Management Fees and General and Administrative Expenses
We pay our Manager a base management fee payable monthly in arrears in amount equal to one twelfth of 1.25% of our Equity. Our Equity is defined as our month-end stockholders' equity, adjusted to exclude the effect of any unrealized gains or losses included in either retained earnings or accumulated OCI, each as computed in accordance with GAAP. There is no incentive compensation payable to our Manager pursuant to the management agreement. We incurred management fees of $113 million and $55 million during fiscal year 2012 and 2011, respectively; the year-over-year increase of which was primarily a function of our follow-on equity raises. General and administrative expenses were $31 million and $19 million during fiscal year 2012 and 2011, respectively. Our general and administrative expenses primarily consisted of prime broker fees, information technology costs, allocation of overhead expenses from our Manager, accounting fees, legal fees, Board of Director fees and insurance expense. Our total operating expense as a percentage of our average stockholders' equity declined year-over-year to 1.52% from 1.77% due to improved operating leverage.
Dividends and Income Taxes
For fiscal year 2012 and 2011, we had estimated taxable income of $2.1 billion and $1.0 billion (or $6.87 and $6.70 per common share), respectively.
As a REIT, we are required to distribute annually 90% of our taxable income to maintain our status as a REIT and all of our taxable income to avoid Federal and state corporate income taxes. We can treat dividends declared by September 15 and paid by December 31 as having been a distribution of our taxable income for our prior tax year ("spill-back provision"). Income as determined under GAAP differs from income as determined under tax rules because of both temporary and permanent differences in income and expense recognition. The primary differences are (i) unrealized gains and losses associated with interest rate swaps and other derivatives and securities marked-to-market in current income for GAAP purposes, but excluded from taxable income until realized or settled, (ii) temporary differences related to the amortization of premiums paid on investments, (iii) timing differences in the recognition of certain realized gains and losses and (iv) permanent differences for excise tax expense. Furthermore, our estimated taxable income is subject to potential adjustments up to the time of filing our appropriate tax returns, which occurs after the end of our fiscal year. The following is a reconciliation of our GAAP net income to our estimated taxable income for the fiscal year 2012 and 2011 (dollars in millions).
Book to tax differences:
Premium amortization, net
Realized loss, net
Unrealized loss, net
Total book to tax differences
Estimated REIT taxable income
Dividend on preferred stock
Estimated REIT taxable income available to common shareholders
Weighted average number of common shares outstanding - basic and diluted
Estimated REIT taxable income per common share - basic and diluted
For fiscal year 2012 and 2011, we declared common dividends of $5.00 and $5.60 per common share, respectively. For fiscal year 2012, we declared dividends on our Series A Preferred Stock of $1.056 per preferred share, which excludes the preferred stock dividend of $0.50 per share declared on December 17, 2012 with a record date of January 1, 2013, which is treated as a fiscal year 2013 dividend for federal income tax purposes. We did not have preferred stock outstanding prior to fiscal year 2012.
As of December 31, 2012, we have distributed all of our taxable income for the 2011 tax year and we have an estimated $749 million of undistributed taxable income related to our 2012 tax year, net of our December 31, 2012 common dividend payable of $424 million. We expect to distribute our remaining fiscal year 2012 taxable income during fiscal year 2013 under the available spill-back provision so that we will not be subject to federal or state corporate income tax. However, as a REIT, we are still subject to a nondeductible federal excise tax of 4% to the extent that the sum of (i) 85% of our ordinary taxable income, (ii) 95% of our capital gains and (iii) any undistributed taxable income from the prior year exceeds our dividends declared in such year and paid by January 31 of the subsequent year. For fiscal year 2012 and 2011, we accrued a federal excise tax of $25 million and $2 million,