Proxy Statement
The Board of Directors (the “Board”) of Annaly Capital Management, Inc. (“Annaly,” the “Company,” “we,” “our” or “us”Board”) is soliciting proxies in connection with our 2017 annual meeting of stockholders (the “Annual Meeting”). We arethe Annual Meeting. The Company is sending the Notice of Internet Availability of Proxy Materials (“Notice”), or a printed copy of the proxy materials, as applicable, commencing on or about April 11, 2017.10, 2018.
To view the Proxy Statement and other materials about the Annual Meeting, go to www.annalyannualmeeting.com or www.proxyvote.com.
All stockholders are cordially invited to attend the Annual Meeting, which will be conducted via a live webcast. The Company is excited to embrace the environmentally-friendly virtual meeting format, which it believes will enable increased stockholder attendance and participation. During this virtual meeting, you may ask questions and will be able to vote your shares electronically. You may also submit questions in advance of the Annual Meeting by visiting www.proxyvote.com. The Company will respond to as many inquiries at the Annual Meeting as time allows.
An audio broadcast of the Annual Meeting will also be available to stockholders by telephone toll-free at 1-877-328-2502. If you plan to attend the Annual Meeting online or listen to the telephonic audio broadcast, you will need the 16-digit control number included in your Notice, on your proxy card or on the instructions that accompany your proxy materials. Please note that listening to the audio broadcast will not be deemed to be attending the Annual Meeting, and you cannot vote from such audio broadcast. The Annual Meeting will begin promptly at 9:00 a.m. (Eastern Time). Online check-in will begin at 8:30 a.m. (Eastern Time), and you should allow ample time for the online check-in procedures.
If you wish to watch the webcast at a location provided by the Company, the Company’s Maryland counsel, Venable LLP, will air the webcast at its offices located at 750 E. Pratt Street, Suite 900, Baltimore, MD 21202. Please note that no members of management or the Board will be in attendance at this location. If you would like to view the Annual Meeting webcast at Venable LLP’s office, please follow the directions for doing so set forth in the “Questions and Answers about the Annual Meeting” section in this Proxy Statement.
By Order of the Board of Directors,
Chief Legal Officer and Secretary
April 10, 2018
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be Held on May 23, 2018.
The Company’s Proxy Statement and 2017 Annual Report to Stockholders are available at www.proxyvote.com. |
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Proxy Summary
This summary contains highlights about the Company and the Annual Meeting. This summary does not contain all of the information that you should consider in advance of the Annual Meeting, and we encouragethe Company encourages you to read the entire proxy statementProxy Statement and our 2016the Company’s 2017 Annual Report on Form 10-K carefully before voting.
2017 Annual Meeting of Stockholders2018 ANNUAL MEETING OF STOCKHOLDERS |
Time and Date: | Thursday, | | |
 | | TIME
AND DATE: | Wednesday, May 25, 201723, 2018 at 9:00 a.m. (Eastern Time) |
Place: | The Warwick Hotel, 65 West 54th Street,
New York, NY 10019 | | |
Record Date: | March 28, 2017 | PLACE: | www.virtualshareholdermeeting.com/NLY2018 |
Voting: | | | |
 | | RECORD DATE: | Close of business on March 26, 2018 |
| | | |
 | | VOTING: | Stockholders are able to vote by Internet atwww.proxyvote.com; www.proxyvote.com; telephone at 1-800-690-6903;
by completing and returning their proxy card; or in persononline at the Annual Meeting |
VOTING MATTERS
| | Board Vote
Recommendation | | Page
Number |
| Proposal No. 1:Election of Directors | | FOReach Director
Director nominee | | 219 |
Proposal No. 2:Approval, on an advisory basis, of ourthe Company’s executive compensation | | FOR | | 2545 |
| Proposal No. 3: Advisory vote on the frequency of future advisory votes to approve our executive compensation
| EVERY ONE YEAR | 29 |
Proposal No. 4:Ratification of the appointment of Ernst & Young LLP | | FOR | | 3049 |
PARTICIPATE IN THE ANNUAL MEETING
After years of declining attendance by stockholders at Annaly’s in-person annual meetings, the Company is moving to an online format for this year’s Annual Meeting. By hosting the Annual Meeting virtually, Annaly is able to communicate more effectively with its stockholders, enable increased attendance and participation from locations around the world and reduce costs for both the Company and its stockholders. This approach also aligns with the Company’s broader sustainability goals. The virtual meeting has been designed to provide the same rights to participate as you would have at an in-person meeting, including providing opportunities to make statements and ask questions.
Time and Date
Thursday, May 25, 2017
at 9:00 a.m. (Eastern Time)
Place
VOTINGThe Warwick Hotel,
65 West 54th Street,
New York, NY 10019
Record Date
March 28, 2017
Voting
Stockholders are entitled
to vote by
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InternetINTERNET
www.proxyvote.com
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TelephoneTELEPHONE
1-800-690-6903
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MailMAIL
completing and returning
their proxy card
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In PersonONLINE
at the Annual Meeting
InformationINFORMATION
www.annalyannualmeeting.com
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You are entitled to participate and vote at the Annual Meeting by visiting www.virtualshareholdermeeting.com/NLY2018. An audio broadcast of the Annual Meeting will also be available to stockholders by telephone toll-free at 1-877-328-2502. If you plan to attend the Annual Meeting online or listen to the telephonic audio broadcast, you will need the 16-digit control number included in your Notice, on your proxy card or on the instructions that accompany your proxy materials. Please note that listening to the audio broadcast will not be deemed to be attending the Annual Meeting and you cannot vote from such audio broadcast. Stockholders can access Annaly’s interactive pre-meeting forum, where you can submit questions in advance of the Annual Meeting and view copies of the Company’s proxy materials, by visiting www.proxyvote.com.
If you wish to watch the webcast at a location provided by the Company, the Company’s Maryland counsel, Venable LLP, will air the webcast at its offices located at 750 E. Pratt Street, Suite 900, Baltimore, MD 2102. Please note that no members of management or the Board will be in attendance at this location. If you wish to view the Annual Meeting via webcast at Venable LLP’s office, please complete theReservation Request Form found at the end of this Proxy Statement. For additional information on the Annual Meeting, and for copies of the Company’s Proxy Statement and 2017 Annual Report, please visit Annaly’s Annual Meeting informational website at www.annalyannualmeeting.com.
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Proxy Summary
Annaly at a GlanceANNALY AT A GLANCE
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| |
> | NLY
New York Stock
Exchange (NYSE): NLY
Traded |
> | Initial public offering (IPO) in 1997
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> | 1997
Initial Public Offering | | $15 billion(1)
Largest mortgage REIT
in the world by market capitalization
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> | Diversified capital manager with four investment groups – Agency, Commercial Real Estate, Residential Credit and Middle Market Lending
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> | Management agreement aligns interests of our manager and our stockholders
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> | Conservative leverage ratio relative to specified peers
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| |
> | 753% total return since IPO (including reinvestment of dividends) as of March 31, 2017
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> | 61.1% total return from the beginning of 2014 through March 31, 2017
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> | Since IPO, declared over $15 billion in common and preferred dividends; declared over $1.2 billion in dividends in 2016
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> | 2016 total return and economic return (change in book value plus dividends paid) of 19.1%, and 5.4%, respectively
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> | Our management team
The Company has voluntarily purchased over 2 million common shares since 2011 |
| |
We have been externally-managed by Annaly Management Company LLC (our(the “Manager”) since July 2013. OurThe Manager is responsible for managing ourthe Company’s affairs pursuant to a management agreement. OurThe Manager pays all of the compensation, including benefits, to its employees (which includes ourinclude the named executive officers (“NEOs”) other than Mr. Keyes, who receives no compensation for his services as ourthe Company’s Chief Executive Officer (“CEO”), but has an interest in the management fee as an indirect equityholder of ourthe Manager). Although certain personnel (but none of ourthe NEOs) are employed by our subsidiaries of the Company for regulatory or corporate efficiency reasons, all compensation and benefits paid to such personnel by ourthese subsidiaries reduce, on a dollar-for-dollar basis, the management fee we paythe Company pays to ourthe Manager. As of December 31, 2016, our2017, the Manager had 148146 employees and ourAnnaly’s subsidiaries collectively had 41six employees. For ease of reference, throughout this proxy statement, ourProxy Statement, the NEOs and the other employees of ourthe Manager, and ourtogether with employees of Annaly’s subsidiaries, are sometimes referred to as “our”Annaly’s employees.
Highlights and AccomplishmentsRECENT OPERATING ACHIEVEMENTS |
Despite challenging market conditions for mortgage real estate investment trusts (“REITs”) during 2016, we performed strongly and achieved a number of significant accomplishments that are discussed below:
Business HighlightsPerformance | | Capital Raising | | Dividends |
> |
32%
Total Shareholder Return in
2017, the single best year in
the last decade | In July 2016, | $2.8 billion
of capital raised across
common and preferred
markets over 6 months(2) | | $1.4 billion
Common and preferred
dividends declared in 2017; Q1
represents the Company completed18thconsecutive
quarter of a $0.30 dividend(3) |
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| Diversification | | Optionality | | Efficiency |
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24%
Capital dedicated to credit
assets at the largest mortgage REIT (“mREIT”) acquisitionend of 2017, an
increase from 11% in history 2014 | | 36
Available investment options
is nearly 3x more than in 2013 | | 48%
Lower operating expense as a
percentage of equity than the
mREIT index in 2017(4) |
|
| Alignment | | Financing | | Human Capital |
|
$5.9 million
of common stock purchased
by Annaly’s NEOs in 2017(5),
with the purchaseCEO voluntarily
increasing his stock ownership
commitment to $15 million | | 7
New financing relationships as
part of Hatteras Financial Corp. (“Hatteras”)initiative to broaden and
diversify counterparties | | 27
New hires in 2017, bringing
total new hires since 2014
to 125+, including several
members of management |
| (1) | Represents capital as of December 31, 2017. |
>(2) | The Company continued its diversification strategyCapital raising total proceeds include $425 million preferred offering completed in 2016 with expansion of investment optionsJanuary 2018. Gross proceeds are before deducting underwriting discounts and targeted growth in select credit assets, including the build out of our residential credit group
other offering expenses. |
>(3) | The Company advanced its funding strategy in 2016 with dedicated financing facilities for our credit groups while also capitalizingfirst quarter 2018 common stock cash dividend was declared on Federal Home Loan Bank term funding
March 15, 2018 and is payable on April 30, 2018. |
> | In April 2016, the Company further aligned management and shareholder interests by expanding its employee stock ownership guidelines to over 40% of employees |
>(4) | AsRepresents the percentage difference of March 31, 2017, all such individuals met, or were on track to meet, their individual ownership guidelinesAnnaly’s operating expense as a percentage of average equity vs. the BBREMTG for 2017. Operating expense is defined as: (i) for internally-managed BBREMTG members, the sum of compensation & benefits, general & administrative expenses and other operating expenses, and (ii) for externally-managed BBREMTG members, the sum of net management fees, compensation & benefits (if any), general & administrative expenses and other operating expenses.
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| (5) | Includes dividend reinvestments. |
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ANNALY’S DIVERSIFIED INVESTMENT STRATEGY
Our Diversified Investment Strategy |
Diversification is a key component of the Annaly strategy. Since 2010, we have2014, Annaly has diversified ourits business model by investing in credit assets, which complement ourthe Company’s primary portfolio of interest rate sensitive investments. This strategy is designed to achieve stable risk-adjusted earnings and book value performance over various interest rate and economic cycles by pairing shorter duration floating-rate credit securities with ourthe Company’s longer duration, fixed-rate agency portfolio. Annaly now has four distinct investment groups, which provide access to over 2536 investment options and structures. While managing investment decisions, we combinethe Company combines a robust capital allocation process with careful risk management. This process enables usAnnaly to take advantage of market fluctuations and inefficiencies and rotate into credit markets when dislocations occur and pricing is attractive on a risk-adjusted, relative value basis.
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Fixed RateAgency | | | Floating RateResidential Credit | | | Commercial Real Estate | | | Middle Market Lending |
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Invests in agency
MBS collateralized by
residential mortgages,
which are guaranteed by
Fannie Mae, Freddie Mac
or Ginnie Mae | | | Invests in non-agency
residential mortgage
assets within securitized
product and whole
loan markets | | | Originates and invests
in commercial mortgage
loans, securities, and
other commercial real
estate debt and equity
investments | | | Provides financing to
private equity backed
middle market
businesses across
the capital structure |
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| | | Assets1 | | | Capital2 | | | |
| | | | | | | | | |
| $107.3bn | $11.6bn | | | $2.8bn | $1.6bn | | | $2.0bn | $1.1bn | | | $1.0bn | $0.8bn |
| | | Sector Rank3 | | | |
| #1/6 | | | #6/18 | | | #4/12 | | | #14/42 |
| | | Strategy | | | |
Countercyclical/
Defensive | | | Cyclical/Growth | | | Cyclical/Growth | | | Countercyclical/
Defensive |
| | | | | | | | | |
| | | Levered Returns4 | | | |
| 9%-10% | | | 8%-11% | | | 7%-10% | | | 9%-11% |
Our diversification strategy is reflected in the following allocation of our equity across four investment groups – Agency, Commercial Real Estate, Residential Credit and Middle Market Lending – as of December 31, 2016.
| (1) | 
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| (2) | (1) Includes loans heldDedicated capital includes TBA purchase contracts, excludes non-portfolio related activity and varies from total stockholders’ equity.
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| (3) | Sector rank compares Annaly dedicated capital in each of its four investment groups as of December 31, 2017 (adjusted for sale.price to book as of December 31, 2017) to the market capitalization of the companies in each respective comparative sector as of December 31, 2017. Comparative sectors used for Agency, Residential Credit and Commercial Real Estate ranking are their respective sector within the BBREMTG as of December 31, 2017. Comparative sector used for Middle Market Lending ranking is the S&P BDC Index. |
| (4) | Levered return assumptions are for illustrative purposes only and attempt to represent current market asset returns and financing terms for prospective investments of the same, or a substantially similar, nature in each respective group. |
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Proxy Summary
The Company has 36 investment options across its four investment groups, which is nearly three times more than in 2013 and up from 26 options at the end of 2015.
DividendsNumber of Available Investment Options |
DIVIDENDS
From ourAnnaly’s IPO in 1997 through MarchDecember 31, 2017, we havethe Company has declared over $15$16 billion in common and preferred dividends to ourits stockholders. In 2016, we2017, Annaly declared over $1.2$1.4 billion in common and preferred dividends.
The cumulative dividends
Annaly has delivered to
stockholders since its IPO
| | $1.4 billion
of common and preferred
dividends delivered to
stockholders in 2017 | | 18
Consecutive quarters of a $0.30
dividend through Q1 2018 |
Delivering Significant Value for Stockholders in 2016Cumulative Dividends Declared since Annaly’s IPO |
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DELIVERING SIGNIFICANT VALUE FOR STOCKHOLDERS
5.4% economic12.4%(1)
Economic return in 2017, which represents the change in book value plus dividends declared over the year | | 32%
(includingTotal shareholder return in 2017, the single best year in the last decade | | 883%
Total shareholder return since Annaly’s IPO (including reinvestment of dividends) | | $1.2 billion dividends declared
(including common and preferred stock dividends) |
Total Common Stock Return Performance |
Since 2014 (the first full year we werethe Company was externally-managed, as more fully described in “Our Management Structure” below)on page38), we haveAnnaly has performed well against relevant benchmarks. As illustrated by the graphgraphs below, shares of ourthe Company’s common stock (including reinvestment of dividends) have returned significant value to our stockholders over the long term relative to both ourthe Company’s mREIT peers and other yield-focused investments.
| Total Shareholder Return since 2014(2) |
 |
| 2017 Total Shareholder Return(2) |
 |
| (1) | 
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| (2) | Source: Bloomberg. mREITs represent BBREMTG Index. Utilities represent the Russell 3000 Utilities Index. MLPs represent the Alerian MLP Index. Asset Managers represent the S&P 500 Asset Management and Custody Bank Index. Banks represent the KBW Bank Index. S&P represents the S&P 500 index. Note: Total shareholder return shown for period of December 31, 2013 to December 31, 2017 in top graph. Total shareholder return shown for period of December 31, 2016 to December 31, 2017 in bottom graph. |
Note: Graph reflects daily market data from December 31, 2013 through March 31, 2017. For a share performance graph for the five-year period ended December 31, 2016, please see pages 42-43 of our Annual Report on Form 10-K for the year ended December 31, 2016 filed with the Securities and Exchange Commission (“SEC”) on February 23, 2017.
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STOCKHOLDER OUTREACH AND RESULTS OF 2017 SAY-ON-PAY VOTE
Proxy Summary7
Non-deal roadshows across the U.S., Canada and Europe |
Source: Bloomberg. mREITs represent the members of the Bloomberg mREIT (“BBREMTG”) Index; Utilities represent the members of the Russell 3000 Utility Index; MLPs represent the members of the Alerian MLP Index; Asset Managers represent the members of the S&P 500 Asset Management and Custody Bank Index; Banks represent the members of the KBW Bank Index; and S&P represents the members of the S&P 500 Index.
| 72
One-on-one meetings and phone calls with stockholders | | 100+
Participants attended Annaly’s inaugural Investor DayEconomic Return Performance |
Since we have electedThe Company is committed to be taxed as a REIT and therefore must distribute at least 90% of our taxable income to our stockholders annually, we believe that economic return, comprised of dividends paid and changes in book value measured over a specified period, is an especially meaningful performance metric for the Company. Concerns over increases in interest rates led us to maintain relatively conservative leverage from the beginning of 2014 through the end of 2016 compared to our Agency mREIT peers. Our Agency mREIT Peers consist of AGNC Investment Corp. (“AGNC”), CYS Investments, Inc. (“CYS”), Capstead Mortgage Corp. (“CMO”), Armour Residential REIT, Inc. (“ARR”), and Anworth Mortgage Asset Corp. (“ANH”) (collectively, the “Agency mREIT Peers”), and represent the agency mortgage REITs included in the BBREMTG Index as of December 31, 2016ongoing engagement with market capitalization above $200 million. From the beginning of 2014 through the end of 2016, we generated an economic return of 21.7% and operated at 26.2% less leverage than this peer group.
Results of 2016 Say-on-Pay Vote and Stockholder Outreach |
Since September 2015, we have had a renewed focus on developing and maintaining relationships with both our retail and institutional stockholders andthrough a wide range of mediums. These engagement efforts have received investoryielded meaningful feedback on a variety of topics, including the Company’s diversified investment strategy and ourits corporate governance, compensation and management structures. From September 2015 through the end of March 2017, our shareholder outreach included:
> | 10 non-deal roadshows encompassing 81 investor meetings
| > | 116 additional one-on-one meetings / phone calls with stockholders
| > | New corporate website with enhanced disclosure |
In addition, followingFollowing the results of our 2016Annaly’s 2017 advisory resolution on executive compensation (commonly known as a “Say-on-Pay” vote), which received support from 53%69% of votes cast, we promptly embarked on athe Company continued its multi-pronged effortoutreach campaign to solicit feedback from key stakeholders regarding ouron a number of issues, including the Manager’s executive compensation program and external management structures. These efforts included:proposed compensation disclosure for 2018, board composition and refreshment and corporate social responsibility initiatives.
>Stockholder Engagement Efforts in 2017 | | Outreach included
approximately | | | Outreach toincluded
approximately | | | Management hosted meetings
with investors representing 65% of shares held by institutional stockholders, including 45 of our 50 largest stockholders
| > | Internal discussions with our Manager’s employees
| | | | | | > | | |  | | |  |
The Company’s stockholder outreach efforts to solicit feedback on the Manager’s executive compensation program and the Company’s proposed disclosure were complemented by related initiatives, including: | | ■ | Analysis of market practices at peer companies
| >■ | Advice from compensation consultants
| >■ | Attendance at investor conferences
| >■ | Discussions with proxy advisory services and corporate governance research firms |
Our stockholders generally were supportive ofThese stockholder engagement efforts generated significant feedback for both the enhanced 2016 proxy disclosure we provided to help investors understand the robust governance processesBoard and procedures around our external management structure, as well as to enable them to measure the management fee we pay to our Manager relative to the performance of the Company. Althoughand resulted in a number of ourenhancements to corporate governance and compensation practices and disclosures. Annaly’s stockholders indicated that they were satisfied withhave been extremely instrumental to, and appreciatedsupportive of, these governance and disclosure enhancements and the levelCompany looks forward to continuing to find innovative ways to engage over the course of 2018 and type of disclosure in our 2016 proxy statement, others indicated that they would like expanded disclosure on our Manager’s executive compensation program in order to enable them to fully evaluate such program, including the degree of alignment between executive pay and Company performance.beyond.
VIII | Annaly Capital Management Inc. 20172018 Proxy Statement | 11 | |
Table of Contents Proxy Summary STOCKHOLDER ENGAGEMENT Proxy SummaryWHAT THE
COMPANY HEARD | | WHAT THE COMPANY DID | Improve Disclosure to
Enable Fully Informed
Say-on-Pay Vote | | ■Provided additional clarity and transparency on the Manager’s executive compensation program, including disclosure of: ■the portion of the management fee that is allocated to NEO compensation paid by the Manager ■of this compensation, the portion of fixed vs. variable/incentive pay ■the metrics utilized to measure performance to determine variable/ incentive pay | Further Increase
Alignment of Senior
Executives with
Stockholders | | ■CEO voluntarily increased his stock ownership commitment to $15 million (from his existing requirement of $10 million) and pledged to meet this amount through open market purchases within three years ■Other members of senior management, including the Chief Investment Officer, Chief Credit Officer, Chief Financial Officer and Chief Legal Officer, also committed to voluntarily increase their stock ownership positions beyond the amounts required under their applicable stock ownership guidelines | Focus on Board
Refreshment and
Diversity | | ■Adopted an enhanced Board self-evaluation process that includes annual assessments of the full Board, each Board committee and individual Directors, which will be facilitated by an external evaluator on a periodic basis ■Assessed all Directors to ensure continued match of skills against the Company’s needs ■Refreshed Board Committee memberships and chairmanships ■Appointed 2 new highly qualified Directors to the Board as of January 1, 2018 ■Doubled the number of women Directors (from 2 to 4) as a result of these appointments ■36% of Directors are women ■4 of 11 Directors have tenure of less than 5 years | | Elevate Board Education | | ■Board became a Full Board Member of the National Association of Corporate Directors (NACD), which gives Directors access to an extensive menu of board education programs, along with research on governance trends and board practices | Expand Corporate
Social Responsibility | | ■Created Public Responsibility Committee of the Board to provide oversight of corporate philanthropy, culture and reputation, social impact investments and initiatives related to sustainability and public policy ■The Company partnered with Capital Impact Partners to launch a new joint venture dedicated to supporting community development in underserved cities across the country ■Recognized in the 2018 Bloomberg Gender-Equality Index, reflecting the Company’s commitment to creating a gender equal workplace | Increase Opportunities for
Stockholder Engagement | | ■Hosted first investor day with over 100 attendees ■Moving to an online format for the Annual Meeting to enable increased stockholder attendance and participation ■Established interactive pre-meeting forum, where stockholders can submit questions in advance of the Annual Meeting |
| 12 | Annaly Capital Management Inc. 2018 Proxy Statement | | |
Given that we do not provide anyTable of Contents
Proxy Summary ENHANCED DISCLOSURE ON THE MANAGER’S EXECUTIVE COMPENSATION PROGRAM 89.7%
of NEO compensation was variable and paid in the form of performance-based cash incentive bonuses | | 10.3%
of NEO compensation was paid in the form of fixed base salaries | | 16.2%
of the aggregate management fees paid to the Manager were allocated by the Manager as NEO compensation |
Over the last two years, the Company has engaged in extensive outreach to our NEOs, we have not previously providedunderstand the information relatedstockholders need in order to ourfully evaluate the Manager’s executive compensation program for our NEOs and such information has not previously been provided to us. However, at the requestpurposes of our Independent Directors and inmaking an informed Say-on-Pay vote. In response to our conversations with stockholders and our commitment to continuous improvement and transparency, ourthis feedback, the Manager has furnishedprovided the following information below about the compensation it paid to the Company about its executive compensation program:NEOs for 2017. Our Manager has agreed to provide
information about its executive
compensation program following
extensive stockholder feedback |
>■ | With the exception of Mr. Keyes (who does not receive any direct or indirect compensation from ourthe Manager or the Company for his services as our Chief Executive Officer,the Company’s CEO, but does have an interest in the fees paid to ourthe Manager as an indirect equityholder of the parent of our Manager), each of our otherthe NEOs receivesreceived a base salary and is eligible for a performance-based cash incentive bonus;
bonus for 2017. | >■ | A significant majorityDuring 2017, the NEOs as a group received aggregate salaries of $2.8 million and aggregate performance-based cash incentive bonuses of $23.9 million from the Manager. These amounts collectively represent 16.2% of the NEOs’ targetaggregate management fees the Company paid to the Manager during 2017. On an aggregated basis, the NEOs received 10.3% of their total compensation isin the form of base salaries and the remaining 89.7% in the form of performance-based and “at-risk”;
cash incentive bonuses.
| >■ | Payout of performance-basedIn determining the cash bonuses is based onit paid to the NEOs for 2017, the Manager considered achievement of both rigorous Company and investment group performance metrics,(1)including core return on equity, core return on assets, and operating expenses as a percentage of average equity, along with individual performance objectives; and
objectives.
| >■ | OurThe Manager considersconsidered a list of specified peer companies (set forth on page44 under “Company Market Data”), together with advice from the Manager’s compensation consultants, when it developsto develop appropriate compensation packages for ourthe NEOs.
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In addition, our Independent Directors have also requested that our Manager establish a framework for isolating the portion of the management fee allocable to 2017 NEO compensation. While the parameters of this framework are currently under review, our Independent Directors have asked our Manager to consider the guidance issued by proxy advisory firms regarding the level of compensation disclosure sufficient to facilitate an assessment of an externally-managed issuer’s pay programs.
Specifically, the Independent Directors have requested that our Manager establish a compensation framework that will enable it to provide the Company can disclose with the following information for disclosure in our 2018 proxy statement:
> | The portion of the management fee that is allocated to NEO compensation paid by our Manager;
| > | Of this compensation, the breakdown of fixed vs. variable/incentive pay; and
| > | The metrics our Manager uses to measure performance to determine our NEOs’ variable/incentive pay.
|
We will continue to considerFor additional information about the outcome of future Say-on-Pay votes, as well as stockholder feedback received throughoutManager, the year,management agreement and invite stockholders to express their viewsexecutive compensation, see “Certain Relationships and Related Party Transactions,” “Management Structure”, “Compensation Paid by the Manager to the Independent Directors as described underNamed Executive Officers” and “Communications with the Board.Compensation Discussion and Analysis.”
Development(1) | Each of the core performance metrics referred to in this Proxy Statement, including core return on equity and Promotioncore return on assets, excludes the premium amortization adjustment, which represents the cumulative impact on prior periods, but not the current period, of Key Executives |
In 2016 and early 2017, the Company announced management promotions within its senior executive team. In November 2016, David L. Finkelstein, who had been serving as Annaly’s Chief Investment Officer, Agency and RMBS, was named Annaly’s Chief Investment Officer with oversight of all of Annaly’s investments and their related investment operations, and Timothy P. Coffey, Annaly’s Chief Credit Officer, was promoted to assume expanded management responsibilities for the Company’s risk department and credit groups. In March 2017, Anthony C. Green, who had been serving as Annaly’s Deputy General Counsel, succeeded R. Nicholas Singh as the Company’s Chief Legal Officer and Secretary.quarter-over-quarter changes in estimated long-term prepayment speeds related to the Company’s Agency mortgage-backed securities.
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Our Manager and Our Management Agreement |
| | Annaly Capital Management Inc. 2018 Proxy Statement | 13 | > |
Table of Contents Proxy Summary THE MANAGER AND THE MANAGEMENT AGREEMENT 1.05%
The Manager receives a fee equal to 1.05% of the Company’s stockholders’ equity | | 29%
Annaly’s management fee is 29% lower than the industry average of 1.48%(1) | | $276 million
Approximate compensation savings since the Externalization in July 2013(2) |
| ■ | All of ourthe NEOs are indirect owners and/or employees of ourthe Manager
| >■ | With the exception of Mr. Keyes, each of ourthe other NEOs receives compensation paid by ourthe Manager. Mr. Keyes receives no compensation for his services as our Chief Executive Officer,CEO, although, as an indirect equityholder of the parent of ourthe Manager, Mr. Keyes has an interest in the fees paid to ourthe Manager
| >■ | OurThe Manager is responsible for the compensation of its employees (including ourthe NEOs other than Mr. Keyes) who provide services to the Company. We doAnnaly does not pay any cash or equity compensation to ourits executive officers, dodoes not provide pension benefits, perquisites or other personal benefits, and havehas no employment agreements or arrangements to pay any cash severance upon their termination or a change in control of the Company
| >■ | OurThe Manager receives a flat management fee equal to 1.05% of ourthe Company’s stockholders’ equity (as defined in ourthe Management Agreement), which is used by the Manager to, among other things, pay the compensation and benefits of itsthe Manager’s employees (including ourthe NEOs). However, the Company does not determine the compensation payable by the Manager to the NEOs, the Company does not allocate any specific portion of the management fee we payit pays to the compensation of ourthe NEOs,
nor does the Company reimburse the Manager for the cost of such compensation | >■ | For 2016,2017, the management fee was approximately $152$164.3 million | | |
Over the past several years, ourthe Manager has made significant investments in personnel corresponding to the diversification of ourits investment strategy into more people-intensive asset classes (including Residential Credit, Commercial Real Estate and Middle Market Lending assets), as well as to the enhancement of our corporate infrastructure.infrastructure enhancements. These investments include the build out of teams for ourthe Agency, Residential Credit, Commercial Real Estate and Middle Market Lending groups, and significant hires in our business support functions, such as risk management, legalRisk Management, Legal and compliance, financeCompliance, Finance and information technology,Information Technology, among others. | Investment in Annaly’s People | | | | 91 | | 96% | | Dedicated staff supporting best-in-class Risk Management, Technology, Legal, Finance and Business Development functions | | of employees feel Annaly is committed to exceeding stockholder expectations, compared to the Financial Services average of 88%(3) | | | | | | 10 | | 7 | | Internal development programs in place with 100% employee participation | | Management committees with broad representation designed to provide guidance and oversight |
The costs of these personnel expansions and improvements have been paid by ourthe Manager rather than by us.the Company. Unlike a number of other externally-managed REITs, we doAnnaly does not reimburse ourthe Manager for any portion or subset of employment costs, all of which are borne by ourthe Manager. An increase to these costs does not result in any increase to the management fee, which is a fixed percentage of our stockholders’ equity as described above. The Independent Directors review the efforts of our Manager to ensure that our Manager continues to invest in our personnel. The Board has concluded that the efforts of our Manager to develop and enhance our personnel have resulted in the establishment of a robust and high quality management team having a full complement of human capital to drive our business performance. We believe our management team is best in class in terms of size, scope and experience compared with our mREIT peers.
X | Annaly Capital Management Inc. 2017 Proxy Statement |
Table of Contents
Despite the costs associated with the diversification of ourits investment strategy, ourthe Manager has continued to operate the business in an efficient manner with appropriately scaled operating costs (including the management fee). As illustrated by the table below, Annaly’s average operating expense levels have remained significantly lower than both ourits internally- and externally-managed mREIT peers over the last fivesix years.  | | | 2012 | 2013 | 2014 | 2015 | 2016 | | Average | Annaly |  | 0.19% | 0.22% | 0.24% | 0.25% | 0.25% | | 0.23% | Internally-Managed Peers | 0.54% | 0.91% | 0.87% | 0.73% | 0.44% | | 0.70% | Externally-Managed Peers | 0.60% | 0.66% | 0.75% | 0.79% | 0.66% | | 0.69% |  | | | 2012 | 2013 | 2014 | 2015 | 2016 | | Average | Annaly | | 1.45% | 1.66% | 1.61% | 1.58% | 1.65%(1) | | 1.59% | Internally-Managed Peers | 2.72% | 3.83% | 4.13% | 3.84% | 2.48% | | 3.40% | Externally-Managed Peers | 2.20% | 3.06% | 3.57% | 3.75% | 4.06% | | 3.33% |
Source: Company Filings, SNL and Bloomberg. Averages are market weighted based on market capitalization as of Dec. 31st of each respective year.
Note: Internally-Managed Peers and Externally-Managed Peers represent the respective internally- and externally-managed members of the BBREMTG Index with market capitalization above $200 million as of December 31st of each respective year. The average for each excludes Annaly and companies during years in which they became public or first listed. Operating Expense is defined as: (i) for Internally-Managed Peers, the sum of compensation & benefits, general & administrative expenses and other operating expenses, and (ii) for Externally-Managed Peers, the sum of net management fees, compensation & benefits (if any), general & administrative expenses and other operating expenses.
| (1) | Excludes costsThe “industry average” reflects the average management fee of $49 million relatedall externally-managed companies (excluding Annaly) included in the BBREMTG Index as of December 31, 2017. For additional information, including assumptions, about this calculation, please see “Management Agreement Terms” on pages38 - 39.
| | (2) | For additional information, including assumptions, about this calculation, please see “Continued Cost Savings Related to the Company’s acquisitionExternalization” onpage 40. | | (3) | “Financial Services” average is provided by Perceptyx based on a cross section of Hatteras.global and domestic banks, credit card companies, insurance companies, accountancy companies, consumer finance companies, stock brokerages, and investment funds. |
| 14 | Annaly Capital Management Inc. 2018 Proxy Statement | | |
Table of Contents Proxy Summary | Operating Expense as a Percentage of Average Equity(1) |
| 2012 | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 | | Average |  | 1.45% | | 1.66% | | 1.61% | | 1.58% | | 1.65% | | 1.68% | | 1.61% | Internally-Managed
Peers | 2.71% | | 3.95% | | 3.92% | | 3.68% | | 2.14% | | 2.10% | | 3.08% | Externally-Managed
Peers | 2.38% | | 3.06% | | 3.55% | | 3.82% | | 4.36% | | 4.00% | | 3.53% | | mREIT Index | 2.33% | | 3.30% | | 3.62% | | 3.80% | | 3.53% | | 3.25% | | 3.30% |
For additional information about ourthe Manager, ourthe management agreement and executive compensation, see “Certain Relationships and Related Party Transactions,” “Our Management Structure”, “Compensation Paid by ourthe Manager to ourthe Named Executive Officers” and “Compensation Discussion and Analysis.” www.annalyannualmeeting.com | XI |
Table of ContentsGOVERNANCE TIMELINE
Proxy SummaryAnnaly Strives for Best-in-Class Governance Practices |
Governance Highlights2013 | | ■Annaly’s proposal to be externally managed received 83% support from stockholders | | ■Added new Independent Director |
We regularly review and update our practices related to our corporate governance, compensation and management structures to align the interests of our management team with those of our stockholders and to respond to stockholder feedback, changes in applicable laws, regulations and stock exchange requirements, and the evolving needs of our business. Our current best practices are highlighted below:
| | | | | Director Independence
and Oversight2014 | | ■Enhanced financial disclosure, including additional financial metrics | | ■Added new Independent Director | | | | | | Director
Qualifications2015 | | ■Robust Lead Independent Director role created ■Established Risk Committee ■Detailed succession planning process with Board | | ■Kevin Keyes appointed as CEO ■Initiated extensive investor outreach | | | | | | Stockholder Rights
and Engagement2016 | | Good Governance /
Corporate Citizenship■Adopted broad-based stock ownership guidelines for employees
■Increased Board ownership guidelines | | ■Adopted clawback policy for external manager ■Adopted anti-pledging policy ■Adopted four-year stock holding period | | | | | | | 2017 | | >■7 of 9 Directors are IndependentEstablished a new Public Relations Committee; rotated Board Committee chairs and members
>■Lead Independent DirectorLaunched social impact investing joint venture
>■Regular executive sessionsInclusion of Board skills matrix in proxy statement
■Joined Council of Institutional Investors (CII) as corporate member | | ■Designated second Audit Committee financial expert ■Joined National Association of Corporate Directors (NACD) as Full Board Member ■NEOs voluntarily committed to increase stock ownership positions ■Hosted inaugural Investor Day ■Launched Women's Interactive Network | | | | | | | 2018 | | ■Added 2 Independent Directors >■Independent Board committeesVirtual meeting format for Annual Meeting
>■Adopted enhanced Board oversees a succession plan for the CEOevaluation process, including individual directors assessments and periodic use of external facilitator
| | ■Enhanced compensation and other senior executives | | >Annual Board and committee self-evaluationsdisclosure in proxy statement
>■Annual assessmentIncluded in the 2018 Bloomberg Gender-Equality Index
|
| (1) | Source: Company Filings, SNL and Bloomberg. Averages are market weighted based on market capitalization as of all DirectorsDecember 31st of each respective year. Note: Internally-Managed Peers and Externally-Managed Peers represent the respective internally- and externally-managed members of the BBREMTG Index as of December 31st of each respective year. The average for each excludes Annaly and companies during years in which they became public or first listed. Operating Expense is defined as: (i) for Internally-Managed Peers, the sum of compensation & benefits, general & administrative expenses and other operating expenses, and (ii) for Externally-Managed Peers and Annaly, the sum of net management fees, compensation & benefits (if any), general & administrative expenses and other operating expenses. Annaly’s 2016 operating expenses exclude costs of $49 million related to ensure continued match of their skills against the Company’s needs >Over-boarding policy limits the numberacquisition of outside boards on which our Directors can serve
>2 “audit committee financial experts”
| | >Majority vote standard for uncontested elections
>Annual stockholder advisory vote on executive compensation
>No restrictions on stockholders’ ability to amend the Company’s by-laws
>Active stockholder engagement program
| | >Clawback policy with manager
>Anti-hedging and pledging policies
>Director and employee stock ownership guidelines
>Four-year stock holding period requirement for employees
>Corporate sustainability initiatives
>Whistleblower procedures and hotline for auditing and accounting concerns
Hatteras Financial Corp. |
XII | Annaly Capital Management Inc. 20172018 Proxy Statement | 15 | |
Table of Contents Proxy Summary BOARD COMPOSITION AND REFRESHMENT Proxy Summary4
of 11 Directors have tenure of
less than 5 years | | 82%
of Annaly’s Board of
Directors is comprised of
Independent Directors with
deep and diverse expertise | | 36%
of Annaly’s Board of
Directors are women |
Board Composition and Refreshment |
The Nominating/Corporate Governance Committee (the “NCG Committee”) of the Board seeks to achieve a balance of knowledge, experience and capability on the Board. Newer directorsDirectors offer fresh ideas and perspectives, while deeply experienced directorsDirectors bring extensive knowledge of ourthe Company’s complex operations. On an annual basis, the NCG Committee evaluates itsthe Board’s overall composition, including directorDirector tenure and rigorously evaluates all directorsDirectors to ensure a continued match of their skill sets against the needs of the Company. This assessment also informs Board succession planning, and contributed to the appointment, effective January 1, 2018, of two new Independent Directors (Katie Beirne Fallon and Vicki Williams) with skills that complement the Company’s highly qualified Board. The table below summarizes key qualifications, skills, and attributes most relevant to ourthe Directors’ service on ourthe Board. For additional information about individual Director’s qualifications and experience, please see the Director biographies beginning on page320. | Board Skill / Experience Summary |
| 16 | | | | | Annaly Capital Management Inc. 2018 Proxy Statement | | | Skill / experience | | No. of Directors | | Total | | | Audit committee financial expert | |  | | 2 | | | Complex and regulated industries | |  | | 8 | | | Compliance | |  | | 5 | | | Corporate governance | |  | | 8 | | | Ethics and social responsibility oversight | |  | | 4 | | | Finance and accounting experience | |  | | 8 | | | Financial services | |  | | 8 | | | Government, public policy and regulatory affairs | |  | | 4 | | | Industry knowledge | |  | | 9 | | | Information technology | |  | | 3 | | | Legal expertise | |  | | 4 | | | Mergers & acquisitions | |  | | 6 | | | Operations | |  | | 9 | | | Other public company board experience | |  | | 3 | | | Private company board experience | |  | | 5 | | | Public company CEO | |  | | 2 | | | Risk management | |  | | 9 | | | Strategy development and implementation | |  | | 7 | | | | |
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Table of Contents
Table of Contents
www.annalyannualmeeting.com | 1Annaly Capital Management Inc. 2018 Proxy Statement | 17 | |
Table of Contents Corporate Governance at Annaly 
| (1) | Represents the percentage difference of operating expense as a percentage of average equity for Annaly vs. the BBREMTG average for 2017. | | (2) | Represents the percentage difference of operating expense as a percentage of average assets for Annaly vs. the BBREMTG average for 2017. Notes: Operating Expense is defined as: (i) for internally-managed BBREMTG members, the sum of compensation & benefits, general & administrative expenses and other operating expenses, and (ii) for externally-managed BBREMTG members (including Annaly), the sum of net management fees, compensation & benefits (if any), general & administrative expenses and other operating expenses. |
| 18 | Annaly Capital Management Inc. 2018 Proxy Statement | | | | |
Table of Contents Corporate Governance at Annaly  |
01 | | Election of Directors We haveThe Company has three Classesclasses of Directors. At the Annual Meeting, our stockholders will vote to elect three Class IIII Directors from the nominees named herein,(Wellington J. Denahan, Michael Haylon and Donnell A. Segalas), whose terms will expire at ourthe annual meeting of stockholders in 2021 (“2021 Annual Meeting”), one Class III Director (Katie Beirne Fallon, who was appointed to the Board, effective January 1, 2018), whose term will expire at the annual meeting of stockholders in 2020 (“2020 Annual Meeting”), and one Class II Director (Vicki Williams, who was appointed to the Board, effective January 1, 2018), whose term will expire at the annual meeting of stockholders in 2019 (“2019 Annual Meeting”), each subject to the election and qualification of their successorshis or her successor or to theirhis or her earlier death, resignation or removal. TheOther than Ms. Williams and Ms. Fallon, the terms of the other Class III and Class IIIII Directors have one yearexpire at the 2019 Annual Meeting and two years,the 2020 Annual Meeting, respectively, remaining on their terms of office and will not be voted upon at the Annual Meeting. The table below provides summary information about each of ourthe Directors.
OUR BOARD OF DIRECTORS HAS NOMINATED AND RECOMMENDS A VOTE FOR FRANCINE J. BOVICH, JONATHAN D. GREEN AND JOHN H. SCHAEFER AS DIRECTORS TO HOLD OFFICE UNTIL OUR ANNUAL MEETING OF STOCKHOLDERS IN 2020 AND UNTIL THEIR RESPECTIVE SUCCESSORS ARE DULY ELECTED AND QUALIFIED. THE PERSONS NAMED IN THE ENCLOSED PROXY WILL VOTE YOUR PROXY IN FAVOR OF THESE NOMINEES UNLESS YOU SPECIFY A CONTRARY CHOICE IN YOUR PROXY.
|  | | | The Board has nominated and recommends a voteFOReach of Wellington J. Denahan, Michael Haylon and Donnell A. Segalas as Directors to hold office until the 2021 Annual Meeting,FORKatie Beirne Fallon as a Director to hold office until the 2020 Annual Meeting, andFORVicki Williams as a Director to hold office until the 2019 Annual Meeting. Unless you specify a contrary choice, the persons named in the enclosed proxy will vote in favor of these nominees. In the event that these nominees should become unavailable for election due to any presently unforeseen reason, the persons named in the proxy will have the right to use their discretion to vote for a substitute. |
| | Name | | Age | | Principal Occupation | | Independent | | Committees |  | | CLASS III DIRECTORS (NOMINATED TO SERVE FOR THREE-YEAR TERMS EXPIRING IN 2020)Wellington J. Denahan | | 54 | | Former Executive Chairman | | No | | ■PR | | | | | | Annaly Capital Management, Inc. | | | | ■Risk | | Michael Haylon | | 60 | | Managing Director | | Yes | | ■Audit | | | | | | Conning, Inc. | | | | ■Risk | | Donnell A. Segalas | | 60 | | Chief Executive Officer and | | Yes | | ■Compensation | | | | | | Managing Partner | | | | (Chair) | | | | | | Pinnacle Asset Management, L.P. | | | | ■NCG | | | | | | | | | | ■PR | | | | | | | | | | | |  | | Kevin G. Keyes | | 50 | | Chairman, Chief Executive Officer | | No | | | | | | | | and President | | | | | | | | | | Annaly Capital Management, Inc. | | | | | | Kevin P. Brady | | 62 | | Chief Executive Officer | | Yes | | ■Audit (Chair) | | | | | | ARMtech, LLC | | | | ■NCG | | | | | | | | | | ■Risk | | E. Wayne Nordberg | | 79 | | Chairman | | Yes | | ■Audit | | | | | | Hollow Brook Wealth Management, LLC | | | | ■Compensation | | | | | | | | | | ■NCG | | Vicki Williams | | 45 | | Senior Vice President Compensation, | | Yes | | ■Audit | | | | | | Benefits and HRIS | | | | ■Compensation | | | | | | NBCUniversal | | | | | | | | | | | | | | | |  | | Francine J. Bovich | 65 | 66 | | Former Managing Director | | Yes | | ■>NCG (Chair) Audit | | | | | | Morgan Stanley Investment Management | | | | ■>PR NCG | | Katie Beirne Fallon | | 42 | | Global Head of Corporate Affairs | | Yes | | ■NCG | | | | | | Hilton Worldwide Holdings Inc. | | | | ■PR | | Jonathan D. Green* | 70 | 71 | | Former Vice Chairman | | Yes | | ■> RiskPR (Chair) | | | The | | | Rockefeller Group | | | | ■>Compensation | | | | | | | | | | ■Risk | | John H. Schaefer | 65 | 66 | | Former President and | | Yes | | ■>Risk (Chair) Audit | | | | | | Chief Operating Officer | | | | ■>Audit Compensation | | | | | | Morgan Stanley Global Wealth Management | | > Risk | CLASS I DIRECTORS (TERMS EXPIRE IN 2018) | Wellington J. Denahan | 53 | Executive Chairman | No | | | | Annaly Capital Management, Inc. | | | Michael Haylon | 59 | Managing Director | Yes | > Audit | | | Conning, Inc. | | > Risk | Donnell A. Segalas | 59 | Chief Executive Officer and | Yes | > Compensation | | | Managing Partner | | (Chair) | | | Pinnacle Asset Management, L.P. | | ■> NCG | CLASS II DIRECTORS (TERMS EXPIRE IN 2019) | Kevin G. Keyes | 49 | Chief Executive Officer and President | No | | | | Annaly Capital Management, Inc. | | | Kevin P. Brady | 61 | Chief Executive Officer | Yes | > Audit (Chair) | | | ARMtech, LLC | | > NCG | | | | | > Risk | E. Wayne Nordberg | 78 | Chairman | Yes | > NCG (Chair) | | | Hollow Brook Wealth Management, LLC | | >Compensation |
| * | Lead Independent Director. For more details, see page1130. |
2 | Annaly Capital Management Inc. 20172018 Proxy Statement | 19 | |
Table of Contents Corporate Governance at Annaly CLASS I DIRECTORS | Wellington J. Denahan | Director since
1997 Committees
PR, Risk | Ms. Denahan co-founded Annaly in 1996 and has served as a Director since that time. Until December 2017, Ms. Denahan served as Chairman of the Board of Annaly (from November 2012) and Executive Chairman of Annaly (from September 2015). Previously, Ms. Denahan served as Chief Executive Officer of Annaly from November 2012 to September 2015 and as Co-Chief Executive Officer of Annaly from October 2012 to November 2012. Ms. Denahan was Annaly’s Chief Operating Officer from January 2006 to October 2012 and Chief Investment Officer from 2000 to November 2012. Ms. Denahan received a B.S. in Finance from Florida State University. |
| Director Qualification Highlights | | The Board believes that Ms. Denahan’s qualifications include her significant oversight experience related to fixed income trading operations through years of serving as Annaly’s Chief Operating Officer and Chief Investment Officer, her industry experience and expertise in the mortgage-backed securities markets, and her operational expertise, including her service as Annaly’s former Chief Executive Officer. |
| Michael Haylon | NomineesDirector since
2008
Committees
Audit, Risk | Mr. Haylon has served as Managing Director and Head of Asset Management Sales, Products and Marketing at Conning, Inc., a global provider of investment management solutions, services and research to Servethe insurance industry, since December 2014. Mr. Haylon previously served as Managing Director and Head of Investment Products at Conning, Inc. from January 2012 until December 2014. From September 2010 to December 2011, Mr. Haylon served as Head of Investment Product Management at General Re – New England Asset Management. He was Chief Financial Officer of the Phoenix Companies, Inc. from 2004 until 2007, and Executive Vice President and Chief Investment Officer of the Phoenix Companies in 2002 and 2003. From 1995 until 2002, he held the position of Executive Vice President of Phoenix Investment Partners, Ltd., a NYSE-listed company, and President of Phoenix Investment Counsel, where he was responsible for the management and oversight of $25 billion in closed-end and open-end mutual funds, corporate pension funds and insurance company portfolios. From 1990 until 1994, he was Senior Vice President of Fixed-Income at Phoenix Home Life Insurance Company. From 1986 until 1990, he was Managing Director at Aetna Bond Investors where he was responsible for management of insurance company and pension fund portfolios. From 1980 until 1984, he was a Three-Year Term ExpiringSenior Financial Analyst at Travelers Insurance Companies. He began his career in 2020 (Class III Directors)1979 in the commercial lending program at Philadelphia National Bank. Mr. Haylon has previously served on the boards of Aberdeen Asset Management and Phoenix Investment Partners. Mr. Haylon received a B.A. from Bowdoin College and a M.B.A. from the University of Connecticut. |
| Director Qualification Highlights | | The Board believes that Mr. Haylon’s qualifications include his significant leadership and management experience from his years of management and oversight of large financial asset portfolios, his prior board experience with other companies and his expertise in financial matters. |
| 20 | Annaly Capital Management Inc. 2018 Proxy Statement | | |
Table of Contents Corporate Governance at Annaly | Donnell A. Segalas | Director since
1997 Committees
Compensation (Chair),
NCG, PR | Mr. Segalas has served as the Chief Executive Officer and a Managing Partner of Pinnacle Asset Management L.P., a New York-based alternative asset management firm, since 2003. Additionally, Mr. Segalas is a member of Pinnacle’s Investment Committee and sits on the boards of its offshore funds. Prior to joining Pinnacle, Mr. Segalas was Executive Vice President and Chief Marketing Officer for Alternative Investment Products at Phoenix Investment Partners. Mr. Segalas is a member of the Nantucket Historical Society. He received a B.A. from Denison University. |
| Director Qualification Highlights | | The Board believes that Mr. Segalas’s qualifications include his significant experience from his years of investing and managing private and public investment vehicles and his experience serving on investment and executive committees of other companies. |
CLASS II DIRECTORS | Kevin G. Keyes | Director since
2012 Chairman of the Board | Mr. Keyes serves as Annaly’s Chairman, Chief Executive Officer and President. Mr. Keyes has served as Chairman since January 2018, Chief Executive Officer since September 2015 and President since October 2012. Previously, Mr. Keyes served as Chief Strategy Officer and Head of Capital Markets of Annaly from September 2010 until October 2012. Prior to joining Annaly as a Managing Director in 2009, Mr. Keyes worked for 20 years in senior investment banking and capital markets roles. From 2005 until 2009, Mr. Keyes served in senior management and business origination roles in the Global Capital Markets and Banking Group at Bank of America Merrill Lynch. Prior to that, he worked at Credit Suisse First Boston from 1997 until 2005 in various capital markets origination roles and Morgan Stanley Dean Witter from 1990 until 1997 in the Mergers and Acquisitions Group and Real Estate Investment Banking Group. Mr. Keyes received a B.A. in Economics and a B.S. in Business Administration (ALPA Program) from the University of Notre Dame. |
| Director Qualification Highlights | | The Board believes that Mr. Keyes brings to the Board a deep understanding of issues that are important to the Company’s growth through his roles as Annaly’s Chairman, CEO and President, and has demonstrated leadership qualities, management capability, business and industry knowledge and a long-term strategic perspective. In addition, Mr. Keyes’ qualifications include over 20 years of experience as an investment banking and equity capital markets professional. |
| Kevin P. Brady | Director since
1997 Committees
Audit (Chair), NCG,
Risk | Mr. Brady has served as the Chief Executive Officer of ARMtech, LLC, a venture capital firm he founded that invests and incubates technology start-ups, since 2007. ARMtech’s current portfolio includes companies in the financial reporting and data spaces. Prior to ARMtech, Mr. Brady founded TaxStream, a software company that specialized in financial reporting, tax and internal controls for multinational corporations. Mr. Brady served as Chief Executive Officer of TaxStream from 2002 to 2008, when the company was sold to Thomson-Reuters. Mr. Brady previously worked for eight years at PricewaterhouseCoopers in New York City, where he consulted on M&A transactions and international tax issues. He was awarded a patent from the U.S. Patent and Trademark Office for the invention of the TaxStream product. Mr. Brady received a B.A. from McGill University, a M.B.A. from New York University and is a Certified Public Accountant (inactive). |
| Director Qualification Highlights | | The Board believes that Mr. Brady’s qualifications include his expertise in financial and accounting matters as well as his significant experience managing systems and companies focusing on the financial accounting market. |
| Annaly Capital Management Inc. 2018 Proxy Statement | 21 | |
Table of Contents Corporate Governance at Annaly | E. Wayne Nordberg | Director since
2004 Committees
Audit, Compensation,
NCG | Mr. Nordberg has served as Chairman of Hollow Brook Wealth Management, LLC, a SEC-registered investment advisor that manages or advises $900 million of investment assets, since 2008. From 2003 to 2008, Mr. Nordberg served as a senior director of Ingalls & Snyder LLC, an NYSE member and registered investment advisor. From 1998 to 2002, Mr. Nordberg served as Vice Chairman of the board of KBW Asset Management, Inc., an affiliate of Keefe, Bruyette, & Woods, Inc., a registered investment advisor. From 1988 to 1998, he served in various capacities for Lord Abbett & Co., a mutual fund company, including as partner and director of its family of funds. He is a member of the Financial Analysts Federation and the New York Society of Security Analysts and is a Trustee of the Atlantic Salmon Federation, the American Museum of Fly Fishing and the National Wildlife Federation Endowment Fund. Mr. Nordberg is also a director of PetroQuest Energy, Inc. and Reaves Utility Income Fund, both NYSE-listed companies. Mr. Nordberg received a B.A. from Lafayette College, where he is a trustee emeritus. |
| Director Qualification Highlights | | The Board believes that Mr. Nordberg’s qualifications include his significant experience in serving at a senior executive level with a SEC-registered investment advisor, his experience as a director of an asset management company and his service as a board member of other public companies. |
| Vicki Williams | Director since
2018 Committees
Audit, Compensation | Ms. Williams has served as Senior Vice President, Compensation, Benefits and HRIS at NBCUniversal, a multinational media conglomerate, and has over 17 years of compensation and governance experience. In addition to overseeing Compensation, Benefits and HRIS, she also oversees human resources support for corporate legal, human resources, communications, diversity, social responsibility and corporate events for NBCUniversal. Prior to joining NBCUniversal, Ms. Williams was a Partner with Pay Governance LLC and a Principal with Towers Perrin (now Willis Towers Watson). Ms. Williams received a B.S. in Mathematics and Education and a M.B.A. with a concentration in finance and quantitative statistics, each with honors from the University of Georgia. |
| Director Qualification Highlights | | The Board believes that Ms. Williams’s qualifications include her broad human resources, executive compensation and governance experience, including serving as a senior-level human resources executive at a multinational company and as an external compensation consultant. |
| 22 | Annaly Capital Management Inc. 2018 Proxy Statement | | |
Table of Contents Corporate Governance at Annaly CLASS III DIRECTORS Francine J. Bovich
| Director since
May 2014
Committees
Audit, NCG (Chair), PR | | Ms. Bovich has over 30 years of investment management experience lastly serving as a Managing Director of Morgan Stanley Investment Management from 1993-2010. Since 2011, Ms. Bovich has been a trustee of The Bradley Trusts. Ms. Bovich has also served as a board member of The Dreyfus Family of Funds since 2012, and serves as a board member of a number of registered investment companies within the fund complex. These funds represent a broad scope of investment strategies including equities (US, non-US,(U.S., non-U.S., global, and emerging markets), taxable fixed income (US, non-US, global and emerging markets), municipal bonds, and cash management. From 1991 through 2005, Ms. Bovich served as the U.S. Representative to the United Nations Investment Committee, which advised a global portfolio of approximately $30 billion. Ms. Bovich is a member of the Economic Club of New York and an emeritus trustee of Connecticut College and chair of the Investment Sub-Committee for its endowment. Ms. Bovich hasreceived a B.A. in Economics from Connecticut College and ana M.B.A. in Finance from New York University. |
| | | Director Qualification Highlights | | The Board believes that Ms. Bovich’s qualifications include her significant investment management experience and her experience serving as a trustee and board member. |
| Katie Beirne Fallon | Director since
2018 Committees
NCG, PR | Ms. Fallon has served as Global Head of Corporate Affairs for Hilton Worldwide Holdings Inc., a multinational hospitality company, since November 2016, where she is responsible for managing the company’s communications, government relations and corporate responsibility efforts. Prior to Hilton, from 2014 to 2016, Ms. Fallon was Senior Advisor and Director of Legislative Affairs for President Obama. Before becoming the President’s chief liaison to the Hill, Ms. Fallon served from May 2013 to December 2013 as President Obama’s Deputy Communications Director at the White House where she devised and executed communications strategies for the President to promote his economic agenda across the country. From 2011 until May 2013, Ms. Fallon was the Staff Director of the Senate Democratic Policy and Communications Center in the U.S. Congress. Ms. Fallon’s prior roles in government and politics include Legislative Director to Senator Chuck Schumer (D-NY), Deputy Staff Director of the Joint Economic Committee and Policy Director at the Democratic Senatorial Campaign Committee. Ms. Fallon received a B.A. in Government and International Studies from the University of Notre Dame and as a Marshall Scholar received a M.A. in Conflict Regulation from Queen’s University Belfast, Northern Ireland and a M.Sc. in Comparative Politics from the London School of Economics. |
| Director Qualification Highlights | | The Board believes that Ms. Fallon’s qualifications include her significant experience in serving at a senior executive level with a multinational public company and her experience serving as a top leadership aide in the highest levels of the U.S. government. |
| Annaly Capital Management Inc. 2018 Proxy Statement | 23 | |
Table of Contents Corporate Governance at Annaly Jonathan D. Green
| Director since
January 1997
Committees
RiskPR (Chair),
Compensation,
Risk Lead Independent
Director | | Mr. Green served as a special advisor to Rockefeller Group International, Inc., a wholly owned subsidiary of Mitsubishi Estate Company, Ltd., operating under the brand of the Rockefeller Group, from January 2011 until December 2014. He joined the Rockefeller Group in 1980 as Assistant Vice President and Real Estate Counsel. In 1983, he was appointed Vice President, Secretary and General Counsel, and in 1990 was elected Chief Corporate Officer. In 1995, he was named President and Chief Executive Officer of Rockefeller Group Development Corporation and Rockefeller Center Management Corporation, both subsidiaries of the Rockefeller Group. In 2002, Mr. Green was named President and Chief Executive Officer of Rockefeller Group International, Inc., becoming Vice Chairman in January 2009. He served as Vice Chairman until December 2010. In his role as Vice Chairman, Mr. Green was active in formulating the strategic planning for the company and its subsidiaries, which include Rockefeller Group Development Corporation, Rockefeller Group Investment Management, Rockefeller Group Technology Solutions, Inc. and Rockefeller Group Business Centers. Before joining the Rockefeller Group, Mr. Green was associated with the New York City law firm of Thacher, Proffitt & Wood. He also serves on the board of trustees of the Wildlife Conservation Society. Mr. Green graduated from Lafayette College and the New York University School of Law. |
| | | Director Qualification Highlights | | The Board believes that Mr. Green’s qualifications include his significant experience as a chief executive, his diverse and significant background in the real estate industry and his legal expertise. |
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Table of Contents
Corporate Governance at Annaly |
John H. Schaefer | Director since
March 2013
Committees
Risk (Chair), Audit,
Compensation
and Risk | | Mr. Schaefer has over 40 years of financial services experience including serving as a member of the management committee of Morgan Stanley from 1998 through 2005 and as2005. He was President and Chief Operating Officer of the Global Wealth Management division of Morgan Stanley.Stanley from 2000 to 2005. Mr. Schaefer retiredwas Executive Vice President and Chief Strategic and Administrative Officer of Morgan Stanley from 1998 to 2000. From 1997 to 1998, he was Managing Director and Head of Strategic Planning and Capital Management. Prior to the 1997 merger of Dean Witter, Discover and Morgan Stanley, Mr. Schaefer was Executive Vice President, Investment Banking and Head of Corporate Finance at Dean Witter, a position he had held since 1991. He began his investment banking career at E.F. Hutton & Company in February 2006 and from 2008 through 20121976. Mr. Schaefer served as a board member and chair of the audit committee of USI Holdings Corporation. Mr. Schaefer hasCorporation from 2008 through 2012. He received a B.B.A. in Accounting from the University of Notre Dame and ana M.B.A. from the Harvard Graduate School of Business. |
Director Qualification Highlights | | The Board believes that Mr. Schaefer’s qualifications include his broad financial services management experience, including management of strategic planning, capital management, human resources, internal audit and corporate communications, as well as his board and audit committee experience. |
Class I Directors (Terms Expire in 2018)24
|
Wellington J. Denahan
Director since
1997
Chairman of the Board
| | Ms. Denahan has served as Chairman of the Board since November 2012 and Executive Chairman of Annaly since September 2015. Previously, Ms. Denahan served as Chief Executive Officer of Annaly from November 2012 to September 2015 and as Co-Chief Executive Officer of Annaly from October 2012 to November 2012. Ms. Denahan was elected in December 1996 to serve as Vice Chairman of the Board. Ms. Denahan was Annaly’s Chief Operating Officer from January 2006 to October 2012 and Chief Investment Officer from 2000 to November 2012. She was a co-founder of Annaly. Ms. Denahan has a B.S. in Finance from Florida State University.
|
Director Qualification Highlights
The Board believes that Ms. Denahan’s qualifications include her significant oversight experience related to fixed income trading operations through years of serving as our Chief Operating Officer and Chief Investment Officer, her industry experience and expertise in the mortgage-backed securities markets, and her operational expertise, including her service as our former Chief Executive Officer.
|
4 | Annaly Capital Management Inc. 20172018 Proxy Statement | | |
Table of Contents Corporate Governance at Annaly |
Michael Haylon
Director since
June 2008
Committees
Audit, Risk
| | Mr. Haylon has served as Managing Director and Head of Asset Management Sales, Products and Marketing at Conning, Inc., a global provider of investment management solutions, services and research to the insurance industry, since December 2014. Mr. Haylon previously served as Managing Director and Head of Investment Products at Conning, Inc. from January 2012 until December 2014. From September 2010 to December 2011, Mr. Haylon served as Head of Investment Product Management at General Re – New England Asset Management. He was Chief Financial Officer of the Phoenix Companies, Inc. from 2004 until 2007, and Executive Vice President and Chief Investment Officer of the Phoenix Companies in 2002 and 2003. From 1995 until 2002, he held the position of Executive Vice President of Phoenix Investment Partners, Ltd., a NYSE-listed company, and President of Phoenix Investment Counsel, where he was responsible for the management and oversight of $25 billion in closed-end and open-end mutual funds, corporate pension funds and insurance company portfolios. From 1990 until 1994, he was Senior Vice President of Fixed-Income at Phoenix Home Life Insurance Company. From 1986 until 1990, he was Managing Director at Aetna Bond Investors where he was responsible for management of insurance company and pension fund portfolios. From 1980 until 1984 he was Senior Financial Analyst at Travelers Insurance Companies. He began his career in 1979 in the commercial lending program at Philadelphia National Bank. Mr. Haylon has previously served on the boards of Aberdeen Asset Management and Phoenix Investment Partners. He has a B.A. from Bowdoin College and a M.B.A. from the University of Connecticut.
|
Director Qualification Highlights
The Board believes that Mr. Haylon’s qualifications include his significant leadership and management experience from his years of management and oversight of large financial asset portfolios, his prior board experience with other companies and his expertise in financial matters.
|
Donnell A. Segalas
Director since
January 1997
Committees
Compensation (Chair),
NCG
| | Mr. Segalas is the Chief Executive Officer and a Managing Partner of Pinnacle Asset Management L.P., a New York-based alternative asset management firm. Additionally, Mr. Segalas is a member of Pinnacle’s Investment Committee and sits on the boards of its offshore funds. Prior to joining Pinnacle in 2003, Mr. Segalas was Executive Vice President for Alternative Investment Products (AIP) at Phoenix Investment Partners. Mr. Segalas is a member of the Nantucket Historical Society. He received a B.A. from Denison University.
|
Director Qualification Highlights
The Board believes that Mr. Segalas’ qualifications include his significant experience from his years of investing and managing private and public investment vehicles and his experience serving on investment and executive committees of other companies.
|
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Table of ContentsINDEPENDENCE OF DIRECTORS
Corporate Governance at Annaly |
Class II Directors (Terms Expire in 2019)
|
Kevin G. Keyes
Director since
November 2012
| | Mr. Keyes has served as Chief Executive Officer of Annaly since September 2015 and as its President since October 2012. Previously, Mr. Keyes served as Annaly’s Chief Strategy Officer and Head of Capital Markets from September 2010 until October 2012. Prior to joining Annaly as a Managing Director in 2009, Mr. Keyes worked for 20 years in senior investment banking and capital markets roles. From 2005 to 2009, Mr. Keyes served in senior management and business origination roles in the Global Capital Markets and Banking Group at Bank of America Merrill Lynch. Prior to that, he worked at Credit Suisse First Boston from 1997 until 2005 in various capital markets origination roles and Morgan Stanley Dean Witter from 1990 until 1997 in the Mergers and Acquisitions Group and Real Estate Investment Banking Group. Mr. Keyes holds a B.A. in Economics and a B.S. in Business Administration (ALPA Program) from the University of Notre Dame.
|
Director Qualification Highlights
Mr. Keyes is our Chief Executive Officer and brings to our Board a deep understanding of issues that are important to the Company’s growth. Through his role as our Chief Executive Officer and other senior management positions at the Company, Mr. Keyes has demonstrated leadership qualities, management capability, business and industry knowledge and a long-term strategic perspective. In addition, Mr. Keyes’ qualifications include over 20 years of experience as an investment banking and equity capital markets professional.
|
Kevin P. Brady
Director since
1997
Committees
Audit (Chair), NCG, Risk
| | Mr. Brady is the Chief Executive Officer of ARMtech, LLC, a venture capital firm that invests and incubates technology start-ups, which he founded in 2007. ARMtech’s current portfolio includes companies in the financial reporting and data spaces. Prior to ARMtech, Mr. Brady founded TaxStream, a software company that specialized in financial reporting, tax and internal controls for multinational corporations. Mr. Brady served as Chief Executive Officer of TaxStream from 2002 to 2008, when the company was sold to Thomson-Reuters. Mr. Brady previously worked for eight years at PricewaterhouseCoopers in New York City, where he consulted on M&A transactions and international tax issues. Mr. Brady holds a B.A. from McGill University, an M.B.A. from New York University and is a Certified Public Accountant (inactive). He was awarded a patent from the U.S. Patent and Trademark Office for the invention of the TaxStream product.
|
Director Qualification Highlights
The Board believes that Mr. Brady’s qualifications include his expertise in financial and accounting matters as well as his significant experience managing systems and companies focusing on the financial accounting market.
|
6 | Annaly Capital Management Inc. 2017 Proxy Statement |
Table of Contents
Corporate Governance at Annaly |
E. Wayne Nordberg
Director since
May 2004
Committees
NCG (Chair),
Compensation
| | Mr. Nordberg has served as Chairman of Hollow Brook Wealth Management, LLC, a SEC-registered investment advisor that manages or advises $1.4 billion of investment assets, since 2008. From January 2003 to November 2008, Mr. Nordberg served as a senior director of Ingalls & Snyder LLC, an NYSE member and registered investment advisor. From 1998 to June 2002, Mr. Nordberg served as Vice Chairman of the board of KBW Asset Management, Inc., an affiliate of Keefe, Bruyette, & Woods, Inc., a registered investment advisor. From 1988 to 1998, he served in various capacities for Lord Abbett & Co., a mutual fund company, including as partner and director of its family of funds. Mr. Nordberg received his B.A. from Lafayette College, where he is a trustee emeritus. He is a member of the Financial Analysts Federation and the New York Society of Security Analysts and is a Trustee of the Atlantic Salmon Federation, the American Museum of Fly Fishing and the National Wildlife Federation Endowment Fund. Mr. Nordberg is also a director of PetroQuest Energy, Inc. and Reaves Utility Income Fund, both NYSE-listed companies.
|
Director Qualification Highlights
The Board believes that Mr. Nordberg’s qualifications include his significant experience in serving at a senior executive level with a SEC-registered investment advisor, his experience as a director of an asset management company and his service as a board member of other public companies.
|
Independence of Our Directors
|
Our Corporate Governance Guidelines and NYSE rules require that at least a majority of our Board members are Independent Directors. We haveThe Board has adopted the definition of “independent director” set forth in Section 303A of the NYSE rules and havehas affirmatively determined that each Director (other than Ms. Denahan and Mr. Keyes) has no material relationships with usthe Company (either directly or as partner, stockholder or officer of an organization that has a relationship with us) and is therefore independent under all applicable criteria for independence in accordance with the standards set forth in the NYSE rules and ourAnnaly’s Corporate Governance Guidelines.
Director Nomination ProcessTwo new, highly qualified
female Independent Directors
joined the Annaly Board in 2018
|
DIRECTOR NOMINATION PROCESS The Nominating/Corporate Governance (“NCG”)NCG Committee is responsible for identifying and screening nominees for Director and for recommending to the Board candidates for nomination for election or re-election to the Board and to fill Board vacancies. The NCG Committee also seeks to maintain an ongoing list of potential Board candidates. Nominees may be suggested by Directors, members of management,stockholders or professional search firms. In evaluating a Director nomination, the NCG Committee may review materials provided by the nominator, a professional search firm or any other party. The NCG Committee seeks to
maintain an ongoing list of
potential Board candidates |
DIRECTOR CRITERIA AND QUALIFICATIONS The NCG Committee seeks to achieve a balance of knowledge, experience and capability on the Board and considers a wide range of factors when assessing potential Director nominees, including a candidate’s background, skills, expertise, diversity, accessibility and availability to serve effectively on the Board. All candidates should (i) possess the highest personal and professional ethics, integrity and values, exercise good business judgment and be committed to representing the long-term interests of the Company and its stockholders, and (ii) have an inquisitive and objective perspective, practical wisdom and mature judgment. It is expected that all Directors will have an understanding of the Company’s business and be willing to devote sufficient time and effort to carrying out their duties and responsibilities effectively. AlthoughBOARD REFRESHMENT AND DIVERSITY
On an annual basis, the NCG Committee evaluates the Board’s overall composition, including Director tenure, and rigorously evaluates all Directors to ensure a continued match of their skill sets against the needs of the Company. The NCG Committee seeks to achieve a balance between the deep knowledge and understanding of Annaly’s business that comes from longer-term service on the Board with the fresh ideas and perspectives that comes from having newer Directors on the Board. And although the NCG Committee does not have a formal diversity policy, it believes that diversity is an important factor in determiningrecognizes the compositionimportance of the Board. Additionally, the Company endeavors to havehaving a Board representing diverse backgrounds and a broad set of experiences at policy-making levels in business, finance, government, education, law and technology, and in other areas that are relevant to the Company’s business and its status as a public company, as this contributes to our success and is in the best interests of our stockholders.company. Two new, highly qualified
Independent Directors have
joined the | Annaly Board overCapital Management Inc. 2018 Proxy Statement | 25
the last few years |
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Table of Contents Corporate Governance at Annaly The NCG Committee’s annual evaluation of the Board’s composition also informs Board succession planning, and contributed to the appointment, effective January 1, 2018, of two new Independent Directors (Ms. Fallon and Ms. Williams) with skills and backgrounds that complement the Company’s highly qualified Board. Ms. Fallon and Ms. Williams were respectively identified as potential Director nominees by the CEO and another member of senior management. Ms. Fallon and Ms. Williams were nominated by the NCG Committee after an extensive and careful search was conducted, and numerous other candidates proposed by Directors, members of management and professional search firms were considered. STOCKHOLDER RECOMMENDATION OF DIRECTOR CANDIDATES Corporate Governance at Annaly |
Stockholder Recommendation of Director Candidates
|
Stockholders who wish the NCG Committee to consider their recommendations for Director candidates should submit their recommendations in writing to ourthe Chief Legal Officer and Secretary at ourthe Company’s principal executive offices. Following verification of the stockholder status of persons proposing candidates, recommendations are aggregated and considered by ourthe NCG Committee at a regularly scheduled or special meeting. If any materials are provided by a stockholder in connection with the nomination of a Director candidate, such materials are forwarded to ourthe NCG Committee. Properly submitted recommendations by stockholders will receive the same consideration by the NCG Committee as other suggested nominees. The Board’s Role and Responsibilities
|
We areTHE BOARD’S ROLE AND RESPONSIBILITIES
The Company is committed to maintaining a strong ethical culture and robust governance practices that benefit the long-term interests of stockholders. Our corporate governance practicesstockholders, which include: Board StructureDIRECTOR
INDEPENDENCE
AND OVERSIGHT | | | Director QualificationsDIRECTOR
QUALIFICATIONS | | | Stockholder RightsSTOCKHOLDER
and EngagementRIGHTS AND
ENGAGEMENT | | | Recent GovernanceGOOD
EnhancementsGOVERNANCE/
CORPORATE
CITIZENSHIP | >■79 of 911 Directors are Independent
>■Robust Lead Independent Director
role
>■Regular executive sessions of Independent Directors
>■Independent key Board committees
>■2Board oversees a succession plan for the CEO and other senior executives
■The Board is a Full Board Member of the NACD | | | ■36% of Directors are women (including the Executive Chairman) | >■4 of 11 Directors have tenure of less than 5 years
■Annual Board, committee and committeeindividual Director self-evaluations
>■Over-boarding policy limits the number of outside boards on which our Directors can serve
>■2 “audit committee financial experts”
>Annual assessment of all Directors to ensure continued match of their skills against the Company’s needs
| | | >■Majority vote standard for uncontested elections
>■Annual stockholder advisory vote on executive compensation
>■No restrictions on stockholders’ ability toStockholders may amend the Company’s by-laws
bylaws by a majority of votes entitled to be cast
>■Active stockholder engagement programStockholders can submit questions for the Annual Meeting through an interactive pre-meeting forum
| | | >■Clawback policy with manager
Manager
>■Anti-pledging policy
Director and employee stock ownership guidelines
>■Stock ownership guidelines for our Directors and employees
Board created new Public Responsibility Committee
>■Four-year stock holding period requirement for employees
Launched joint venture dedicated to supporting community development in underserved cities
>■Corporate sustainability initiativesMember of the 2018 Bloomberg Gender-Equality Index
|
Board Oversight of Risk26
| Annaly Capital Management Inc. 2018 Proxy Statement | | |
Table of Contents Corporate Governance at Annaly BOARD OVERSIGHT OF RISK Full BoardFULL BOARD
| Risk management begins with ourthe Board, through review and oversight of ourthe Company’s risk management framework, and continues with executive management, through ongoing formulation of risk management practices and related execution in managing risk. The Board exercises its oversight of risk management primarily through its Risk Committee and Audit Committee. At least annually, the full Board reviews ourthe Company’s risk management program, which identifies and quantifies a broad spectrum of enterprise-wide risks and related action plans, with management.management | | | | | | | | | | | | | RISK COMMITTEE | | | Risk CommitteeAUDIT COMMITTEE
The Risk Committee assists
| Assists the Board in its oversight of ourthe Company’s risk governance structure, our risk management and risk assessment guidelines and policies, ourand risk tolerance,appetite, including risk appetite levels and our capital liquiditytargets and funding.limits | | | Audit Committee
The Audit Committee assistsAssists the Board in its oversight of the quality and integrity of ourthe Company’s accounting, internal controls and financial reporting practices, including appointing the independent auditor selection, evaluation and review,reviewing its qualifications, performance and oversight of internal audit.independence, and compliance with legal and regulatory requirements
|
ManagementMANAGEMENT
Risk
| Responsible for day-to-day risk assessment and risk management are the responsibility of our management. A series of management committees have oversight or decision-making responsibilities for risk assessment and risk management activities. These management committees include the Operating Committee, Enterprise Risk Committee, the Asset and Liability Committee, the Investment Committee the Validation Committee and the Financial Reporting and Disclosure Committee.Committee |
8 | Annaly Capital Management Inc. 2017 Proxy Statement |
Table of Contents
Corporate Governance at Annaly |
In addition to the risk oversight processes outlined above, the Board reviews its risk assessment of the Company’s compensation policies and practices applicable to the Company’s equity incentive plans with the Compensation Committee. For additional information on this review, please see the “Risks Related to Compensation Policies and Practices” section of this proxy statement.Proxy Statement. For additional information on the responsibilities of the Risk Committee and the Audit Committee, please see the “Board Committees” section of this proxy statement.Proxy Statement. The Audit and Risk Committees
Committees have primary
Board oversight
of the
Company’s risk
management
framework |
Management Succession PlanningMANAGEMENT SUCCESSION PLANNING
|
The Board oversees and maintains a succession plan for the Chief Executive OfficerCEO and other senior executives. In carrying out this function, the Board endeavors to ensure that the Company’s management has the capabilities to cause the Company to operate in an efficient and business-like fashion in the event of a vacancy in senior management, whether anticipated or sudden. | Annaly Capital Management Inc. 2018 Proxy Statement | Board Commitment and Over-Boarding Policy27 | |
Table of Contents Corporate Governance at Annaly BOARD COMMITMENT AND OVER-BOARDING POLICY In order to provide sufficient time for informed participation in their Board responsibilities: >■ | Directors who also serve as chief executive officers or hold equivalent positions at other companies should not serve on more than two other boards of public companies in addition to the Company’s Board;
| >■ | Other Directors should not serve on more than four other boards of public companies in addition to the Company’s Board; and
| >■ | A member of the Audit Committee should not serve on the audit committee of more than two other public companies. |
All of our Directors are currently in compliance with this policy. Directors are required to notify the Chairman of the Board and the chair of the NCG Committee in advance of accepting an invitation to serve on another public company board. Communications with the BoardCOMMUNICATIONS WITH THE BOARD
|
Stockholders and other persons interested in communicating with an individual Director (including the Lead Independent Director), the Independent Directors as a group, any committee of the Board or the Board as a whole, may do so by submitting such communication to: Annaly Capital Management, Inc.
[Addressee]
1211 Avenue of the Americas
New York, NY 10036
Phone: 1-888-8 ANNALY
Facsimile: (212) 696-9809
Email: investor@annaly.com The Legal Department reviews communications to the Directors and forwards those communications related to the duties and responsibilities of the Board.Board to the appropriate parties. Certain items such as business solicitation or advertisements, product-related inquiries, junk mail or mass mailings, resumes or other job-related inquiries, spam and unduly hostile, threatening, potentially illegal or similarly unsuitable communications will not be forwarded. Stockholders may
communicate Communicate with any of
our Directors, includingDirector, Including the
Lead Independent Director |
www.annalyannualmeeting.com | 9 |
TableCERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Approval of ContentsRelated Party Transactions Corporate Governance at Annaly |
Certain Relationships and Related Party Transactions |
Approval of Related Party Transactions |
Each of ourAnnaly’s Directors, Director nominees and executive officers is required to report all transactions with usthe Company in which they or an immediate family member had or will have a direct or indirect material interest with respect to us in an annual disclosure questionnaire and on an on-going basis. We reviewManagement reviews these annual questionnaires and anyrequires interim reports and, if we determine itdetermined to be necessary, discussdiscusses any reported transactions with the entire Board. Other than as discussed in this section, there were no reported transactions for 20162017 and there is no transaction currently pending for 2017. We do2018. The Board does not, however, have a formal written policy for approval or ratification of such transactions, and all such transactions are evaluated on a case-by-case basis. If we believemanagement believes a transaction could be a related party transaction or could raise particular conflict of interest issues, weit will discuss it with our legal counsel, and if necessary, wethe Board will form an independent BoardIndependent committee that has the right to engage its own legal and financial counsel to evaluate, approve or ratify the transaction. | 28 | Annaly Capital Management AgreementInc. 2018 Proxy Statement | | |
We haveTable of Contents
Corporate Governance at Annaly Management Agreement The Company has entered into a management agreement (the “Management Agreement”) with ourthe Manager. Our managementManagement of the Company is conducted by ourthe Manager through the authority delegated to it in the Management Agreement and pursuant to the policies established by ourAnnaly’s Board. The Independent Directors periodically review the Management Agreement with the assistance of separate legal and financial advisors, who are selected and retained by the Independent Directors. The Management Agreement was effective as of July 1, 2013 and was amended in November 2014 and then amended and restated in April 2016, and may be further amended by agreement between ourthe Manager and us.the Company. The Management Agreement’s current term ends on December 31, 2018 and will automatically renew for successive two-year terms unless at least two-thirds of ourthe Independent Directors or the holders of a majority of ourthe outstanding shares of the Company’s common stock elect to terminate the agreement in their sole discretion and for any or no reason. At any time during the term or any renewal term, either party may deliver to the other party prior written notice of its intention to terminate the Management Agreement no less than one year prior to its proposed termination date or, but only in the event ourthe Manager is the terminating party, such earlier date as determined by usthe Company in ourits sole discretion. There is no termination fee for a termination of the Management Agreement by either ourthe Manager or us.the Company. See also “Disclosure Enhancements” on page42 for a discussion of compensation paid by the Manager to the NEOs. The Management Agreement provides that during its term and, in the event of termination of the Management Agreement by ourthe Manager without cause, for a period of one year following such termination, ourthe Manager will not, without ourthe Company’s prior written consent, manage any REIT, which engages in the management of mortgage-backed securities in any geographical region in which we operate.the Company operates. Pursuant to the terms of the Management Agreement, we pay ourthe Company pays the Manager a monthly management fee equal to 1/12th of 1.05% of ourthe Company’s stockholders’ equity, as defined in the Management Agreement, for its management services. WeThe Company incurred approximately $152$164.3 million in management fees under the Management Agreement during the year ended December 31, 2016.2017.
The Manager OurThe management fee of
1.05% of
stockholders’
equity (as defined
in our
the Management Agreement )Agreement)
compares favorably to the
industry average |
10 | Annaly Capital Management Inc. 20172018 Proxy Statement | 29 | |
Table of Contents Board Structure and Processes BOARD LEADERSHIP STRUCTURE Board Leadership Structure |
The Board believes that whether to have the same person occupy the offices of Chairman of the Board and Chief Executive OfficerCEO should be decided by the Board, from time to time, in its business judgment after considering relevant factors, including the specific needs of the business and what is in the best interests of the Company’s stockholders. Currently, Ms. Denahan servesCompany at that point in time. Under the Corporate Governance Guidelines, the Independent Directors will annually select an Independent Director to serve as Lead Independent Director when the Executive ChairmanCEO and Chairman of the Board roles are combined or if the Chairman is not otherwise independent. Currently, Mr. Keyes serves as Chairman, CEO and President, while Mr. Keyes serveGreen serves as the Chief Executive Officer and a Director. As Ms. Denahan and Mr. Keyes are both considered executive officers of the Company, the Board has designated Mr. Green to serve as the Lead Independent Director. We believeThe Board believes that ourthe current leadership structure isprovides effective independent oversight of management, while allowing both the Board and serves the best interests of our stockholders by providing for a robust independent leadership position on the Board. This structure allowsmanagement to benefit from Mr. Keyes to focus on his duties in managing theKeyes’s day-to-day operations of the Company, while benefitting from Ms. Denahan’s invaluable knowledge and expertise regardingfamiliarity with the Company’s business. The Lead Independent Director has the following responsibilities:
OurThe Lead Independent Director
has significant authority
and
responsibilities |
| THE CHAIRMAN OF THE BOARD | ◆ | THE LEAD INDEPENDENT DIRECTOR | | | ■Presides at full meetings of the Board and the Annual Meeting of Stockholders ■Meets with the Lead Independent Director to receive feedback from executive sessions of Independent Directors ■Communicates with all Directors on key issues and concerns outside of Board meetings ■Advises on the selection of committee chairs ■Draws on his knowledge of the Company’s business, operations, industry and competitive developments in setting Board agendas ■Consults with the Lead Independent Director to ensure that Board agendas and information empower the Board to fulfill its responsibilities ■Has authority to call special meetings of the Board if necessary and otherwise updates Directors between meetings through one-on-one or group phone calls ■Authorizes the retention of advisors and consultants who report to management ■Presents the Company’s message and strategy to stockholders, employees and regulators | | | > | ■Presides at all meetings of the Board in the absence of or at the request of the Chairman, of the Board, including executive sessions of Independent Directors | > | ■Facilitates communication between the Independent Directors and the Chairman of the Board and the Chief Executive Officer | > | CEO ■Advises on the selection of committee chairs | > | ■Approves the quality, quantity and timeliness of information sent to the Board | > | ■Approves Board meeting agendas | > | ■Approves Board meeting schedules to assure there is sufficient time for discussion of all agenda items | > | ■Has authority to call meetings of the Independent Directors | > | ■Authorizes the retention of outside advisors and consultants who report directly to the Board | > | ■If requested by stockholders, ensures that he is available, when appropriate, for consultation and direct communication with major stockholders | | |
We believeThe Board believes that the Board’sits independent oversight function is further enhanced by ourits policy to hold regular executive sessions of the Independent Directors without management present and the fact that a majority of ourthe Company’s Directors (and every member of our four standing Boardthe Board’s three key committees) is independent.
Executive Sessions of Independent Directors |
OurEXECUTIVE SESSIONS OF INDEPENDENT DIRECTORS
The Corporate Governance Guidelines require that the Board have at least two regularly scheduled meetingsexecutive sessions of Independent Directors each year for our Independent Directors.year. These meetings,executive sessions, which are designed to promote unfettered discussions among ourthe Independent Directors, are presided over by ourthe Lead Independent Director.Director, or in his or her absence, the chair of the Compensation Committee. During 2016, our2017, the Independent Directors, without the participation of Board members who are members of management, held 5 meetings.five executive sessions. www.annalyannualmeeting.com30 | Annaly Capital Management Inc. 2018 Proxy Statement | 11 | |
Table of Contents Board Structure and Processes BOARD AND COMMITTEE EVALUATIONS Board Structure and Processes |
Board and Committee Evaluations |
The Lead Independent Director and the NCG Committee are responsible for overseeing an annual self-evaluation process for the Board. The self-evaluation process seeks to identify specific areas, if any, that need improvement or strengthening in order to increase the effectiveness of the Board as a whole and its members and committees. Each standing committeeIn 2018, the Board adopted an enhanced Board self-evaluation process that includes annual assessments of the full Board, evaluateseach Board committee and individual Directors. Such assessments will be facilitated by an external evaluator on a periodic basis. In addition to these formal self-evaluations, the Board considers its performance as well as that of its members and committees on an annualongoing basis and reportsshares relevant feedback with management. DIRECTOR ORIENTATION AND CONTINUING EDUCATION The Board believes that Director orientation and continuing education is critical to the Board on such evaluation. Board Composition and Refreshment |
The NCG Committee seeksBoard’s ability to achievefulfill its responsibilities in a balance of knowledge, experiencedynamic and capabilityconstantly evolving business environment. New Directors participate in a robust onboarding process, which includes extensive training materials and personal briefings by senior management on the Board. Newer directors offer fresh ideasCompany’s strategic plans, financial statements, and perspectives, while deeply experienced directors bring extensive knowledgekey policies and practices. In addition, the Company encourages Directors to participate in external continuing director education programs, and the Company provides reimbursement for related expenses. Continuing director education is also provided during Board meetings and as stand-alone information sessions outside of our complex operations. On an annual basis,meetings. In line with the NCG Committee evaluates its overall composition, including director tenure, and rigorously evaluates all directorsCompany’s commitment to ensurecontinuing board education, in 2017, the Board became a continued match of their skill sets against the needsFull Board Member of the Company.NACD, which gives Directors access to an extensive menu of board education programs, along with research on governance trends and board practices.
Code of Business Conduct and Ethics |
We haveGOVERNING DOCUMENTS
Code of Business Conduct and Ethics The Board has adopted a Code of Business Conduct and Ethics (the “Code of Conduct”), which sets forth the basic principles and guidelines for resolving various legal and ethical questions that may arise in the workplace and in the conduct of our business. This codeCode of Conduct is applicable to ourAnnaly’s Directors, executive officers and employees.employees, and is also a “code of ethics” as defined in Item 406(b) of Regulation S-K. The Company will make any legally required disclosures regarding amendments to, or waivers of, provisions of the Code of Conduct on the Company’s website. Corporate Governance Guidelines |
We haveCorporate Governance Guidelines
The Board has adopted Corporate Governance Guidelines that, in conjunction with the charters of ourthe Board committees, provide the framework for the governance of ourthe Company. Where You Can Find Our Governing Documents |
OurOther Governance Policies
Annaly’s Directors, executive officers and employees are also subject to the Company’s other governance policies, including a Foreign Corrupt Practices Act and Anti-Bribery Compliance Policy, an Insider Trading Policy, and a Regulation FD Policy. Where You Can Find the Code of Business Conduct, Corporate Governance Guidelines and Ethics,Committee Charters The Code of Conduct, Corporate Governance Guidelines, Compensation Committee Charter, Audit Committee Charter, NCG Committee Charter, Public Responsibility Committee Charter and Risk Committee Charter are available on ourAnnaly’s website (www.annaly.com). WeThe Company will provide copies of these documents free of charge to any stockholder who sends a written request to Investor Relations, Annaly Capital Management, Inc., 1211 Avenue of the Americas, New York, NY 10036. | Annaly Capital Management Inc. 2018 Proxy Statement | Board Committees31 | |
Table of Contents Board Structure and Processes BOARD COMMITTEES The Board has fourfive standing committees: the Audit Committee, the Compensation Committee, the NCG Committee, and the Risk Committee. Each committee is governed by a written charter approved by the Board and is comprised entirely of Independent Directors, as required under the existing rules of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the NYSE. In addition, each member of the Audit Committee and the Compensationrecently-formed Public Responsibility Committee. As part of the Board’s continuing review of its Board committee structure and responsibilities, and in response to dialogue with stockholders, the Board created the new Public Responsibility Committee meetsin late 2017. At the additional independence criteria applicable to directors serving on these committees undersame time, the NYSE listing rules.Board reorganized the membership of most of its other committees. AllThe Board committeescreated the
are composed entirely ofnew Public Responsibility
Independent Directors Committee in late 2017 |
12 | Annaly Capital Management Inc. 2017 Proxy Statement |
Table of Contents
Board Structure and Processes |
The table below shows the current membership of each Board committee and number of meetings of each committee held in 2016. | Director | Audit
Committee | Compensation
Committee | NCG
Committee | Risk Committee | | Francine J. Bovich | M | | M | | | Kevin P. Brady | C | | M | M | | Jonathan D. Green(1) | | M | | C | | Michael Haylon | M | | | M | | E. Wayne Nordberg | | M | C | | | John H. Schaefer | M | M | | M | | Donnell A. Segalas | | C | M | | | 2016 Meetings: | 4 | 4 | 3 | 4 |
| Director | | Audit
Committee | | Compensation
Committee | | NCG
Committee | | PR
Committee | | Risk
Committee | | Francine J. Bovich | | | | | |  | | • | | | | Kevin P. Brady | | | | | | • | | | | • | | Wellington J. Denahan | | | | | | | | • | | • | | Katie Beirne Fallon | | | | | | • | | • | | | | Jonathan D. Green(1) | | | | • | | | | | | • | | Michael Haylon | | • | | | | | | | | • | | E. Wayne Nordberg | | • | | • | | • | | | | | | John H. Schaefer | | • | | • | | | | | | | | Donnell A. Segalas | | | | | | • | | • | | | | Vicki Williams | | • | | • | | | | | | | | 2017 Meetings: | | 6 | | 2 | | 4 | | 0(2) | | 5 |
M = • Member C = Chairperson
|
| (1) | (1) Mr. Green serves as the Lead Independent Director. For more details, see page1130.
| | (2) | The Public Responsibility (“PR”) Committee did not hold any meetings in 2017, as it was established in November 2017. |
| 32 | Annaly Capital Management Inc. 2018 Proxy Statement | | |
Table of Contents Board Structure and Processes | AUDIT COMMITTEE | Committee Members: Kevin P. Brady (Chair)
Michael Haylon
E. Wayne Nordberg
John H. Schaefer
Vicki Williams Number of Meetings:
6 | Key ResponsibilitiesResponsibilities: ■ | Audit | > | Recommends to our BoardAppoints the engagement or termination of independent registered public accountants | | > | accounting firm and reviews its qualifications, performance and independence ■Reviews the plan and results of the auditing engagement with ourthe Chief Financial Officer and ourthe independent registered public accountants | | > | accounting firm ■Oversees internal audit activities | | > | ■Oversees the quality and integrity of our financial statements and financial reporting process | | > | ■Oversees the adequacy and effectiveness of internal control over financial reporting ■Reviews and pre-approves the audit and permitted non-audit services and proposed fees of the independent registered public accounting firm ■Prepares the report of the Audit Committee required by the rules of the SEC to be included in the Proxy Statement |
The Board has determined that eachEach member of the Audit Committee member is financially literate and thatindependent of the Company and management under the applicable rules of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the listing standards of the NYSE. The Board has designated Messrs. Brady and Haylon areas “audit committee financial experts” under applicable SEC rules. For more information on the Audit Committee’s responsibilities and activities, see the “Board Oversight of Risk” and “Report of the Audit Committee” sections of this proxy statement.Proxy Statement. | |
CompensationCOMPENSATION COMMITTEE | > Committee Members:
Donnell A. Segalas
(Chair)
Jonathan D. Green
E. Wayne Nordberg
John H. Schaefer
Vickie Williams Number of Meetings:
2 | Key Responsibilities: ■Evaluates the performance of ourthe Manager and the terms of the Management Agreement | | > | ■Reviews the fees payable to ourthe Manager | | > | ■Administers the Company’s equity incentive plans and other equity compensation programs | | > | ■Reviews the form and amount of Director compensation | | > | ■Evaluates the performance of ourthe Company’s officers ■Reviews and discusses with management the Compensation Discussion and Analysis and related disclosures as required by the SEC ■Prepares the report of the Compensation Committee required by the rules of the SEC to be included in the Proxy Statement |
Each member of the Compensation Committee is independent of the Company and management under the listing standards of the NYSE. For more information on the Compensation Committee’s responsibilities and activities, see the “Compensation of Directors” and “Compensation Discussion and Analysis” sections of this proxy statement.Proxy Statement. | |
www.annalyannualmeeting.com | 13Annaly Capital Management Inc. 2018 Proxy Statement | 33 | |
Table of Contents Board Structure and Processes |
Board Structure and Processes | NCG COMMITTEE | > Committee Members:
Francine J. Bovich
(Chair)
Kevin P. Brady
Katie Beirne Fallon
E. Wayne Nordberg
Donnell A. Segalas Number of Meetings:
4 | Key Responsibilities: ■Develops and recommends criteria for considering potential Board candidates | | > | ■Identifies and screens individuals qualified to become Board members, and recommends to the Board candidates for nomination for election or re-election to the Board and to fill Board vacancies | | > | ■Develops and recommends to the Board a set of corporate governance guidelines and recommends modifications as appropriate | | > | ■Provides oversight of the evaluation of the Board and management | | > | ■Considers other corporate governance matters, such as directorDirector retirement policies, management succession plans and potential conflicts of interest of Board members and senior management, and recommends changes as appropriate |
RiskPUBLIC RESPONSIBILITY COMMITTEE | Committee Members: Jonathan D. Green
(Chair)
Francine J. Bovich
Wellington J. Denahan
Katie Beirne Fallon
Donnell A. Segalas Number of Meetings:
N/A(1) | Key Responsibilities: Assists the Board in its oversight of the Company’s items of public responsibility, including: ■corporate philanthropy ■social impact investments ■sustainability initiatives ■corporate culture and reputation ■public policy initiatives |
| RISK COMMITTEE | Committee Members: John H. Schaefer(Chair)
Kevin P. Brady
Wellington J. Denahan
Jonathan D. Green
Michael Haylon Number of Meetings:
5 | Key Responsibilities: Assists the Board in its oversight of the Company’s: | | > ■
| risk governance structure | | > | ■risk management and risk assessment guidelines and policies regarding capital, liquidity and funding risk, investment/market risk, credit risk, counterparty risk, operational liquidity, fundingrisk, compliance, regulatory and reputationallegal risk and such other risks as necessary to fulfill the committee’s duties and responsibilities | | > | ■risk tolerance,appetite, including risk toleranceappetite levels and capital targets and limits | | > | capital, liquidity, and funding |
For more information on the Risk Committee’s responsibilities and activities, see the “Board Oversight of Risk” section of this proxy statement.Proxy Statement. | |
| (1) | The Public Responsibility Committee did not hold any meetings in 2017, as it was established in November 2017. |
Director Attendance34 | Annaly Capital Management Inc. 2018 Proxy Statement | | |
Table of Contents Board Structure and Processes DIRECTOR ATTENDANCE During 2016, our2017, the Board held 1513 meetings. Each Director attended at least 75% of the aggregate number of meetings held by ourthe Board and each committee on which the Director served.served during the period he or she was on such committee. We expectThe Company expects each member of the Board to attend our annual meeting of stockholders.the Annual Meeting. All of our Directorsthe Company’s then-Directors attended our 2016Annaly’s 2017 annual meeting of stockholders (the “2016“2017 Annual Meeting”). Ms. Fallon and Ms. Williams were appointed as Directors effective January 1, 2018 and, therefore, did not attend the 2017 Annual Meeting.
14 | Annaly Capital Management Inc. 2017 Proxy Statement |
Table of ContentsCOMPENSATION OF DIRECTORS
Board Structure and Processes |
Compensation of Directors |
We compensate ourThe Company compensates the Independent Directors. Any Director who is also an employee or owner of ourthe Manager does not receive compensation for serving on ourthe Board. OurThe Compensation Committee is responsible for reviewing, and recommending to the Board, the form and amount of compensation paid to ourthe Independent Directors.
The compensation elements paid to ourthe Independent Directors for service on the Board and its committees for 20162017 is set forth below: | Annual Compensation Element | | Amount | | Annual Cash Retainer | | $100,000 | | Deferred Stock Unit (“DSU”) Grant | | $135,000 in DSUs | | Lead Independent Director Retainer | | $30,000 | | Committee Member Retainer | | $8,000 – Audit Committee | | | $7,000 – Compensation Committee | | | $7,000 – Risk Committee | | | $5,000 – NCG Committee | | Committee Chair Retainer(1) | | $20,000 – Audit Committee | | | $10,000 – Compensation Committee | | | $10,000 – Risk Committee | | | $10,000 – NCG Committee |
| (1) | (1) Committee Chairs received Committee Chair Retainers in addition to, and not in lieu of, Committee Member Retainers. No retainers for service as a Member or Chair of the Public Responsibility Committee were paid in 2017, as the committee did not meet during such year, having been established in November 2017.
|
Each DSU is equivalent in value to one share of ourthe Company’s common stock. DSUs are granted on the date of the annual stockholder meeting and vest immediately. DSUs convert to shares of ourthe Company’s common stock one year after the date of grant unless the Director elects to defer the settlement of the DSUs to a later date. DSUs do not have voting rights. DSUs pay dividend equivalents in either cash or additional DSUs at the election of the Director. OurThe Independent Directors are also eligible to receive other stock-based awards under ourthe Company’s equity incentive plan. We reimburse ourThe Company reimburses the Directors for their reasonable out-of-pocket travel expenses incurred in connection with their attendance at full Board and committee meetings.
Director Stock Ownership Guideline |
Director Stock Ownership Guideline In 2016, wethe Board increased the stock ownership guideline for ourthe Independent Directors to provide that each Independent Director should strive to own an amount of ourthe Company’s common stock equal to five times the annual cash retainer. Shares counting toward the guideline include shares that are owned outright, DSUs and any other shares held in deferral accounts. To facilitate achievement of the guideline, we havethe Board has adopted and implemented a “retention ratio” that requires Independent Directors to retain and hold 50% of the net profit shares from DSUs until the specified ownership level is achieved. As of March 31, 2017, all of ourthe Independent Directors have met or are on tracktheir way to meetmeeting their stock ownership guideline. In 2016, wethe Board increased the
the stock ownership
guideline for
Independent
Directors to 5x the
annual cash retainer,
which is
currently
$100,000 $100,000 |
| Annaly Capital Management Inc. 2018 Proxy Statement | Role of Compensation Consultant35 | |
Table of Contents Board Structure and Processes Role of the Independent Compensation Consultant During 2016, our2017, the Compensation Committee retained an independent compensation consultant, Frederic W. Cook & Co., a nationally-recognized compensation consulting firm (“F. W. Cook”), to assist the Compensation Committee in its review of the compensation arrangements provided to ourthe Independent Directors. The Compensation Committee considered F. W. Cook’s independence in light of SEC regulations and NYSE listing standards. The Compensation Committee discussed all relevant factors including the servicesand concluded that no conflict of interest exists that would prevent F. W. Cook provided to our Manager discussed under “from independently representing the Compensation Paid by our Manager to our Named Executive Officers” below, and concluded that the continued engagement of F. W. Cook does not raise any conflicts of interest.Committee. www.annalyannualmeeting.com | 15 |
Table of ContentsDirector Compensation
Board Structure and Processes |
The table below summarizes the compensation paid by usthe Company to ourthe Independent Directors for the fiscal year ended December 31, 2016.2017. Name | Fees Earned or Paid in Cash | Stock Awards(1) | Total | | Fees Earned or
Paidin Cash | | Stock
Awards(2) | | Total | | Francine J. Bovich | $113,000 | $135,000 | $248,000 | | $113,000 | | $135,000 | | $248,000 | | Kevin P. Brady | $140,000 | $135,000 | $275,000 | | $140,000 | | $135,000 | | $275,000 | | Jonathan D. Green | $154,000 | $135,000 | $289,000 | | $154,000 | | $135,000 | | $289,000 | | Michael Haylon | $115,000 | $135,000 | $250,000 | | $115,000 | | $135,000 | | $250,000 | | E. Wayne Nordberg | $122,000 | $135,000 | $257,000 | | $122,000 | | $135,000 | | $257,000 | | John H. Schaefer | $122,000 | $135,000 | $257,000 | | $122,000 | | $135,000 | | $257,000 | | Donnell A. Segalas | $122,000 | $135,000 | $257,000 | | $122,000 | | $135,000 | | $257,000 |
| (1) | Ms. Fallon and Ms. Williams were appointed to the Board effective January 1, 2018 and did not receive any compensation for the fiscal year ended December 31, 2017. | | (2) | The amounts in this column represent the aggregate grant date fair value of the DSU awards, computed in accordance with FASB ASC Topic 718 and based on the closing price of ourthe Company’s common stock on the date of grant. DSUs are vested at grant and accrue dividend equivalents as additional DSUs or cash at the election of the Director. |
The following table sets forth information with respect to the aggregate outstandingunexercised option awards at December 31, 20162017 of each of ourthe Independent Directors. All such option awards have vested. WeOptions are no longer grant optionsgranted as part of ourthe Company’s Director compensation program. | Name | | Outstanding Unexercised
Option
Awards at 12/31/1617 | | Francine J. Bovich | – | — | | Kevin P. Brady | 43,750 | 42,500 | | Jonathan D. Green | 91,250 | 90,000 | | Michael Haylon | 76,250 | 75,000 | | E. Wayne Nordberg | 91,250 | 90,000 | | John H. Schaefer | – | — | | Donnell A. Segalas | 78,750 | 77,500 |
16 36 | Annaly Capital Management Inc. 20172018 Proxy Statement | | |
Table of Contents Our Management
The following table sets forth certain information with respect to ourthe Company’s executive officers, all of whom are indirect owners and/or employees of ourthe Manager: | Name | | Age | | Title | | Kevin G. Keyes | 49 | 50 | | Chairman, Chief Executive Officer President and Director | Wellington J. Denahan | 53 | Chairman of the Board and Executive ChairmanPresident | | Glenn A. Votek | 58 | 59 | | Chief Financial Officer | | David L. Finkelstein | 44 | 45 | | Chief Investment Officer | | Timothy P. Coffey | 43 | 44 | | Chief Credit Officer | | Anthony C. Green | 42 | 43 | | Chief Legal Officer and Secretary |
Biographical information on Mr. Keyes and Ms. Denahan is provided above under the heading “Election of Directors.” Certain biographical information for Messrs. Votek, Finkelstein, Coffey and Green is set forth below. Glenn A. Votekhas served as Chief Financial Officer of Annaly since August 2013. Mr. Votek also served as Chief Financial Officer of Fixed Income Discount Advisory Company, (FIDAC)a former wholly-owned subsidiary of the Company, from August 2013 until October 2015 and as Annaly’s Chief Administrative Officer from May 2013 until August 2013. Mr. Votek joined Annaly in May 2013 from CIT Group where he was an Executive Vice President and Treasurer since 1999 and President of Consumer Finance since 2012. Prior to that, Mr. Votek worked at AT&T and its finance subsidiary from 1986 until 1999 in various financial management roles. Mr. Votek has a B.S. in Finance and Economics from the University of Arizona/Kean College and a M.B.A. in Finance from Rutgers University. David L. Finkelsteinhas served as Chief Investment Officer of Annaly since November 2016. Mr. Finkelstein previously served as Annaly’s Chief Investment Officer, Agency and RMBS beginning in February 2015 and as Annaly’s Head of Agency Trading beginning in August 2013. Prior to joining Annaly, Mr. Finkelstein served for four years as an Officer in the Markets Group of the Federal Reserve Bank of New York where he was the primary strategist and policy advisor for the MBS purchase program. Mr. Finkelstein has over 20 years of experience in fixed income investment. Prior to the Federal Reserve Bank of New York, Mr. Finkelstein held Agency MBS trading positions at Salomon Smith Barney, Citigroup Inc. and Barclays PLC. Mr. Finkelstein received his B.A. in Business Administration from the University of Washington and his M.B.A. from the University of Chicago, Booth School of Business. Mr. Finkelstein also holds the Chartered Financial Analyst® Analyst®designation. Timothy P. Coffeyhas served as Chief Credit Officer of Annaly since January 2016. Mr. Coffey served as Annaly’s Head of Middle Market Lending from 2010 until January 2016. Mr. Coffey has over 20 years of experience in leveraged finance and has held a variety of origination, execution, structuring and distribution positions. Prior to joining Annaly in 2010, Mr. Coffey served as Managing Director and Head of Debt Capital Markets in the Leverage Finance Group at Bank of Ireland. Prior to that, Mr. Coffey held positions at Scotia Capital, the holding company of Saul Steinberg’s Reliance Group Holdings, and SC Johnson International. Mr. Coffey received his B.A. in Finance from Marquette University. Anthony C. Greenhas served as Chief Legal Officer and Secretary of Annaly since March 2017. Mr. Green previously served as Annaly’s Deputy General Counsel from 2009 until February 2017. Prior to joining Annaly, Mr. Green was a partner in the Corporate, Securities, Mergers & Acquisitions Group at the law firm K&L Gates LLP. Mr. Green has over 1718 years of experience in corporate and securities law. Mr. Green holds a B.A. in Economics and Political Science from the University of Pennsylvania and a J.D. and LL.M. in International and Comparative Law from Cornell Law School. www.annalyannualmeeting.com | 17 |
Table of ContentsSTOCK PURCHASES BY EXECUTIVE OFFICERS SINCE 2011
Stock Purchases by Executive Officers since 2011 |
Since 2011, ourthe executive officers have purchased over 21.4 million shares of ourthe Company’s common stock (including open market purchases, dividend reinvestments, and option exercises) with an aggregate purchase price of $23.1$16.3 million as set forth in the table below. | Executive Officer | Shares Purchased | Purchase Price(1) | | None
of our
NEOs has
ever sold
shares
of our
common
stock | | Kevin G. Keyes | 606,908 | $ | 6,895,000 | | | Wellington J. Denahan | 1,059,871 | $ | 12,311,000 | | | Glenn A. Votek | 61,266 | $ | 640,000 | | | David L. Finkelstein | 200,000 | $ | 2,122,000 | | | Timothy P. Coffey | 30,000 | $ | 304,000 | | | Anthony C. Green | 77,750 | $ | 843,000 | | | TOTAL | 2,035,794 | $ | 23,115,000 | |
(1) Rounded to the nearest thousand.
| Executive Officer | | Shares
Purchased | | Purchase
Price(1) |
| No NEO has ever
sold shares of
the Company’s
common stock
| | Kevin G. Keyes | | 934,779 | | $ | 10,560,000 | | Glenn A. Votek | | 93,597 | | $ | 1,017,000 | | David L. Finkelstein | | 300,000 | | $ | 3,370,000 | | Timothy P. Coffey | | 30,000 | | $ | 304,000 | | Anthony C. Green | | 101,000 | | $ | 1,085,000 | | TOTAL | | 1,459,376 | | $ | 16,336,000 |
18(1) | Rounded to the nearest thousand. |
| | Annaly Capital Management Inc. 20172018 Proxy Statement | 37 | |
Table of Contents Management Structure OurOVERVIEW
Following the management externalization transaction (the “Externalization”), which was approved by holders of approximately 83% of the Company’s stock on May 23, 2013, the Company became externally-managed by the Manager. Pursuant to the terms of the Management StructureAgreement, the Company pays the Manager a management fee and the Manager pays all of the compensation to Annaly’s management personnel (including the NEOs). The Compensation Committee annually reviews the management fee and the performance of the Manager, including the achievements discussed beginning on page7. The Independent Directors then consider the Compensation Committee’s recommendations when determining whether to renew or amend the terms of the Management Agreement. Based on the review and factors described in more detail below, the Independent Directors have determined that the Management Agreement continues to be in the best interests of the Company and its stockholders. For additional information, see “Certain Relationships and Related Party Transactions”, “Compensation Paid by the Manager to the Named Executive Officers” and “Compensation Discussion and Analysis.” Following our management externalization transaction (the “Externalization”), which was approved by approximately 83% of our stockholders on May 23, 2013, we became externally managed by our Manager. Pursuant to the terms of the Management Agreement, we pay our Manager a management fee and our Manager pays all of the compensation to our management personnel (including our NEOs). The Compensation Committee annually reviews the management fee and the performance of our Manager, including the accomplishments discussed beginning onpage IV of the Proxy Summary. The Independent Directors then consider the Compensation Committee’s recommendations when determining whether to renew or amend the terms of the Management Agreement. Based on the review and factors described in more detail below, the Independent Directors have determined that the Management Agreement continues to be in the best interests of the Company and our stockholders. For additional information, see “Certain Relationships and Related Party Transactions”, “Compensation Paid by our Manager to our Named Executive Officers” and “Compensation Discussion and Analysis.”
| | Our Management Agreement
compares favorably to the
management agreements of our
externally-managedthe Company’s externally-
managed peers |
Management Agreement Terms |
We believeMANAGEMENT AGREEMENT TERMS
The Compensation Committee believes that the terms and conditions of the Management Agreement compare favorably to the terms and conditions that exist between ourAnnaly’s externally-managed mREIT peers and their respective managers. In particular, as illustrated by the table below, when compared to the median for the peer comparison, (i) the management fee paid to ourthe Manager is lower as a percentage of stockholders’ equity, (ii) the term of the Management Agreement was of a shorter duration, and (iii) the Management Agreement has no termination fee, which is expressed in the table below as a multiple of trailing average annual management fees. | Mean | Median | Min | Max |  | | Mean | | Median | | Min | | Max | | Annaly | | Agency Residential REITs | | | | | | | | | | | | | | | | | Base management fee(1) | 1.13% | 1.13% | 1.05% | 1.20% | 1.05% | | 1.29% | | 1.29% | | 1.20% | | 1.37% | | 1.05% | | Initial term in years | 6.0 | 6.0 | 2.0 | 10.0 | 2.0 | | 6.0 | | 6.0 | | 2.0 | | 10.0 | | 2.0 | | Termination fee multiple(2) | 4.4x | 4.4x | 3.3x | 5.5x | None | | 4.2x | | 4.2x | | 3.0x | | 5.3x | | None | | Incentive fee | None | None | None | None | None | | None | | None | | None | | None | | None | | Commercial REITs | | | | | | | | | | | | | | | | | Base management fee | 1.50% | 1.50% | 1.50% | 1.50% | 1.05% | | 1.50% | | 1.50% | | 1.50% | | 1.50% | | 1.05% | | Initial term in years | 2.8 | 3.0 | 2.0 | 3.0 | 2.0 | | 2.8 | | 3.0 | | 2.0 | | 3.0 | | 2.0 | | Termination fee multiple | 3.1x | 2.9x | 2.1x | 5.0x | None | | 3.2x | | 3.0x | | 3.0x | | 4.0x | | None | | Incentive fee(3) | 21% above
8% hurdle | 20% above
8% hurdle | None | 25% above
8% hurdle | None | | 20% above
8% hurdle | | 20% above
8% hurdle | | None | | 25% above
8% hurdle | | None | | Non-Agency Residential / Hybrid REITs | | | | | | | | Base management fee | 1.50% | 1.50% | 1.50% | 1.50% | 1.05% | | | Non-Agency Residential/Hybrid REITs | | | | | | | | | | | | | Base management fee(4) | | | 1.49% | | 1.50% | | 1.41% | | 1.50% | | 1.05% | | Initial term in years | 2.5 | 3.0 | 1.0 | 3.0 | 2.0 | | 4.0 | | 3.0 | | 1.0 | | 15.0 | | 2.0 | Termination fee multiple(4)(5) | 3.1x | 3.2x | 1.0x | 5.0x | None | | 2.9x | | 3.0x | | 1.0x | | 5.0x | | None | Incentive fee(5)(6) | N/A | N/A | None | 25% above
10% hurdle | None | | N/A | | N/A | | ~15%
above
~12%
hurdle | | 35% above
12.5%
hurdle | | None |
Source: Public filings as of year ended December 31, 2016.2017. All base management fees are calculated as a percentage of stockholders’ equity and all termination fees are calculated as a multiple of the average annual base management fee during the prior 24-month period, except as otherwise specified below. Agency Residential REITs represent the Agency mREIT Peers, withexternally-managed agency mortgage REITs included in the exceptionBBREMTG Index as of AGNC, CYSDecember 31, 2017 and CMO, which are internally-managed companies;includes Anworth Mortgage Asset Corporation (“ANH”) and ARMOUR Residential REIT, Inc. (“ARR”). Commercial REITs represent the externally-managed commercial mortgage REITs included in the BBREMTG Index as of December 31, 2016 with market capitalization above $200 million2017 and includes Blackstone Mortgage Trust, Inc. (“BXMT”), Ares Commercial Real Estate Corp. (“ACRE”), Resource Capital Corp. (“RSO”), Apollo Commercial Real Estate Finance, Inc. (“ARI”), and Starwood Property Trust Inc. (“STWD”); and Sutherland Asset Management (“SLD”). Non-Agency Residential/Residential / Hybrid REITs represents the externally-managed non-agency | 38 | Annaly Capital Management Inc. 2018 Proxy Statement | | |
Table of Contents Management Structure residential and hybrid mortgage REITs included in www.annalyannualmeeting.com | 19 |
Table of Contents
the BBREMTG Index as of December 31, 2016 with market capitalization above $200 million2017 and includes New Residential Investment Corp. (“NRZ”), Western AssetTwo Harbors Investment Corp. (“TWO”), Invesco Mortgage Capital, Inc. (“IVR”), PennyMac Mortgage Investment Trust (“PMT”), MTGE Investment Corp. (“WMC”MTGE”), New York Mortgage Trust Inc. (“NYMT”), AG Mortgage Investment Trust, Inc. (“MITT”), PennyMacOrchid Island Capital, Inc. (“ORC”), Western Asset Mortgage (“WMC”), Great Ajax Corp (“AJX”), Cherry Hill Mortgage Investment TrustCorp. (“PMT”CHMI”), InvescoEllington Residential Mortgage Capital Inc.REIT (“IVR”EARN”), and Two HarborsFive Oaks Investment Corp. (“TWO”OAKS”). | (1) | For ARR, base management fee is calculated as 1.5%1.50% of gross equity raised up to $1.0 billion plus 0.75% of gross equity raised in excess of $1.0 billion. | | (2) | ARR’s termination fee is calculated as the greater of (a) the base management fee calculated prior to the effective date of agreement termination for the remainder of the term or (b) 3x the base management fee during the preceding full 12 months. | | (3) | Of the fivesix Commercial REITs, fourfive have incentive fees in addition to their base management fees. STWD and RSO have incentive fees of 20% above an 8% hurdle. BXMT has a 20%an incentive fee of 20% above a 7% hurdle. RSO has aan incentive fee of 25% above an 8% hurdle. SLD has an incentive fee of 15% above an 8% hurdle. For purposes of this table, the calculation of the mean includes only the fourfive Commercial REITs that have incentive fees. | | (4) | NYMT only pays base management and incentive fees with respect to its distressed residential loan strategy. NYMT’s base management fee is calculated as 1.50% of invested capital in distressed residential mortgage loans. | | (5) | NRZ’s termination fee is calculated using the prior 12-month period. Pursuant to the terms of its management agreement, PMT’s termination fee is calculated as a multiple of the base management fee and a performance incentive fee. For purposes of this table, we have disregarded any impact from this performance incentive fee on PMT’s termination fee multiple.multiple has been disregarded. | (5)(6) | Of the six13 Non-Agency Residential/Hybrid REITs, twofour have incentive fees in addition to their base management fees. NRZ has an incentive fee of 25% above a 10% hurdle. PMT has an incentive fee with a sliding scale beginning above 8%. |
Structure and Amount NYMT has an incentive fee of 35% above a 12.5% hurdle. AJX has an incentive fee of 20% above an 8% hurdle. For purposes of this table, the calculation of the Management Feemean includes only the four Non-Agency Residential/Hybrid REITs that have incentive fees. |
STRUCTURE AND AMOUNT OF THE MANAGEMENT FEE The Compensation Committee annually reviews both the structure of the management fee as well as the amount of such fee to determine whether they incentivize the management teamManager to work towards the Company’s desired goals to the benefit of long-term stockholder interests. The Compensation Committee has determined that the use of a management fee formulated as a percentage of stockholders’ equity (as defined in ourthe Management Agreement) represents a responsible and prudent method of compensating the management team.Manager. In particular, in the context of an mREIT that uses leverage as a key component of its business strategy, the Compensation Committee believes that providing for a contractually required payment structured as an “incentive fee” may misalign the goals of the management team fromthoseManager from those of the stockholders. Moreover, the Compensation Committee believes that a management fee that is based upon stockholders’ equity (along with the stock ownership guidelines discussed on page47) aligns the management team to the goals of the Company, and that focusing the management fee on the preservation and growth of the Company’s book value incentivizes the Manager to achieve long-term performance that protects stockholders’ equity as realized losses decrease such equity and, ultimately, the management fee. Additionally, for the Manager to earn a larger management fee, the stockholders’ equity of the Company would need to increase. As a result, the growth of the stockholders’ equity is an alignment between the interests of stockholders and the Manager. Further, this alignment is stronger in the REIT industry than in other businesses. REIT regulations require the Company to pay at least 90% of its earnings to stockholders as dividends. As a result, unlike most companies, Annaly cannot grow its business and book value by reinvesting its earnings. This places a unique market discipline on the Company. Moreover, theThe Compensation Committee believes that a management fee that is based upon stockholders’ equity, along with the stock ownership guidelines discussed on page 27, aligns the management team to the goals of the Company. We believe that focusing the management fee on the preservation and growth of the Company’s book value incentivizes our Manager to achieve long-term performance that protects our stockholders’ equity as realized losses decrease such equity and, ultimately, the management fee.
Additionally, for our Manager to earn a larger management fee, the stockholders’ equity of the Company would need to increase. As a result, the growth of the stockholders’ equity is an alignment between the interests of our stockholders and the management team. Further, this alignment is stronger in the REIT industry than in other businesses. REIT regulations require us to pay at least 90% of our earnings tostockholders as dividends. As a result, unlike most companies, we cannot grow our business and our book value by reinvesting our earnings. This places a unique market discipline on us.
| | The Compensation
Committee annually
reviews the structure
and amount of the management
management fee to
determine whether it
appropriately incentivizes the
the management team |
WeThe Compensation Committee also believebelieves that ourthe structure of the management fee structure is more favorable to ourthe Company’s stockholders than if it werethe fee was based on total assets under management, which could potentially incentivize an external manager to excessively leverage assets under management in an attempt to increase short termshort-term incentive payouts.
Clawback for the Management Fee |
Clawback for the Management Fee Pursuant to the 2016 amendment and restatement of the Management Agreement, the Company is entitled to receive reimbursement from ourthe Manager if the Board determines that a computation error (regardless of the reason for or amount of such error) resulted in the overpayment of a management fee to ourthe Manager. | Annaly Capital Management Inc. 2018 Proxy Statement | Continued Cost Savings Related to the Externalization39 | |
We believeTable of Contents
Management Structure CONTINUED COST SAVINGS RELATED TO THE EXTERNALIZATION The Compensation Committee believes that the Externalization has materially reduced the Company’s compensation-related costs. When comparing the management fees wethe Company paid for the fiscal years ended December 31, 2013, 2014, 2015, 2016 and 20162017 against the estimated compensation costs (including tax costs) wethe Company would have paid for the same period if those costs remained what they were in 2012, we estimatemanagement estimates that the Externalization has resulted in total compensation savings, including tax savings, (calculated in accordance with GAAP) of approximately $138$276 million. 20 | Annaly Capital Management Inc. 2017 Proxy Statement |
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As illustrated by the table below, the management fee for each of 2013(1), 2014, 2015, 2016 and 20162017 is significantly lower than ourthe Company’s 2012 compensation expenses (which is represented by the dashed bluedark gray line): Management Fee / Fee/Compensation Expense(2),(3) 
|
($ in thousands) 
| (1) | Although ourthe Manager commenced management of Annaly on July 1, 2013, ourthe Company’s stockholders received the benefit of the compensation savings created by the Externalization for the entire 2013 calendar year pursuant to a pro forma adjustment to the 2013 management fee. WeThe Manager calculated a pro forma management fee, which was the management fee as if we werethe Company was managed by ourthe Manager from January 1, 2013 until July 1, 2013, and the actual amount of cash compensation paid to all of ourAnnaly’s employees from January 1, 2013 until July 1, 2013 reduced the amount of the management fee owed to ourthe Manager. | | (2) | Assumes compensation costs for each of 2013, 2014, 2015, 2016 and 20162017 would have remained what they were in 2012 (the last full year prior to the Externalization). | | (3) | Gray shaded area represents compensations savings (exclusive of tax savings). |
ANNUAL REVIEW OF MANAGER PERFORMANCE AND MANAGEMENT FEE CONSIDERATIONS The Compensation Committee annually reviews the Manager’s performance and management fee against both historical results and the Company’s mREIT peers, based on a number of metrics, including those discussed above in the “Proxy Summary” and the expense ratios discussed below. Annual Review of Manager Performance and Management Fee Considerations |
The Compensation Committee
annually reviews ourboth the
Manager’s performance and management fee against both our historical results and our mREIT peers, based on a number of metrics, including those discussed above in the “Proxy Summary” and the expense ratios discussed below. | | We annually review both our performance
and the terms and conditions of ourthe
Management Agreement |
Peer Comparison of Operating Expenses as a Percentage of Average Assets and Average Stockholders’ Equity40 | Annaly Capital Management Inc. 2018 Proxy Statement | | |
Table of Contents Management Structure Peer Comparison of Operating Expenses as a Percentage of Average Assets and Average Stockholders’ Equity The Compensation Committee reviews ourthe Company’s total operating expenses (including the management fee), as a percentage of both our average assets and our average stockholders’ equity.equity, among other metrics. The Compensation Committee believes these ratios, which allow us to comparecomparison of the Manager’s performance of our Manager to both ouragainst the Company’s internally- and externally-managed mREIT peers, measure the extent to which we operatethe Manager operates in an economically efficient manner. www.annalyannualmeeting.com | 21Operating Expense as a Percentage of Average Assets |
| 2012 | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 | | Average | | 0.19% | | 0.22% | | 0.24% | | 0.25% | | 0.25% | | 0.25% | | 0.23% | Internally-Managed
Peers | 0.54% | | 1.05% | | 0.87% | | 0.72% | | 0.37% | | 0.44% | | 0.67% | Externally-Managed
Peers | 0.67% | | 0.63% | | 0.75% | | 0.81% | | 0.74% | | 0.74% | | 0.72% | | mREIT Index | 0.62% | | 0.74% | | 0.77% | | 0.80% | | 0.60% | | 0.62% | | 0.69% |
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Our Management StructureOperating Expense as a Percentage of Average Equity |
| | | 2012 | 2013 | 2014 | 2015 | 2016 | | Average | Annaly | | 0.19% | 0.22% | 0.24% | 0.25% | 0.25% | | 0.23% | Internally-Managed Peers | 0.54% | 0.91% | 0.87% | 0.73% | 0.44% | | 0.70% | Externally-Managed Peers | 0.60% | 0.66% | 0.75% | 0.79% | 0.66% | | 0.69% | | | | 2012 | 2013 | 2014 | 2015 | 2016 | | Average | Annaly | | 1.45% | 1.66% | 1.61% | 1.58% | 1.65%(1) | | 1.59% | Internally-Managed Peers | 2.72% | 3.83% | 4.13% | 3.84% | 2.48% | | 3.40% | Externally-Managed Peers | 2.20% | 3.06% | 3.57% | 3.75% | 4.06% | | 3.33% |
| 2012 | | 2013 | | 2014 | | 2015 | | 2016 | | 2017 | | Average | | 1.45% | | 1.66% | | 1.61% | | 1.58% | | 1.65% | | 1.68% | | 1.61% | Internally-Managed
Peers | 2.71% | | 3.95% | | 3.92% | | 3.68% | | 2.14% | | 2.10% | | 3.08% | Externally-Managed
Peers | 2.38% | | 3.06% | | 3.55% | | 3.82% | | 4.36% | | 4.00% | | 3.53% | | mREIT Index | 2.33% | | 3.30% | | 3.62% | | 3.80% | | 3.53% | | 3.25% | | 3.30% |
Source: Company Filings, SNL and Bloomberg. Averages are market weighted based on market capitalization as of Dec. 31st of each respective year. Note: Internally-Managed Peers and Externally-Managed Peers represent the respective internally- and externally-managed members of the BBREMTG Index with market capitalization above $200 million as of December 31st of each respective year. The average for each excludes Annaly and companies during years in which they became public or first listed. Operating Expense is defined as: (i) for Internally-Managed Peers, the sum of compensation & benefits, general & administrative expenses and other operating expenses, and (ii) for Externally-Managed Peers and Annaly, the sum of net management fees, compensation & benefits (if any), general & administrative expenses and other operating expenses. (1) | Excludes costs of $49 million related to the Company’s acquisition of Hatteras. |
Annaly’s 2016 operating expenses exclude costs of $49 million related to the Company’s acquisition of Hatteras Financial Corp.In its review of these operating expense ratios, the Compensation Committee noted that the Company has outperformed both ourits internally- and externally-managed mREIT peers over the last fivesix fiscal years. In this regard, the Compensation Committee has viewed the Company’s performance as an indicator that, among other things, ourthe Manager has managed the Company in an efficient manner with appropriately scaled operating costs (including the management fee). 22 | Annaly Capital Management Inc. 20172018 Proxy Statement | 41 | |
Table of Contents Compensation Paid by ourthe Manager to ourthe Named Executive Officers NAMED EXECUTIVE OFFICERS The NEOs for 2017 are: OverviewName | | Title | | Kevin G. Keyes | | Chairman, Chief Executive Officer (CEO) and President | | Glenn A. Votek | | Chief Financial Officer (CFO) | | David L. Finkelstein | | Chief Investment Officer (CIO) | | Timothy P. Coffey | | Chief Credit Officer (CCO) | | Anthony C. Green | | Chief Legal Officer (CLO) and Secretary |
INTRODUCTION As discussed throughout this proxy statement, we pay ourProxy Statement, the Company pays the Manager a management fee, the purpose of which is not to provide compensation to ourthe NEOs, but rather to compensate ourthe Manager for the services it provides for the day-to-day management of Annaly. The proceeds of the management fee are used by ourthe Manager in part to pay compensation to ourthe Manager’s personnel, including ourthe NEOs other than Mr. Keyes (who does not receive any compensation for serving as our Chief Executive Officer,the Company’s CEO, but has an interest in the management fee as an indirect equityholder of ourthe Manager); however, the Company does not determine the compensation payable by the Manager to the NEOs, the Company does not allocate any specific portion of the management fee we payit pays to the compensation of ourthe NEOs, and we do notnor does the Company reimburse ourthe Manager for the cost of such compensation. OurThe Manager makes all decisions relating to compensation it pays to ourthe NEOs based on the factors, including individual and Company performance, it determines to be appropriate and subject to any employment agreements entered into between ourthe Manager and individual NEOs.
DISCLOSURE ENHANCEMENTS Given that we doAnnaly does not provide any compensation to ourthe NEOs, we havehistorically, the Company disclosed information about the management fees it paid to the Manager, but did not previously provideddisclose information relatedabout the Manager’s executive compensation program. However, at the request of the Independent Directors, the Company has engaged in extensive outreach over the last two years in order to ourunderstand the information stockholders need to fully evaluate the Manager’s executive compensation program for our NEOs and such information has not been previously provided to us. However, atpurposes of the request of our Independent Directors and inSay-on-Pay vote. 2017 Changes In response to our conversations with stockholders following the 2016 Say-on-Pay vote and our commitmentconversations with the Manager, the Manager consented to continuous improvement and transparency, ourdisclosure of certain qualitative information about the Manager’s executive compensation program in the Company’s 2017 Proxy Statement. The Independent Directors also requested that the Manager has furnishedprovide the following information for disclosure in the Company’s 2018 Proxy Statement: | ■ | The portion of the management fee that is allocated to NEO compensation paid by the Manager; | | ■ | Of this compensation, the breakdown of fixed vs. variable/incentive pay; and | | ■ | The metrics the Manager uses to measure performance to determine the NEOs’ variable/incentive pay. |
2018 Changes Following the 2017 Say-on-Pay vote, the Company again engaged in a multi-pronged effort to gather stockholder feedback regarding its 2017 compensation disclosure. While stockholders generally appreciated the qualitative information the Company provided about the Manager’s executive compensation program in the 2017 Proxy Statement, others indicated that they needed specific information about the magnitude of NEO compensation and the proportion of variable NEO pay in order to evaluate the alignment between NEO pay and Company performance. In response to this feedback, the Manager has provided the information below about the compensation it paid to the Company about its executive compensation program:NEOs for 2017. >42 | Annaly Capital Management Inc. 2018 Proxy Statement | | |
Table of Contents Compensation Paid by the Manager to the Named Executive Officers Summary of 2017 NEO Compensation | ■ | With the exception of Mr. Keyes (who does not receive any direct or indirect compensation from ourthe Manager or the Company for his services as our Chief Executive Officer,CEO, but does have an interest in the fees paid to ourthe Manager as an equityholder of the parent of ourthe Manager), each of ourthe other NEOs receivesreceived a base salary and is eligible for a performance-based cash incentive bonus as further described under “Components of Our NEOs’ Compensation” below;
for 2017. | >■ | A significant majorityDuring 2017, the NEOs as a group received aggregate salaries of $2.8 million and aggregate performance-based cash incentive bonuses of $23.9 million from the Manager. These amounts collectively represent 16.2% of the NEOs’ targetaggregate management fees the Company paid to the Manager during 2017. On an aggregated basis, the NEOs received 10.3% of their total compensation isin the form of base salaries and the remaining 89.7% in the form of performance-based and “at-risk”;
cash incentive bonuses. | >■ | Payout of performance-basedIn determining the cash bonuses is based onit paid to the NEOs for 2017, the Manager considered achievement of both rigorous Company and investment group performance metrics, including core return on equity, core return on assets, and operating expenses as a percentage of average equity, along with individual performance objectives; and
objectives. | >■ | OurThe Manager considersconsidered a list of specified peer companies (set forth below under “Company Market Data”), together with advice from the Manager’s compensation consultants, including F. W. Cook, when it developsto develop appropriate compensation packages for ourthe NEOs. |
In addition, our Independent Directors have also requested that our Manager establish a framework for isolating the portionComponents of the management fee allocable to 2017 NEO compensation. While the parameters of this framework are currently under review, our Independent Directors have asked our Manager to consider the guidance issued by proxy advisory firms regarding the level of compensation disclosure sufficient to facilitate an assessment of an externally-managed issuer’s pay programs.
Specifically, the Independent Directors have requested that our Manager establish a compensation framework that will enable it to provide the Company with the following information for disclosure in our 2018 proxy statement:
> | The portion of the management fee that is allocated to NEO compensation paid by our Manager;
| > | Of this compensation, the breakdown of fixed vs. variable/incentive pay; and
| > | The metrics our Manager uses to measure performance to determine our NEOs’ variable/incentive pay. |
For additional information on our stockholder outreach efforts following the 2016 Say-on-Pay vote, please see “Compensation Discussion & Analysis – Consideration of “Say-on-Pay” Voting Results” below.
www.annalyannualmeeting.com | 23 |
Table of Contents
Compensation Paid by our Manager to our Named Executive Officers |
Components of our NEOs’ Compensation |
OurThe Manager’s executive compensation program includes both a base salary and a performance-based cash incentive bonus. Although ourthe Compensation Committee has discretion to grant equity awards of Company common stock to ourthe NEOs (which it has not exercised since ourthe Externalization), the management fee we paythe Company pays to ourthe Manager is paid entirely in cash and therefore ourthe Manager has no independent ability to provide awards of Company stock as part of ourthe NEOs’ compensation. To address this limitation on ourin the Manager’s executive compensation program, ourthe Manager has structured ourthe NEOs’ performance-based cash incentive bonuses with a mix of both rigorous Company performance metrics and individual performance objectives. The table below describes the objectives supported by each of ourthe Manager’s primary compensation elements, along with an overview of the key design features of each element.
| Compensation Element | | What It Does | | Key Measures | | Base Salary | | >■Provides a level of fixed pay appropriate to an executive’s role and responsibilities
>■Evaluated on an annual basis, may be adjusted up or down
| | >■Experience, duties and scope of responsibility
>■Internal and external market factors
| Performance-Based Performance - Based
Cash
Incentive Bonus | | >■Provides a competitive annual cash incentive opportunity
>■Links executives’ interests to those of our stockholderswith stockholders’ interests
■Incentivizes and rewards superior individual and Company performance | | >■Based on achievement of both rigorous Company performance metrics (including core return on equity, core return on assets and operating expenses as percentage of average equity), together with individual performance objectives
|
NEO Pay Mix The Manager’s executive compensation program is designed so that the majority of compensation is performance-based and “at-risk” to promote alignment of the NEOs’ interests with those of stockholders. In determining payout of the NEOs’ performance-based cash incentive bonuses (which represents the variable portion of their compensation packages), the Manager considered achievement of both rigorous performance metrics, including core return on equity, core return on assets, and operating expenses as a percentage of average equity, along with individual performance objectives. During 2017, Messrs. Votek, Finkelstein, Coffey, and Green received aggregate performance-based cash incentive bonuses of $23.9 million from the Manager. | Annaly Capital Management Inc. 2018 Proxy Statement | Company Market Data43 | |
OurTable of Contents
Compensation Paid by the Manager to the Named Executive Officers The base salaries for the NEOs (which represent the fixed portion of their compensation packages) are reviewed annually and may be increased or decreased as the Manager deems appropriate. During 2017, Messrs. Finkelstein, Votek, Coffey and Green received aggregate salaries of $2.8 million from the Manager. On an aggregated basis, Messrs. Votek, Finkelstein, Coffey and Green received 10.3% of their total compensation in the form of base salaries and the remaining 89.7% in the form of performance-based cash incentive bonuses. | 2017 NEO Fixed vs. Variable Pay Mix |
How the Manager Makes Executive Compensation Decisions In establishing and reviewing executive compensation packages, the Manager considers the nature and scope of each executive’s role and responsibilities, individual and Company performance, retention considerations and feedback from stakeholders, along with the market data, analyses and recommendations provided by external compensation consultants (as further described below under “Role of the Manager’s Compensation Consultants” and “Market Compensation Data”). Role of the Manager’s Compensation Consultants During 2017, the Manager retained Meridian Compensation Partners, LLC, FPL Associates, L.P. and Richter Associates, Inc. for advice and perspectives regarding market trends that may impact decisions about the Manager’s executive compensation program and practices. Company Market Data The Manager considers compensation data and practices of a group of peer companies (the “Peer Group”), as well as current market trends and practices generally, in developing appropriate compensation packages for ourthe NEOs. In determining the Peer Group, ourthe Manager considers both industry and company-specific dynamics to identify the peers with which we competethe Company competes for assets, stockholders and talent. As a result, ourthe Manager focuses on peers within the mREIT industry, as well as asset management companies that manage mREITs, along with other asset managers and financial companies within relevant market capitalization and/or revenue bands. OurThe Manager annually reviews the Peer Group and may update its composition tobetterto better reflect the Company’s competitive landscape or, if necessary, to account for corporate changes, including acquisitions and dispositions. OurThe Manager considers
both industry
and company-specificcompany-
specific dynamics to identify
identify the peers with which we competethe
Company competes for assets,
stockholders and talent |
COMPENSATION PEER GROUP Compensation Peer Group | > | Affiliated Managers Group, Inc. | > | Janus CapitalFortress Investment Group Inc. | > | AG Mortgage Investment Trust, Inc. | > | KKR & Co. L.P. | > | AGNC Investment Corp. | > | Leucadia National Corporation | > | American Capital, Ltd. | > | MFA Financial, Inc. | > | Ameriprise Financial, Inc. | > | New Residential Investment Corp. | > | Anworth Mortgage Asset Corporation | > | New York Mortgage Trust, Inc. | > | Apollo Commercial Real Estate Finance, Inc. | > | Newcastle Investment Corp. | > | Apollo Global Management LLC | > | Northern Trust Corporation | >AGNC Investment Corp. | Ares Capital CorporationFranklin Resources, Inc. | > | NorthStar Asset Management GroupRaymond James Financial, Inc. | > | Ares Management LP | > | PennyMac Mortgage Investment Trust | > | ARMOUR Residential REIT,Ameriprise Financial, Inc. | > | Redwood Trust, Inc. | > | Blackstone Mortgage Trust, Inc. | > | SEI Investments Company | > | Colony Capital, Inc. | >Invesco Ltd. | Starwood Property Trust, Inc. | >Ares Capital Corporation | Eaton Vance Corp. | >KKR & Co. L.P. | T. Rowe Price Group, Inc. | >Ares Management, L.P. | Fortress Investment Group LLCLazard Ltd | >TD Ameritrade Holding Corporation | | ARMOUR Residential REIT, Inc. | Legg Mason, Inc. | The Blackstone Group L.P. | >E*TRADE Financial Corporation | Franklin Resources, Inc. | >Leucadia National Corporation | The Carlyle Group L.P. | >Eaton Vance Corp. | Invesco Ltd. | > | Two HarborsNew Residential Investment Corp. | > | Invesco Mortgage Capital Inc. | > | Waddell & Reed Financial, Inc. |
24 44 | Annaly Capital Management Inc. 20172018 Proxy Statement |
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Executive Compensation
Table of Contents Executive Compensation 02 | | Advisory Approval of Our Executive Compensation
Our The Board is committed to corporate governance best practices and recognizes the significant interest of stockholders in executive compensation matters. We areThe Company is providing this non-binding advisory vote pursuant to Section 14A of the Exchange Act. As described in detail under the headings “Our Management Structure” and “Compensation Paid by ourthe Manager to ourthe Named Executive Officers” above and “Compensation Discussion and Analysis” below, we arethe Company is externally-managed by ourthe Manager pursuant to the Management Agreement between ourthe Manager and us. Ourthe Company. The Manager is responsible for paying all compensation expense associated with managing usthe Company and ourits subsidiaries. We pay ourThe Company pays the Manager a management fee, and ourthe Manager uses the proceeds from the management fee to pay compensation to ourthe Manager’s personnel, including ourthe NEOs other than Mr. Keyes (who does not receive any compensation for serving as our Chief Executive Officer,the Company’s CEO, but has an interest in the management fee as an indirect equityholder of ourthe Manager); however, the Company does not determine the compensation payable by the Manager to the NEOs, the Company does not allocate any specific portion of the management fee we payit pays to the compensation of ourthe NEOs, and we do notnor does it reimburse ourthe Manager for the cost of such compensation. OurThe Manager makes all decisions relating to the compensation of ourthe NEOs based on the factors ourthe Manager determines to be appropriate, including both individual and Company performance, and subject to the terms of any employment agreement entered into between ourthe Manager and an individual NEO. Our Compensation Committee has no authority to influence or determine how our Manager compensates our NEOs. Our Manager does not consult with the Compensation Committee prior to making compensation determinations for our NEOs, including how much such officers are paid. OurThe NEOs are eligible to receive equity awards pursuant to ourthe Company’s equity incentive plan, which is administered by the Compensation Committee. No equity awards were made to any of ourthe NEOs in 2016.2017. In 2016, we2017, the Company did not pay any compensation to ourthe NEOs.
The Board recommends that the stockholders vote in favor of the following resolution: “RESOLVED, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and related narrative discussion, is hereby APPROVED.” While this vote is advisory and not binding on us, ournon-binding, the Board and Compensation Committee value the views of ourthe Company’s stockholders and will consider the voting results when making compensation decisions regarding ourthe Company’s equity incentive plans. THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE APPROVAL OF THIS RESOLUTION.
| | | | The Board recommends a voteFORthe Approval of this Resolution. |
www.annalyannualmeeting.com | 25 |
Table of ContentsCOMPENSATION DISCUSSION AND ANALYSIS
Our NEOs for 2016 are:
Name | Title | Kevin G. Keyes | Chief Executive Officer (CEO), President and Director | Glenn A. Votek | Chief Financial Officer (CFO) | David L. Finkelstein | Chief Investment Officer (CIO) | Timothy P. Coffey | Chief Credit Officer (CCO) | Anthony C. Green | Chief Legal Officer (CLO) and Secretary |
Compensation Discussion and Analysis |
As discussed above, ourthe Manager pays all of the compensation, including benefits, to its employees (including ourthe NEOs other than Mr. Keyes). Although certain personnel (but none of ourthe NEOs) are employed by ourthe Company’s subsidiaries for regulatory or corporate efficiency reasons, all compensation and benefits paid to such personnel by ourthe Company’s subsidiaries reduce, on a dollar-for-dollar basis, the management fee we paythe Company pays to ourthe Manager. The proceeds of the management fee are used in part to pay compensation to ourthe Manager’s personnel, including ourthe NEOs other than Mr. Keyes (who does not receive any compensation for serving as our Chief Executive Officer,the Company’s CEO, but has an interest in the management fee as an indirect equityholder of ourthe Manager); however, the Company does not determine the compensation payable by the Manager to the NEOs, the Company does not allocate any specific portion of the management fee we payit pays to the compensation of our NEOS and we do notthe NEOs, nor does it reimburse ourthe Manager for the cost of such compensation. | Annaly Capital Management Inc. 2018 Proxy Statement | 45 | |
Table of Contents Executive Compensation Accordingly, wethe Company did not pay any cash compensation to ourthe NEOs, nor did wethe Company grant them any plan-based awards, for 2016. We do2017. The Company does not provide ourthe NEOs with pension benefits, perquisites or other personal benefits. The Company is not party to any employment agreements entered into between ourthe Manager and individual NEOs, and we doit does not have any arrangements to pay such individuals any cash severance upon their termination or a change in control of the Company. As a result, no compensation is includable in the Summary Compensation Table for the NEOs. Pursuant to the terms of the Management Agreement, we pay ourthe Company pays the Manager a monthly management fee equal to 1/12th of 1.05% of ourthe Company’s stockholders’ equity, as defined in the Management Agreement, for its management services, which was approximately $152$164.3 million during the year ended December 31, 2016.2017. OurThe Manager, which is a private company that is not subject to the disclosure requirements of the SEC, has sole discretion to determine the compensation it pays to its employees, including ourthe NEOs. Under the terms of the management agreement, our Compensation Committee has no decision-making role related to and is not entitled to approve our Manager’s compensation decisions. Our Manager does not consult with the Compensation Committee prior to making any compensation determinations for our NEOs. Rather, as discussed above, the Compensation Committee is responsible for annually reviewing the performance of, and fees paid to, our Manager under the Management Agreement and for making recommendations to the independent members of the Board. For additional information, please see “Certain Relationships and Related Party Transactions”, “Our Management Structure” and “Compensation Paid by our Manager to our Named Executive Officers” above.
As noted above, the Company has no specific compensation arrangements for our Manager’s employees who are furnished pursuant to the Management Agreement to serve as the Company’s NEOs, and ourThe Manager makes all compensation determinations for its employees without any direction by the Board and without reference to any specific policies or programs under the oversight of the Board. OurThe Manager compensates its employees (including ourthe NEOs) for a variety of services performed for the benefit of ourthe Manager. Thus, the compensation paid by ourthe Manager to its employees who are serving as the Company’s NEOs is not considered to be part of the Company’s executive compensation program.
26 | Annaly Capital Management Inc. 2017 Proxy Statement |
TableConsideration of Contents“Say-on-Pay” Voting Results
Consideration of “Say-on-Pay” Voting Results |
At our 2016the Company’s 2017 Annual Meeting, 53%69% of the votes cast supported our advisory resolution on the fiscal year 2015 compensation of our NEOs (commonly known as a “Say-on-Pay” vote).Company’s Say-on-Pay vote. While the Say-on-Pay vote received majority support, the CompensationCommitteeCompensation Committee was disappointed with the percentage of votes cast against the proposal. Theproposal and the Company promptly embarked on a multi-pronged effortredoubled its engagement efforts in order to gather feedback from key stakeholders regarding our compensationunderstand the information stockholders need to evaluate the alignment between NEO pay and external management structures.Company performance. These efforts included: We reached out to investors representing 65%
of shares held by institutional investors |
>■ | Outreach to investors representing 65%approximately 72% of shares held by institutional stockholders, including 4592% of ourthe Company’s 50 largest stockholders
and 96% of the Company’s 25 largest stockholders | > | Internal discussions with our Manager’s employees
| >■ | Analysis of market practices at peer companies
| >■ | Advice from compensation consultants
| >■ | Attendance at investor conferences
| >■ | Discussions with proxy advisory services and corporate governance research firms |
During the course of this review, wethe Company identified that certain stockholders and other key stakeholders would like the Company to provide expanded disclosure on ourdisclose the magnitude of NEO compensation and the proportion of variable NEO pay to facilitate an informed evaluation of the Manager’s executive compensation program in order to enable them to fully evaluate such program, including the degree of alignment between executive pay and Company performance.program. In order toorderto address these concerns, ourthe Manager has provided the Company with certain qualitativedetailed quantitative information about its executive compensation program for inclusion in this proxy statement. In addition, our Independent Directors specifically requested that our Manager establish a framework for isolating the portion of the management fee allocable to 2017 NEO compensation so that the Company can provide related quantitative information in our 2018 proxy statement.Proxy Statement. For additional details, please see “Compensation“Compensation Paid by ourthe Manager to ourthe Named Executive Officers – Changes for 2017”2018 Changes” above. The Company reached out to
92% of its 50 largest stockholders |
WeThe Company and the Board will continue to consider the outcome of future Say-on-Pay votes, as well as stockholder feedback received throughout the year, and invite stockholders to express their views to the Independent Directors as described under “Communications with the Board.Board.”
Executive Compensation Policies46 |
Stock Ownership Guidelines for Certain Employees |
To align the interests of the employees of our Manager with those of our stockholders, the Board instituted expanded stock ownership guidelines for certain employees of our Manager, including our executive officers, in 2016. These guidelines provide for the following ownership levels:
| Position | Number of
Individuals | Required Ownership of Annaly
Stock | Timeframe to Meet Guideline | | Chief Executive Officer | 1 | $10,000,000 | April 12, 2019 | | Executive Chairman | 1 | 1,673,134 shares | April 12, 2016 | Other Operating
Committee Members | 7 | 30% of Annual Total Compensation | 5 years | | Managing Directors | 20 | 20% of Annual Total Compensation | 5 years | | Director-Level Employees | 33 | 10% of Annual Total Compensation | 5 years | | Total | 62 | | |
www.annalyannualmeeting.comAnnaly Capital Management Inc. 2018 Proxy Statement | 27 | |
Table of Contents Executive Compensation EXECUTIVE COMPENSATION POLICIES Stock Ownership Guidelines/Commitments | Position | | Number of
Individuals | | Annaly Stock Ownership
Guideline/Commitment | | Timeframe to Meet
Guideline/Commitment | | Chief Executive Officer(1) | | 1 | | $15,000,000 | | July 2020 | | Other Operating Committee Members(2) | | 9 | | 30% of Annual Total Compensation | | 5 years | | Managing Directors | | 23 | | 20% of Annual Total Compensation | | 5 years | | Director-Level Employees | | 28 | | 10% of Annual Total Compensation | | 5 years | | Total | | 61 | | | | |
Executive Compensation(1) | In July 2017, Mr. Keyes voluntarily committed to increase his stock ownership position beyond his Board-approved ownership guideline of $10 million. Mr. Keyes has pledged to meet his enhanced $15 million commitment solely through additional open market purchases of the Company’s common stock. | | (2) | In July 2017, other members of senior management (including the CIO, CCO, CFO and CLO) voluntarily committed to increase their stock ownership positions beyond the guideline of 30% of annual total compensation adopted by the Board. Like Mr. Keyes, these officers have agreed to achieve their increased stock ownership commitments by July 2020 solely through open market purchases of the Company’s common stock. |
These stock ownership guidelines apply to more than 40% of ourthe Manager’s employees. As of March 31, 2017, all such individuals either met or, within the applicable period, are expected to meet the stock ownership guidelines. Stock Holding Period Under a policy adopted by the Compensation Committee in 2016, our Manager’s employees(including ourtheManager’s employees (including the executive officers) are required to hold for a period of four years the net after-tax shares of Company stock they receive through stock option exercises or vesting of equity incentive awards. In 2016, we adoptedThe NEOs voluntarily
expansive stockcommitted to increase their
NLY positions beyond the
amounts stated under their
ownership guidelines and
a four-year stock holding
period requirement |
Prohibition on Hedging Company Securities |
We haveProhibition on Hedging Company Securities
The Company has a policy prohibiting ourthe Manager’s employees (including ourthe executive officers) from engaging in any hedging transactions with respect to our equityCompany securities held by them, which includes the purchase of any financial instrument (including forward contracts and zero cost collars) designed to hedge or offset any decrease in the market value of our equityCompany securities. Prohibition on Pledging Company Securities |
In 2016, we adoptedProhibition on Pledging Company Securities
The Company has a policy prohibiting ourthe Manager’s employees (including ourthe executive officers) from holding Company securities in a margin account or pledging Company securities as collateral for a loan. Risks Related to Compensation Policies and Practices |
Risks Related to Compensation Policies and Practices As discussed above in “Our Management Structure,” ourthe Compensation Committee is not entitled to approve compensation decisions made by ourthe Manager and ourthe Manager does not consult with the Compensation Committee prior to making any such decisions. Therefore, the Compensation Committee has no compensation policies or practices applicable to, or decision-making role regarding, the manner in which ourthe Manager uses the management fee to cover its operating expenses, including employee compensation. However, in connection with the Compensation Committee’s administration of the Company’s equity incentive plan, the Committee conducts an annual risk assessment of the Company’s compensation policies and practices applicable to such plan. In 2016,2017, the Compensation Committee determined that these compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on us.the Company. Executive Compensation Tables |
Summary Compensation Table |
We did not pay any compensation to our NEOs with respect to the years ended December 31, 2016, December 31, 2015 or December 31, 2014.
Grants of Plan-Based Awards |
We did not grant our NEOs any plan based awards in 2016.
Outstanding Equity Awards at Fiscal Year-End |
None of our NEOs had outstanding equity awards at December 31, 2016.
We did not pay any cash
or equity compensation
to our NEOs for 2016.
We do not provide them
with pension benefits,
perquisites or other
personal benefits. |
28 | Annaly Capital Management Inc. 20172018 Proxy Statement | 47 | |
Table of Contents Options Exercised and Stock Vested |
No options were exercised and no stock vested for our NEOs during 2016.Executive Compensation
Pension Benefits and Nonqualified Deferred Compensation |
We do not provide our NEOs any benefits pursuant to defined benefit plans and nonqualified deferred compensation plans.COMPENSATION COMMITTEE REPORT
Potential Payments upon Termination or Change in Control |
We are not responsible for any amounts payable or any additional vesting of outstanding equity awards for any termination of service by any of our NEOs. No amounts would have been payable by us to any of our NEOs upon a change in control as of December 31, 2016.
Compensation Committee Report |
The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement. Donnell A. Segalas (Chair)Jonathan D. GreenE. Wayne NordbergJohn H. SchaeferProxy Statement.
| Donnell A. Segalas (Chair) | Jonathan D. Green | E. Wayne Nordberg | John H. Schaefer | Compensation Committee Interlocks and Insider ParticipationVicki Williams |
EXECUTIVE COMPENSATION TABLES Summary Compensation Table The Company did not pay any compensation to the NEOs with respect to the years ended December 31, 2017, December 31, 2016 or December 31, 2015. Grants of Plan-Based Awards The Company did not grant the NEOs any plan based awards in 2017. Outstanding Equity Awards at Fiscal Year-End None of the NEOs had outstanding equity awards at December 31, 2017. Options Exercised and Stock Vested No options were exercised and no stock vested for the NEOs during 2017. The Company did not pay any
cash or equity compensation to
the NEOs for 2017. The Company
does not provide them with
pension benefits, perquisites or
other personal benefits. |
OurPension Benefits and Nonqualified Deferred Compensation
The Company does not provide the NEOs with any benefits pursuant to defined benefit plans and nonqualified deferred compensation plans. Potential Payments upon Termination or Change in Control The Company is not responsible for any amounts payable or any additional vesting of outstanding equity awards for any termination of service by any of the NEOs. No amounts would have been payable by the Company to any of the NEOs upon a change in control as of December 31, 2017. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Compensation Committee is comprised solely of the following Independent Directors: Messrs. Segalas (Chair), Green, Nordberg and Schaefer.Schaefer and Ms. Williams. None of them is serving or has served as an officer or employee of usthe Company or any affiliate or has any other business relationship or affiliation with us,the Company, except his service as a Director, and there are no other Compensation Committee interlocks that are required to be reported under the rules and regulations of the Exchange Act. CEO PAY RATIO Effective July 1, 2013, all of the Company’s employees were terminated by the Company and were hired by the Manager. However, a limited number of employees remain as employees of the Company’s subsidiaries for regulatory or corporate efficiency reasons. All compensation and benefits paid to such personnel by the Company’s subsidiaries reduce, on a dollar-for-dollar basis, the management fee the Company pays to the Manager. At December 31, 2017, the Company’s measurement date for identifying the median employee, the Company’s subsidiaries had six full-time employees (and no part-time employees). The Company chose total compensation in accordance with the requirements of the Summary Compensation Table as its consistently applied compensation measure to identify the median employee. The Company’s median employee compensation as calculated using the Summary Compensation Table requirements was $229,408 in 2017. The Company does not provide any compensation to the CEO. As a result, the CEO to median employee pay ratio is not applicable. This information is being provided for compliance purposes. Neither the Compensation Committee nor management of the Company used the pay ratio measure in making compensation decisions. | 48 | | | |  | Advisory Vote on the Frequency of Future Advisory Votes to Approve our Executive Compensation
As required pursuant to Section 14A of the Exchange Act, we are seeking a vote from stockholders as to how frequently (a “Say-on-Frequency” vote) we should hold Say-on-Pay votes. By voting on this proposal, stockholders may indicate whether they would prefer that we conduct future Say-on-Pay votes once every one, two or three years. Stockholders may also abstain from casting a vote on this proposal.
The Board has determined that conducting a Say-on-Pay vote every year is the most appropriate alternative for the Company. In reaching this recommendation, the Board considered that holding an annual Say-on-Pay vote is consistent with the preference expressed by our stockholders in response to our prior Say-on-Frequency vote in 2011, where a majority of the votes cast voted to hold an annual Say-on-Pay vote. In addition, the Board recognizes that holding a Say-on-Pay vote on an annual basis is a corporate governance best practice and is consistent with the Company’s policy of facilitating communications of stockholders with the Board and its various committees, including the Compensation Committee.
Although the Board intends to carefully consider the voting results of this proposal, the vote is advisory and not binding on the Company or the Board. The Board may decide that it is in the best interests of stockholders and the Company to hold an advisory vote to approve our executive compensation more or less frequently than the frequency preferred by stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU SELECT “EVERY ONE YEAR” FOR THE FREQUENCY OF FUTURE ADVISORY VOTES TO APPROVE OUR EXECUTIVE COMPENSATION.
| | Annaly Capital Management Inc. 2018 Proxy Statement | | | | |
www.annalyannualmeeting.com | 29 |
Table of Contents Audit Committee Matters 03 | | | | |  |
Ratification of Appointment of Independent Registered Public Accounting Firm
The Audit Committee is responsible for the appointment, compensation, retention, and oversight of the Company’s independent registered public accounting firm. OurThe Audit Committee has appointed Ernst & Young LLP (“Ernst & Young” or “E&Y”) to serve as ourthe Company’s independent registered public accounting firm for the fiscal year ending December 31, 2017,2018, and stockholders are being asked to ratify the selection at the Annual Meeting as a matter of good corporate governance. Ernst & Young has served as ourAnnaly’s independent registered public accounting firm since 2012. In appointing Ernst & Young, the Audit Committee considered a number of factors, including Ernst & Young’s independence, objectivity, level of service, industry knowledge, technical expertise, and tenure as ourthe independent auditor. We expectThe Company expects that representatives of Ernst & Young will be present at the Annual Meeting, will have the opportunity to make a statement if they desire to do so and will be available to respond to appropriate questions. If the appointment of Ernst & Young is not ratified, ourthe Audit Committee will reconsider the appointment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR 2017. Even if the appointment is ratified, the Audit Committee may, in its discretion, appoint a different independent auditor at any time during the year if the Audit Committee determines that such a change would be in the stockholders best interest.
| | | | The Board recommends a voteFORthe ratification of the appointment of Ernst & Young LLP as the Company’s Independent Registered Public Accounting Firm for the year 2018. |
REPORT OF THE AUDIT COMMITTEE The Audit Committee operates pursuant to a charter which it reviews annually, and a brief description of the Audit Committee’s primary responsibilities is included under the heading “Board Committees – Audit Committee” in this Proxy Statement. Under the Audit Committee’s charter, management is responsible for the preparation of the Company’s financial statements and the independent registered public accounting firm is responsible for auditing those financial statements and expressing an opinion as to their conformity with U.S.generally accepted accounting principles. In addition, the independent registered public accounting firm is responsible for auditing and expressing an opinion on the Company’s internal controls over financial reporting. ReportThe Audit Committee
is responsible for the
appointment, compensation,
retention and oversight of the Audit Committee
independent auditors |
The Audit Committee has reviewed and discussed ourAnnaly’s audited financial statements with management and with Ernst & Young, ourthe Company’s independent auditorsauditor for 2016.2017. The Audit Committee has discussed with Ernst & Young the matters required to be discussed by Statement on Auditing Standards No. 61, as amended. The Audit Committee has received from Ernst & Youngapplicable standards adopted by the written statements required by Public Company Accounting Oversight Board, (PCAOB) Rule No. 3526, “Communications with Audit Committees Concerning Independence,” and has discussedincluding matters concerning Ernst & Young’s independence with Ernst & Young.independence.
The Audit Committee
is responsible for
the appointment,
compensation,
retention and
oversight of our
independent auditors |
In reliance on these reviews and discussions, and the report of the independent registered public accounting firm, the Audit Committee has recommended to ourthe Board, and ourthe Board has approved, that the audited financial statements be included in ourthe Company’s Annual Report on Form 10-K for the year ended December 31, 2016 for filing2017 filed with the SEC. The foregoing report has been furnished by the Audit Committee: Kevin P. Brady (Chair) Francine J. Bovich Michael Haylon John H. Schaefer
30Kevin P. Brady (Chair) | Michael Haylon | E. Wayne Nordberg | John H. Schaefer | Vicki Williams |
| | Annaly Capital Management Inc. 20172018 Proxy Statement | 49 | |
Table of Contents Relationship with Independent Registered Public Accounting Firm |
Audit Committee Matters RELATIONSHIP WITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The aggregate fees billed for 20162017 and 20152016 by E&Y for each of the following categories of services are set forth below: | Service Category | 2016 | 2015 | | 2017 | | 2016 | Audit | $2,416,392 | $2,144,350 | | $ | 2,498,876 | | $ | 2,416,392 | Audit-Related | 30,000 | 127,500 | | | 61,000 | | | 30,000 | Tax | 239,900 | 223,310 | | | 232,000 | | | 239,900 | All Other | – | – | | | – | | | – | | Total | $2,685,292 | $2,495,160 | | $ | 2,791,876 | | $ | 2,686,292 |
| (1) | (1) For 2015, $15,000Audit fees primarily relate to integrated audits of the Company’s annual consolidated financial statements and internal control over financial reporting under Sarbanes-Oxley Section 404, reviews of the Company’s quarterly consolidated financial statements, audits of the Company’s subsidiaries’ financial statements and comfort letters and consents related to SEC registration statements.
| | (2) | Audit-Related fees are primarily for assurance and related services that was includedare traditionally performed by the independent registered public accounting firm and include due diligence and accounting consultations. | | (3) | Tax fees are primarily for preparation of tax returns and compliance services and tax consultations. | | (4) | All Other fees are for those services not described in “Tax” fees in our 2016 proxy statement has been reclassified to “Audit” fees.one of the other categories. |
Audit fees primarily relate to integrated audits of our annual consolidated financial statements and internal control over financial reporting under Sarbanes-Oxley Section 404, reviews of our quarterly consolidated financial statements, audits of our subsidiaries’ financial statements and comfort letters and consents related to SEC registration statements.
Audit-Related fees are primarily for assurance and related services that are traditionally performed by the independent registered public accounting firm and include due diligence and accounting consultations.
Tax fees are primarily for preparation of tax returns and compliance services and tax consultations.
All Other fees are for those services not described in one of the other categories.
The Audit Committee has also adopted policies and procedures for pre-approving all non-audit work performed by ourthe independent registered public accounting firm. The Audit Committee retained E&Y to provide certain non-audit services in 2016,2017, all of which were pre-approved by the Audit Committee. Specifically, the Audit Committee pre-approved the use of E&Y for the following categories of non-audit services: >■ | accounting consultations on matters addressed during the audit or interim reviews
| >■ | agreed upon procedures in connection with financing arrangements of certain Company subsidiaries
| >■ | tax compliance and consultations |
The Audit Committee determined that the provision by E&Y of these non-audit services is compatible with E&Y maintaining its independence. In addition to thesethe non-audit services described above, the Audit Committee also pre-approved certain audit services, including comfort letters and consents related to SEC registration statements and review of SEC comment letters. The Audit Committee requires
the lead audit partner to be
rotated every five years and is
involved in selecting each new
lead audit partner |
We understandThe Company understands the need for E&Y to maintain objectivity and independence as the auditor of ourits financial statements and our internal control over financial reporting. In accordance with SEC rules, the Audit Committee requires the lead E&Y partner assigned to ourAnnaly’s audit to be rotated at least every five years, and the Audit Committee and its chair is involved in selecting each new lead audit partner. OurThe Audit Committee approved the hiring of E&Y to provide all of the services detailed above prior to such independent registered public accounting firm’s engagement. NoneofNone of the services related to theAudit-Related Feesdescribed above was approved by the Audit Committee pursuant to a waiver of pre-approval provisions set forth in applicable rules of the SEC.
The Audit Committee
requires the lead
audit partner to be
rotated every five
years and is
involved in selecting
each new lead audit
partner50 | Annaly Capital Management Inc. 2018 Proxy Statement | |
www.annalyannualmeeting.com | 31 |
Table of Contents Stock Ownership Information SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Security Ownership of Certain Beneficial Owners and Management |
The following table sets forth certain information as of March 28, 201726, 2018 relating to the beneficial ownership of ourthe Company’s common stock by (i) each NEO, (ii) each Director and nominee for Director, (iii) all of our executive officers and Directors as a group, and (iv) all persons that we knowthe Company knows beneficially own more than 5% of ourits outstanding common stock. Knowledge of the beneficial ownership of ourthe Company’s common stock is drawn from statements filed with the SEC pursuant to Section 13(d) or 13(g) of the Exchange Act. | Beneficial Owner(1) | Amount and Nature of
Beneficial Ownership(2) | Percent of
Class(3) | | Amount and
Nature of
Beneficial
Ownership(2) | | Percent of
Class(3) | | Kevin G. Keyes | 656,908 | * | | 984,779 | | * | | Wellington J. Denahan | 2,223,134 | * | | | Glenn A. Votek | 61,266 | * | | 93,597 | | * | | David L. Finkelstein | 200,000 | * | | 300,000 | | * | | Timothy P. Coffey | 38,000 | * | | 38,000 | | * | | Anthony C. Green | 77,750 | * | | 101,000 | | * | | Kevin P. Brady(4) | 244,704 | * | | 260,836 | | * | | Francine J. Bovich | | | 76,574 | | * | | Wellington J. Denahan | | | 2,198,414 | | * | | Katie Beirne Fallon(5) | | | – | | * | | Jonathan D. Green | 197,074 | * | | 214,778 | | * | | Michael Haylon | 136,324 | * | | 154,028 | | * | | Donnell A. Segalas | 209,954 | * | | | E. Wayne Nordberg(5) | 213,574 | * | | | E. Wayne Nordberg(6) | | | 231,278 | | * | | John H. Schaefer | 94,155 | * | | 108,679 | | * | | Francine J. Bovich | 45,692 | * | | | All executive officers and Directors as a group (13 people) | 4,398,535 | * | | | BlackRock, Inc.(6) | 91,946,636 | 9.0% | | | The Vanguard Group, Inc.(7) | 78,782,459 | 7.7% | | | Donnell A. Segalas(7) | | | 259,386 | | * | | Vicki Williams(5) | | | – | | * | | All executive officers and Directors as a group (15 people) | | | 5,021,349 | | * | | BlackRock, Inc.(8) | | | 98,137,061 | | 8.5% | | The Vanguard Group, Inc.(9) | | | 97,590,302 | | 8.4% |
| * | | Represents beneficial ownership of less than one percent of the common stock.
| | (1) | | The business address of each Director and NEO is c/o Annaly Capital Management, Inc., 1211 Avenue of the Americas, New York, NY 10036. To the best of ourthe Company’s knowledge, each stockholder listed has sole voting and investment power with respect to the shares beneficially owned by the stockholder.
| | (2) | | For purposes of this table, “beneficial ownership” is determined in accordance with Rule 13d-3 under the Exchange Act, pursuant to which a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person, or such group of persons, has the right to acquire within 60 days of the date of determination. In light of the nature of vested options, we haveThe Company has also included shares of common stock underlying vested options. The shares of common stock underlying vested options included in the above table are as follows: Kevin P. Brady 42,500 shares; Wellington J. Denahan 550,000 shares; Kevin P. Brady 43,750400,000 shares; Jonathan D. Green 91,25090,000 shares; Michael Haylon 76,250 shares; Donnell A. Segalas 78,75075,000 shares; E. Wayne Nordberg 91,25090,000 shares; and Donnell A. Segalas 77,500 shares. The DSUs included in the above table above are as follows: Kevin P. Brady 55,05472,436 DSUs; Francine J. Bovich 63,074 DSUs; Jonathan D. Green 60,07479,028 DSUs; Michael Haylon 60,074 DSUs; Donnell A. Segalas 55,05479,028 DSUs; E. Wayne Nordberg 60,07479,028 DSUs; John H. Schaefer 28,11242,636 DSUs; and Francine J. Bovich 45,692Donnell A. Segalas 72,436 DSUs.
| | (3) | | For purposes of computing the percentage of outstanding shares of common stock held by each person or group of persons named above, any shares which such person or group of persons has the right to acquire within 60 days, including vested options and DSUs, are deemed to be outstanding for the purpose of computing the percentage of outstanding shares of the class owned by such person or group of persons, but are not deemed to be outstanding for the purpose of computing the percentage of outstanding shares owned by any other person or group of persons.
| | (4) | | Includes: (i) 48,750 shares owned by the Kevin P. Brady Family Trust, (ii) 42,500 shares owned by Mr. Brady’s wife, (iii) 1,500 shares owned by Mr. Brady’s daughter,daughters, and (iv) 9,000 shares owned by Mr. Brady’s mother. Mr. Brady disclaims beneficial ownership of these 101,750 shares.
| | (5) | Appointed to the Board effective January 1, 2018. | | (6) | Includes: (i) 10,000 shares owned by the Olivia Nordberg Trust and (ii) 9,000 shares owned by Mr. Nordberg’s spouse.
| (6)(7) | Includes: (i) 3,000 shares owned by the Hercules Segalas Irrevocable Trust, (ii) 900 shares owned by Mr. Segalas’s daughters, and (iii) 2,100 shares owned by the Katherine Lacy Segalas Devlin Irrevocable Trust. Mr. Segalas disclaims beneficial ownership of these 6,000 shares. |
| Annaly Capital Management Inc. 2018 Proxy Statement | 51 | |
Table of Contents Stock Ownership Information | (8) | BlackRock, Inc., 55 East 52nd Street, New York, NY 10055, as a parent holding company or control person of certain named funds (“BlackRock”), filed a Schedule 13G/A on January 19, 201729, 2018 reporting, as of December 31, 2016,2017, beneficially owning 91,946,63698,137,061 shares of common stock with the sole power to vote or to direct the vote of 83,299,09088,472,142 shares of common stock the shared power to vote or to direct the vote of zero shares of common stock,and the sole power to dispose or to direct the disposition of 91,946,636 shares of common stock and the shared power to dispose or to direct the disposition of zero98,137,061 shares of common stock. This information is based solely on information contained in the Schedule 13G/A filed by Blackrock.
| (7)(9) | | The Vanguard Group, Inc., 100 Vanguard Blvd., Malvern, PA 19355, as a parent holding company or control person of certain named funds (“Vanguard”), filed a Schedule 13G/A on February 9, 201712, 2018 reporting, as of December 31, 2016,2017, beneficially owning 78,782,45997,590,302 shares of common stock with the sole power to vote or to direct the vote of 839,393934,888 shares of common stock, the shared power to vote or to direct the vote of 440,856470,621 shares of common stock, the sole power to dispose or to direct the disposition of 77,539,38396,290,492 shares of common stock and the shared power to dispose or to direct the disposition of 1,243,0761,299,810 shares of common stock. This information is based solely on information contained in the Schedule 13G/A filed by Vanguard. |
32 | Annaly Capital Management Inc. 2017 Proxy Statement |
Table of ContentsSECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Stock Ownership Information |
Section 16(a) Beneficial Ownership Reporting Compliance |
We believeThe Company believes that based solely on ourits review of the reports filed during the fiscal year ended December 31, 20162017 and on the written representations of those filing reports, all filing requirements under Section 16(a) of the Exchange Act, as amended, applicableforms required to ourbe filed by Annaly’s executive officers, Directors and beneficial owners of more than ten percent of ourits common stock were complied withfiled on a timely basis.basis and in compliance with Section 16(a) of the Exchange Act.
| 52 | Annaly Capital Management Inc. 2018 Proxy Statement | | |
Table of Contents Other Information ACCESS TO FORM 10-K
On written request, wethe Company will provide without charge to each record or beneficial holder of ourthe Company’s common stock as of the close of business on March 28, 201726, 2018 (the “Record Date”) a copy of our annual reportthe Company’s Annual Report on Form 10-K for the year ended December 31, 2016,2017, as filed with the SEC. You should address your request to Investor Relations, Annaly Capital Management, Inc., 1211 Avenue of the Americas, New York, NY 10036 or email your request to us at investor@annaly.com. You may also access such report on ourAnnaly’s website,www.annaly.com, under “Investors - SEC Filings.”
STOCKHOLDER PROPOSALS Any stockholder intending to presentpropose a proposalmatter for consideration at our 2018 annual meeting of stockholdersthe Company’s 2019 Annual Meeting and have the proposal included in the proxy statement and form of proxy for such meeting must, in addition to complying with the applicable laws and regulations governing submissions of such proposals (Rule 14a-8 of the Exchange Act), submit the proposal in writing to us no later than December 12, 2017.11, 2018. Pursuant to ourthe Company’s current Amended and Restated Bylaws (“Bylaws”), any stockholder intending to nominate a Director or present a proposal at an annual meeting of our stockholders that is not intended to be included in the proxy statementProxy Statement for such annual meeting must notify us in writingprovide written notification not lesslater than 5:00 p.m. Eastern Time on the date that is 120 days prior to the first anniversary of the date of the proxy statement for the preceding year’s annual meeting nor moreearlier than 150 days prior to the first anniversary of the date of the proxy statementProxy Statement for the preceding year’s annual meeting. Accordingly, any stockholder who intends to submit such a nomination or such a proposal at our 2018 annual meeting of stockholdersthe 2019 Annual Meeting must notify us in writingprovide written notification of such proposal by December 12, 2017,11, 2018, but in no event earlier than November 12, 2017.11, 2018. Any such nomination or proposal should be sent to Chief Legal Officer and Secretary, Annaly Capital Management, Inc., 1211 Avenue of the Americas, New York, NY 10036 and, to the extent applicable, must include the information required by ourthe Company’s Bylaws.
OTHER MATTERS As of the date of this proxy statement,Proxy Statement, the Board does not know of any matter that will be presented for consideration at the Annual Meeting other than as described in this proxy statement.Proxy Statement. www.annalyannualmeeting.com | 33 |
Table of ContentsQUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
Questions and Answers about the Annual Meeting |
Q: Q | When and where is the Annual Meeting? | | | A: A | The Annual Meeting will be held on Thursday, May 25, 201723, 2018, at 9:00 a.m. (Eastern Time) online at www.virtualshareholdermeeting.com/NLY2018. If you plan to attend the Warwick Hotel, 65 West 54th Street, New York, NY 10019.Annual Meeting online, you will need the 16-digit control number included in your Notice, on your proxy card or on the instructions that accompany your proxy materials. | | |
| Q | Why did I receive a Notice in the mail regarding the Internet availability of proxy materials instead of a paper copy of proxy materials? | | | | A | The SEC has approved “Notice and Access” rules relating to the delivery of proxy materials over the Internet. These rules permit the Company to furnish proxy materials, including this Proxy Statement and the Annual Report, to stockholders by providing access to such documents on the Internet instead of mailing printed copies. Most stockholders will not receive paper copies of the proxy materials unless they request them. Instead, the Notice, which will be mailed to stockholders, provides instructions regarding how you may access and review all of the proxy materials on the Internet. The Notice also instructs you as to how you may authorize your proxy via the Internet or by telephone. If you would like to receive a paper or email copy of the Company’s proxy materials, you should follow the instructions for requesting such materials printed on the Notice. | | |
| Annaly Capital Management Inc. 2018 Proxy Statement | 53 | | |
Table of Contents Other Information Q: Q | Can I vote my shares by filling out and returning the Notice? | | | | A | No. The Notice identifies the items to be voted on at the Annual Meeting, but you cannot vote by marking the Notice and returning it. The Notice provides instructions on how to authorize your proxy via the Internet or by telephone or how to vote at the Annual Meeting or to request a paper proxy card, which will contain instructions for authorizing a proxy by the Internet, by telephone or by returning a signed paper proxy card. | | |
| Q | Who is entitled to vote at the Annual Meeting? | | | A: A | Only common stockholders of record as of the close of business on the Record Date (March 28, 2017)26, 2018) are entitled to vote at the Annual Meeting. | | |
| Q | How can I vote my shares? | | | Q: A | You may vote online during the Annual Meeting prior to the closing of the polls at www.virtualshareholdermeeting.com/NLY2018, or by proxy via Internet (www.proxyvote.com), telephone (1-800-690-6903), or by completing and returning your proxy card. The Company recommends that you vote by proxy even if you plan to virtually attend the Annual Meeting as you can always change your vote online at the meeting. You can authorize a proxy to vote via the Internet or by telephone at any time prior to 11:59 p.m., Eastern Time, May 22, 2018, the day before the meeting date. | | |
| Q | What quorum is required for the Annual Meeting? | | | A: A | A quorum will be present at the Annual Meeting if a majority of the votes entitled to be cast are present, in person or by proxy. SinceOn the Record Date there were 1,018,971,4411,159,657,350 outstanding shares of the Company’s common stock, each entitled to one vote per share, as of the Record Date, we will need at least 509,485,721 votes present in person or by proxy at the Annual Meeting for a quorum to exist. If a quorum is not present at the Annual Meeting, we expect that the Annual Meeting will be adjourned to solicit additional proxies. | | Q: | What are the voting requirements that apply to the proposals discussed in this proxy statement? | | A: | |
“Majority” means (a) with regard to an uncontested election of Directors, the affirmative vote of a majority of all the votes cast on the election of each Director; provided, however, that in a contested election of Directors where the number of nominees exceeds the number of Directors to be elected, the Directors shall be elected by a plurality of the votes cast; and (b) with regard to the advisory approval of our executive compensation and the ratification of the appointment of Ernst & Young, a majority of the votes cast at the Annual Meeting.
“Plurality” means, with regard to the advisory vote on the frequency of future advisory votes to approve our executive compensation, the option (every one, two or three years) receiving the greatest number of “for” votes will be considered the frequency recommended by stockholders.
“Discretionary voting” occurs when a bank, broker, or other holder of record does not receive voting instructions from the beneficial owner and votes those shares in its discretion on any proposal as to which the rules of the NYSE permit such bank, broker, or other holder of record to vote. When banks, brokers, and other holders of record are not permitted under the NYSE rules to vote the beneficial owner’s shares on a proposal, and there is at least one other proposal on which discretionary voting is allowed, the affected shares are referred to as broker “non-votes.”
Q: | What is the effect of abstentions and broker “non-votes”? | | A: | share. Abstentions and broker “non-votes” will be treated as shares that are present and entitled to vote for purposes of determining the presence of a quorum. If a quorum is not present at the Annual Meeting, the Company expects that the Annual Meeting will be adjourned to solicit additional proxies. | | |
| Q | What are the voting requirements that apply to the proposals discussed in this Proxy Statement? | | |
| | | | “Majority” means (a) with regard to an uncontested election of Directors, the affirmative vote of a majority of total votes cast for and against the election of each Director; and (b) with regard to the advisory approval of executive compensation and the ratification of the appointment of Ernst & Young, a majority of the votes cast at the Annual Meeting. | | | | “Discretionary voting” occurs when a bank, broker, or other holder of record does not receive voting instructions from the beneficial owner and votes those shares in its discretion on any proposal as to which the rules of the NYSE permit such bank, broker, or other holder of record to vote (“routine matters”). When banks, brokers, and other holders of record are not permitted under the NYSE rules to vote the beneficial owner’s shares on a proposal (“non-routine matters”), if you do not provide voting instructions, your shares will not be voted on such proposal. This is referred to as a broker “non-vote.” | | | | For each of the proposals above, you can vote or authorize a proxy to vote “FOR,” “AGAINST” or “ABSTAIN.” | | Abstentions |
| Q | What is the effect of abstentions and broker non-votes, if any,“non-votes” on the proposals submitted at the Annual Meeting? | | | | A | Abstentions will have no effect on any of the proposals submitted at the Annual Meeting. | | | | Broker “non-votes”, if any, will have no effect on Proposal 1 or Proposal 2, and are not applicable to Proposal 3. | | |
34 54 | Annaly Capital Management Inc. 20172018 Proxy Statement | | |
Table of Contents
Other Information Q: Q | How will my shares be voted if I do not specify how they should be voted? | | | A: A | Properly executed proxies that do not contain voting instructions will be voted as follows: | | | |
| (1) | Proposal No. 1: FOR the election of Directors;each Director nominee listed herein; | | | | | (2) | Proposal No. 2: FOR the approval, on a non-binding and advisory basis, of our executive compensation; | | | (3) | Proposal No. 3: For EVERY ONE YEAR with regard to the frequency of future advisory votes to approve ourCompany’s executive compensation; and | | | | | | (4)(3) | Proposal No. 4:3: FOR the ratification of the appointment of Ernst & Young LLP as ourthe Company’s independent registered public accounting firm.firm for 2018. | | | | | | The Company officers you appointauthorize as proxies may exercise their proxy and vote your shares for one or more postponements or adjournments of the Annual Meeting, including postponements or adjournments to permit further solicitations of proxies. | | | We do not expect that any matter other than the proposals described above will be brought before the Annual Meeting. If, however, other matters are properly presented at the Annual Meeting, the Company officers appointed as proxies will vote in accordance with the recommendation of our Board. | |
Q: Q | What do I do if I want to change my vote? | | | A: A | You may revoke a proxy at any time before it is votedexercised by filing with us a duly executed revocation of proxy, by submitting a duly executed proxy to us with a later date, using the phone or online voting procedures, or by appearing atparticipating in the Annual Meeting via live webcast and voting in person.online during the Annual Meeting prior to the closing of the polls. You may revoke a proxy by any of these methods, regardless of the method used to deliver your previous proxy. AttendanceVirtual attendance at the Annual Meeting without voting online will not itself revoke a proxy. | | |
Q: Q | How will voting on any other business be conducted? | | | A: A | Other than the fourthree proposals described in this proxy statement, we knowProxy Statement, the Company knows of no other business to be considered at the Annual Meeting. If any other matters are properly presented at the meeting, your signed proxy card authorizes Kevin G. Keyes, ourChairman, Chief Executive Officer and President, and Anthony C. Green, ourChief Legal Officer and Secretary, or either of them acting alone, to vote on those matters in their discretion. | | |
Q: Q | Who will count the vote? | | | A: A | Representatives of Broadridge Financial Solutions, Inc.,American Election Services, LLC, the independent Inspectorinspector of Elections,elections, will count the votes. | | |
Q: Q | WhoHow can attendI participate in the Annual Meeting? | | | A: A | All stockholders of record as of the Record Date can attend the Annual Meeting although seating is limited. If your shares are held through a brokeronline at www.virtualshareholdermeeting.com/NLY2018. An audio broadcast of the Annual Meeting will also be available to stockholders by telephone toll-free at 1-877-328-2502. Please note that listening to the audio broadcast will not be deemed to be attending the Annual Meeting, and you would likecannot vote from such audio broadcast. If you plan to attend please either (1) write us at Investor Relations, Annaly Capital Management, Inc., 1211 Avenue of the Americas, New York, NY 10036Annual Meeting online or email us at investor@annaly.com, or (2) bring a copy of your brokerage account statement or an omnibus proxy (which you can get from your broker)listen to the telephonic audio broadcast, you will need the 16-digit control number included in your Notice, on your proxy card or on the instructions that accompany your proxy materials. Online check-in will begin at 8:30 a.m. (Eastern Time), and you should allow ample time for online check-in procedures. If you wish to watch the webcast at a location provided by the Company, the Company’s Maryland counsel, Venable LLP, will air the webcast at its offices located at 750 E. Pratt Street, Suite 900, Baltimore, MD 21202. Please note that no members of management or the Board will be in attendance at this location. If you wish to view the Annual Meeting. | | | Meeting via webcast at Venable LLP’s office, please complete theReservation Request Form found at the end of this Proxy Statement. In addition, you must bring a valid, government-issued photo identification, such as a driver’s license or a passport. Ifpassport to Venable LLP’s offices. | | |
| Q | What is the pre-meeting forum and how can I access it? | | | | A | One of the benefits of the online Annual Meeting format is that it allows the Company to communicate more effectively with its stockholders via a pre-meeting forum that you plan to attendcan access by visiting www.proxyvote.com. Through use of the pre-meeting forum, stockholders can submit questions in advance of the Annual Meeting please checkand view copies of the box on yourCompany’s proxy card when you return your proxy or follow the instructions on your proxy cardmaterials. The Company will respond to vote and confirm your attendance by telephone or Internet. In addition, if you are a record holder of common stock, your name is subject to verification against the list of our record holders on the Record Date prior to being admitted to the Annual Meeting. If you are not a record holder but hold shares in street name, that is, with a broker, dealer, bank or other financial institution that serves as your nominee, you should be prepared to provide proof of beneficial ownership on the Record Date, or similar evidence of ownership. If you do not comply with the procedures outlined above, you will not be admitted to the Annual Meeting. | | | Security measures will be in placemany inquiries at the Annual Meeting to help ensure the safety of attendees. Metal detectors similar to those used in airports may be located at the entrance to the meeting room and briefcases, handbags and packages may be inspected. No cameras or recording devices of any kind, or signs, placards, banners or similar materials, may be brought into the Annual Meeting. Anyone who refuses to comply with these requirements will not be admitted.as time allows. | | |
www.annalyannualmeeting.com | 35Annaly Capital Management Inc. 2018 Proxy Statement | 55 | |
Table of Contents
Other Information Q: Q | Why is the Company holding the Annual Meeting online? | | | | A | After years of declining attendance by stockholders at Annaly’s in-person annual meetings, the Company is moving to an online format for this year’s Annual Meeting to enable increased attendance and participation from locations around the world and reduce costs for both the Company and stockholders. This approach also aligns with the Company’s broader sustainability goals. | | |
| Q | What if I have difficulties accessing the pre-meeting forum or locating my 16-digit control number prior to the day of the Annual Meeting on May 23, 2018? | | | | A | Prior to the day of the Annual Meeting on May 23, 2018, if you need assistance with your 16-digit control number and you hold your shares in your own name, please call toll-free 1-866-232-3037 in the United States or 1-720-358-3640 if calling from outside the United States If you hold your shares in the name of a bank or brokerage firm, you will need to contact your bank or brokerage firm for assistance with your 16-digit control number. | | |
| Q | What if during the check-in time or during the Annual Meeting I have technical difficulties or trouble accessing the live webcast of the Annual Meeting? | | | | A | If you encounter any difficulties accessing the live webcast of the Annual Meeting during the check-in or during the Annual Meeting itself, including any difficulties with your 16-digit control number, please call toll-free 1-855-449-0991 in the United States or 1-720-378-5962 if calling from outside the United States, for assistance. Technicians will be ready to assist you beginning at 8:30 a.m. Eastern Time with any difficulties. | | |
| Q | How will wethe Company solicit proxies for the Annual Meeting? | | | A: A | The expense of soliciting proxies will be borne by the Company. Proxies will be solicited principally through the use of mail, but our Directors, executive officers and employees, who will not be specially compensated, may solicit proxies from our stockholders by telephone, facsimile or other electronic means or in person. Also, the Company will reimburse banks, brokerage houses and other custodians, nominees and fiduciaries for any reasonable expenses in forwarding proxy materials to beneficial owners. | | | | We haveThe Company has retained Innisfree M&A Incorporated,Georgeson Inc., a proxy solicitation firm, to assist usit in the solicitation of proxies in connection with the Annual Meeting. WeThe Company will pay InnisfreeGeorgeson a fee of $15,000 for its services. In addition, wethe Company may pay InnisfreeGeorgeson additional fees depending on the extent of additional services requested by usthe Company and will reimburse InnisfreeGeorgeson for expenses InnisfreeGeorgeson incurs in connection with its engagement by us.the Company. In addition to the fees paid to Innisfree, weGeorgeson, the Company will pay all other costs of soliciting proxies.
| | | | Stockholders have the option to vote over the Internet or by telephone. Please be aware that if you vote over the Internet, you may incur costs such as telephone and access charges for which you will be responsible. | | Q: | |
| Q | What is “Householding” and does Annaly do this? | | | A: A | “Householding” is a procedure approved by the SEC under which stockholders who have the same address and last name and do not participate in electronic delivery of proxy materials receive only one copy of a company’s proxy statementProxy Statement and annual report from a company, bank, broker or other intermediary,Annual Report unless one or more of these stockholders notifies the company or their respective bank, broker or other intermediary that they wish to continue to receive individual copies. We engageThe Company engages in this practice as it reduces our printing and postage costs. However, if a stockholder of record residing at such an address wishes to receive a separate annual reportAnnual Report or proxy statement,Proxy Statement, he, she or sheit may request it orally or inby writing by contacting us atto Annaly Capital Management, Inc., 1211 Avenue of the Americas, New York, NY 10036, Attention: Investor Relations, by emailing us at investor@annaly.com, or by calling us at 212-696-0100, and wethe Company will promptly deliver the requested annual reportAnnual Report or proxy statement.Proxy Statement. If a stockholder of record residing at such an address wishes to receive a separate annual reportAnnual Report or proxy statementProxy Statement in the future, he, she or sheit may contact usthe Company in the same manner. If you are an eligible stockholder of record receiving multiple copies of our annual reportthe Company’s Annual Report and proxy statement,Proxy Statement, you can request householding by contacting usthe Company in the same manner. If you own your shares through a bank, broker or other nominee, you can request householding by contacting the bank, broker or other nominee. | | |
| 56 | Annaly Capital Management Inc. 2018 Proxy Statement | | |
Table of Contents Other Information Q: Q | Could the Annual Meeting be postponed or adjourned? | | | A: A | If a quorum is not present or represented, ourthe Company’s Bylaws permit the chairman of the meeting to postpone or adjourn the Annual Meeting, without notice other than an announcement at the Annual Meeting. | | |
Q: Q | Who can help answer my questions? | | | A: A | If you have any questions or need assistance voting your shares or if you need copies of this proxy statementProxy Statement or the proxy card, you should contact: | | |
Annaly Capital Management, Inc.
1211 Avenue of the Americas
New York, NY 10036
Phone: 1-888-8 ANNALY
Facsimile: (212) 696-9809
Email: investor@annaly.com
Attention: Investor Relations |
Annaly Capital Management, Inc.
1211 Avenue of the Americas
New York, NY 10036
Phone: 1-888-8 ANNALY
Facsimile: (212) 696-9809
Email: investor@annaly.com
Attention: Investor Relations
OurThe Company’s principal executive offices are located at the address above.
36 | Annaly Capital Management Inc. 2017 Proxy Statement |
Table of ContentsWHERE YOU CAN FIND MORE INFORMATION
Where You Can Find More Information |
We fileThe Company files annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other information that we filethe Company files with the SEC at the SEC’s public reference room at Public Reference Room, 100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. These SEC filings are also available to the public from commercial document retrieval services and at the Internet worldwide web site maintained by the SEC atwww.sec.gov. www.sec.gov. Reports, proxy statements and other information concerning usthe Company may also be inspected at the offices of the NYSE, which is located at 20 Broad Street, New York, NY 10005. OurAnnaly’s website is www.annaly.com. We makeThe Company makes available on this website under “Investors - SEC Filings,” free of charge, ourits annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after wesuch materials are electronically filefiled or furnish such materialsfurnished to the SEC.
www.annalyannualmeeting.com | 37Annaly Capital Management Inc. 2018 Proxy Statement | 57 | |
Table of Contents 2018 ANNUAL MEETING OF STOCKHOLDERS
RESERVATION REQUEST FORM If you wish to view Annaly Capital Management, Inc.’s 2018 Annual Meeting of Stockholders webcast at the offices of Venable LLP (located at 750 E. Pratt Street, Suite 900, Baltimore, MD 21202), please complete the following information and return to Anthony C. Green, Chief Legal Officer and Secretary, Annaly Capital Management, Inc., 1211 Avenue of the Americas, New York, NY 10036. Please note that no members of management or of the Board of Directors will be present at Venable LLP’s offices. In addition, you must bring a valid, government-issued photo identification, such as a driver’s license or a passport to Venable LLP’s offices. | Your name and address: | | | | Number of Shares of NLY
Common Stock You Hold: | | | | | If the shares listed above are not registered in your name, please identify the name of the registered stockholder belowand include evidence that you beneficially own the shares. | | | Registered Stockholder: | | | | | (Name of Your Bank, Broker or Other Nominee) |
Table of Contents
Table of Contents   ANNALY CAPITAL MANAGEMENT, INC.
1211 AVENUE OF THE AMERICAS
NEW YORK, NY 10036
ATTN: GLENN A. VOTEK VOTE BY INTERNET -www.proxyvote.com | Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. | | ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS | If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. | | VOTE BY PHONE - 1-800-690-6903 | Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions. | | VOTE BY MAIL | Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. |
VOTE BY INTERNET
Before The Meeting - Go towww.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meeting - Go towww.virtualshareholdermeeting.com/NLY2018 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions up until 11:59 p.m. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
| TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: | E26881-P89845 | E38745-P03314 | | KEEP THIS PORTION FOR YOUR RECORDS | | DETACH AND RETURN THIS PORTION ONLY | THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. | DETACH AND RETURN THIS PORTION ONLY |
ANNALY CAPITAL MANAGEMENT, INC. ANNALY CAPITAL MANAGEMENT, INC.
| | | | | |
| | The Board of Directors recommends you vote FOR the following:
| |
| 1. | Election of Directors
| | | | | | | | Nominees:
| | For | | Against | | Abstain | | 1a. | Wellington J. Denahan
| | ☐ | | ☐ | | ☐ | | 1b. | Michael Haylon
| | ☐ | | ☐ | | ☐ | | 1c. | Donnell A. Segalas
| | ☐ | | ☐ | | ☐ | | 1d. | Katie Beirne Fallon
| | ☐ | | ☐ | | ☐ | | 1e. | Vicki Williams
| | ☐ | | ☐ | | ☐ | | |
| | | | | | | | | | | | | | | 1. | Election of Directors | | | | | | | | | | | | | | Nominees: | | For | Against
| Abstain
| | | | | | | | | | | 1a. | Francine J. Bovich | | ☐ | ☐ | ☐ | | | | | | | | | | | 1b. | Jonathan D. Green | | ☐ | ☐ address changes and/or comments, please check this box and write them on the back where indicated. | ☐ | | | | | | | | | | | 1c. | John H. Schaefer | | ☐ | ☐ | ☐ |
| The Board of Directors recommends you vote FOR proposal 2:
| | For | | Against | | | | | | | Abstain | | 2. | Advisory approval of the company's executive compensation.
| ⬜ | ⬜☐ | ⬜ | ☐ | | ☐ | | | | | | | | | | The Board of Directors recommends you vote 1 YEAR on proposal 3: | | 1 Year | 2 Years
| 3 Years
| Abstain | | | | | | | | | | 3. | Advisory vote on the frequency of future advisory votes to approve the company's executive compensation. | | ⬜ | ⬜ | ⬜ | ⬜ |
The Board of Directors recommends you vote FOR proposal 4:3:
| For | Against | Abstain | | | | | | | | | 4. 3. | Ratification of the appointment of Ernst & Young LLP as ourthe company's independent registered public accounting firm for 2017.the fiscal year ending December 31, 2018. | ⬜ | ⬜☐ | ⬜ | ☐ | | ☐ | |
| | | | | | | | NOTE:Voting items may include such other business as may properly come before the meeting or any adjournment thereof. | | | | | | |
Please indicate if you plan to attend this meeting. | Yes | | No | | ⬜ | | ⬜ |
For address changes and/sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or comments,other fiduciary, please check this box and write them on the back where indicated. | ⬜ |
give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
| | | |
|
| | | | | | | | Signature [PLEASE SIGN WITHIN BOX] | Date | | | Signature (Joint Owners) | Date | |
Table of Contents Annaly Capital Management, Inc.
1211 Avenue of the Americas
New York, NY 10036
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The2016 2017 ANNUAL REPORT TO STOCKHOLDERS and 20172018 NOTICE & PROXY STATEMENT are available at
www.proxyvote.com.
E26882-P89845E38746-P03314 |
Annaly Capital Management, Inc.
Annual Meeting of Stockholders
May 25, 2017
This proxy is solicited by the Board of Directors
Revoking all prior proxies, the undersigned hereby appoints Kevin G. Keyes and Anthony C. Green, and each of them, proxies, with full power of substitution, to appear on behalf of the undersigned and to vote all shares of Common Stock, par value $.01 per share, of Annaly Capital Management, Inc. (the "Company") that the undersigned is entitled to vote at theAnnual Meeting of Stockholders of the Company to be held at the Warwick Hotel, 65 West 54th Street, New York, New York 10019,commencing at 9:00 a.m., New York time, on Thursday, May 25, 2017, and at any adjournment thereof, as fully and effectively as the undersigned could do if personally present and voting, hereby approving, ratifying and confirming all that said attorneys and agents or their substitutes may lawfully do in place of the undersigned as indicated below.
The Shares represented by this proxy when properly executed, will be voted as directed. If no directions are given, this proxy will be voted in accordance with the Board of Directors' recommendations as listed on the reverse side of this card and at their discretion on any other matter that may properly come before the meeting.
Annaly Capital Management, Inc.
Annual Meeting of Stockholders
May 23, 2018
This proxy is solicited by the Board of Directors
Revoking all prior proxies, the undersigned hereby appoints Kevin G. Keyes and Anthony C. Green, and each of them, proxies, with full power of substitution, to appear on behalf of the undersigned and to vote all shares of Common Stock, par value $.01 per share, of Annaly Capital Management, Inc. (the "Company") that the undersigned is entitled to vote at the Annual Meeting of Stockholders of the Company, which will be a completely virtual meeting conducted via live webcast to be held at 9:00 a.m., Eastern Time, on Wednesday, May 23, 2018 at www.virtualshareholdermeeting.com/NLY2018, and at any adjournment thereof as fully and effectively as the undersigned could do if personally present and voting, hereby approving, ratifying and confirming all that said attorneys and agents or their substitutes may lawfully do in place of the undersigned as indicated below. The shares represented by this proxy when properly executed, will be voted as directed.If no directions are given, this proxy will be voted in accordance with the Board of Directors' recommendations as listed on the reverse side of this card and at their discretion on any other matter that may properly come before the meeting. | | | |
| Address Changes/Comments: | | | | | | | | (If you noted any address change and/or comments above, please mark corresponding box on the reverse side.)
Continued and to be signed on reverse side
|
(If you noted any address change and/or comments above, please mark corresponding box on the reverse side.)
Continued and to be signed on reverse side
|
| 
