Stacked annotation stored in a geodatabase feature class does not stack. The text appears on one line, and block characters appear where the next line should start.
You are displaying annotation in a data frame with a defined coordinate system, while the coordinate system of the annotation feature class is undefined.
Solution or Workaround
Define the coordinate system of the annotation feature class. Refer to the ArcGIS Desktop Help for information on defining the coordinate system of feature classes. Select the Index tab of the ArcGIS Desktop Help and type "Feature Class". Double-click on 'and spatial reference'.