,637


$
2.27


$
13,948



17,487,500


$
0.80Effect of Dilutive Securities:Options outstanding for the
    purchase of common stock


















Diluted EPS:Net earnings per share of common
    stock and assumed conversions

$
46,917



20,646,637


$
2.27


$
13,948



17,487,500


$
0.80   12.  Initial
    Public Offering
   F-38




---



##### Table of Contents



13.  Fair
    Value of Financial Instruments
  Disclosures about Fair Value of
    Financial Instruments
    December 31,
    2006


December 31,
    2005Carrying


Estimated


Carrying


EstimatedAmount


Fair
    Value


Amount


Fair
    ValueAssets:Available for sale securities

$
3,342,608


$
3,342,608


$
2,439,228


$
2,439,228Real estate loans


237,670



235,900



146,497



146,455Other investments


20,133



20,133







Derivative assets


20,865



20,865



11,983



11,983Liabilities:Repurchase agreements


2,723,643



2,723,643



1,977,858



1,977,858Repurchase agreements, related
    party


144,806



144,806



16,429



16,429Collateralized debt obligations


194,396



194,396



227,500



227,500Note payable, related party










35,000



35,000Derivative liabilities


11,148



11,148



9,660



9,660     Available for sale securities
  Real estate loans
 F-39




---



##### Table of Contents



Other investments
  Derivative assets and liabilities
  Repurchase agreements
  Collateralized debt obligations and note payable, related
    party
  14.
    Selected
    Quarterly Results of Operations (Unaudited)    December 31,


September 30,


June 30,


March 31,2006


2006


2006


2006Operating results:Interest and dividend income

$
59,118


$
55,627


$
45,293


$
41,186Interest expense


39,873



39,452



31,425



28,851Net interest and dividend income


19,245



16,175



13,868



12,335Net income


14,210



11,255



6,008



15,444Per share data:Net income  basic

$
0.57


$
0.50


$
0.34


$
0.88Net income  diluted

$
0.57


$
0.50


$
0.34


$
0.88Dividends declared

$
0.66


$
0.60


$
0.725


$
0.725   December 31,


September 30,


June 30,


March 31,2005


2005


2005


2005Operating results:Interest income

$
34,914


$
28,879


$
15,095


$
713Interest expense


22,802



17,978



7,542



103Net interest income


12,112



10,901



7,553



610Net income


1,222



12,289



315



122Per share data:Net income  basic

$
0.07


$
0.70


$
0.02


$
0.01Net income  diluted

$
0.07


$
0.70


$
0.02


$
0.01Dividends declared

$
0.725


$
0.58


$
0.25


$
     15.
    Subsequent
    Events  2006-1
 F-40




---



##### Table of Contents



2006-1
    30-year
  triple-net
   F-41




---



##### Table of Contents



CRYSTAL RIVER
    CAPITAL, INC. AND SUBSIDIARIES
    SCHEDULE IV  SCHEDULE OF MORTGAGE LOANS ON REAL
    ESTATEDecember 31, 2006
    (In thousands)



6 PrincipalAmountof LoanSubject toFinal






Face


Carrying


DelinquentInterest


Maturity



Prior


Amount of


Amount of


Principal orLoan Type

Rate


Date

Periodic Payment
    Terms

Liens(1)


Mortgages


Mortgages(2)


InterestConstruction Loans:Birchwood Acres


8.45
%

July
    2008

Interest payable monthly with
    scheduled periodic principal payments over the life to maturity


n/a


$
11,994


$
11,998



Cambridge Condos


16.00


November
    2007

Interest is capitalized monthly at
    a fixed rate with the principal and accrued interest due at
    maturity

$
20,735



8,058



8,058



Total construction
    loans














20,052



20,056Mezzanine Loans:Walgreens


7.32


February
    2016

Principal and interest are payable
    monthly based on amortization schedule over the life to maturity


112,175



11,063



11,133



Sheffield Building


14.35


July
    2008

Interest payable monthly with the
    principal due at maturity


400,000



5,860



5,876



Total mezzanine loans














16,923



17,009Whole Loans:Forbes Trinchera Ranch


7.83


September
    2010

Interest payable monthly with the
    principal due at maturity


n/a



37,000



37,004



Highvale Coal Ltd.


5.42


July
    2021

Principal and interest are payable
    annually based on amortization schedule over the life to maturity


n/a



42,885



42,885



Forestville Plaza


8.63


November
    2009

Interest payable monthly with the
    principal due at maturity


n/a



3,400



3,367



Nationwide  
    Fairgate Apartments


5.98


November
    2012

Principal and interest are payable
    monthly based on amortization schedule over the life to maturity


n/a



4,816



4,952



Nationwide  
    Willow Springs Apts


6.29


November
    2013

Principal and interest are payable
    monthly based on amortization schedule over the life to maturity


n/a



6,752



7,065



Nationwide  
    Marine Drive
    Tech Center


5.20


August
    2016

Principal and interest are payable
    monthly based on amortization schedule over the life to maturity


n/a



4,295



4,262



Nationwide  
    Garden Grove Community Center


6.33


June
    2015

Principal and interest are payable
    monthly based on amortization schedule over the life to maturity


n/a



9,323



9,818



Nationwide  
    Pioneer Ridge Apartments


5.25


July 2014

Principal and interest are payable
    monthly based on amortization schedule over the life to maturity


n/a



12,610



12,493



 F-42




---



##### Table of Contents



PrincipalAmountof LoanSubject toFinal






Face


Carrying


DelinquentInterest


Maturity



Prior


Amount of


Amount of


Principal orLoan Type

Rate


Date

Periodic Payment
    Terms

Liens(1)


Mortgages


Mortgages(2)


InterestNationwide  
    Torrance Tech Business Center


4.95


December
    2014

Principal and interest are payable
    monthly based on amortization schedule over the life to maturity


n/a



4,985



4,847



Nationwide  
    Shops of Dunwoody


6.66


August
    2015

Principal and interest are payable
    monthly based on amortization schedule over the life to maturity


n/a



8,495



9,155



Nationwide  
    Coral Springs Shopping Center


4.94


January
    2015

Principal and interest are payable
    monthly based on amortization schedule over the life to maturity


n/a



11,448



11,133



Nationwide  
    American Distribution II


5.29


February
    2016

Principal and interest are payable
    monthly based on amortization schedule over the life to maturity


n/a



5,249



5,213



Nationwide  
    121 Champion Way


5.22


August
    2015

Principal and interest are payable
    monthly based on amortization schedule over the life to maturity


n/a



8,202



8,105



Nationwide  
    Roseville Industrial


5.41


January
    2016

Principal and interest are payable
    monthly based on amortization schedule over the life to maturity


n/a



22,869



22,854



Nationwide  
    Seaboard Commons


6.21


July
    2016

Principal and interest are payable
    monthly based on amortization schedule over the life to maturity


n/a



12,714



13,379



Nationwide  
    Stone Creek Village


6.01


July
    2016

Interest payable monthly with the
    principal due at maturity


n/a



3,899



4,073



Total whole loans














198,942



200,605Total loans













$
235,917


$
237,670     (1)
    
    Represents estimated amount of
    mortgage liens collateralizing senior debt(2)
    
    Includes unamortized underwriting
    costs  Reconciliation of
    Mortgage Loans on Real EstateBalance, March 15, 2005

$
Additions during period:New mortgage loans


179,220Underwriting costs


50Subtractions during period:Mortgages sold


(32,676
)Principal payments


(89
)Amortization of underwriting costs


(8
)Balance, December 31, 2005


146,497Additions during period:New mortgage loans and advances on
    construction loans


140,208Capitalized interest


1,164Underwriting costs


174Subtractions during period:Mortgages sold


Principal payments


(2,052
)Amortization of underwriting costs


(38
)Foreign currency translation losses


(144
)Mortgages repaid


(48,139
)Balance, December 31, 2006

$
237,670    F-43