ARBOLADA CAPITAL MANAGEMENT CO IPO

We are offering                    shares of our common stock at the initial 
public offering price of $             per share. Concurrently, we are selling 
to TCW Capital Investment Corporation, a subsidiary of The TCW Group, Inc., 
and certain employees of TCW an aggregate of $         million of our common 
stock at the initial public offering price in a private placement. We estimate 
that the net proceeds we will receive from selling common stock in this 
offering and the concurrent private placement will be approximately 
$             million, after deducting underwriting discounts and commissions 
and estimated offering expenses of approximately $             million (or, if 
the underwriters exercise their over-allotment option in full, approximately 
$             million, after deducting underwriting discounts and commissions 
and estimated offering expenses of approximately $             million). 

We plan to use all the net proceeds from this offering and the concurrent 
private placement to purchase agency securities. We anticipate that 
approximately 50% of our initial agency securities will consist of fixed-rate 
RMBS guaranteed by FNMA and that the remaining 50% will consist of hybrid ARM 
RMBS guaranteed by FNMA. We expect that the fixed-rate RMBS guaranteed by FNMA 
will have the following characteristics: (i) coupons ranging from 4.0% to 
6.5%; (ii) original maturities of either 15 years or 30 years; and (iii) 
current weighted average months to maturity ranging from 70 months to 360 
months. We expect that the hybrid ARM RMBS guaranteed by FNMA will have the 
following characteristics: (i) initial net weighted average fixed coupons 
ranging from 2.5% to 6.0%; (ii) original months to first initial reset of 
underlying loans of either 36 months, 60 months, 84 months or 120 months; and 
(iii) current weighted average months to maturity of approximately 50 months. 

We expect to deploy the net proceeds on a leveraged basis within 90 days of 
the closing of this offering and the concurrent private placement. Depending 
on the economic environment and our outlook for the mortgage market at the 
time we ultimately deploy the net proceeds on a leveraged basis, the 
percentage allocations of agency securities within our initial leveraged 
investment portfolio may differ from the currently expected allocations 
described above. 

Depending on the availability of our targeted investments in securities within 
the 90 days following the closing of this offering and the concurrent private 
placement, we may temporarily invest the net proceeds in readily marketable, 
short-term, interest-bearing investments, including money market accounts, 
that are consistent with our intention to qualify as a REIT. These temporary 
investments are expected to provide a lower net return than we hope to achieve 
from our targeted investments in securities.

We operate in a highly competitive market for investment opportunities. Our 
profitability depends, in large part, on our ability to acquire agency and 
non-agency securities at attractive prices. In acquiring our securities, we 
compete with a variety of institutional investors, including other REITs, 
specialty finance companies, public and private funds (including other funds 
managed by TCW), commercial and investment banks, commercial finance and 
insurance companies and other financial institutions. Many of our competitors 
are substantially larger and have considerably greater financial, technical, 
marketing and other resources than we do. Several other REITs have recently 
raised, or are expected to raise, significant amounts of capital, and may have 
investment objectives that overlap with ours, which may create additional 
competition for investment opportunities. Some competitors may have a lower 
cost of funds and access to funding sources that may not be available to us, 
such as funding from the U.S. Government. Many of our competitors are not 
subject to the same operating constraints associated with REIT tax compliance 
or maintenance of the Investment Company Act exemptions on which we rely. In 
addition, some of our competitors may have higher risk tolerances or different 
risk assessments, which could allow them to consider a wider variety of 
investments. Furthermore, competition for investments in agency or non-agency 
securities may lead to the price of such securities to increase, which may 
further limit our ability to generate desired returns.