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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

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Annaly Capital Management, Inc.

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May 22, 2019
9:00 a.m. (Eastern Time)
www.virtualshareholdermeeting.com/NLY2019

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Message from our Chairman, CEO and President

Dear Fellow Shareholders,

2018 was a year of transformation for Annaly. We successfully delivered on many of the key corporate goals we communicated to you last year, and despite a difficult macro environment, reached a number of significant strategic milestones made possible by the institutionalization and diversification of Annaly over the past five years. The progress made in 2018 further establishes Annaly as a market and governance leader and positions the Company to continue executing upon the most integral components of our platform and strategy, which are outlined in the themes below.

Operating & Investment Platform

Diversified Shared Capital Model

The most important theme of 2018 was diversification. Annaly has transformed into a diversified operating company built to capitalize on numerous strategic opportunities across multiple complementary businesses. Since our diversification strategy began in 2014, Annaly has broadly invested in over $10 billion of credit assets through continued development of our platform, expanded institutional partnerships and corporate acquisitions.(1)As a result, today each of our three credit businesses would rank among the top ten industry leaders in their respective industry sectors by size on a standalone basis.

Financing, Capital & Liquidity

Diversification in the ways we access capital and the broadening of our financing alternatives are equally important in driving our outperformance and capital efficiency. Since the beginning of 2016, we have increased our capital base by $6.5 billion, more than half of which was sourced from avenues besides common equity offerings, further illustrating our leadership in the capital markets.(2)

We continue to enhance our capital efficiency through non-recourse, dedicated financing structures for each of our credit businesses – improving terms of existing arrangements, increasing financing capacity and establishing new counterparty relationships. Specifically, since the beginning of 2018, we have added $2.4 billion of additional borrowing capacity across our three credit businesses and expanded our financing diversification by establishing Annaly as a repeat issuer in the residential and commercial securitization markets.(3)

Operational Efficiency

Continuing to scale our differentiated operating platform has provided a foundation for growth, diversification and efficiency that is unmatched in the industry. Since 2014, we have made significant investments across our four businesses, adding expertise and depth to our investment teams and best-in-class infrastructure to support our strategies. Notably, we have grown our total number of IT professionals by over 40% during this time period. Our expanded in-house technology capabilities have led to the development of proprietary portfolio analytics, financial and capital allocation models, risk testing and accounting software, providing Annaly with distinct competitive advantages and cost savings.

Growth Strategies & Performance

Growth & Income

We have demonstrated, and the market has clearly validated, that size and scale drive performance. 2018 marked another successful year for Annaly and the execution of our long-term growth strategy. We capitalized on a number of opportunities that continue to solidify Annaly’s brand as a market and governance leader. Since 2016, amidst a market backdrop with the Fed raising rates eight times and the yield curve flattening by 86%, Annaly has grown its market capitalization 64%, while delivering an additional $4.2 billion in cumulative dividends to shareholders.

Note: For footnoted information, please refer to “Message from our Chairman, CEO and President” in Endnotes section.

 Annaly Capital Management Inc. 2019 Proxy Statement(3) i

Filing Party:

 (4) 

Date Filed:


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Organically, we have continued to grow each of our four business platforms by expanding our internal investment options and continuing to broaden our proprietary partnerships. Today, Annaly has established over 20 strategic relationships with industry leading, dedicated partners across our four businesses, which have resulted in improved efficiencies and increased origination capabilities. In addition to our organic growth, expansion of partnerships and superior capital markets access, Annaly remains well-positioned to continue to gain market share through further consolidation, as demonstrated by our acquisition of Hatteras Financial Corp. in 2016 and most recently of MTGE Investment Corp. in 2018.

Risk-Adjusted Returns

The diversification and size of Annaly’s lower-levered capital base and investment businesses, along with our prudent risk management processes, continue to drive outperformance of Annaly’s total return. Since 2014, our total shareholder return of 83% is 1.2x higher than mREITs, 1.3x higher than the S&P 500 and 2.3x higher than the Yield Sectors.(4)In addition to our absolute returns, our proprietary model is producing higher cash flow margins than most any other financial services company – our pre-tax margins of approximately 60% are 3x higher than the average for corporations in the Yield Sectors.(5)

Corporate Responsibility and Governance

Corporate Governance

Our dedication to corporate responsibility and governance also sets us apart from the market – and undoubtedly is another contributor to Annaly’s historical outperformance. We believe that continually evaluating the framework of our corporate responsibility and governance practices ensures alignment and transparency, resulting in increased value to our shareholders over the long term. In order to more specifically frame our efforts and illustrate our industry leading commitment to governance, we recently published a comprehensive narrative on our website detailing our commitment to ESG, which others are now, of course, beginning to emulate.

In 2018, we also announced two important governance enhancements: the decision to declassify our Board initiating annual election of all Directors, along with adopting an enhanced Board Refreshment Policy that contains both tenure and age limit provisions. Our commitment to Board refreshment is further demonstrated by the election of four new independent directors since the beginning of 2018, three of whom are women, which will bring the percentage of women on the Board to 45% following the 2019 Annual Meeting of Stockholders(6), which is nearly 2x higher than the average for the S&P 500.

Human Capital

Behind the achievements and successes highlighted in this letter, and in everything we do, is the deep and varied expertise of our most important asset – our people. Today we have over 170 talented professionals, the largest number in the Company’s history, who have supported our successful evolution from a mono-line Agency mortgage REIT to the Industry Innovator we are today.(7)We are very proud of how hard we work at the Company each day and how well we treat each other as partners, and in 2018 we recorded the highest level of employee satisfaction since we initiated our annual employee engagement survey in 2015.(8)

We continue to expand our initiatives focused on advancing diversity throughout the Firm, which remains a key business priority. In 2018, 47% of new hires identified as racially diverse, increasing overall firm diversity to 32%, which is 60% higher than our industry based on Bureau of Labor Statistics data.(9)Additionally, nearly 40% of new hires in 2018, 40% of Managing Director promotions and 50% of additions to Annaly’s Operating Committee since 2015 have been women.

Note: For footnoted information, please refer to “MessageMessage from our Chairman, CEO and President” in Endnotes section.

iiAnnaly Capital Management Inc. 2019 Proxy Statement

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Responsible Investments

Finally, our dedication to ESG principles, as well as our deep investment capabilities, uniquely positions us to support the vitality of local communities and the economy. This past year, we collaborated once again with Capital Impact Partners, a national mission-driven non-profit community development financial institution, to launch our second social impact joint venture, which is specifically aimed at supporting affordable housing and other community development projects in Washington, D.C.

As we look ahead, we will continue our diversified and complementary growth strategies and reward our shareholders by taking advantage of opportunities in the market that are unique to Annaly. We are more prepared than ever to benefit from our size, liquidity, optionality and operational efficiency. I am grateful for the confidence of our Board, which has empowered us to be the industry leader we have become. I want to thank my fellow shareholders for their steadfast commitment, support and trust of this management team. And, to each Annaly employee, I sincerely appreciate all of the hard work and dedication, every day. We have so much opportunity in front of us.

Finally, this year we are excited to once again virtually “host” investors from around the world at our Annual Shareholder Meeting. The meeting will be conducted online via live webcast for the second consecutive year and we look forward to engaging with you then.


Kevin Keyes
Chairman, Chief Executive Officer & President
April [___], 2019Chief Investment Officer

Note: For footnoted information, please referDear Fellow Stockholders,

Looking back over the last year, it is hard to “Messagebelieve what we have come through and where we stand now. It is with tremendous gratitude that I write this letter – gratitude for the healthcare workers and scientists who fight against the COVID-19 pandemic, for the other essential workers who keep critical infrastructure open and functioning, and for every member of the Annaly team. Through their continued efforts and engagement, the Company has been able to navigate unprecedented market and economic volatility and deliver outstanding performance.

The events of the last year have reinforced what we have long known at Annaly – that our employees are our greatest asset. Sustaining a diverse, inclusive and equitable environment is critical to our employees’ health, safety and development. It is also a business imperative as we believe it helps generate stronger returns for our stockholders. In July 2020, we appointed the Company’s first Head of Inclusion and formed an Inclusion Support Committee of Executive Sponsors. We also conducted firm-wide unconscious bias trainings to establish foundational knowledge, language and understanding to support our efforts. The Board shares in this commitment. In 2020, the Board amended our Corporate Governance Guidelines to reflect its practice of seeking out highly qualified candidates of diverse gender and race. In addition, following the closing of the internalization transaction on June 30, 2020, the Management Development and Compensation Committee assumed broad oversight of the Company’s human capital management, including policies and strategies related to recruiting, retention, career development, management succession, corporate culture, diversity and employment.

After a series of corporate governance enhancements over the last few years, which includes declassifying the Board and separating the role of CEO and Chair of the Board, our decision to internalize management was a natural step along this continuum. As evidenced by the Compensation Discussion and Analysis (“CD&A”) and executive compensation tables included in this proxy statement, moving to an internally-managed structure has significantly enhanced the Company’s disclosure and control of executive compensation. We are proud of the considerable steps taken to re-design the executive compensation program for 2020, which include the introduction of equity incentives, including performance-based awards, and the use of a quantitative corporate performance scorecard that reflects both financial and non-financial goals.

Since our founding Annaly has delivered $21 billion of common and preferred dividends and, while our stockholders are at the center of every decision we make, we continue to be invested in the needs and priorities of all stakeholders. In October, on the 23rd anniversary of our IPO, we published our inaugural Corporate Responsibility Report, which demonstrates our commitment to transparency and robust environmental, social and governance (“ESG”) practices. In response to feedback from our Chairman, CEOstockholders, the report includes supplemental disclosures under the Supplemental Accounting Standards Board (“SASB”) and President”Global Reporting Initiative (“GRI”) frameworks, along with the Company’s first ever goals and commitments across five critical dimensions of ESG.

While the firm’s comprehensive business continuity planning and infrastructure enabled us to swiftly and successfully transition to a remote work environment in Endnotes section.March 2020, we recognize the challenges faced by operating in one for an extended period. To address the needs of our employees, we have provided technology stipends, telemedicine benefits, mental health resources and mindfulness sessions. We have also increased internal communications throughout the firm and sponsored virtual events to cultivate our sense of community.

Annaly Capital Management Inc. 2019 Proxy Statementiii

Over the last year, we have spoken many times both internally and to the market about the importance of leading with purpose in response to the trying societal and economic climate. The support and guidance of our Board empower us to do exactly that – to build the Company for the long-term, to fulfill our mission of delivering competitive yield to our stockholders and to foster a culture that develops talent and champions diversity. In particular, I would like to extend my sincere thanks to Donnell Segalas, who is stepping down from the Board after diligently representing our stockholders for more than twenty years.

On behalf of Annaly’s Board, it is my pleasure to invite you to the 2021 Annual Meeting of Stockholders, which will be conducted via an interactive virtual meeting format on May 19th. We appreciate your partnership on this journey and your continued confidence in the Company.

Table of ContentsSincerely,










































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Table of ContentsDavid L. Finkelstein

Chief Executive Officer & Chief Investment Officer

April 7, 2021

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Notice of Annual Meeting of Stockholders

To the Stockholders of Annaly Capital Management, Inc.:

Annaly Capital Management, Inc., a Maryland corporation (“Annaly” or the “Company”), will hold its annual meeting of stockholders (the “Annual Meeting”) on May 22, 2019,19, 2021, at 9:00 a.m. (Eastern Time) online at www.virtualshareholdermeeting.com/NLY2019, to consider and vote upon:NLY2021. At the Annual Meeting, you will be asked to:

1.

Elect foureleven Directors for a term ending at the 2022 annual meeting of one year eachstockholders and when their respective successors are duly elected and qualify, as set forth in the accompanying Proxy Statement;

2.

Approve, on an advisory basis, the Company’s executive compensation, as described in the Proxy Statement; and

3.

Approve an amendment to the Company’s charter to increase the number of authorized shares of capital stock to 3,000,000,000 shares; and
4.Ratify the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2019.2021.

The Company will also transact any other business as may properly come before the Annual Meeting or any postponement or adjournment thereof. Only common stockholders of record at the close of business on March 25, 2019,22, 2021 the record date for the Annual Meeting, may vote at the Annual Meeting and any postponements or adjournments thereof.

Your vote is very important. Please exercise your right to vote.

The Company’s Board of Directors (“Board”) is soliciting proxies in connection with the 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 [__], 2019.7, 2021.

To view the Proxy Statement and other materials about the Annual Meeting, go to www.annalyannualmeeting.comwww.proxydocs.com/NLY or www.proxyvote.com.

All stockholders are cordially invited to attend the Annual Meeting, which will be conducted via a live webcast for a second consecutive year.webcast. The Company saw increased stockholder attendancebelieves that the virtual meeting format allows enhanced participation of, and participation at its first virtual stockholder meeting in 2018 and is confident that this format will once again allow enhanced interaction with, our global stockholder base.base, while also being sensitive to the public health and travel concerns that our stockholders may have in light of the continuing COVID-19 pandemic. During the upcoming virtual meeting, you may ask questions and will be able to vote your shares electronically from your home or any remote location with Internet connectivity. You may also submit questions in advance of the Annual Meeting by visiting www.proxyvote.com. The Company will respond to as many inquiries that are pertinent to the Company 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 1-877-328-2502.1-855-450-0066 in the United States or 1-236-714-3499if calling from outside the United States, and providing Conference ID 1577814. 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 ask questions or 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 view 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,
 

LOGO

Anthony C. Green

Chief Corporate Officer, Chief Legal Officer and Secretary

April [__], 20197, 2021

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be Held on May 22, 2019.19, 2021.

The Company’s Proxy Statement and 20182020 Annual Report to Stockholders are available at www.proxyvote.com.


Annaly Capital Management Inc. 2019 Proxy Statement1

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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 the Company encourages you to read the entire Proxy Statement and the Company’s 20182020 Annual Report on Form 10-K carefully before voting.

2019 Annual Meeting of Stockholders
2021 ANNUAL MEETINGOF STOCKHOLDERS

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 Time
and Date:TIMEAND DATE:

Wednesday, May 22, 201919, 2021 at 9:00 a.m. (Eastern Time)

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Place:PLACE:

www.virtualshareholdermeeting.com/NLY2019NLY2021

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Record Date:RECORD DATE:

Close of business on March 25, 201922, 2021

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Voting:VOTING:

Stockholders are able to vote by Internet at www.proxyvote.com; telephone at 1-800-690-6903; by completing and returning their proxy card; or online at the Annual Meeting


Voting Matters

VOTING MATTERS  
Board Vote
Recommendation		  Page
Number
Proposal No. 1:Election of DirectorsFOR each Director
nominee		1411

Proposal No. 2:Approval, on an advisory basis, of the Company’s executive compensationFOR4162
Proposal No. 3:Approval of an amendment to the Company’s charter to increase the number of authorized shares of capital stock to 3,000,000,000 shares

FOR

46

Proposal No. 4: 3: Ratification of the appointment of Ernst & Young LLP for the year ending December 31, 20192021FOR4863

Participate inPARTICIPATEINTHE ANNUAL MEETING

The virtual meeting will be available to stockholders across the Annual Meetingglobe via any Internet-connected device and has been designed to provide the same rights to participate as you would have at an in-person meeting, including providing opportunities to vote, make statements and ask questions. This approach is sensitive to public health and travel concerns related to the COVID-19 pandemic, aligns with the Company’s broader sustainability goals and reduces costs for both the Company and its stockholders.

VOTING

Voting

Stockholders may
vote by

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INTERNET

www.proxyvote.com

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TELEPHONE

1-800-690-6903

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MAIL

completing and returning
their proxy card

  LOGO

Internet
ONLINEwww.proxyvote.com

at the Annual Meeting

INFORMATION

www.proxydocs.com/NLY


You are entitled to participate, vote and ask questions at the Annual Meeting by visiting www.virtualshareholdermeeting.com/NLY2021. An audio broadcast of the Annual Meeting will also be available to stockholders by telephone toll-free at 1-855-450-0066 in the United States or 1-236-714-3499if calling from outside the United States, and providing Conference ID 1577814. 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. 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. The Company will respond to as many inquiries that are pertinent to the Company at the Annual Meeting as time allows.

ANNALYATA GLANCE

 

Telephone
1-800-690-6903

 

Mail
completing and returning
their proxy card

 

Online
at the Annual MeetingNLY

Information
www.annalyannualmeeting.com


After years of declining attendance at Annaly’s in-person annual meetings and marked growth of our international stockholder base over the same time period, the Company saw increased stockholder attendance and participation at its first virtual annual meeting in 2018. The Company is excited to once againembrace the virtual meeting format for the 2019 Annual Meeting. This environmentally-friendly approach also aligns with the Company’s broader sustainability goals and reduces costs for both the Company and its stockholders. The virtual meeting will be available to stockholders across the globe via any Internet-connected device and 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.

You are entitled to participate and vote at the Annual Meeting by visiting www.virtualshareholdermeeting.com/NLY2019. 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. 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 view 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 via webcast at Venable LLP’s office, please complete the Reservation Request Form found at the end of this Proxy Statement.

2Annaly Capital Management Inc. 2019 Proxy Statement

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Proxy Summary

Annaly at a Glance

NLY
New York Stock
Exchange (“NYSE”) Traded

1997

Initial Public Offering

$14.6 billion
mREIT

Largest mortgage REIT
mREIT in the world(1)

TheEVOLUTIONOF ANNALY

2020 was marked by transformative change. Annaly’s commitment to strong governance, organizational and human capital resources have enhanced the firm’s resilience and agility.

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EXECUTIVE COMPENSATION FOLLOWINGTHE INTERNALIZATION

Prior to the closing of the Internalization, the Company hashad been externally-managed by Annaly Management Company LLC (the “Manager”) since July 2013. The Manager is responsible for managing the Company’s affairs pursuant to a management agreement and, as of December 31, 2018, directly employed 95% of the individuals who provide services to the Company. Although certain personnel are employed by subsidiaries of the Company for regulatory or corporate efficiency reasons, for ease of reference, throughout this Proxy Statement, the Named Executive Officers (“NEOs”“Former Manager”) and the other employeesFormer Manager (rather than the Company) had employed and compensated the Company’s named executive officers (“NEOs”). Upon the closing of the Manager, togetherInternalization on June 30, 2020, the Company began directly compensating our NEOs and the newly renamed Management Development and Compensation (“MDC”) Committee assumed oversight of the Company’s executive compensation program. While 2020 represents a transitional year for the Company’s executive compensation program, the MDC Committee is proud of the significant steps taken to re-design it for 2020 and is committed to institutionalizing a market competitive program that incentivizes strong performance, drives alignment with employees of Annaly’s subsidiaries, are sometimes referred tostockholders and reflects best practices, market insights and robust governance as Annaly’s employees.reflected by the additional compensation enhancements adopted by the MDC Committee for 2021.

Recent Operating Achievements
Performance Capital RaisingDividends
 

Former Manager’s Approach to
83%Executive Compensation Prior to
Total Shareholder
Return since 2014Internalization

Over 50%
of capital raised since the
beginning of 2016 was
sourced from avenues
besides follow-on common
equity offerings(2)

MDC Committee’s Approach to

Executive Compensation Post-
$1.6 billionInternalization

Further Executive Compensation
Common and preferred
dividends declared
in 2018Enhancements for 2021

∎ NEOs were employed and compensated by the Former Manager rather than the Company with no direction or guidance from the MDC Committee on NEO pay

∎ NEO compensation was paid solely in cash – no equity compensation

∎ Prior year proxy statements disclosed compensation paid to the NEOs on an aggregate basis rather than an individual basis

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∎ NEOs are directly employed and compensated by the Company under the oversight of the MDC Committee

∎ NEOs receive a meaningful portion of their annual incentive compensation in the form of equity incentives, which include performance stock units (“PSUs”)

∎ 2021 proxy statement discloses total compensation paid to each NEO for 2020, including compensation paid by the Former Manager for the first half of the year, along with compensation paid by the Company

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∎ For the CEO, increasing the relative weighting of equity as a percentage of total target compensation opportunity to approximately 50%

∎ For all NEOs, increasing the proportion of PSUs as a percentage of total equity compensation (with a majority of the NEOs, including the CEO, at approximately 50% for 2021 and all NEOs at approximately 50% for 2022)

∎ Institutionalizing a formulaic approach to determining NEO annual incentive opportunities with 75% based on corporate/organizational metrics and 25% based on individual metrics

Note: For footnoted information, please refer to “Annaly at a Glance” in Endnotes  section.

RECENT OPERATING ACHIEVEMENTS

DiversificationPerformance

OptionalityDiversification

Operating Efficiency

Efficiency

 

5.1%

economic return(1) in Q4 2020;

1.8% for the full year 2020

$4.22.4 billion

of originations and purchases
across Annaly’s three credit
businesses in 20182020(2)

1.62%

operating expense ratio for FY 2020; down +20bps year-over-year reflecting realized cost savings related to the Internalization(3)

Liquidity

37
Available investment options
is nearly 3x more than in 2013Capital Structure

50%
Stockholder Value

Lower operating expense$8.7 billion

of unencumbered assets, including

cash and unencumbered Agency MBS

of $6.3 billion

$460 million

7.50% Series D Cumulative Redeemable Preferred Stock was redeemed, reducing preferred equity as a
percentagepercent of equity than the
mREIT indexcapital structure to 11%

$209 million

of common stock repurchased in 20182020; authorized new $1.5 billion common stock repurchase program(4)

ConsolidationFinancingHuman Capital

$906 million
Acquisition of MTGE
Investment Corp., representing
Annaly’s third successful
transaction since 2013

$900 million
of additional financing capacity
added since 2018 through
three new credit facilities and
upsizing of existing facilities(5)

44%
of Operating Committee
and Managing Director
promotions since
2015 were women

ANNALY’S SHARED CAPITAL MODELAND STRATEGIC FOCUS

Annaly is able to efficiently diversify its investments across our businesses through a rigorous shared capital model and capital allocation process. In March 2021, the Company signed a definitive agreement to sell our commercial real estate business to Slate Asset Management. We believe the transaction provides compelling execution for our stockholders and allows us to reprioritize the strategic focus of the firm. The transaction is subject to customary closing conditions, including applicable regulatory approvals, and is expected to be completed by the third quarter of 2021.

LOGO

Note: For footnoted information, please refer to “Annaly at a Glance & Recent“Recent Operating Achievements ”& Annaly’s Shared Capital Model and Strategic Focus” in Endnotes section.

DELIVERING SIGNIFICANT VALUE FOR STOCKHOLDERS

Annaly Capital Management Inc. 2019 Proxy Statement3
 

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Proxy Summary

Annaly's Diversified Shared Capital Model

Diversification is a key component of the Annaly strategy, which has four distinct investment groups. Since 2014, Annaly has diversified its business model by investing in credit assets, which complement the Company’s primary portfolio of fixed-rate investments. This strategy is designed to achieve stable risk-adjusted returns and book value performance over various interest rate and economic cycles by pairing shorter duration floating-rate credit loans and securities with the Company’s longer duration, fixed-rate agency portfolio.

The Company has 37 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. While managing investment decisions, the Company combines a robust capital allocation process with careful risk management. This process enables Annaly 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.

Number of Available Investment Options

Note: For footnoted information, please refer to “Annaly’s Diversified Shared Capital Model” in Endnotes section.

4Annaly Capital Management Inc. 2019 Proxy Statement 

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~$21 billion

Proxy Summary

Growth and Income

$5.7 billion
of market cap growth
since the beginning of 2016

$4.2 billion
of common and preferred
dividends declared
since the beginning of 2016Annaly’s IPO(1)

55%
24total return

years of delivering yield

to stockholders
since the beginning

$1.4 billion

of 2016common and preferred dividends declared in 2020

Since January 2016,inception, Annaly has grown its market cap by $5.7 billion, or 64%, and declared over $4.2nearly $21 billion in cumulative common and preferred dividends to stockholders, amidst a challenging market backdrop, where the Federal Reserve has raised rates 8 times and the Treasury curve has flattened by 86%.returning significant value to stockholders.

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STOCKHOLDER OUTREACHAND RESULTSOF 2020 SAY-ON-PAY VOTE

Growth & Outperformance Over Time

Note: For footnoted information, please refer to “Growth and Income” in Endnotes section.

Annaly Capital Management Inc. 2019 Proxy Statement5
 

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Proxy Summary

Delivering Significant Value For Stockholders

24.4%
Economic return generated
by Annaly with its current
investment teams since 2014(1)

83%
Total shareholder return generated
by Annaly since 2014

869%
Total shareholder return
since Annaly’s IPO(2)

Since 2014 (the first full year the Company was externally-managed, as more fully described in “Management Structure” on page 34), shares of the Company’s common stock (including reinvestment of dividends) have returned significant value to stockholders relative to both the Company’s mREIT peers and other yield-focused investments.

Total Shareholder Return since 2014(3)

Note: For footnoted information, please refer to “Delivering Significant Value for Stockholders” in Endnotes section.

6Annaly Capital Management Inc. 2019 Proxy Statement 

Table of Contents

Proxy Summary

Stockholder Outreach and Results of 2018 Say-on-Pay Vote

~275
100%Points

of top 100 institutional investors
included in 2020—2021
outreach to
investors for proxy
engagement since 2015efforts

~11090%

of all institutional investors
included in 2020—2021
outreach efforts

120+One-on-one

one-on-one meetings with
stockholders across the U.S.,
globeCanada and Europe since 2015

Over 94%
of votes cast supported
Annaly’s 2018 Say-on-Pay vote2020

The Company is committed to ongoing engagement with both retail and institutional stockholders through a wide range of mediums, including: in-person and virtual meetings, conferences, phone calls, electronic communication and electronic communication.social media. Following the results of Annaly’s 20182020 advisory resolution on executive compensation (commonly known as a “Say-on-Pay” vote), which received strong support from over 94%approximately 96% of votes cast, the Company has continued its multi-pronged stockholder outreach campaign to solicit feedback on a number of issues, including (i) the Manager’sCompany’s executive compensation programpractices and related disclosure,disclosures, (ii) the structure, composition and refreshment of the Board, andCompany’s human capital management, (iii) the Company’s Corporate Responsibilitydiversity and Environmental, Socialinclusion efforts, and Governance(iv) the Company’s corporate responsibility and environmental, social and governance (“ESG”) initiatives.

2018–2019 Stockholder Engagement Efforts
Outreach included
approximately		Outreach included
approximately		Management hosted meetings
with investors representing
of top 50 institutional investorsof institutional ownershipof top 5 largest shareholders

Annaly’s stockholder engagement efforts generated significant feedback for both the Board and management and have resulted in a number of enhancements to the Company’s management structure and its corporate governance, corporate responsibility and compensation practices and disclosures over the last few years. Annaly’s stockholders have been extremely instrumental to, and supportive of, these governance and disclosure enhancements and the Company looks forward to continuing to find innovative ways to engage over the course of 20192021 and beyond.

Note: For footnoted information, please refer to “Delivering Significant Value for Stockholders” in Endnotes section.

The Company’s stockholder outreach is complemented by related initiatives, including:
■

The Company’s stockholder outreach is complemented by related initiatives, including:

∎Analysis of market governance and compensation practices at peer companies

■

∎Advice from external advisors, including governance and compensation consultants, Boardboard search firms and proxy solicitors

■

∎Attendance at investor conferences

■

∎Discussions with proxy advisory services and corporate governance research firms


Annaly Capital Management Inc. 2019 Proxy Statement7

Table of Contents2020 – 2021 STOCKHOLDER ENGAGEMENT EFFORTS

Proxy Summary

Stockholder Engagement

What The
Company Heard		What The Company Did

Review ClassifiedWHAT THE
Board StructureCOMPANY HEARD

■WHAT THE COMPANY DID

Build Best Practice Driven Executive Compensation Program

The Board conducted∎ In connection with the Internalization, the MDC Committee has re-designed the executive compensation program to reflect the Company’s internally-managed structure

∎ Following peer benchmarking, stockholder outreach and a review regardingof best practices, the potential declassificationMDC Committee introduced a number of compensation enhancements for 2020, including:

–  Introduction of equity incentives, which represents a significant shift from the Former Manager’s all-cash compensation structure

–  Introduction of a quantitative corporate performance scorecard, that includes both financial and non-financial goals, and

–  The adoption of an enhanced clawback policy that includes triggers for accounting restatements and executive misconduct

∎ In November 2020, we amended executive employment agreements to remove minimum guaranteed bonuses to better align the Company’s executive compensation program with stockholder interests and governance best practices.

∎ To further the alignment of our executive compensation program with the interests of our stockholders and support the firm’s ownership culture, the MDC Committee is making additional enhancements for 2021, including:

–  For the CEO, increasing the relative weighting of equity as a percentage of total target compensation opportunity to approximately 50%

–  For all NEOs, increasing the proportion of PSUs as a percentage of total equity compensation (with a majority of the Board in favorNEOs, including the CEO, at approximately 50% for 2021 and all NEOs at approximately 50% for 2022)

–  Reducing discretion and providing for a more formulaic approach to determining NEO annual incentive opportunities with 75% based on corporate/organizational metrics and 25% based on individual metrics

∎ Increasing the proportion of annual electionsobjective financial metrics as a percentage of all directorscorporate/organizational metrics from 50% to 60%

Demonstrate Commitment to Human Capital Amidst

COVID-19

∎

 Transitioned to 100% remote work environment ahead of New York state mandate

■∎Following this review, in December 2018, Provided telemedicine benefits, mental health resources and mindfulness sessions to meet the Board approved and amendedneeds of our employees

∎ Expanded mandate of MDC Committee to include broad oversight of the Company’s bylaws to declassify the Board over a three-year period

■The amended bylaws provide that Directors will be nominated for one-year terms beginning with the 2019 Annual Meeting of Stockholders with all Directors standing for annual elections commencing with the 2021 Annual Meeting of Stockholders
human capital, including career development and progression, corporate culture and diversity

Focus on Board
Composition and
Diversity

■∎Comprehensive third-party facilitated self-evaluation Appointed our first Head of Inclusion and formed an Inclusion Support Committee of Executive Sponsors

∎ Conducted unconscious bias training for all employees to establish foundational knowledge, language and understanding to support the fullCompany’s diversity and inclusion initiatives

∎ Disclosed racial/ethnic diversity of our Directors in our Board each Board Committeeskills and individual Directors

–Focus areas of the evaluation included Board and Committee skills, structure, dynamics, processes, leadership and refreshment
■Engaged professional search firm to assist the Board in identifying qualified director candidates with a mandate to present equal representation of women and minority candidates
■Elected four new highly qualified Independent Directors since the beginning of 2018, including three women
–45% of Continuing Directors are women and 45% of Continuing Directors have tenure of less than 5 years(1)
experiences matrix

Enhance Board
Refreshment Policy

Expand Corporate Responsibility

Disclosures

■∎ Published inaugural Corporate Responsibility Report in October 2020

∎ Report outlines the Company’s goals and commitments across our five key ESG areas: corporate governance, human capital, responsible investments, risk management and environment

∎ Includes supplemental disclosures under the Sustainability Accounting Standards Board and Global Report Initiative frameworks

BOARD COMPOSITION, STRUCTUREAND REFRESHMENT

The Nominating/Corporate Governance (“NCG”) Committee Chair, in conjunction with an outside governance expert, ledendeavors to have a full reviewBoard representing diverse backgrounds and a wide range of optionsprofessional experiences. The NCG Committee annually evaluates its overall composition and rigorously evaluates individual Directors to facilitate Board refreshment
■Following this review, in October 2018,ensure a continued match of their skill sets and projected tenure against the Board adopted an enhanced Board refreshment policy providing that an independentneeds of the Company. For additional information about individual Director’s qualifications and experience, please see the Director biographies beginning on page 12.

15 or 73

Independent Directors may not standnotstand for re-election at the next annual meeting of stockholders followingupon the earlier of his or her: (i) 12th anniversary15 years of service on the Board or (ii)their 73rd birthday

Deepen Corporate
Responsibility

■Dedicated resources and personnel to enhancing Annaly’s corporate responsibility function, including the 2018 hire of a community development veteran Tanya Rakpraja as the Company’s Head of Corporate Responsibility and Government Relations
■Added extensive disclosure on the Company’s Corporate Responsibility and ESG efforts to Annaly’s corporate website
■Partnered with Capital Impact Partners to launch a second joint venture dedicated to supporting affordable housing and other community development projects in Washington D.C.
■Commenced an energy audit of our Corporate Headquarters in order to more fully track and monitor our impact and energy usage

Note: For footnoted information, please refer to “Stockholder Engagement” in Endnotes section.

8Annaly Capital Management Inc. 2019 Proxy Statement
 

Table of Contents

Proxy Summary

Corporate Responsibility

As responsible stewards of capital, Annaly takes into account ESG factors that contribute to our ability to drive positive impacts and deliver attractive risk-adjusted returns over the long term. Annaly’s Corporate Responsibility efforts were institutionalized by the establishment of a dedicated Corporate Responsibility team in 2018, which is led by Tanya Rakpraja as Annaly’s Head of Corporate Responsibility and Government Relations. The Corporate Responsibility team collaborates across business areas to develop initiatives, monitor progress and manage reporting, and provides routine updates to the Corporate Responsibility Committee(1) of the Board (and, as appropriate, to the full Board). The Company provides extensive disclosure on its ESG efforts on the “Corporate Responsibility” section of Annaly’s corporate website at www.annaly.com/corporate-responsibility.

The Manager and The Management Agreement

0.75%

  

29%

  

$300 million

In 2019, the Manager reduced
its fee on Incremental
Stockholders’ Equity(2)
from 1.05% to 0.75%

Annaly’s management fee is
29% lower than the industry
average of 1.47%(3)

Approximate compensation
savings since the Externalization
in July 2013(4)


■All of the NEOs are indirect owners and/or employees of the Manager
■With the exception of Mr. Keyes, each of the other NEOs receives compensation paid by the Manager. Mr. Keyes receives no compensation for his services as the Company’s Chairman, Chief Executive Officer (“CEO”) and President, although, as an indirect equityholder of the parent of the Manager, Mr. Keyes has an interest in the fees paid to the Manager
■The Manager is responsible for the compensation of the NEOs (other than Mr. Keyes). Annaly does not pay any cash or equity compensation to its NEOs, and does not provide pension benefits, perquisites or other personal benefits
■The Manager uses the management fees paid by the Company to, among other things, pay the compensation and benefits of the NEOs. However, the Company does not allocate any specific portion of the management fees to NEO compensation or otherwise determine such compensation or reimburse the Manager for the costs thereof
■For 2018, the Company’s payments to the Manager included the management fee of $179.8 million and expense reimbursements of $9.2 million
■In March 2019, the Manager and the Company amended the Management Agreement solely to reduce the management fee on Incremental Stockholders’ Equity. Pursuant to this amendment, which recognizes the efficiencies that have been gained with scale, the Company pays the Manager a monthly management fee equal to 1/12th of the sum of: (i) 1.05% of Base Stockholders’ Equity(5), and (ii) 0.75% of Incremental Stockholders’ Equity(2)

Note: For footnoted information, please refer to “Corporate Responsibility & The Manager and the Management Agreement”
in Endnotes section.

 Annaly Capital Management Inc. 2019 Proxy Statement9
 

64%

of Continuing Directors identify as women and/or racially/ethnically diverse


Table of Contents

Proxy Summary

The Manager’s Executive Compensation Program

90.5%

  

9.5%

  

16.8%

of NEO compensation was variable and paid in the form of performance-based incentive bonuses

of NEO compensation was paid in the form of fixed base salaries

of aggregate management fees and expense reimbursements paid to the Manager were allocated by the Manager as NEO compensation

Although Annaly neither employs nor compensates the NEOs, the Company is committed to providing its stockholders with information about the Manager’s executive compensation program in order to enable an informed Say-on-Pay vote.

The Manager’s Executive Compensation Philosophy and Process

The key principle of the Manager’s compensation philosophy for all employees, including the NEOs, is to pay for performance. The Manager’s NEO compensation planning process incorporates key areas of evaluation including: external market data, internal benchmarking, and quantitative and qualitative assessments of Company, group and individual performance. Individuals are evaluated based on mid-year and year-end manager reviews and the utilization of a 9-box talent review model, which assesses individual performance and potential. In establishing and reviewing individual NEO compensation packages, the Manager also considers the nature and scope of each NEO’s role and responsibilities, retention considerations and feedback from stakeholders.

Overview of the Manager’s 2018 Executive Compensation Program

■With respect to 2018,(1) the NEOs as a group received aggregate salaries of $3.0 million and aggregate performance-based incentive bonuses of $28.7 million from the Manager. These amounts collectively represent 16.8% of the aggregate management fees and reimbursements the Company paid to the Manager for 2018. On an aggregated basis, the NEOs received 9.5% of their total compensation in the form of base salaries and the remaining 90.5% in the form of performance-based incentive bonuses.
■In determining the cash bonuses it paid to the NEOs for 2018, the Manager considered achievement of both rigorous Company performance metrics,(2) including core return on equity, core return on assets and operating expenses as a percentage of average equity and as percentage of average assets, along with group and individual performance objectives.

For additional information about the Manager, the management agreement and executive compensation, see “Certain Relationships and Related Party Transactions,” “Management Structure,” “Compensation Paid by the Manager to the Named Executive Officers” and “Compensation Discussion and Analysis.”

Note: For footnoted information, please refer to “Overview of Manager’s 2018 Executive Compensation Program” in Endnotes section.

10Annaly Capital Management Inc. 2019 Proxy Statement

Table of Contents

Proxy Summary

Board Composition, Structure And Refreshment

12 or 73

  

2021

  

45%

Independent Directors may
not stand for re-election upon
the earlier of 12 years of
service or their 73rd birthday

All Directors will stand for
annual election commencing
with the 2021 Annual Meeting

of Annaly’s Continuing
Directors(1) are women, which is
over 2x the average of S&P 500
companies

The NCG Committee seeks to achieve a balance of knowledge, experience and capability on the Board. Newer Directors offer fresh ideas and perspectives, while deeply experienced Directors bring extensive knowledge of the Company’s complex operations. The table below summarizes key qualifications, skills, and attributes most relevant to the Continuing Directors’(1)service on the Board. For additional information about individual Director’s qualifications and experience, please see the Director biographies beginning on page 15.

Skill / Experience Summary of Continuing Directors(1)

             
Skill / Experience Bovich Denahan Fallon Finkelstein Hamilton Haylon Hannan Reeves Schaefer Williams Votek Total
Complex and regulated industries ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ 11
Compliance  

 

 ✓ ✓  

 

  

 

 ✓ ✓ ✓  

 

 ✓  

 

 6
Corporate governance ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ 11
Ethics and social responsibility ✓  

 

 ✓ ✓  

 

  

 

 ✓ ✓  

 

 ✓  

 

 6
Finance and accounting ✓ ✓  

 

  

 

 ✓ ✓ ✓  

 

 ✓ ✓ ✓ 8
Financial expert  

 

  

 

  

 

  

 

  

 

 ✓ ✓  

 

  

 

  

 

 ✓ 3
Financial services ✓ ✓ ✓ ✓ ✓ ✓ ✓  

 

 ✓  

 

 ✓ 9
Government, public policy and regulatory affairs  

 

 ✓ ✓ ✓  

 

  

 

  

 

  

 

 ✓  

 

  

 

 4
Industry knowledge ✓ ✓ ✓ ✓ ✓ ✓  

 

  

 

 ✓  

 

 ✓ 8
Information technology  

 

 ✓  

 

  

 

  

 

  

 

  

 

  

 

  

 

 ✓ ✓ 3
Legal expertise  

 

  

 

  

 

  

 

  

 

  

 

  

 

 ✓  

 

  

 

  

 

 1
Mergers & acquisitions  

 

 ✓  

 

 ✓ ✓ ✓  

 

 ✓ ✓ ✓ ✓ 8
Operations ✓ ✓ ✓ ✓ ✓ ✓ ✓  

 

 ✓  

 

 ✓ 9
Other public company board experience ✓  

 

  

 

  

 

 ✓ ✓ ✓  

 

  

 

  

 

  

 

 4
Private company board experience ✓  

 

  

 

  

 

 ✓  

 

 ✓ ✓ ✓  

 

 ✓ 6
Public company CEO  

 

 ✓  

 

 ✓  

 

  

 

  

 

  

 

  

 

  

 

 ✓ 3
Risk management ✓ ✓  

 

 ✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓ 10
Strategy development and implementation  

 

 ✓ ✓ ✓ ✓ ✓ ✓  

 

 ✓ ✓ ✓ 9
Gender diversity ✓ ✓ ✓  

 

  

 

  

 

 ✓  

 

  

 

 ✓  

 

 5
Racial/ethnic diversity  

 

  

 

  

 

  

 

  

 

  

 

 ✓ ✓  

 

  

 

 ✓ 3
Total 11 14 10 11 11 12 14 9 11 10 14 

 

Note: For footnoted information, please refer to “Board Composition, Structure and Refreshment” in Endnotes section.

Continuing Director Diversity(1)

LOGOLOGOLOGOLOGO

As evidenced by the composition of our Board, the Company is committed to seeking out highly qualified candidates of diverse gender and race, as well as taking into account other factors that promote principles of diversity. Over the last few years, the Board had adopted a number of enhancements that are intended to result in regular Board refreshment. In December 2018, the Company announced that the Board had amended the Company’s bylaws to declassify the Board over a three-year period with all Directors standing for annual election commencing with this year’s Annual Meeting. The Board annually evaluates its overall composition and rigorously evaluates individual Directors to ensure a continued match of their skill sets and projected tenure against the needs of the Company. As a result of this process, the Board elected new Independent Directors, Kathy Hopinkah Hannan and Thomas Hamilton, effective February 13, 2019 and March 6, 2019, respectively. In 2018, the Boardhas also underwent a comprehensive third-party facilitated self-evaluation, which included assessments of the full Board, each Board committee and individual Directors. Focus areas of this evaluation included Board and Committee skills, structure, dynamics, processes, leadership and refreshment. Based on the results of its self-evaluation, the Board determined to conduct a follow-up review to further analyze considerations related to Board refreshment, including Director term and tenure. This review, which benefitted from significant stockholder feedback, ultimately led to the adoption of a Boardadopted an enhanced refreshment policy requiring that Independent Directors may not stand for re-election following the earlier of their 1215thanniversary of service on the Board service or their 73rdbirthday. In addition, this analysis informed the Board’s unanimous approval and adoption of a bylaw amendment to declassifyextraordinary circumstances, the Board may determine that an Independent Director may stand for re-election after having reached such age or term limit for up to three additional one-year terms.

ENVIRONMENTAL, SOCIALAND GOVERNANCE (“ESG”)

As a responsible steward of capital, the Company actively focuses on integrating ESG considerations into our overall strategy. The Company views ESG risks and opportunities as critical components for achieving strategic business objectives, managing risks and delivering attractive risk-adjusted returns over the long-term. At the Company, we strive to have a three-year period beginningpositive impact in the communities where we live, work and invest by conducting our business in accordance with the 2019 Annual Meeting, with all Directors standing for annual election commencing withhighest ethical standards, guided by our strong corporate values.

On the 2021 Annual Meeting.23rd anniversary of our IPO, the Company published our inaugural Corporate Responsibility Report, demonstrating our commitment to transparency and robust ESG practices. Among other things, the report introduces supplemental disclosures under the Sustainability Accounting Standards Board and Global Reporting Initiative frameworks. The report also outlines the Company’s goals and commitments across our five key ESG areas: corporate governance, human capital, responsible investments, risk management and the environment.

LOGO

Note: For footnoted information, please refer to “Board Composition, Structure and Refreshment”“Continuing Director Diversity” in Endnotes section.

Annaly Capital Management Inc. 2019 Proxy Statement11

TableThe Company’s successful management through the COVID-19 pandemic underscores the importance of Contentsour comprehensive ESG strategy. The safety and well-being of our employees and partners have been our top priority and the guiding principle of our response. Our extensive business continuity planning and infrastructure investments prepared us to transition to remote work seamlessly ahead of New York state mandates. We procured telemedicine benefits, mental health resources and mindfulness sessions to meet the needs of our employees. We increased company-wide internal communications and have sponsored virtual gatherings to foster our sense of community. Altogether, we believe that our thorough planning and disciplined focus on responsible investments, robust risk management and leading governance and human capital practices have enhanced the strength and resilience of our business.

In 2020, we prioritized enhancing our diversity and inclusion initiatives, which have long been a business imperative at the Company as we believe it helps us generate stronger returns for our stockholders. We appointed our first Head of Inclusion with support from a cross-functional team, formed an Inclusion Support Committee of Executive Sponsors and conducted unconscious bias training for all employees to establish foundational knowledge, language and understanding to support Annaly’s diversity and inclusion initiatives. Lastly, our corporate giving has continued to support high-impact programs that seek to combat homelessness and promote the professional development of women and underrepresented communities, which are social issues that we are deeply committed to advancing.

Table of Contents

Notice of Annual Meeting of Stockholders1
Proxy Summary21
Corporate Governance at Annaly1310
Proposal 1: Election of Directors1411

Director Nominees Standing for One-Year Terms

1512

Directors Whose Current Terms Expire in 2020Recent Corporate Governance and Corporate Responsibility Highlights

17

Directors Whose Current Terms Expire in 2021Governing Documents

1918
The Board’s Role and ResponsibilitiesBoard Committees2019

Audit Committee

20

Corporate Responsibility Committee

20

MDC Committee

21

NCG Committee

21

Risk Committee

22
Board Structure and Processes23

Board Leadership Structure

23

Independence of Directors

2023

Director Nomination ProcessExecutive Sessions of Independent Directors

2123
Director Criteria and Qualifications21
Consideration of Board Diversity21
Stockholder Recommendation of Director Candidates21
Board Effectiveness, Self-Evaluations and Refreshment22
Board Commitment and Over-Boarding Policy22

Board Oversight of Risk

2324

CEO Performance Reviews and Management Succession Planning

2324

Board Effectiveness, Self-Evaluation and Refreshment

25

Director Criteria and Qualifications

25

Consideration of Board Diversity

26

Director Nomination Process

26

Stockholder Recommendation of Director Candidates

26

Communications with the Board

2426

Director Attendance

26

Board Commitment and Over-Boarding Policy

27

Director Orientation and Continuing Education

27

Certain Relationships and Related Party Transactions

2427
Board Structure and Processes26
Board Leadership Structure26
Executive Sessions of Independent Directors27
Director Orientation and Continuing Education27
Governing Documents27
Board Committees28
Director Attendance31

Compensation of Directors

3129
ManagementExecutive Officers3331
Stock Purchases by Executive Officers since 2011Compensation Discussion and Analysis3332

Management StructureExecutive Summary

3432

OverviewHow Executive Compensation Decisions are Made

3440

Recent ChargesExecutive Compensation Design and Award Decisions for 2020

3442

Management Agreement TermsExecutive Compensation Policies

3451

Structure and AmountReport of the Management FeeCompensation Committee

3552
Continued Cost Savings Related to the ExternalizationExecutive Compensation Tables3553

Annual Review of Manager Performance and Management Fee ConsiderationsSummary Compensation Table

3653

Compensation Paid by the Manager to the Named Executive OfficersGrants of Plan-Based Awards

3755

Named Executive OfficersOutstanding Equity Awards at Fiscal Year-End

3756

IntroductionStock Vested

3756

The Manager’s ExecutivePension Benefits and Nonqualified Deferred Compensation Program

3756

Executive CompensationPotential Payments upon Termination or Change in Control

4156

Compensation Committee Interlocks and Insider Participation

60

CEO Pay Ratio

60
Proposal 2: Advisory Approval of Executive Compensation4162
Compensation Discussion and Analysis42
Executive Compensation Policies43
Report of the Compensation Committee43
Executive Compensation Tables and Related Narrative44
Compensation Committee Interlocks and Insider Participation45
CEO Pay Ratio45
Proposal 3: Approval of an Amendment to the Company's Charter to Increase the Number of Authorized Shares to 3,000,000,000 Shares46
Purpose and Background47
Potential Effect47
Vote Required47
Conclusion47
Audit Committee Matters4863
Proposal 4:3: Ratification of Appointment of Independent Registered Public Accounting Firm4863

Report of the Audit Committee

4863

Relationship with Independent Registered Public Accounting Firm

4964
Stock Ownership Information5065

Security Ownership of Certain Beneficial Owners and Management

5065
Section 16(A) Beneficial Ownership Reporting ComplianceOther Information5167
Other Information52

Where You Can Find More Information

5267

Stockholder Proposals

5267

Other Matters

5267

Questions and Answers About the Annual Meeting

52

12Annaly Capital Management Inc. 2019 Proxy Statement67 

Cautionary Note Regarding Forward-Looking Statements

72 
Endnotes73

Appendix - Non-GAAP Reconciliations

75

Table of Contents

Corporate Governance at Annaly

The Company is committed to maintaining a strong ethical culture and robust governance practices that benefit the long-term interests of stockholders, which include:

Annaly Strives for Best-in-Class Governance Practices

2013
■Annaly’s proposal to be externally managed received 83% support from stockholders
■Added new Independent Director (John H. Schaefer)
■Established Risk Committee

2014DIRECTOR INDEPENDENCE AND OVERSIGHT

■Enhanced financial disclosure, including additional financial metrics

 

■∎Added new Separate CEO and Independent Director (Francine J. Bovich)Chair of the Board

∎

 Majority of Directors are Independent

∎ Regular executive sessions of Independent Directors

∎ Independent key Board Committees (Audit, MDC and NCG)

∎ Board oversees a succession plan for the CEO and other senior executives

BOARD REFRESHMENT AND DIVERSITY

∎ Board refreshment policy triggered upon earlier of 15 years of service or 73rd birthday

–  64% of Continuing Directors(1) have tenure of less than 5 years

∎  Board is committed to seeking out highly qualified candidates of diverse gender and race, as well as taking into account other factors that promote principles of diversity

–  45% of Continuing Directors(1) are women

–  27% of Continuing Directors(1) are racially/ethnically diverse

–  100% of Committee leadership positions are held by women

DIRECTOR QUALIFICATIONS AND EVALUATION

∎ Annual Board, Committee and individual Director self-evaluations with periodic use of an external facilitator

∎ Comprehensive Board succession planning process

∎ Robust over-boarding policy limits the number of outside public company boards, other than Annaly, on which Directors can serve to three other boards for non-CEOs and one other board for sitting CEOs

∎ Multiple Audit Committee financial experts

STOCKHOLDER RIGHTS AND ENGAGEMENT

∎ All Directors are elected annually

∎ Majority vote standard for uncontested elections

∎ Annual stockholder advisory vote on executive compensation

∎ Majority voting to approve amendments to the Company’s charter and bylaws

∎ Virtual meeting format enables participation from global stockholder base

∎ Stockholders can submit questions for the Annual Meeting through an interactive pre-meeting forum and during the Annual Meeting

2015CORPORATE RESPONSIBILITY

■Robust Lead Independent Director role created
■Initiated detailed succession planning process with Board
■Introduced annual employee engagement survey

& ESG

 

■∎Kevin Keyes appointed as CEO

■Launched extensive investor outreach
2016
■Adopted broad-based stock ownership guidelines for employees
■Increased Directors stock ownership guidelines
■Adopted clawback policy for external manager
■Adopted anti-pledging policy for employees
■Adopted four-year stock holding period
2017
■Established new Board created Corporate Responsibility Committee(1) in 2017

∎

■Rotated Board Committee chairs and members
■Launched initial social impact investing joint venture
■Included Board skills matrix in proxy statement
■Joined Council of Institutional Investors (CII)
■Launched Women's Interactive Network
■Designated second Audit Committee financial expert
■Joined National Association of Corporate Directors (NACD)
■NEOs voluntarily committed to increase stock ownership positions
■Hosted inaugural Investor Day
2018
■Added two new Independent Directors (Katie Beirne Fallon and Vicki Williams)
■Introduced virtual meeting format for Annual Meeting
■Adopted enhanced Board evaluation process, including individual directors assessments and periodic use of external facilitator
■Amended bylaws to declassify Board beginning with the 2019 Annual Meeting with full Board standing for annual election commencing with the 2021 Annual MeetingBloomberg Gender-Equality Index for the fourth consecutive year

∎

■Created new executive role to lead the Company’s Corporate Responsibility and ESG initiatives

∎

■Enhanced compensation and other disclosure in proxy statement
■Recognized in the 2018 Bloomberg Gender-Equality Index
■Instructed Board search firm to present equal representation in the slate of potential director candidates, including women and minority candidates
■Adopted policy requiring that Independent Directors may not stand for re-election following the earlier of their 12thanniversary of Board service or 73rdbirthday
2019
■Announced second social impact investing joint venture
■Added extensive disclosure on the Company’s Released inaugural Corporate Responsibility Report in 2020

∎ Established cross-functional Sustainability Leadership Team in 2020

∎ Appointed our first Head of Inclusion and ESG efforts to Annaly’s corporate website

■The Manager reduced its management fee on Incremental Stockholders’ Equity(2)  from 1.05% to 0.75%
■Added two new Independent Directors (Kathy Hopinkah Hannan and Thomas Hamilton)
■Recognizedformed an Inclusion Support Committee of Executive Sponsors in the 2019 Bloomberg Gender-Equality Index
2020

Note: For footnoted information, please refer to “Corporate Governance at Annaly” in Endnotes section.

Annaly Capital Management Inc. 2019 Proxy Statement13
 

Table of Contents

Corporate Governance at Annaly

PROPOSAL
01
 

PROPOSAL

01

Election of Directors

Consistent with its commitment to strong corporate governance practices, the Board is in the process of implementing a declassified Board structure.

At the Annual Meeting, stockholders will vote to elect foureleven nominees to serve as Directors, (Kevin G. Keyes, Thomas Hamilton, Kathy Hopinkah Hannan and Vicki Williams), whose one-year terms will expire at the annual meeting of stockholders in 20202022 (“2022 Annual Meeting”) and when their respective successors are duly elected and qualify. Directors elected at the annual meetings of stockholders in 2017 and 2018 will not be voted upon at the Annual Meeting and will serve out the remainder of their terms. All Directors will stand for annual election beginning with the annual meeting of stockholders in 2021. The table below provides summary information about each of the Directors other than Messrs. Brady and NordbergDonnell A. Segalas, who havehas not been renominatednominated for election as Directorsa Director in line with the BoardBoard’s refreshment policy adopted in October 2018.policy. The Company is gratefuland the Board wish to Messrs. Brady and Nordbergexpress their gratitude to Mr. Segalas for theirhis many years of dedicated service on the Board.

LOGO

The Board has nominated and recommends a vote FOR each of Kevin G. Keyes,Francine J. Bovich, Wellington J. Denahan, Katie Beirne Fallon, David L. Finkelstein, Thomas Hamilton, Kathy Hopinkah Hannan, Michael Haylon, Eric A. Reeves, John H. Schaefer, Glenn A. Votek and Vicki Williams as Directors, with each to hold office until the 20202022 Annual Meeting, and until their respective successors are duly elected and qualify. 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.


NameAgePrincipal OccupationIndependentCommittees
Director Nominees Standing for One-Year Terms
Kevin G. Keyes51Chairman, Chief Executive Officerand President
Annaly Capital Management, Inc.		No
Thomas Hamilton51President & CEO
Construction Forms, Inc.		YesAudit
Risk
Kathy Hopinkah Hannan57Former National Managing Partner,
Global Lead Partner
KPMG LLP		YesAudit
NCG
Vicki Williams46Chief Human Resources Officer
NBCUniversal		YesAudit
Compensation

Name

  Age  

Principal Occupation

Independent

Committees

Francine J. Bovich69

Former Managing Director

Morgan Stanley Investment Management

YesNCG (Chair)
CR

Wellington J. Denahan†Directors Whose Current Terms Expire in 202057

Former Executive Chairman and Co-Founder

Annaly Capital Management, Inc.

NoRisk (Chair)
CR
Francine J. Bovich67Former Managing Director
Morgan Stanley Investment Management		YesNCG (Chair)
CR

Katie Beirne Fallon43Global Head of Corporate Affairs
Hilton Worldwide Holdings Inc.		YesCR
NCG
Jonathan D. Green*72Former Vice Chairman
Rockefeller Group		YesCR (Chair)
Compensation
Risk
John H. Schaefer67Former President and Chief Operating Officer
Morgan Stanley Global Wealth Management		YesRisk (Chair)
Audit
Compensation
Directors Whose Current Terms Expire in 2021Katie Beirne Fallon45

Chief Global Impact Officer

McDonald’s Corporation

YesCR (Chair)
NCG
Wellington J. Denahan55

Former
David L. Finkelstein48

Chief Executive Chairman
Officer & Chief Investment Officer

Annaly Capital Management, Inc.

NoCR
Risk
Michael Haylon61

Thomas Hamilton53

Owner and Director

Construction Forms, Inc.

Yes

Audit MDC

Risk

Kathy Hopinkah Hannan    59

Former National Managing Partner, Global Lead Partner

KPMG LLP

Yes

Audit (Chair) MDC

NCG

Michael Haylon*63

Managing Director and Head of Conning North America

Conning, Inc.

YesAudit
Risk
Donnell A. Segalas61

Chief Executive Officer and
Eric A. Reeves48

Managing Partner
Pinnacle AssetDirector, Head of Private Capital Investments

Duchossois Capital Management L.P.

YesCompensationCR
NCG

John H. Schaefer69

Former President and Chief Operating Officer Morgan

Stanley Global Wealth Management

YesRisk (Chair)
Audit MDC

Glenn A. Votek62

Former Senior Advisor

Annaly Capital Management, Inc.

No

CR
NCG

Risk

Vicki Williams48

Chief Human Resources Officer

NBCUniversal

YesMDC (Chair) Audit

“CR” refers to the Corporate Responsibility Committee, “MDC” refers to the Management Development and Compensation Committee and “NCG” refers to the Nominating/Corporate Governance Committee.

†

Vice Chair of the Board.

*

Lead Independent Director. For more details, see page 26.Chair of the Board.


DIRECTOR NOMINEES

14Annaly Capital Management Inc. 2019 Proxy Statement
Francine J. Bovich

Table of Contents

Corporate Governance at Annaly

Director Nominees Standing for One-Year Terms

Kevin G. Keyes

Director since

2014

2012Committees

ChairmanNCG (Chair), CR

Ms. Bovich has over 30 years 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 Annalyinvestment management experience lastly serving 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, from 1997 to 2005 he worked at Credit Suisse First Boston in various Capital Markets Origination roles, and from 1990 to 1997 at Morgan Stanley Dean Witter inInvestment Management from 1993 to 2010. Since 2011, Ms. Bovich has been a trustee of The Bradley Trusts. Ms. Bovich has also served as a board member of The BNY Mellon Family of Funds (formerly known as The Dreyfus Family of Funds) since 2012, and serves as a board member of a number of registered investment companies within the Mergersfund complex. These funds represent a broad scope of investment strategies including equities (U.S., non-U.S., global and Acquisitions Groupemerging markets), taxable fixed income (U.S., non-U.S., global and Real Estateemerging markets), municipal bonds, and cash management. From 1991 through 2005, Ms. Bovich served as the U.S. Representative to the United Nations Investment Banking Group. Mr. KeyesCommittee, 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 received a B.A. in Economics from Connecticut College and a 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.

Wellington J. Denahan

Director since

1997

Committees

Risk (Chair), CR

Vice Chair of the Board

Ms. Denahan co-founded the Company in 1996 and has served as a Director since the Company’s initial public offering. Until December 2017, Ms. Denahan served as Chairman of the Board of the Company (from November 2012) and Executive Chairman of the Company (from September 2015). Previously, Ms. Denahan served as CEO of the Company from November 2012 to September 2015 and as Co-Chief Executive Officer of the Company from October 2012 to November 2012. Ms. Denahan was the Company’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 the Company’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 the Company’s former CEO.

Katie Beirne Fallon

Director since

2018

Committees

CR (Chair), NCG

Ms. Fallon has served as Chief Global Impact Officer for McDonald’s Corporation, a global foodservice retailer, since October 2020, where she is responsible for the company’s government relations, communications, sustainability and McDonald’s corporate philanthropy and Environmental, Social and Governance (ESG) strategy. Prior to McDonald’s, Ms. Fallon served as Global Head of Corporate Affairs for Hilton Worldwide Holdings Inc., a multinational hospitality company, starting in November 2016, where she was 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’s Campaign Cabinet,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 President’s Circle,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 Student-Athlete Advisory Council and the Jesse Harper Council, as parthighest levels of the Rockne Athletics Fund. HeU.S. government.

David L. Finkelstein

Director since

2020

Chief Executive Officer and Chief Investment Officer

Mr. Finkelstein has served as Chief Executive Officer of the Company since March 2020 and as Chief Investment Officer since November 2016. Previously, Mr. Finkelstein served as the Company’s Chief Investment Officer, Agency and RMBS beginning in February 2015 and as the Company’s Head of Agency Trading beginning in August 2013. Prior to joining the Company in 2013, 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 is a member of the Wall Street Journal’s CEO Council and serves onTreasury Markets Practice Group sponsored by the BoardFederal Reserve Bank of Directors of the Rock and Roll Forever Foundation.New York. Mr. Keyes holds aFinkelstein received his B.A. in Economics and a B.S. in Business Administration (ALPA Program) from the University of Notre Dame.Washington and his M.B.A. from the University of Chicago, Booth School of Business. Mr. Finkelstein also holds the Chartered Financial Analyst® designation.

Director Qualification Highlights

The Board believes that Mr. Keyes provides the Board aFinkelstein’s qualifications include his deep understanding of issues that are important toexpertise in fixed income investments, his experience serving as the Company’s growth throughChief Executive Officer and Chief Investment Officer and his roles as Annaly’s Chairman, CEOextensive markets 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.policy experience.


Thomas Hamilton

Director since

2019

2019Committees

Committees
Audit, MDC, Risk

Mr. Hamilton has served as the President, Chief Executive Officeran Owner and OwnerDirector of Construction Forms, Inc. (“Con Forms”), an industrial manufacturing company, since 2013. From 2013 until September 2020, Mr. Hamilton also served as Con Forms’ President and Chief Executive Officer. Prior to his current position,roles at Con Forms, Mr. Hamilton spent 24 years in a number of leadership positions in the financial industry. Most recently, Mr. Hamilton served as a Strategic Advisor to the Global Head of Fixed Income, Currencies and Commodities at Barclays Capital in New York. Mr. Hamilton’s prior roles at Barclays include serving as the Global Head of Securitized Product Trading and Banking, in which capacity he was responsible for the build out of the Barclays’Barclays’s Global Securitized Product businesses, and as the Head of Municipal Trading and Investment Banking. Prior to Barclays, Mr. Hamilton held various Managing Director roles at Citigroup, Inc. and Salomon Brothers, Inc., where he began his career. Mr. Hamilton also serveshas served as a Director of Larimar Therapeutics, Inc., a clinical-stage biotechnology company focused on developing treatments for rare complex diseases, since May 2020 when Chondrial Therapeutics, Inc. merged with Zafgen, Inc. and the combined company began operating as Larimar. Prior to the merger, Mr. Hamilton had served as Chairman of the Board of Chondrial Therapeutics, Inc., a biotechbiotechnology company he started to cure a rare neurodegenerative disease called Friedreich’s Ataxia.Ataxia, since 2013. He is also a Director of the Friedreich’s Ataxia Research Alliance, along with Co-Founder of his own charitable scientific effort, the CureFA Foundation. Mr. Hamilton received a B.S. in Finance from the University of Dayton.

Director Qualification Highlights

The Board believes that Mr. Hamilton’s qualifications include his expertise in fixed income, mortgage-related assets, strategies and markets and significant leadership experience.


Annaly Capital Management Inc. 2019 Proxy Statement15

Table of Contents

Corporate Governance at Annaly

Kathy Hopinkah Hannan, PhD, CPA

Director since

2019

2019Committees

Committees
Audit (Chair), MDC, NCG

Dr. Hannan is a former Global Lead Partner, National Managing Partner and Vice Chairman of KPMG, LLP, the U.S. member firm of the global audit, tax and advisory services firm KPMG International. Dr. Hannan has over 30 years of industry experience and held numerous leadership roles during her distinguished career with KPMG. From 2015 until her 2018 retirement, Dr. Hannan served as Global Lead Partner, Senior Advisor for KPMG’s Board Leadership Center and National Leader Total Impact Strategy. Dr. Hannan also served as the Midwest Area Managing Partner for KPMG’s Tax Services from 2004 to 2009. Subsequent to that role, from 2009 to 2015, Dr. Hannan served as the National Managing Partner of Diversity and Corporate Responsibility. While at KPMG, Dr. Hannan also founded the KPMG Women’s Advisory Board. In addition to her roles at KPMG, as a Native American Indian and member of the Ho-Chunk Nation Tribe, Dr. Hannan served on President George W. Bush’s National Advisory Council on Indian Education. Currently, Dr. Hannan serves on the boards of directors of Otis Elevator Co. (NYSE: OTIS) and Blue Trail Holdings, is Chairman of the Board of Trustees and a member of the Executive Committee of the Smithsonian National Museum of the American Indian, is a Trustee of the Committee for Economic Development in Washington D.C. and is an active member of Women Corporate Directors. From 2014 to 2020, Dr. Hannan served as Chairman of the Board & National President for Girl Scouts of the USA, is a member of the Board of Trustees and Executive Committee of the Smithsonian National Museum of the American Indian and is a Trustee of the Committee for Economic Development in Washington D.C.USA. Dr. Hannan received a Ph.D. in Leadership Studies from Benedictine University and a B.A. from Loras College. She is also a graduate of the Chicago Management Institute at the University of Chicago, Booth School of Business and the Institute of Comparative Political & Economic Systems at Georgetown University.

Director Qualification Highlights

The Board believes that Dr. Hannan’s qualifications include her expertise in financial, tax and accounting matters as well as her significant experience in enterprise sustainability, corporate governance and organizational effectiveness.


Vicki WilliamsMichael Haylon

Director since

2008

2018Committees

Committees
Audit, CompensationRisk

Independent Chair of the Board

Ms. Williams has over 18 years of compensation and governance experience. Ms. WilliamsMr. Haylon has served as Managing Director and Head of Conning North America at Conning, Inc., a global provider of investment management solutions, services and research to the insurance industry, since June 2018. Mr. Haylon has served as a Managing Director at Conning, Inc. since January 2012 and previously served as Head of Asset Management Sales, Products and Marketing from December 2014 until June 2018 and as Head of Investment Products 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 Human ResourcesFinancial Officer for NBCUniversal, a multinational media conglomerate, since July 2018,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., and President of Phoenix Investment Counsel, where she ishe was responsible for the company’s global human resources function, including compensation, benefits, developmentmanagement and learning, talent acquisition, executive search, HR systems,oversight of $25 billion in closed-end and the HR service center. Ms. Williamsopen-end mutual funds, corporate pension funds and insurance company portfolios. Mr. Haylon has previously served as Senior Vice President, Compensation, Benefitson the boards of Aberdeen Asset Management and HRIS at NBCUniversal beginning in 2011. Prior to joining NBCUniversal, Ms. Williams wasPhoenix Investment Partners. Mr. Haylon received a Partner with Pay Governance LLCB.A. from Bowdoin College and a Principal with Towers Perrin (now Willis Towers Watson). Ms. Williams received a B.S. in Education with a concentration in mathematics education and an M.B.A. with a concentration in finance and quantitative statistics, each with honors from the University of Georgia.Connecticut.

Director Qualification Highlights

The Board believes that Ms. Williams’Mr. Haylon’s qualifications include her broad human resources, executive compensationhis significant leadership and governancemanagement experience including servingfrom his years of management and oversight of large financial asset portfolios, his prior board experience with other companies and his expertise in financial matters.

Eric A. Reeves

Director since

2021

Committees

NCG, CR

Mr. Reeves has served as chief human resources officer at a multinational company and as an external compensation consultant.

16AnnalyManaging Director, Head of Private Capital Investments of Duchossois Capital Management Inc. 2019 Proxy Statement

Table of Contents

Corporate Governance at Annaly

Directors Whose Current Terms Expire in 2020

Francine J. Bovich

Director(“DCM”), a private investment firm, since
2014

Committees
NCG (Chair), CR

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 2017. Mr. Reeves has also served as a board memberGeneral Counsel & Secretary of The Dreyfus FamilyDuchossois Group, a family-owned holding company comprised of Fundsdiversified operating companies and DCM, since 2012,2007 and its Chief Administrative Officer since 2017. Mr. Reeves was formerly a law partner of McDermott, Will & Emery and a corporate attorney at Jones Day. Mr. Reeves serves on the boards of several DCM portfolio companies and funds as a board memberwell as on the Advisory Board of a number of registered investment companies withinOzinga Bros. His civic and philanthropic commitments include trusteeships at Rush University Medical Center and the fund complex. These funds represent a broad scope of investment strategies including equities (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. BovichNational Philanthropic Trust. Mr. Reeves is a member of the Economic Club of New YorkHenry Crown Fellows at the Aspen Institute and an emeritus trustee of Connecticut College and chair of the Investment Sub-Committee for its endowment. Ms. Bovich received a B.A. in Economics from Connecticut College and a 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 servingwas honored as a trustee and board member.

Katie Beirne Fallon

Director since
2018

Committees
NCG, CR

Ms. Fallon has served as Global HeadChicago United Business Leader 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 Capitol 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 promoteColor. Mr. Reeves received 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 DameMichigan 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 PoliticsJ.D. from the London School of Economics.Ohio State University.

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. 2019 Proxy Statement17

Table of Contents

Corporate Governance at Annaly

Jonathan D. Green

Director since
1997

Committees
CR (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’sReeves’ qualifications include his significantexpertise in sourcing, executing and managing private capital investments, his years of legal experience from serving as a chief executive, his diversegeneral counsel and significant background in the real estate industrya law firm partner and his legal expertise.private company board experience.


John H. Schaefer

Director since

2013

2013Committees

Committees
Risk, (Chair), Audit,
Compensation MDC

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. He was President and Chief Operating Officer of the Global Wealth Management division of Morgan Stanley from 2000 to 2005. Mr. Schaefer was 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 1976. Mr. Schaefer served as a board member and chair of the audit committee of USI Holdings Corporation from 2008 through 2012. He received a B.B.A. in Accounting from the University of Notre Dame and a 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.


18Annaly Capital Management Inc. 2019 Proxy Statement
Glenn A. Votek

Table of Contents

Corporate Governance at Annaly

Directors Whose Current Terms Expire in 2021

Wellington J. Denahan

Director since

2019

1997Committees

Committees
PR,CR, Risk

Ms. Denahan co-founded Annaly in 1996 and hasGlenn A. Votek served as a Director since that time. Until December 2017, Ms. Denahan servedSenior Advisor to the Company from March 2020 to August 2020 after serving as Chairman of the Board of Annaly (from November 2012) and Executive Chairman of Annaly (from September 2015). Previously, Ms. Denahan served asInterim Chief Executive Officer and President of Annalythe Company from November 20122019 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

Director since
2008

Committees
Audit, Risk

Mr. Haylon has served as Managing Director and Head of Conning North America at Conning, Inc., a global provider of investment management solutions, services and research to the insurance industry, since June 2018. Mr. Haylon has served as a Managing Director at Conning, Inc. since January 2012 and previously served as Head of Asset Management Sales, Products and Marketing from December 2014 until June 2018 and as Head of Investment Products 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. HeMarch 2020. Previously, he was Chief Financial Officer of the Phoenix Companies, Inc.Company from 2004 until 2007, andAugust 2013 to December 2019. Mr. Votek has over 30 years of experience in financial services. Prior to joining the Company in 2013, Mr. Votek was an Executive Vice President and Chief Investment OfficerTreasurer at CIT Group since 1999 and also President of Consumer Finance since 2012. Prior to that, he worked at AT&T and its finance subsidiary from 1986 to 1999 in various financial management roles. Mr. Votek holds a B.S. in Finance and Economics from Kean University/University of Arizona, a M.B.A in Finance from Rutgers University and attended the Executive Education Program of the Phoenix Companies in 2002 and 2003. From 1995 until 2002, he held the positionColgate W. Darden Graduate School 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-IncomeBusiness Administration 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 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. Mr. Haylon received a B.A. from Bowdoin College and a M.B.A. from the University of Connecticut.Virginia.

Director Qualification Highlights

The Board believes that Mr. Haylon’sVotek’s qualifications include his extensive knowledge of the Company’s operations and assets through his prior roles as the Company’s former Interim CEO and President and former Chief Financial Officer, 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.and accounting expertise.


Donnell A. SegalasVicki Williams

Director since

2018

1997Committees

Committees
CompensationMDC (Chair),
NCG, CR Audit

Mr. SegalasMs. Williams has 20 years of compensation and governance experience. Ms. Williams has served as Chief Human Resources Officer for NBCUniversal, a multinational media conglomerate, since July 2018, where she is responsible for the Chief Executive Officercompany’s global human resources function, including compensation, benefits, development 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 Committeelearning, talent acquisition, executive search, HR systems, and sits on the boards of its offshore funds.HR service center. Ms. Williams previously served as Senior Vice President, Compensation, Benefits and HRIS at NBCUniversal beginning in 2011. Prior to joining Pinnacle, Mr. SegalasNBCUniversal, Ms. Williams was Executive Vice Presidenta Partner with Pay Governance LLC and Chief Marketing Officer for Alternative Investment Products at Phoenix Investment Partners. Mr. Segalas is a member of the Nantucket Historical Society. HePrincipal with Towers Perrin (now Willis Towers Watson). Ms. Williams received a B.A.B.S. in Education with a concentration in mathematics education and a M.B.A. with a concentration in finance and quantitative statistics, each with honors from Denison University.the University of Georgia.

Director Qualification Highlights

The Board believes that Mr. Segalas’Ms. Williams’ qualifications include his significanther broad human resources, executive compensation and governance experience, from his years of investingincluding serving as chief human resources officer at a multinational company and managing private and public investment vehicles and his experience serving on investment and executive committees of other companies.as an external compensation consultant.


RECENT CORPORATE GOVERNANCEAND CORPORATE RESPONSIBILITY HIGHLIGHTS

Annaly Capital Management Inc. 2019 Proxy Statement19
The Company is committed to continually enhancing its corporate governance
and corporate responsibility practices

Table of Contents

Corporate Governance at Annaly

The 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, which include:

DIRECTOR
INDEPENDENCE
AND OVERSIGHT
■Board refreshment policy triggered upon earlier of 12 years of service or 73rd birthday
■9 of 11 Continuing Directors(1) are Independent
■Robust Lead Independent Director role
■Regular executive sessions of Independent Directors
■Independent key Board committees
■Board oversees a succession plan for the CEO and other senior executives

2017

 

∎   Established Corporate Responsibility Committee

∎   Rotated Board Committee chairs and members

∎   Launched social impact investing joint venture

∎   Included Board skills and experiences matrix in proxy statement

 

∎   Launched Women’s Interactive Network (“WIN”)

∎   Designated second Audit Committee financial expert

∎   Joined National Association of Corporate Directors (“NACD”)

∎   Hosted inaugural Investor Day

DIRECTOR
QUALIFICATIONS

■2018

45% of Continuing∎   Added two new Independent Directors(1) are women

∎

■45% of Continuing Directors(1) have tenure of less than 5 years
■Annual   Adopted enhanced Board committeeevaluation process, including individual Directors assessments and individual Director self-evaluations with periodic use of an external facilitator

∎

■Comprehensive Board refreshment and succession planning process
■Over-boarding policy limits the number of outside Boards on which Directors can serve
■Multiple audit committee financial experts
STOCKHOLDER
RIGHTS AND
ENGAGEMENT
■Amended bylaws to declassify the Board over a three-yearthree year period
■Majority vote standard with all Directors standing for uncontested elections
■Annual stockholder advisory vote on executive compensation
■Stockholders may amendannual election commencing with the bylaws by a majority of votes entitled to be cast
■Virtual meeting format enables participation from global stockholder base
■Stockholders can submit questions for the2021 Annual Meeting through an interactive pre-meeting forum

∎

   Recognized in the 2018 Bloomberg Gender-Equality Index

 

CORPORATE
RESPONSIBILITY∎

■Director and employee stock ownership guidelines
■Board created Corporate Responsibility Committee in 2017(2)
■Announced second joint venture dedicated to supporting community development in 2019
■Member of the 2019 Bloomberg Gender-Equality Index
■Created new executive role to lead the Company’s Corporate Responsibility and ESG initiatives

∎

   Instructed Board search firm to present equal representation in the slate of potential Director candidates, including candidates of diverse gender and race

■∎   Adopted Board refreshment policy with both a term limit and an age limit

∎   Completed first energy audit of the Company’s corporate office

2019

∎   Increased commitment to social impact investing joint venture

∎Added extensive disclosure on the Company’s Corporate Responsibility and ESG efforts to Annaly’s corporate website

∎   Launched WIN Mentoring Circles to foster community and connect smaller cohorts of women with senior leaders

∎   Added two new Independent Directors

∎   Recognized in the 2019 Bloomberg Gender-Equality Index for the second consecutive year

∎   Separated the roles of CEO and Chair of the Board and appointed an Independent Chair of the Board

2020

∎   Completed Internalization to enable stronger alignment of incentives between stockholders and executives and increased transparency and disclosure

∎   Refined Director “over-boarding” policy to reduce the number of outside boards on which Directors can serve

∎   Appointed our first Head of Inclusion and formed an Inclusion Support Committee of Executive Sponsors

∎   Recognized in the 2020 Bloomberg Gender-Equality Index for the third consecutive year

∎   Amended Corporate Governance Guidelines to formalize Board’s commitment to seeking out highly qualified candidates of diverse gender and race

∎   Published inaugural Corporate Responsibility Report

2021

∎   Disclosed racial/ethnic diversity of our Directors in our Board skills and experiences matrix

∎   Added new Independent Director

∎   Recognized in the 2021 Bloomberg Gender-Equality Index for the fourth consecutive year

GOVERNING 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 business. This Code of Conduct is applicable to the Company’s Directors, executive officers and 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

The Board has adopted Corporate Governance Guidelines that, in conjunction with the charters of the Board Committees, provide the framework for governance of the Company.

Other Governance Policies

The Company’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 Conduct, Corporate Governance Guidelines and Committee Charters

The Code of Conduct, Corporate Governance Guidelines, MDC Committee Charter, Audit Committee Charter, NCG Committee Charter, Corporate Responsibility Committee Charter and Risk Committee Charter are available on Annaly’s website (www.annaly.com). The 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.

Board Committees

The Board has five standing Committees: the Audit Committee, the MDC Committee, the NCG Committee, the Risk Committee and the Corporate Responsibility (“CR”) Committee.

The table below shows the membership as of the date of this Proxy Statement of each Board Committee and number of Committee meetings held in 2020.

Director Audit
Committee		 MDC
Committee		 NCG
Committee		 CR
Committee		 Risk
Committee
Francine J. Bovich     LOGO •  

 

Wellington J. Denahan†       • LOGO

 

Katie Beirne Fallon     • LOGO  

 

David L. Finkelstein          

 

Thomas Hamilton • •     •

 

Kathy Hopinkah Hannan LOGO E • •    

 

Michael Haylon* • E       •

 

Eric A. Reeves(1)     • •  

 

John H. Schaefer • •     •

 

Donnell A. Segalas(2)   • • •  

 

Glenn A. Votek(3)       • •

 

Vicki Williams • LOGO      

 

% of Independent Members: 100% 100% 100% 67% 60%

 

2020 Meetings: 7 11 5 3 4

 

•MemberLOGO  Chair        EAudit Committee Financial Expert        †Vice Chair of the Board            * Independent Chair of the Board

Committee Membership Determinations

The Board annually reviews the membership and chairship of each Board Committee as part of its broader Board and Committee refreshment and succession planning. This review, which is led by the NCG Committee, takes into account, among other factors, the needs of the Committees, the experience, availability and projected tenure of Directors and the desire to balance Committee continuity with fresh insights. For additional detail, see the “Board Effectiveness, Self-Evaluations and Refreshment” section of this Proxy Statement.

Note: For footnoted information, please refer to “Board Committees” in Endnotes section.

AUDIT COMMITTEE

Committee Members:

Kathy Hopinkah Hannan
(Chair)
Thomas Hamilton

Michael Haylon

John H. Schaefer

Vicki Williams

Number of Meetings in

2020: 7

Key Responsibilities:

∎ Appoints the independent registered public accounting firm and reviews its qualifications, performance and independence

∎ Reviews the plan and results of the auditing engagement with the Chief Financial Officer and the independent registered public accounting firm

∎ Oversees internal audit activities

∎ Oversees the quality and integrity of 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 Securities and Exchange Commission (“SEC”) to be included in the Proxy Statement

∎ Together with the Risk Committee, jointly oversees practices and policies related to cybersecurity and receives regular reports from management throughout the year on cybersecurity and related risks

Each member of the Audit Committee is financially literate and independent 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 Dr. Hannan and Mr. Haylon as 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.

CORPORATE RESPONSIBILITY COMMITTEE

Committee Members:

Katie Beirne Fallon (Chair)

Francine J. Bovich

Wellington J. Denahan

Eric A. Reeves(1)

Donnell A. Segalas(2)

Glenn A. Votek

Number of Meetings in

2020: 3

Key Responsibilities:

Assists the Board in its oversight of the Company’s items of corporate responsibility that reflect the Company’s values and character, including:

∎ corporate philanthropy

∎ responsible investments, including social impact investments

∎ environmental and sustainability

∎ public policy

∎ reputation

For more information on the Corporate Responsibility Committee’s responsibilities, see the “Board Oversight of Risk” section of this Proxy Statement.

Note: For footnoted information, please refer to “Audit Committee & Corporate Responsibility Committee” in Endnotes section.

MDC COMMITTEE

Committee Members:

Vicki Williams (Chair)

Thomas Hamilton

Kathy Hopinkah Hannan

John H. Schaefer

Donnell A. Segalas(1)

Number of Meetings

in 2020: 11

Key Responsibilities:

∎ Assists the Board in overseeing the Company’s executive compensation policies and practices

∎ Reviews and recommends to the Independent Directors for approval the compensation of the CEO

∎ Reviews, approves and recommends to the Board the adoption of equity-based compensation or incentive compensation plans

∎ Assists the Board in its oversight of the development, implementation and effectiveness of the Company’s policies and strategies relating to its human capital management, including recruiting, retention, career development, management succession, corporate culture, diversity and employment

∎ Reviews the form and amount of Director compensation

∎ 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 MDC Committee is independent of the Company and management under the listing standards of the NYSE and qualifies as a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act.

For more information on the MDC Committee’s responsibilities and activities, see the “Compensation of Directors,” “Compensation Discussion and Analysis,” and “Report of the Compensation Committee” sections of this Proxy Statement.

NCG COMMITTEE

Committee Members:

Francine J. Bovich (Chair)

Katie Beirne Fallon Kathy

Hopinkah Hannan

Eric A. Reeves(2)

Donnell A. Segalas(1)

Number of Meetings in

2020: 5

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

∎ Considers other corporate governance matters such as Director tenure and retirement policies, and potential conflicts of interest of Board members and senior management, and recommends changes as appropriate

∎ Considers continuing education alternatives for directors and provides oversight of management’s responsibility for providing the Board with educational sessions on matters relevant to the Company and its business

Each member of the NCG Committee is independent of the Company and management under the applicable listing standards of the NYSE.

For more information on the NCG Committee’s responsibilities and activities, see the “Director Criteria and Qualifications,” “Consideration of Board Diversity,” “Board Effectiveness, Self-Evaluations and Refreshment,” “Director Nomination Process” and “Stockholder Recommendation of Director Candidates” sections of this Proxy Statement.

Note: For footnoted information, please refer to “MDC Committee & NCG Committee” in Endnotes section.

RISK COMMITTEE

Committee Members:

Wellington J. Denahan
(Chair)

Thomas Hamilton

Michael Haylon

John H. Schaefer

Glenn A. Votek

Number of Meetings in

2020: 4

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 risk, compliance, regulatory and legal risk, and such other risks as necessary to fulfill the Committee’s duties and responsibilities

∎ risk appetite, including risk appetite levels and capital adequacy and limits

∎ practices and policies related to cybersecurity (together with the Audit Committee) and receives regular reports from management throughout the year on cybersecurity and related risks

For more information on the Risk Committee’s responsibilities and activities, see the “Board Oversight of Risk” section of this Proxy Statement.

IndependenceBoard Structure and Processes

Over the last few years, the Board has focused on enhancing its structure, composition and effectiveness. Recent enhancements, including declassifying the Board and separating the roles of the Chair of the Board and CEO, have been informed by the Board’s annual self-evaluation and succession planning processes, its review of evolving best practices and feedback from the Company’s long-term stockholders.

BOARD LEADERSHIP STRUCTURE

In November 2019, the Board separated the roles of Chair of the Board and CEO. While the Board believes that whether to have the same person occupy the offices of Chair of the Board and CEO should be decided by the Board from time to time in its business judgment, the Board has determined that having strong independent Board leadership in the form of an Independent Chair is in the best interests of the Company at this time. In addition to the Chair, the Board may elect a Vice Chair to assist the Chair from among its members. Currently, Mr. Haylon serves as Independent Chair of the Board and Ms. Denahan serves as Vice Chair.

The separation of the CEO and Chair roles allows Mr. Finkelstein to focus on the Company’s overall business and strategy, while allowing Mr. Haylon to focus his attention on governance of the Board and oversight of management. Ms. Denahan will support Mr. Haylon in carrying out certain of his responsibilities. The Board believes that its independent oversight function is further enhanced by its policy to hold regular executive sessions of the Independent Directors without management present and the fact that a majority of the Company’s Directors (and every member of the Audit Committee, MDC Committee and NCG Committee) is independent.

The Independent Chair of the Board

∎ Presides at meetings and executive sessions of the Board

∎ Serves as a liaison between the CEO and the Independent Directors

∎ Presides over Annual Meetings of Stockholders

∎ Together with the Board and Vice Chair, serves as an advisor to the CEO

∎ Participates, together with the MDC Committee, in the performance evaluation of the CEO

∎ Provides input into the selection of Committee chairs

∎ Approves Board meeting agendas and schedules

∎ Advises the CEO on the Board’s informational needs

∎ Has authority to call and chair meetings and executive sessions of the Board

∎ Authorizes the retention of advisors and consultants who report to the Board

∎ Together with the NCG Chair, leads the Board’s annual performance evaluation

∎ If requested by stockholders, ensures that he or she is available, when appropriate for consultation and direct communication with major stockholders

INDEPENDENCEOF DIRECTORS

Annaly’s Corporate Governance Guidelines and NYSE rules require that at least a majority of Board members are Independent Directors. The Board has adopted the definition of “independent director” set forth in Section 303A of the NYSE rules and has affirmatively determined that each Director (other than Ms. Denahan and Mr. Keyes)Messrs. Finkelstein and Votek) has no material relationships with the Company other than as a Director (either directly or as partner, stockholder or officer of an organization that has a relationship with the Company) and is therefore independent under all applicable criteria for independence in accordance with the standards set forth in the NYSE rules and Annaly’s Corporate Governance Guidelines.

Four new, highly qualified
Independent Directors have
joined the Annaly Board since
the beginning of 2018

Note: For footnoted information, please referEXECUTIVE SESSIONSOF INDEPENDENT DIRECTORS

The Corporate Governance Guidelines require that the Board have at least two regularly scheduled executive sessions of Independent Directors each year. These executive sessions, which are designed to “The Board’s Role and Responsibilities” in Endnotes section.promote unfettered discussions among the Independent Directors, are presided over by the Independent Chair of the Board. During 2020, the Independent Directors, without the participation of Board members who are members of management, held eight executive sessions.

BOARD OVERSIGHTOF RISK

20FULL BOARD

Annaly Capital Management Inc. 2019 Proxy Statement

Risk management begins with the Board, through review and oversight of the Company’s risk management framework, and continues with executive management, through ongoing formulation of risk management practices and related execution. The Board exercises its oversight of risk primarily through its Risk Committee and Audit Committee with support from the other Board Committees. At least annually, the full Board reviews with management the Company’s risk management program, which identifies and quantifies a broad spectrum of enterprise-wide risks, including cyber and technology-related risks, and related action plans

 

Audit Committee

Risk Committee

Assists the Board in its oversight of the quality and integrity of the Company’s accounting, internal controls and financial reporting practices, including appointing the independent auditor and reviewing its qualifications, performance and independence, and compliance with legal and regulatory requirements

Assists the Board in its oversight of the Company’s risk governance structure, risk management and risk assessment guidelines and policies, and risk appetite, including risk appetite levels and capital adequacy and limits

MDC Committee

Corporate Responsibility

Committee

NCG Committee

Assists the Board in its oversight of risk related to the Company’s compensation policies and practices

Assists the Board in its oversight of any matters that may present reputational or ESG risk to the Company

Assists the Board in its oversight of the Company’s corporate governance framework and the annual self-evaluation of the Board

MANAGEMENT

Responsible for day-to-day risk assessment and risk management. A series of management committees have 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 and the Financial Reporting and Disclosure Committee


TableAs part of Contents

Corporate Governance at Annaly

Director Nomination Process

their risk oversight responsibilities, the Audit Committee and Risk Committee held two joint meetings in 2020. The NCGAudit Committee is responsible for identifying and screening nominees for DirectorRisk Committee receive regular reports from management throughout the year on cybersecurity and for recommendingrelated risks. In addition to the risk oversight processes outlined above, the Board candidates for nomination for election or re-electionannually reviews its risk assessment of the Company’s compensation policies and practices applicable to the Company’s equity incentive plans. For additional information on this review, please see the “Risks Related to Compensation Policies and Practices” section of this Proxy Statement.

CEO PERFORMANCE REVIEWSAND MANAGEMENT SUCCESSION PLANNING

The Independent Chair of the Board and the Chair of the MDC Committee jointly coordinate and lead the Board’s annual performance evaluation of the CEO, which reflects input from all Non-Employee Directors. The Board oversees and maintains a succession plan for the CEO and other senior executives. Executive succession and talent development are a regular agenda item for the Board and, at least once per year, the Board has a fulsome discussion of talent at each business and functional leadership level across the Company. In carrying out this function, the Board endeavors to fillensure 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.

BOARD EFFECTIVENESS, SELF-EVALUATIONSAND REFRESHMENT

The Company’s comprehensive Board vacancies.and Committee refreshment and succession planning process is designed to ensure that the Board and each Committee is comprised of highly qualified Directors, with the independence, diversity, skills and perspectives to provide strong and effective oversight. The Board, led by the NCG Committee, also seeksannually evaluates the composition of the Board and each Committee, and rigorously evaluates individual Directors to maintainensure a continued match of their skill sets and tenure against the needs of the Company. In 2020, the NCG Committee initiated a Board search process to identify and vet potential Director candidates. Eric A. Reeves was identified as a potential Director nominee by a member of the Board. He was considered as part of an ongoing list of potential Board candidates. Nominees may be suggestedextensive and careful search, which involved numerous other candidates proposed by Directors, members of management stockholders or professional search firms. In evaluatingand advisors. As a result of this process, the Board elected Mr. Reeves as a new Independent Director nomination, theeffective March 19, 2021.

The NCG Committee may review materials provided byis also responsible for overseeing an annual self-evaluation process for the nominator,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 professional search firm or any other party.whole and its members and committees.

LOGO

Focus areas of the 2020 self-evaluation included Board and Committee leadership structure, dynamics, priorities, skills, processes and fulfillment of responsibilities. Based on the results of the 2020 self-evaluation process, the Board’s practices evolved in a number of ways, including:

The∎  Additional in-person Board meeting time devoted to the Company’s crisis management and preparedness

∎  NCG Committee seeksassumed more formal responsibility for Director continuing education alternatives

∎  Future self-evaluations will be expanded to
maintain an ongoing list of
potential include additional questions on Board candidatesand Committee succession planning

∎  2021 Board agenda revised to include additional sessions on priority topics


Director Criteria and QualificationsDIRECTOR CRITERIAAND 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.

The NCG Committee seeks
to achieve a balance of
knowledge, experience and
capability on the Board


Consideration of Board DiversityCONSIDERATIONOF BOARD DIVERSITY

The Company endeavors to have a Board representing diverse backgrounds and a wide range of professional experiences. The NCG Committee also takesIn 2020, the Board formalized its existing practice by amending the Company’s Corporate Governance Guidelines to reflect the Board’s commitment to seeking out highly qualified candidates of diverse gender and race, as well as taking into account other factors that promote principles of diversity, including diversity of a candidate’s perspective, background, gender, race, nationality, age and other demographics. The NCG Committee instructs any search firm it engages to include womencandidates of diverse gender and minority candidatesrace in every director candidate pool presented to the Committee.

Three women have joinedThe Corporate Governance Guidelines formalize the Board’s commitment to seeking out highly qualified
Annaly Board since the
beginningcandidates of 2018diverse gender and race

Stockholder RecommendationDIRECTOR NOMINATION PROCESS

The 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 Candidatesnomination, the NCG Committee may review materials provided by the nominator, a professional search firm or any other party.

STOCKHOLDER RECOMMENDATIONOF DIRECTOR CANDIDATES

Stockholders who wish the NCG Committee to consider their recommendations for Director candidates should submit their recommendations in writing to Anthony C. Green, the Chief Corporate Officer, Chief Legal Officer and Secretary at the Company’s principal executive offices. Following verification of the stockholder status of persons proposing candidates, recommendations are aggregated and considered by the NCG Committee at a regularly scheduled or special meeting. If any materials are provided by a stockholder in connection with the recommendation of a Director candidate, such materials are forwarded to the NCG Committee. Properly submitted recommendations by stockholders will receive the same consideration by the NCG Committee as other suggested nominees.

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Board Effectiveness, Self-Evaluations and Refreshment

Tenure of Continuing Directors(1)

The Company’s comprehensive Board and Committee refreshment and succession planning process is designed to ensure that the Board and each Committee is comprised of highly qualified Directors, with the independence, diversity, skills and perspectives to provide strong and effective oversight. The Board, led by the NCG Committee, annually evaluates the composition of the Board and each Committee, and rigorously evaluates individual Directors to ensure a continued match of their skill sets and tenure against the needs of the Company. As a result of this process, the Board elected new Independent Directors Kathy Hopinkah Hannan and Thomas Hamilton, effective February 13, 2019 and March 6, 2019, respectively. Dr. Hannan and Mr. Hamilton were identified as potential Director nominees by two separate members of senior management, and were elected to the Board after an extensive and careful search was conducted, and after numerous other candidates proposed by Directors, members of management and a professional search firm were considered.

The NCG Committee is 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. In early 2018, the Board adopted an enhanced Board self-evaluation process that includes annual assessments of the full Board, each Board committee and individual Directors, along with periodic use of an external facilitator. In the summer of 2018, an outside governance expert facilitated this comprehensive self-evaluation. Focus areas included Board and Committee skills, structure, dynamics, processes, fulfillment of responsibilities, leadership and refreshment.

Based on the results of its self-evaluation, the Board determined to conduct a follow-up review to further analyze considerations related to Board refreshment, including Director term and tenure. This review, which benefitted from significant stockholder feedback, ultimately led to the adoption of a Board refreshment policy requiring that Independent Directors may not stand for re-election following the earlier of their 12thanniversary of Board service or their 73rdbirthday. In addition, this analysis informed the Board’s unanimous approval and adoption of a bylaw amendment to declassify the Board over a three-year period beginning with the 2019 Annual Meeting, with all Directors standing for annual election commencing with the 2021 Annual Meeting.

Board Commitment and Over-Boarding PolicyCOMMUNICATIONSWITHTHE BOARD

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 Board;
■Other Directors should not serve on more than four other boards of public companies in addition to the Board; and
■A member of the Audit Committee should not serve on the audit committee of more than two other public companies.

All 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.

Note: For footnoted information, please refer to “Board Effectiveness, Self-Evaluations and Refreshment” in Endnotes section.

22Annaly Capital Management Inc. 2019 Proxy Statement

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Corporate Governance at Annaly

Board Oversight of Risk

FULL BOARD

Risk management begins with the Board, through review and oversight of the 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 with management the Company’s risk management program, which identifies and quantifies a broad spectrum of enterprise-wide risks, including cyber and technology-related risks, and related action plans

RISK COMMITTEE

AUDIT COMMITTEE

Assists the Board in its oversight of the Company’s risk governance structure, risk management and risk assessment guidelines and policies, and risk appetite, including risk appetite levels and capital adequacy and limits

Assists the Board in its oversight of the quality and integrity of the Company’s accounting, internal controls and financial reporting practices, including appointing the independent auditor and reviewing its qualifications, performance and independence, and compliance with legal and regulatory requirements

MANAGEMENT

Responsible for day-to-day risk assessment and risk management. A series of management committees have 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 and the Financial Reporting and Disclosure Committee


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 and the Company’s Severance and Noncompetition Agreement (the “CEO Severance Agreement”) with Mr. Keyes. For additional information on this review, please see the “Risks Related to Compensation Policies and Practices” section of this 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.
As part of their risk oversight
responsibilities, the Audit
Committee and Risk Committee
held two joint meetings in 2018

CEO Performance Reviews and Management Succession Planning

The Lead Independent Director and the Chair of the Compensation Committee jointly coordinate and lead the Board’s annual performance evaluation of the CEO, which reflects input from all non-executive Directors. The Board oversees and maintains a succession plan for the CEO and other senior executives. Executive succession and talent development are a regular agenda item for the Board and, at least once per year, the Board has a fulsome discussion of talent at each business and functional leadership level across the Company. 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.

The Board’s oversight of succession planning and talent development is complemented by management’s commitment to attracting, developing and recruiting top talent with diverse perspectives and backgrounds. Since 2015, the Company has introduced ten unique learning and development programs for its employees, which are intended to foster community, employee skills and engagement and shared cultural values through professional development, career management and cross-departmental collaboration and networking.

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Corporate Governance at Annaly

Communications with the Board

Stockholders and other persons interested in communicating with an individual Director (including the Lead Independent Director)Chair of the Board), 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 all communications to the Directors and forwards those communications related to the duties and responsibilities of the 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.

Certain RelationshipsDIRECTOR ATTENDANCE

During 2020, the Board held 13 meetings. All Directors attended at least 75% of the aggregate number of meetings of the full Board and Related Party Transactions

Approval of Related Party Transactionsthe Committees on which they served, during the period in which they served, in 2020.

The Board recognizes the fact that transactions with related persons present a heightened risk of conflicts of interests and/or improper valuation (or the perception thereof). The Board has adopted a written policy on transactions with related persons that is in conformity with NYSE listing standards.

Under this policy any related person transaction, and any material amendment or modification to a related person transaction, must be reviewed and approved or ratified by any standing or ad hoc committeeCompany encourages each member of the Board composed solely of Independent Directors who are disinterested or byto attend the disinterested members of the full Board.

In connection with the review and approval or ratification of a related person transaction, management must:

■disclose the name of the related person and the basis on which the person is a related person, the material terms of the related person transaction, including the approximate dollar value of the amount involved in the transaction, and all the material facts as to the related person’s direct or indirect interest in, or relationship to, the related person transaction;
■advise as to whether the related person transaction complies with the terms of agreements governing the Company's material outstanding indebtedness that limit or restrict the Company's ability to enter into a related person transaction;
■advise as to whether the related person transaction will be required to be disclosed in the Company's filings under the Securities Act of 1933, as amended (the “Securities Act”) or the Securities Exchange Act of 1934, as amended (the “Exchange Act” and collectively with the Securities Act, the “Acts”), and related rules, and, to the extent such transaction is required to be disclosed, ensure that the related person transaction is disclosed in accordance with such Acts and related rules; and
■advise as to whether the related person transaction constitutes a “personal loan” for purposes of Section 402 of the Sarbanes-Oxley Act of 2002.

In addition, the related person transaction policy provides that the committee or disinterested Directors, as applicable, in connection with any approval or ratification of a related person transaction involving a non-employee Director or Director nominee, should consider whether such transaction would compromise the Director or Director nominee’s status as an “independent,” or “non-employee” Director, as applicable, under the rules and regulations of the SEC, the NYSE and the Code of Business Conduct and Ethics.

24Annaly Capital Management Inc. 2019 Proxy Statement

Table of Contents

Corporate Governance at Annaly

Management Agreement

The Company has entered into a management agreement (the “Management Agreement”) with the Manager. Management of the Company is conducted by the Manager through the authority delegated to it in the Management Agreement and pursuant to the policies established by Annaly’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, amended in November 2013, amended and restated in April 2016 and August 2018 and amended most recently in March 2019, and may be further amended by agreement between the Manager and the Company.

The Management Agreement’s current term ends on December 31, 2019 and will automatically renew for successive two-year terms unless at least two-thirds of the Independent Directors or the holders of a majority of the outstanding sharesAnnual Meeting. All of the Company’s common stock in their sole discretion electthen-Directors attended the 2020 Annual Meeting of Stockholders (the “2020 Annual Meeting”). Mr. Reeves was elected as a Director effective March 19, 2021 and therefore did not attend the 2020 Annual Meeting.

BOARD COMMITMENTAND OVER-BOARDING POLICY

In response to terminate the agreement for any or no reason upon 365 days prior written notice (such notice, a “Termination Notice”).

If the Company elects to terminate the Management Agreement, it may elect to accelerate the Termination Date to a date that is between sevenrevised policies and 90 days after the date it delivers a Termination Notice (the “Notice Delivery Date”). If the Company does not elect to accelerate the Termination Date, then the Manager may elect to accelerate the Termination Date to the date that is 90 days after the Notice Delivery Date. If the Termination Date is accelerated (such date, the “Accelerated Termination Date”) by either the Company or the Manager, in addition to any amounts accrued for the period prior to the Accelerated Termination Date, the Company shall pay the Manager an acceleration fee in an amount equal to the average annual management fee earned by the Manager during the 24-month period immediately preceding such Accelerated Termination Date multiplied by a fraction with a numerator of 365 minus the number of dayscommentary from the Notice Delivery Date to the Accelerated Termination Date, and a denominator of 365.

The Management Agreement provides that during its term and, in the event of termination of the Management Agreement by the Manager without cause, for a period of one year following such termination, the Manager will not manage, operate, join, control, participate in, or advise any person other than the Company without the prior written consent of the Risk Committee of the Board.

Prior to the most recent amendment to the Management Agreement in March 2019, the Company had paid the Manager a flat monthly management fee equal to 1/12thof 1.05% of Stockholders’ Equity(1)for its management services. Pursuant to this arrangement, during the year ended December 31, 2018, the Company incurred $179.8 million in management fees and $9.2 million in permitted reimbursement payments under the Management Agreement. None of the reimbursement payments were attributable to compensation of the Company’s NEOs.

In March 2019, the Managerleading institutional investors and the Company amendedconsiderable time commitment and responsibilities associated with Board and Committee service, in 2020 the Management Agreement for the sole purpose of reducing the monthly management fee on Incremental Stockholders’ Equity.(2)PursuantBoard refined its Director “over-boarding” policy to this amendment, which recognizes the efficiencies that have been gained with scale, the Company pays the Manager a monthly management fee for its management services equal to 1/12thof the sum of: (i) 1.05% of Base Stockholders’ Equity(3), and (ii) 0.75% of Incremental Stockholders’ Equity.(2)provide that:

The Manager

The Manager is a Delaware limited liability company and is indirectly owned by certain members of senior management. For additional information about the Manager, please see “Management Structure”, “Compensation Paid by the Manager to the Named Executive Officers” and “Compensation Discussion and Analysis.”
In 2019, the Manager reduced
its fee on Incremental
Stockholders’ Equity to
0.75% from 1.05%

Note: For footnoted information, please refer to “Management Agreement” in Endnotes section.

 Annaly Capital Management Inc. 2019 Proxy Statement∎25

Directors should not serve on more than three other public company boards in addition to the Company’s Board;

 

∎

Directors who also serve as CEOs or hold equivalent positions at other companies should not serve on more than one other public company board 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.

Table of Contents

Board Structure and Processes

Board Leadership Structure

The Board believes that whetherAll Directors are currently in compliance with this policy. Directors are required to havenotify the same person occupy the offices of ChairmanIndependent Chair of the Board and CEO should be decided by the Board, from time to time, in its business judgment after considering relevant factors, including the specific needsChair of the business and what isNCG Committee in the best interestsadvance of the Company at that point in time. Under the Corporate Governance Guidelines, the Independent Directors will annually selectaccepting an Independent Directorinvitation to serve as Lead Independent Director when the CEO 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. J. Green serves as Lead Independent Director.on another public company board.

The Board believes that the current leadership structure provides effective independent oversight of management, while allowing both the Board and management to benefit from Mr. Keyes’ day-to-day familiarity with the Company’s business.
The Lead Independent Director
has significant authority
and responsibilities


The Chairman of the BoardThe 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, including executive sessions of Independent Directors
■Facilitates communication between the Independent Directors and the Chairman of the Board and 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

The Board believes that its independent oversight function is further enhanced by its policy to hold regular executive sessions of the Independent Directors without management present and the fact that a majority of the Company’s Directors (and every member of the Audit Committee, Compensation Committee and NCG Committee) is independent.

26Annaly Capital Management Inc. 2019 Proxy Statement
 
The Company’s “over-boarding” policy limits the number of outside boards on which our
Directors can serve

Table of Contents

Board Structure and Processes

Executive Sessions of Independent DirectorsDIRECTOR ORIENTATIONAND CONTINUING EDUCATION

The Corporate Governance Guidelines require that the Board have at least two regularly scheduled executive sessions of Independent Directors each year. These executive sessions, which are designed to promote unfettered discussions among the Independent Directors, are presided over by the Lead Independent Director, or in his or her absence, the chair of the Compensation Committee. During 2018, the Independent Directors, without the participation of Board members who are members of management, held seven executive sessions.

Director Orientation and Continuing Education

The Board believes that Director orientation and continuing education is critical to the Board’s ability to fulfill its responsibilities in a dynamic and constantly evolving business environment. New Directors participate in a robust onboarding process, which includes extensive training materials and personal briefings by senior management on the Company’s strategic plans, financial statements, and key policies and practices. In addition, the Company encourages Directors to participate in external continuing directorDirector education programs, and the Company provides reimbursement for related expenses. Continuing directorDirector education is also provided during Board meetings and as stand-alone information sessions outside of meetings. In line with the Company’s commitment to continuing boardBoard education, in 2017, the Board becameis a Full Board Member of the NACD, which gives Directors access to an extensive menu of boardBoard education programs, along with research on governance trends and boardBoard practices.

Governing DocumentsCERTAIN RELATIONSHIPSAND RELATED PARTY TRANSACTIONS

Approval of Related Party Transactions

The Board recognizes the fact that transactions with related persons present a heightened risk of conflicts of interests and/or improper valuation (or the perception thereof). The Board has adopted a written policy on transactions with related persons in conformity with NYSE listing standards.

Under this policy any related person transaction, and any material amendment or modification to a related person transaction, must be reviewed and approved or ratified by any standing or ad hoc Committee of the Board composed solely of Independent Directors who are disinterested or by the disinterested members of the full Board.

In connection with the review and approval or ratification of a related person transaction, management must:

∎

disclose the name of the related person and the basis on which the person is a related person, the material terms of the related person transaction, including the approximate dollar value of the amount involved in the transaction, and all the material facts as to the related person’s direct or indirect interest in, or relationship to, the related person transaction;

∎

advise as to whether the related person transaction complies with the terms of agreements governing the Company’s material outstanding indebtedness that limit or restrict the Company’s ability to enter into a related person transaction;

∎

advise as to whether the related person transaction will be required to be disclosed in the Company’s filings under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act (the Exchange Act collectively with the Securities Act, the “Acts”), and related rules, and, to the extent such transaction is required to be disclosed, ensure that the related person transaction is disclosed in accordance with such Acts and related rules; and

∎

advise as to whether the related person transaction constitutes a “personal loan” for purposes of Section 402 of the Sarbanes-Oxley Act of 2002.

In addition, the related person transaction policy provides that the Committee or disinterested Directors, as applicable, in connection with any approval or ratification of a related person transaction involving a non-employee Director or Director nominee, should consider whether such transaction would compromise the Director or Director nominee’s status as an “independent,” or “non-employee” Director, as applicable, under the rules and regulations of the SEC, the NYSE and the Code of Business Conduct and EthicsEthics.

Closing of the Internalization and Termination of the Management Agreement

The Internalization closed on June 30, 2020 and the Management Agreement was terminated at that time

On February 12, 2020, the Company entered into an internalization agreement (the “Internalization Agreement”) with the Former Manager and certain affiliates of the Former Manager. Pursuant to the Internalization Agreement, the Company agreed to acquire all of the outstanding equity interests of the Former Manager and the Former Manager’s direct and indirect parent companies. In connection with the closing of the Internalization, on June 30, 2020, the Company acquired all of the assets and liabilities of the Former Manager, and the Company transitioned from an externally-managed real estate investment trust (“REIT”) to an internally-managed REIT. At the closing, all employees of the Former Manager became employees of the Company. The Board has adoptedparties also terminated the Amended and Restated Management Agreement by and between the Company and the Former Manager (the “Management Agreement”) and therefore the Company no longer pays 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 business. This Code of Conduct is applicable to Annaly’s Directors, executive officers and 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 amendmentsmanagement fee to, or waivers of, provisionsreimburses expenses of, the CodeFormer Manager.

Prior to the closing of Conduct on the Company’s website.

Corporate Governance Guidelines

The Board has adopted Corporate Governance Guidelines that, in conjunction withInternalization, the chartersFormer Manager, under the Management Agreement and subject to the supervision and direction of the Board, committees, providewas responsible for (i) the frameworkselection, purchase and sale of assets for governancethe Company’s investment portfolio; (ii) recommending alternative forms of capital raising; (iii) supervising the Company.

Other Governance Policies

Annaly’s Directors, executive officersCompany’s financing and employees arehedging activities; and (iv) day to day management functions. The Former Manager also subjectperformed such other supervisory and management services and activities relating to the Company’s other governance policies, includingassets and operations as appropriate. In exchange for the management services, the Company paid the Former Manager a Foreign Corrupt Practices Actmonthly management fee, and Anti-Bribery Compliance Policy,the Former Manager was responsible for providing personnel to manage the Company. Prior to the closing of the Internalization, the Company had paid the Former Manager a monthly management fee for its management services in an Insider Trading Policy,amount equal to 1/12th of the sum of (i) 1.05% of Stockholders’ Equity (as defined in the Management Agreement) up to $17.28 billion, and a Regulation FD Policy.

Where You Can Find(ii) 0.75% of Stockholders’ Equity (as defined in the CodeManagement Agreement) in excess of Conduct, Corporate Governance Guidelines and Committee Charters

The Code of Conduct, Corporate Governance Guidelines, Compensation Committee Charter, Audit Committee Charter, NCG Committee Charter, Corporate Responsibility Committee Charter and Risk Committee Charter are available on Annaly’s website (www.annaly.com).$17.28 billion. The Company will provide copies of these documents free of chargedid not pay the Former Manager any incentive fees. For the six months ended June 30, 2020 prior to any stockholder who sends a written request to Investor Relations, Annaly Capital Management, Inc., 1211 Avenuethe closing of the Americas, New York, NY 10036.Internalization, the compensation and management fee computed in accordance with the Management Agreement was $77.9 million.

Annaly Capital Management Inc. 2019 Proxy Statement27

TablePrior to the closing of Contents

Board Structurethe Internalization, the Company reimbursed the Former Manager for certain services in connection with the management and Processes

Board Committees

The Board created the new
Corporate Responsibility
Committee in late 2017(1)

The Board has five standing committees:operations of the Company and its subsidiaries as permitted under the terms of the Management Agreement. Such reimbursable expenses included the cost for certain legal, tax, accounting and other support and advisory services provided by employees of the Former Manager to the Company. Pursuant to the Management Agreement, until the closing of the Internalization, the Company reimbursed the Former Manager for the cost of such services, provided such costs were no greater than those that would be payable to comparable third party providers. Expense reimbursements and related waivers were routinely reviewed with the Audit Committee the Compensation Committee, the NCG Committee, the Risk Committee and the Corporate Responsibility Committee.

The table below shows the membership as of the date of this proxy statement of each Board committee and number of meetings of each committee held in 2018.


Director   Audit
Committee		   Compensation
Committee		   NCG
Committee		   CR
Committee		   Risk
Committee
Francine J. Bovich•
Kevin P. Brady(2)  E••
Wellington J. Denahan••
Katie Beirne Fallon••
Jonathan D. Green*••
Thomas Hamilton(3)••
Kathy Hopinkah Hannan(4)• E•
Michael Haylon• E•
E. Wayne Nordberg(2)•••
John H. Schaefer••
Donnell A. Segalas••
Vicki Williams••
% of Independent Members:100%100%100%80%80%
2018 Meetings:93324
•

Member

Chairperson

E

Financial Expert

*Lead Independent Director

Committee Membership Determinations

The Board annually reviews the membership and chairmanship of each Board Committee as part of its broader Board and Committee refreshment and succession planning. This review, which is led by the NCG Committee, takes into account, among other factors, the needs of the Committees, the experience, availability and projected tenure of Directors and the desire to balance Committee continuity with fresh insights. For additional detail, see the “Board Effectiveness, Self-Evaluations and Refreshment” section of this Proxy Statement.

Note: For footnoted information, please refer to “Board Committees” in Endnotes section.

28Annaly Capital Management Inc. 2019 Proxy Statement

Table of Contents

Board Structure and Processes

Audit Committee

Committee Members:
Kevin P. Brady(Chair)(1)
Thomas Hamilton(2)
Kathy Hopinkah Hannan(3)
Michael Haylon
E. Wayne Nordberg(1)
John H. Schaefer
Vicki Williams

Number of Meetings
in 2018:9

Key Responsibilities:
■Appoints the independent registered public accounting firm and reviews its qualifications, performance and independence
■Reviews the plan and results of the auditing engagement with the Chief Financial Officer and the independent registered public accounting firm
■Oversees internal audit activities
■Oversees the quality and integrity of 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
■Together with the Risk Committee, jointly oversees practices and policies related to cybersecurity

Each member of the Audit Committee is financially literate and independent of the Company and management under  the applicable rules of the Exchange Act, and the listing standards of the NYSE. The Board has designated Messrs. Brady and Haylon and Dr. Hannan as 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.


Compensation Committee

Committee Members:
Donnell A. Segalas(Chair)
Jonathan D. Green
E. Wayne Nordberg(1)
John H. Schaefer
Vicki Williams

Number of Meetings
in 2018:3

Key Responsibilities:
■Evaluates the performance of the Manager and the terms of the Management Agreement
■Reviews the fees payable to the 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 the 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.

Note: For footnoted information, please refer to “Audit Committee & Compensation Committee” in Endnotes section.

Annaly Capital Management Inc. 2019 Proxy Statement29

Table of Contents

Board Structure and Processes

NCG Committee

Committee Members:
Francine J. Bovich(Chair)
Kevin P. Brady(1)
Katie Beirne Fallon
Kathy Hopinkah Hannan(2)
E. Wayne Nordberg(1)
Donnell A. Segalas

Number of Meetings in
2018:3

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 Director retirement policies, management succession plans and potential conflicts of interest of Board members and senior management, and recommends changes as appropriate

Each member of the NCG Committee is independent of the Company and management under the applicable listing standards of the NYSE.

For more information on the NCG Committee’s responsibilities and activities, see the “Director Nomination Process,” “Director Criteria and Qualifications,” “Board Refreshment and Diversity” and “Stockholder Recommendation of Director Candidates” section of this Proxy Statement.


Corporate Responsibility Committee(3)

Committee Members:
Jonathan D. Green(Chair)
Francine J. Bovich
Wellington J. Denahan
Katie Beirne Fallon
Donnell A. Segalas

Number of Meetings
in 2018:2

Key Responsibilities:
Assists the Board in its oversight of the Company’s items of corporate responsibility, including:
■corporate philanthropy
■social impact investments
■sustainability initiatives
■corporate culture and reputation
■public policy initiatives
For more information on the formation of the Corporate Responsibility Committee, see the “Corporate Responsibility” section of this Proxy Statement.


Risk Committee

Committee Members:
John H. Schaefer(Chair)
Kevin P. Brady(1)
Wellington J. Denahan
Jonathan D. Green
Thomas Hamilton(4)
Michael Haylon

Number of Meetings
in 2018:4

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 risk, compliance, regulatory and legal risk and such other risks as necessary to fulfill the committee’s duties and responsibilities
■risk appetite, including risk appetite levels and capital adequacy and limits
■practices and policies related to cybersecurity (together with the Audit Committee)
For more information on the Risk Committee’s responsibilities and activities, see the “Board Oversight of Risk” section of this Proxy Statement.

Note: For footnoted information, please refer to “NCG Committee, Corporate Responsibility Committee
& Risk Committee” in Endnotes section.

30Annaly Capital Management Inc. 2019 Proxy Statement

Table of Contents

Board Structure and Processes

Director Attendance

During 2018, the Board held 14 meetings. All Directors attended at least 75% of the aggregate number of meetings of the full Board and the committees on which they served, during the period in which they served, in 2018.

The Company expects each member of the Board in conformance with established policies. For the six months ended June 30, 2020 prior to attend the Annual Meeting. Allclosing of the Internalization, reimbursement payments to the Former Manager were $14.2 million. None of the reimbursement payments were attributable to compensation of the Company’s then-Directors attended Annaly’s 2018 annual meetingexecutive officers.

The Former Manager

The Former Manager is a Delaware limited liability company and, until the closing of stockholders (the “2018 Annual Meeting”). Dr. Hannan and Mr. Hamilton were elected as Directors effective February 13, 2019 and March 6, 2019, respectively, and therefore did not attend the 2018 Annual Meeting.Internalization, was indirectly owned by certain members of the Company’s management. The Company acquired the Former Manager in connection with the Internalization, which closed on June 30, 2020.

Compensation of DirectorsCOMPENSATIONOF DIRECTORS

The Company compensates the Non-ExecutiveNon-Employee Directors. Any Director who is also an employeeexecutive officer or owner of the Manageremployee does not receive compensation for serving on the Board. The CompensationMDC Committee is responsible for reviewing, and recommending to the Board, the form and amount of compensation paid to the Non-ExecutiveNon-Employee Directors.

The annual compensation elements paid to the Non-ExecutiveNon-Employee Directors for service on the Board and its standing committeesCommittees for 20182020 are set forth below:

Annual Compensation ElementAmount
Annual Cash RetainerCompensation Element  $100,000Amount

Annual Cash Retainer

$100,000

Deferred Stock Unit (“DSU”) Grant

$135,000145,000 in DSUs

Lead Independent Director Retainer$30,000

Independent Board Chair Retainer

$30,000

Vice Chair Retainer

$10,000

Committee Member Retainer

$8,00010,000 – all Board Committees

Committee Chair Retainer(1)

$20,000 – Audit Committee

$10,000 – all other Board Committees

____________________

1.

Committee Chairs receivedreceive Committee Chair Retainers in addition to, and not in lieu of, Committee Member Retainers.

Each DSU is equivalent in value to one share of the Company’s common stock. DSUs are granted on the date of the annual stockholder meeting and vest immediately. DSUs convert to shares of the 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. The Independent Directors are also eligible to receive other stock-based awards under the Company’s equity incentive plan.2020 Equity Incentive Plan, which includes certain limits on awards to Non-Employee Directors.

The Company reimburses the Directors for their reasonable out-of-pocket travel expenses incurred in connection with their attendance at full Board and committeeCommittee meetings.

Director Stock Ownership GuidelineGuidelines

In 2016, the Board increased the

The stock ownership guidelineguidelines for the Independent Directors to provideprovides that each Independent Director should strive to own an amount of the 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, the Board has adopted and implemented a “retention ratio” that requires IndependentNon-Employee Directors to retain and hold 50% of the net profit shares from DSUs until the specified ownership level is achieved. As of December 31, 2018,the date of this proxy statement, all of the IndependentNon-Employee Directors had met or were on their way to meeting their stock ownership guideline.

The stock ownership guideline
for Independent Directors is 5x
the annual cash retainer


Annaly Capital Management Inc. 2019 Proxy Statement31

Table of Contents

Board Structure and Processes

Role of the Independent Compensation Consultant

During 2018,2020, the CompensationMDC Committee retained an independent compensation consultant, Frederic W. Cook & Co. (“F. W. Cook”), to assist the CompensationMDC Committee in its review of the compensation provided to the Non-ExecutiveNon-Employee Directors. F.W. Cook provides market research and analyses on Director compensation programs and proposals, including reviews of competitive market trends and design practices and relevant peer and market benchmarking. The CompensationMDC Committee considered F. W. Cook’s independence in light of SEC regulations and NYSE listing standards. The CompensationMDC Committee discussed all relevant factors and concluded that no conflict of interest exists that would prevent F. W. Cook from independently representing the CompensationMDC Committee.

Director Compensation

The table below summarizes the compensation paid by the Company to the Non-ExecutiveNon-Employee Directors for the fiscal year ended December 31, 2018.2020.

Name(1)Fees Earned or
Paid in Cash
($)		Stock
Awards(2)
($)		Total
($)
Francine J. Bovich   126,000   135,000   261,000
Kevin P. Brady144,000135,000279,000
Wellington J. Denahan116,000135,000251,000
Katie Beirne Fallon116,000135,000251,000
Jonathan D. Green(3)182,000135,000317,000
Michael Haylon(3)124,000135,000259,000
E. Wayne Nordberg(3)132,000135,000267,000
John H. Schaefer134,000135,000269,000
Donnell A. Segalas(3)142,000135,000277,000
Vicki Williams116,000135,000251,000
____________________

Name(1)  Fees Earned or
Paid in Cash
($)		   Stock
Awards(2)
($)		   Total
($)		 

 

 

Francine J. Bovich

   140,000        145,000    285,000 
  

Wellington J. Denahan(3)

   147,500        145,000    292,500 
  

Katie Beirne Fallon

   127,500        145,000    272,500 
  

Jonathan D. Green(4)

   75,000        —      75,000 
  

Thomas Hamilton

   127,500        145,000    272,500 
  

Kathy Hopinkah Hannan(3), (5)

   167,500        145,000    312,500 
  

Michael Haylon(3)

   170,000        145,000    315,000 
  

John H. Schaefer(5)

   155,000        145,000    300,000 
  

Donnell A. Segalas(5)

   150,000        145,000    295,000 
  

Vicki Williams(5)

   130,000        145,000    275,000 
  

1.Dr. Hannan and

Compensation information for Mr. Hamilton wereVotek, including fees earned for serving as a Non-Employee Director following his retirement as an executive of the Company on August 31, 2020, is set forth in the Summary Compensation Table below. Mr. Reeves was elected to the Board effective February 13, 2019 and March 6, 2019, respectively,19, 2021 and did not receive any compensation for the fiscal year ended DecembertDecember 31, 2018.2020.

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 the 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.

3.

The amount in the “Fees Earned or Paid in Cash ($)” column includes fees earned for service on a special committee of the Board established to identify a permanent CEO (the “CEO Search Committee”). The fees include a retainer in the amount of $10,000 for each CEO Search Committee member and an additional retainer in the amount of $10,000 for the CEO Search Committee chair Mr. Haylon.

4.

Mr. Green served on the Board through May 20, 2020, the date of the Company’s 2020 Annual Meeting.

5.

The amount in the “Fees Earned or Paid in Cash ($)” column includes fees earned for service on a special committee of the Board established to evaluate changesoptions related to the terms of the Management Agreement and related agreements.Internalization (the “Internalization Committee”). The fees include a retainer in the amount of $8,000$10,000 for each special committeeInternalization Committee member and an additional retainer in the amount of $10,000 for the special committeeInternalization Committee chair Mr. J. Green.Schaefer.

The following table sets forth information with respect to the aggregate unexercised option awards at December 31, 2018 of each of the Non-Executive Directors. All such option awards have vested. Options are no longer granted as part of the Company’s Non-Executive Director compensation program.

Name(1)Unexercised
Option Awards
at 12/31/18
Kevin P. Brady12,500
Jonathan D. Green50,000
Michael Haylon50,000
E. Wayne Nordberg50,000
Donnell A. Segalas37,500
____________________
1.Ms. Bovich, Ms. Denahan, Ms. Fallon, Mr. Schaefer and Ms. Williams did not hold any unexercised option awards at December 31, 2018. Dr. Hannan and Mr. Hamilton were elected to the Board effective February 13, 2019 and March 6, 2019, respectively.

32Annaly Capital Management Inc. 2019 Proxy Statement

Table of Contents

ManagementExecutive Officers

The following table sets forth certain information with respect to the Company’s executive officers, all of whom are indirect owners and/or employees of the Manager:officers:

NameAgeTitle
Kevin G. KeyesName  51Age  Chairman,

Title

  David L. Finkelstein

48

Chief Executive Officer and PresidentChief Investment Officer

Glenn A. Votek
60

  Serena Wolfe

41

Chief Financial Officer

David L. Finkelstein
46

  Steve F. Campbell

49

Chief Operating Officer

Chief Investment Officer

Timothy P. Coffey

45

47

Chief Credit Officer

  Ilker Ertas

50

Head of Securitized Products

Anthony C. Green

44

46

Chief Corporate Officer, Chief Legal Officer and Secretary

Biographical information on Mr.  KeyesFinkelstein is provided above under the heading “Election“Election of Directors.Directors.” Certain biographical information for Ms. Wolfe and Messrs. Votek, Finkelstein,Campbell, Coffey, Ertas and Green is set forth below.

Glenn A. VotekSerena Wolfehas served as Chief Financial Officer of Annalythe Company since August 2013. Mr. Votek alsoDecember 2019. Prior to joining the Company in 2019, Ms. Wolfe served as Chief Financial Officer of Fixed Income Discount Advisory Company, a former wholly-owned subsidiary of the Company, from August 2013 until October 2015Partner at Ernst & Young LLP (“EY”) since 2011 and as Annaly’s Chief Administrative Officerits Central Region Real Estate Hospitality & Construction (“RHC”) leader from May 2013 until August 2013. Mr. Votek joined Annaly in May 2013 from CIT Group where he2017 to November 2019, managing the go-to-market efforts and client relationships across the sector. Ms. Wolfe was an Executive Vice Presidentpreviously also EY’s Global RHC Assurance Leader. Ms. Wolfe practiced with EY for over 20 years, including six years with EY Australia 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 Economics16 years with the U.S. practice. Ms. Wolfe graduated from the University of Arizona/Kean CollegeQueensland with a Bachelor of Commerce in Accounting. She is a Certified Public Accountant in the states of New York, California, Illinois and a M.B.A. in Finance from Rutgers University.Pennsylvania.

David L. FinkelsteinSteven F. Campbell has served as Chief InvestmentOperating Officer of Annaly since November 2016.June 2020. Prior to this position, Mr. Finkelstein previouslyCampbell served as Annaly’s Chief Investment Officer, Agency and RMBS beginning in February 2015 anda number of other senior roles at Annaly, including as Annaly’s Head of Agency Trading beginning in August 2013. PriorBusiness Operations from September 2019 to joiningJune 2020, Head of Credit Operations and Enterprise Risk from February 2018 to September 2019, Chief Operating Officer of Annaly Commercial Real Estate Group from December 2016 to February 2018 and Head of Credit Strategy from April 2015 to February 2018. 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. FinkelsteinCampbell has over 20 years of experience in fixed income investment.financial services. Prior to joining Annaly in 2015, Mr. Campbell held various roles over six years at Fortress Investment Group LLC, including serving as a Managing Director in the Federal Reserve Bank of New York,Credit Funds business. Prior to that, Mr. FinkelsteinCampbell held Agency MBS trading positions at Salomon Smith Barney, Citigroup Inc.General Electric Capital Corporation and Barclays PLC.D.B. Zwirn & Co, L.P. with a focus on credit and debt restructuring. Mr. FinkelsteinCampbell received his B.A. in Business Administrationa B.B.A. from the University of WashingtonNotre Dame and hisa M.B.A. from the University of Chicago, Booth School of Business. Mr. Finkelstein also holds the Chartered Financial Analyst®designation.

Timothy P. Coffeyhas served as Chief Credit Officer of Annalythe Company since January 2016. Mr. Coffey served as Annaly’sthe Company’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 Annalythe Company 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,Previously, 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.University

Ilker Ertas has served as Head of Securitized Products at Annaly since February 2019. Prior to this position, Mr. Ertas served in a number of other senior roles at Annaly, including as Head of RMBS Portfolios from February 2018 to February 2019, Head of Trading from February 2017 to February 2018, Head of Asset Trading from October 2016 to February 2017 and Managing Director, Agency & Residential Credit from June 2015 to October 2016. Mr. Ertas has 20 years of experience in U.S. fixed income markets. Prior to joining Annaly in 2015, Mr. Ertas was at Citigroup Inc., where he was most recently a Managing Director and Head of Mortgage Derivatives Trading. Mr. Ertas has also held mortgage trading positions at Barclays PLC and Lehman Brothers Holdings Inc. Mr. Ertas received a B.S. in Industrial Engineering from Bogazici University in Istanbul, Turkey and a M.B.A. from the Yale School of Management.

Anthony C. Greenhas served as Chief Corporate Officer of Annalythe Company since January 2019 and as Chief Legal Officer and Secretary of the Company since March 2017. Mr. Green previously served as Annaly’sthe Company’s Deputy General Counsel from 2009 until February 2017. Prior to joining Annaly,the Company, Mr. Green was a partner in the Corporate, Securities, Mergers & Acquisitions Group at the law firm K&L Gates LLP. Mr. Green has over 1920 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.

Stock Purchases by Executive Officers Since 2011Compensation Discussion and Analysis

Since 2011,This Compensation Discussion and Analysis describes the executive officers have purchased approximately 1.5 million shareskey features of the Company’s common stock (including open market purchasesexecutive compensation program and dividend reinvestments) with an aggregate purchase price of approximately $16.5 million as set forththe Management Development and Compensation Committee’s approach in deciding compensation for the table below.Company’s named executive officers (“NEOs”) for performance in 2020:

Executive Officer     Shares
Purchased		     Purchase
Price(1)





  		No NEO has ever
sold shares of
the Company’s
common stock
Kevin G. Keyes934,779$10,560,000
Glenn A. Votek104,846$1,135,000
David L. Finkelstein300,000$3,371,000
Timothy P. Coffey30,000$304,000
Anthony C. Green101,000$1,085,000
TOTAL1,470,624$ 16,455,000
____________________

1.Rounded to the nearest thousand.

NEO Name  Annaly Capital Management Inc. 2019 Proxy StatementTitle

33

David L. Finkelstein

Chief Executive Officer (effective March 2020) and Chief Investment Officer

 

Table of Contents

Management Structure

Overview

The Company has been externally-managed by the Manager since 2013. Pursuant to the terms of the Management Agreement, the Company pays the Manager a management fee and the Manager determines the compensation of its employees, including the NEOs other than Mr. Keyes(1). The Compensation Committee annually reviews the management fee and the performance of the Manager, including the achievements discussed beginning on page 3. 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, including the management fee reduction discussed under “Recent Changes,” the Independent Directors believe that the Management Agreement continues to be in the best interests of the Company. 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.”
The Management Agreement
compares favorably to the
management agreements of
the Company’s externally-
managed peers


Recent Changes

From the inception of the Company's management externalization transaction (the “Externalization”) in 2013 through March 2019, the Company paid the Manager a flat monthly management fee for its management services equal to 1/12thof 1.05% of Stockholders’ Equity(2). In March 2019, the Manager and the Company amended the Management Agreement for the sole purpose of reducing the monthly management fee on Incremental Stockholders’ Equity(3). Pursuant to this amendment, which recognizes the efficiencies that have been gained with scale, the Company pays the Manager a monthly management fee equal to 1/12thof the sum of: (i) 1.05% of Base Stockholders’ Equity(4), and (ii) 0.75% of Incremental Stockholders’ Equity(3). In addition to the management fee, the Company continues to reimburse the Manager for certain legal, tax, accounting and other support and advisory services provided by employees of the Manager to the Company as permitted pursuant to the terms of the Management Agreement.

Management Agreement Terms

The Compensation Committee believes that the terms and conditions of the Management Agreement, including the recent reduction to the management fee, compare favorably to the terms and conditions that exist between Annaly’s externally-managed mREIT peers and their respective managers. In particular, as illustrated by the table below(5), when compared to the median for the peer comparison, (i) the tiered management fee paid to the Manager is lower as a percentage of stockholders’ equity and (ii) the term of the Management Agreement is of a shorter duration.

MeanMedianMinMaxAnnaly
Agency Residential REITs     
Base management fee(6)     1.28%     1.28%     1.20%     1.36%     1.05%
Initial term in years6.06.02.010.02.0
Incentive feeNoneNoneNoneNoneNone
Commercial REITs
Base management fee1.50%1.50%1.50%1.50%1.05%
Initial term in years2.83.02.03.02.0
Incentive fee(7)20%
above
8% hurdle		20%
above
8% hurdle		None25%
above
8% hurdle		None
Non-Agency Residential/Hybrid REITs     
Base management fee1.49%1.50%1.41%1.50%1.05%
Initial term in years4.33.01.015.02.0
Incentive fee(8)N/AN/A~15%
above
~12%
hurdle		35%
above
12.5%
hurdle		None

Note: For footnoted information, please refer to “Overview, Recent Changes & Management Agreement Terms” in Endnotes section.

34Annaly Capital Management Inc. 2019 Proxy Statement 

Table of Contents

Management Structure

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 Manager 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 tiered management fee formulated as a percentage of Stockholders’ Equity(1)represents a responsible and prudent method of compensating the 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 Manager 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 page 35) 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 because realized losses decrease such equity and, ultimately, the management fee.

Additionally, for the Manager to earn a larger management fee, Stockholders’ Equity would need to increase. As a result, the growth of Stockholders’ Equity aligns 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.
The Compensation Committee
annually reviews the structure
and amount of the management
fee to determine whether it
appropriately incentivizes the
management team

Serena Wolfe



In March 2019, the Manager and the Company reduced the monthly management fee on Incremental Stockholders’ Equity(2). The Compensation Committee believes that the introduction of a tiered management fee structure recognizes and accounts for the efficiencies that can be gained with scale.

The Compensation Committee also believes that the structure of the management fee is more favorable to the Company’s stockholders than if the 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-term incentive payouts.

In addition to the management fee, in August 2018, following the unanimous approval of the Independent Directors, the Company began reimbursing the Manager for certain legal, tax, accounting and other support and advisory services provided by employees of the Manager to the Company. These reimbursements (which totaled $9.2 million for 2018) are permitted pursuant to the terms of the Management Agreement provided the related costs are no greater than those that would be payable to comparable third party providers.

Clawback for the Management Fee

Pursuant to the Management Agreement, the Company is entitled to receive reimbursement from the 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 the Manager.

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 and related expenses the Company paid for the fiscal years ended December 31, 2013(3)through December 31, 2018 against the estimated compensation costs (including tax costs) the Company would have paid for the same period if those costs remained what they were in 2012, management estimates that the Externalization has resulted in total compensation savings, including tax savings, (calculated in accordance with GAAP) of approximately $300 million.
The Company estimates that the
Externalization has resulted in total
compensation savings, including
tax savings, of approximately
$300 million

Note: For footnoted information, please refer to “Structure and Amount of the Management Fee &
Continued Cost Savings Related to the Externalization” in Endnotes section.

  Annaly Capital Management Inc. 2019 Proxy Statement35

Chief Financial Officer

 

Table of Contents

Management Structure

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”.

The Compensation Committee also reviews the Company’s total operating expenses (including the management fee and related expenses), as a percentage of both average assets and average stockholders’ equity. The Compensation Committee believes these ratios, which allow comparison of the Manager’s performance against the Company’s internally- and externally-managed mREIT peers, measure the extent to which the Manager operates in an economically efficient manner.

Operating Expense as a Percentage of Average Assets(1)
  
2012     2013     2014     2015     2016     2017     2018   Average
0.19%0.22%0.24%0.25%0.25%0.25%0.26%0.24%
Internally-Managed
Peers		0.54%1.05%0.87%0.72%0.37%0.44%0.46%0.64%
Externally-Managed
Peers		0.67%0.63%0.75%0.81%0.74%0.74%0.88%0.75%
mREIT Index0.62%0.74%0.77%0.80%0.60%0.62%0.63%0.68%

Operating Expense as a Percentage of Average Equity(1)
2012     2013     2014     2015     2016     2017     2018   Average
1.45%1.66%1.61%1.58%1.65%1.68%1.85%1.64%
Internally-Managed
Peers		2.71%3.95%3.92%3.68%2.14%2.10%2.36%2.98%
Externally-Managed
Peers		2.38%3.06%3.55%3.82%4.36%4.00%4.54%3.67%
mREIT Index2.33%3.30%3.62%3.80%3.53%3.25%3.29%3.25%

In its review of these operating expense ratios, the Compensation Committee noted that the Company has outperformed both its internally- and externally-managed mREIT peers over the last seven fiscal years. In this regard, the Compensation Committee has viewed the Company’s performance as an indicator that, among other things, the Manager has managed the Company in a comparatively efficient manner with appropriately scaled operating costs (including the management fee).

Note: For footnoted information, please refer to “Annual Review of Manager Performance and
Management Fee Considerations” in Endnotes section.

36Annaly Capital Management Inc. 2019 Proxy Statement 

Table of Contents

Compensation Paid by the Manager to the Named Executive Officers

Named Executive Officers

The NEOs for 2018 are:

NameTitle
Kevin G. Keyes

Timothy P. Coffey

  Chairman, Chief Executive Officer and President
Glenn A. VotekChief Financial Officer
David L. FinkelsteinChief Investment Officer
Timothy P. Coffey

Chief Credit Officer

Ilker Ertas

Head of Securitized Products

Anthony C. Green

Chief Corporate Officer, Chief Legal Officer and Secretary

Glenn A. Votek

Former Senior Advisor (March 2020 – August 2020)

Former Interim CEO and President (November 2019 – March 2020)

This discussion is divided into four topics: (1)  Executive Summary, (2) How Executive Compensation Decisions are Made, (3) Executive Compensation Design and Award Decisions for 2020, and (4)  Executive Compensation Policies.

EXECUTIVE SUMMARY

Introduction

As discussed above in “Management Structure,”2020 was a transformational year for the Company is externally managedon a number of fronts. Prior to last year, the Company had been externally-managed by Annaly Management Company LLC (the “Former Manager”) since July 2013. As an externally-managed REIT, the Company had paid the Former Manager a monthly cash management fee and the Former Manager (rather than the Company) had employed and compensated the Company’s management team (including the NEOs). During this time, the Compensation Committee of the Board had oversight of the management fees paid by the Company to the Former Manager, but the Compensation Committee did not have oversight, direction or guidance in respect of the compensation paid by the Former Manager to the NEOs.

In February 2020, the Company entered into an agreement (the “Internalization Agreement”) to acquire its Former Manager and paystransition from an externally-managed REIT to an internally-managed REIT (the “Internalization”). At the Manager a management fee,same time, the purposeCompany entered into employment agreements and/or severance rights agreements with certain of which is not to provide compensation toits NEOs that would become effective upon the closing of the Internalization when the NEOs but rather to compensate the Manager for the services it provides for the day-to-day managementwould become employees of the Company. The proceedsexecutive employment agreements, severance rights agreements and the Internalization Agreement were negotiated by a special Board committee comprised exclusively of Independent Directors that had been formed to consider such transactions. The employment agreements, which initially included minimum guaranteed bonus amounts for 2020, reflected the management fee are used by the Manager in part to pay compensationimportance to the NEOs other thanBoard of retaining the Company’s senior management team through and beyond the Internalization during a time when the Company was also conducting a search process to identify a permanent CEO.

The Company appointed Mr. Keyes (who does not receive any compensation for servingFinkelstein as the Company’s Chairman,permanent Chief Executive Officer (“CEO”) in March 2020 and the Company’s Interim CEO and President but has an interestMr. Votek transitioned to the role of Senior Advisor to the Company. Mr. Votek retired as Senior Advisor in August 2020 and currently serves as a Non-Employee Director. Given the management fee as an indirect equityholdertemporary nature of Mr. Votek’s executive roles in 2020, this Compensation Discussion & Analysis primarily focuses on compensation decisions in respect of the Manager)Company’s current active NEOs. (For a discussion of the compensation paid to Mr. Votek in 2020, please refer to the section titled “Compensation Paid to the Former Interim CEO and President” below.)

The Compensation Committee of the Board assumed responsibility of the Company’s executive compensation program and broad oversight of its human capital management upon the closing of the Internalization on June 30, 2020. To reflect its new and expanded mandate, the Compensation Committee’s name was changed to the Management Development and Compensation Committee (the “MDC Committee”). As an externally-managed issuer,described below, the MDC Committee is committed to institutionalizing a market competitive executive compensation program that incentivizes strong performance, drives alignment with stockholders and reflects best practices, market insights

and robust governance. This commitment is reflected by the significant changes to the executive compensation program in 2020, as well as the additional compensation enhancements adopted by the MDC Committee for 2021.

Executive Compensation Prior to the Internalization

Prior to July 1, 2020, the Company does not determinewas externally-managed by the Former Manager. Until such time, the Former Manager paid all compensation, including benefits, to its employees (including the NEOs). The Former Manager also made all compensation determinations for its employees (including the NEOs) without any direction by the MDC Committee or the Board and without reference to any specific policies or programs under their oversight. Thus, the compensation payablepaid by the Former Manager to its employees who served as the Company’s NEOs doesfrom January 1, 2020 through June 30, 2020 (other than a one-time equity award made by the Board to the former Interim CEO and President, which vested on the appointment of a permanent CEO in March 2020) was not al-locate any specific portionpart of the management fee it pays toCompany’s executive compensation program and was not paid or awarded by the compensation of the NEOs, and does not reimburse the Manager for the cost of such compensation. Aside from a severance agreement directly between the Company and Mr. Keyes and the ability of the Compensation Committee to grant plan-based equity awards to the NEOs (which it has not exercised since the Externalization), the Manager makes all decisions relating to compensation it pays to the NEOs based on the factors, including individual and Company performance, it determines to be appropriate and subject to any employment agreements entered into between the Manager and individual NEOs.

The Manager’s Executive Compensation Program

InCompany. However, in order to enable the Company’s stockholders to make an informed Say-on-Pay vote the Manager has provided the following information about theand to provide a complete picture of all compensation it paid or awarded to the NEOs for 2018:2020, the Company is disclosing executive compensation for 2020 paid or awarded by both the Former Manager and the Company in this proxy statement. See “2020 Total Direct Compensation Table” later in this discussion.

Executive Compensation Following the Internalization

In connection with the signing of the Internalization Agreement in February 2020, the Company entered into new employment agreements with Ms. Wolfe and Messrs. Finkelstein, Coffey and Green. In March 2020, Mr. Finkelstein’s agreement was superseded by a new employment agreement that reflected his promotion to the role of the CEO. These employment agreements, which became effective upon the closing of the Internalization, had been designed to retain the Company’s leadership team during a uniquely transformative period and originally included minimum guaranteed bonus amounts for 2020 (and for 2021 in the case of Ms. Wolfe, who first joined the Former Manager in December 2019), along with one-time equity awards for each of Messrs. Finkelstein, Coffey and Green that were granted upon the closing of the Internalization. The MDC Committee considered the form and amount of these Internalization awards, which were granted to provide immediate alignment of the interests of the Company’s long-term NEOs with the interests of the Company’s stockholders, when determining Messrs. Finkelstein’s, Coffey’s and Green’s total annual incentive compensation for 2020. In November 2020, the Company and each of Ms. Wolfe and Messrs. Finkelstein, Coffey and Green entered into an amended and restated employment agreement to remove their respective minimum guaranteed bonuses, which the MDC Committee believes better aligns the Company’s executive compensation program with stockholder interests and governance best practices for an internally-managed REIT.

Messrs. Finkelstein’s, Coffey’s and Green’s employment agreements expired following payment of their 2020 incentive awards in early 2021. As of the date of this proxy statement, only Ms. Wolfe is party to an employment agreement with the Company. Ms. Wolfe’s employment agreement will expire following payment of her 2021 incentive award in early 2022. The extended term of Ms. Wolfe’s employment agreement was necessary to recruit her to the Company and is consistent with the term of the employment agreement Ms. Wolfe had entered into with the Former Manager prior to joining the Company in December 2019. Going forward, the Company does not intend for NEOs to be covered by employment agreements except when needed for recruitment or retention purposes.

Further Executive Compensation Enhancements for 2021

To further the alignment of our executive compensation program with the interests of our stockholders and support the firm’s ownership culture, the MDC Committee is making additional enhancements for 2021, including:

■∎The portion

For the CEO, increasing the relative weighting 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.

Summary of 2018 NEO Compensation

■With the exception of Mr. Keyes(1), each of the other NEOs received a base salary and a performance-based incentive bonus for 2018.
■With respect to 2018,(2) the NEOs as a group received aggregate salaries of $3.0 million and aggregate performance-based incentive bonuses of $28.7 million from the Manager. These amounts collectively represent 16.8% of the aggregate management fees and reimbursements the Company paid to the Manager for 2018. On an aggregated basis, the NEOs received 9.5% of their total compensation in the form of base salaries and the remaining 90.5% in the form of performance-based incentive bonuses.
■In determining the cash bonuses it paid to the NEOs for 2018, the Manager considered achievement of both rigorous Company performance metrics(3), including core return on equity core return on assets and operating expenses as a percentage of average equity andtotal target compensation opportunity to approximately 50%

∎

For all NEOs, increasing the proportion of PSUs as a percentage of average assets, alongtotal equity compensation (with a majority of the NEOs, including the CEO, at approximately 50% for 2021 and all NEOs at approximately 50% for 2022)

∎

Reducing discretion and providing for a more formulaic approach to determining NEO annual incentive opportunities with group75% based on corporate/organizational metrics and 25% based on individual performance objectives.metrics

■

–  Increasing the proportion of objective financial metrics as a percentage of corporate/organizational metrics from 50% to 60%

Philosophy and Program Objectives

The MDC Committee’s compensation philosophy seeks to institutionalize the Internalization’s objective to align the interests of the Company’s employees with those of its stockholders and is driven by the following principles:

The Manager considered a list∎

Pay for Performance: A significant portion of specified peer companies (set forth below under “Company Market Data”), togetherexecutive officer compensation should vary with advice frombusiness performance;

∎

Create Long-Term Stockholder Value: Equity incentive awards should have multi-year vesting and performance periods;

∎

Support Risk Management: Compensation policies and practices should reflect the Manager’s compensation consultantsCompany’s risk management culture;

∎

Attract, Retain and counsel,Incentivize Top Talent: Compensation packages should be market-competitive to develop appropriate compensation packagesfacilitate hiring, retaining and motivating high-performing executives; and

∎

Reinforce our Culture and ESG Priorities: Compensation programs should incorporate our ESG goals and align leadership with our firm culture and values.

2020 Business Performance Highlights(1)

Investment Strategy & Performance

Annaly delivered strong results due to its well-positioned investment portfolio amidst pandemic-related
economic uncertainty

Total
Assets(2)

Capital Allocation

Economic Return

Q4’20 / FY 2020

Total Shareholder Return Since
Annaly’s IPO(3)

$101.6bn

78%

Agency

22%

Credit

5.1% / 1.8%LOGO

∎ Annaly generated core earnings(4) of $1.10per average share of common stock for the NEOs.year, which is $0.19 in excess of the dividend

∎ Portfolio continues to be well-positioned to generate attractive returns with strong focus on Agency MBS

–  $95 billion in highly liquid Agency portfolio, representing 93% of total assets(2)

∎ Credit businesses conservatively positioned with low leverage and limited exposure to industries most affected by COVID-19

–  Full-year credit originations of$2.4 billionwere down nearly 50% year-over-year given cautious approach to underwriting

Note: For footnoted information, please refer to “Summary of 2018 NEO Compensation”“2020 Business Performance Highlights” in Endnotes section.

Financing, Capital and Liquidity

Fortified our balance sheet by reducing leverage, increasing liquidity, lowering our cost of capital and diversifying financing

∎ Economic leverage reduced to 6.2x from 7.2x in the prior year

∎$8.7 billion of unencumbered assets, including cash and unencumbered Agency MBS of $6.3 billion

∎ Achieved lowest cost of financing in a decade, with average economic cost of interest bearing liabilities(1)declining 114bps to 0.87% for Q4 2020 compared to Q4 2019

∎Repurchased $209 millionin shares of common stock during the year(2)

∎Redeemed all outstanding shares of the $460 million, 7.50% Series D Cumulative Redeemable Preferred Stock, reducing preferred equity as a percentage of our capital structure to 11%, which is line with our historical average over the last ten years

∎ Added $1.125 billion of capacity across two new credit facilities for Annaly Residential Credit Group

∎ Completed five residential whole loan securitizations totaling $2.1 billion since the beginning of 2020, bringing aggregate issuance to more than $5.3 billionsince the beginning of 2018(3)

LOGO

Operational Efficiency

Annaly’s Internalization provides an opportunity for incremental cost control and operating flexibility

∎  Demonstrated improved cost efficiency metrics in the second half of the year following the completion of the Internalization

Operating Expense (“OpEx”) as % of Equity

∎  Annaly’s operating expense was 1.62%for the year,4.2x and 2.1x more efficient than externally-managed peers and internally-managed peers, respectively(4)

LOGO

Note: For footnoted information, please refer to “Financing, Capital and Liquidity & Operational Efficiency ” in Endnotes section.

Evolution of Compensation Framework

While 2020 represents a transitional year for the Company’s executive compensation program, the MDC Committee is proud of the significant steps taken to re-design this program for 2020 and is focused on continually enhancing the Company’s compensation framework to reflect strong compensation governance and reward sustained value creation, as reflected by the additional compensation enhancements adopted by the MDC Committee for 2021.

EVOLUTION OF EXECUTIVE COMPENSATION IN 2020

∎ Introduced equity incentives for executives, which represents a significant transition from the Former Manager’s all-cash compensation structure

∎ Amended and restated executive employment agreements to remove minimum guaranteed bonus amounts

∎ Introduced a balanced corporate performance scorecard into the MDC Committee’s framework for determining annual incentive opportunities, consisting of:

–  Objective financial performance goals (Relative Economic Return, Absolute Core Return on Equity and Operating Efficiency) weighted at 50%

–  Performance on key risk indicators weighted at 20%

–  Other performance measures (mix of Stakeholder (including total shareholder return metrics), People and Innovation goals) weighted at 30%

∎ Adopted robust NEO stock ownership requirements and holding restrictions

∎ Adopted enhanced clawback policy for NEOs’ incentive compensation, which includes triggers for accounting restatement and misconduct

FURTHER EXECUTIVE COMPENSATION ENHANCEMENTS FOR 2021

∎ For the CEO, increased the relative weighting of equity as a percentage of total target compensation opportunity to approximately 50%

∎ For all NEOs, increasing the proportion of PSUs as a percentage of total equity compensation (with a majority of the NEOs, including the CEO, at approximately 50% for 2021 and all NEOs at approximately 50% for 2022)

∎ For PSUs granted in January 2021 for performance in 2020, added a Total Stockholder Return governor to the portion of the awards tied to Relative Economic Return, which provides that the percentage of applicable target PSUs earned will be capped at 100% if Total Stockholder Return for the three-year performance period is negative

∎ Reduced discretion and provided for a more formulaic approach to determining NEO annual incentive opportunities for performance in 2021 with 75% based on corporate/organizational metrics and 25% based on individual metrics

– Objective financial performance goals (Relative Economic Return, Absolute Core Return on Equity and Operating Efficiency) weighted at 60% (up from 50% in 2020)

Components of Executive Compensation

The primary components of the Former Manager’s cash-only executive compensation framework included a base salary and a performance-based cash bonus. In connection with the Internalization, the Company introduced equity incentive awards to this framework to better align executive and stockholder interests, link executive compensation to Company performance and support the Company’s ownership culture. The table below describes the objectives supported by the Company’s primary compensation elements for 2020 – commonly referred to as “total direct compensation,” along with an overview of the key measures and governance principles for each element.

2020 Compensation
Element

Objectives

Key Measures

Governance Principles

Base salary

∎ Provide a level of fixed pay appropriate to an NEO’s roles and responsibilities

∎ Experience, duties and scope of responsibility

∎ Internal and external market factors

∎ Comprises minority of overall compensation opportunity compared to “at risk” pay

Annual Cash Incentives

∎ Provide a market competitive annual cash incentive opportunity

∎ Incentivize and reward superior Company and individual performance

∎ Considers achievement of financial, risk and other operational performance measures

∎ No guaranteed minimum award amounts

Long-Term Equity Incentives

∎ Align NEO’s interests with long-term stockholder interests

∎ Encourage long-term, sustainable performance results

∎ Support retention of key talent

∎ Award amounts included as part of annual incentive consider achievement of financial, risk and other operational performance measures for the performance year

∎ PSUs vest based on achievement of multiple rigorous Company performance metrics over a three-year performance period

∎ Restricted stock units (“RSUs”) vest based on continued service and provide both retention and stock value accumulation incentives

∎ No guaranteed minimum award amounts

∎ Provide tailored mix of PSUs and RSUs

∎ Restrict use of one-time equity awards for extraordinary circumstances such as the recent Internalization, and where such awards are made, consider the form and amount when determining an NEO’s total annual incentive compensation

2020 Total Direct Compensation Table

The following table which supplements the Summary Compensation Table on page 53, shows the total direct compensation paid or awarded to each NEO for 2020, including compensation paid by the Former Manager and compensation for 2020 performance that was paid or awarded by the Company in early 2021. The table below is not a substitute for the required information included in the Summary Compensation Table. As discussed above, the Company began compensating the NEOs following the closing of the Internalization on June 30, 2020. Until such time, the Former Manager paid all compensation, including benefits, to the NEOs (other than a one-time equity award made to the former Interim CEO and President, which vested on the appointment of Mr. Finkelstein as our permanent CEO in March 2020). Accordingly, while the Summary Compensation Table only reflects compensation paid or awarded by the Company for 2020, the total direct compensation table below reflects the total direct compensation paid or awarded to the NEOs for 2020 regardless of whether it was paid by us or the Former Manager. Also, in accordance with SEC rules, the Summary Compensation Table includes the grant date fair value of stock awards in the year granted, even if the grant is based on a review of prior year performance. As discussed in more detail below, certain of the RSU and PSU awards granted to the NEOs as part of their annual incentive award for 2020 performance were granted in 2021 after the MDC Committee’s review of 2020 Company and individual performance. Those amounts are shown in the table below because the MDC Committee considered those awards to be part of the NEOs’ overall compensation for performance in 2020, but those amounts are not included in the Summary Compensation Table as 2020 compensation in accordance with SEC rules.

      Awards for 2020 performance

 

      

NEO

  Salary
($) (1)		  Variable cash
awards ($)(2)		  Equity awards
(granted in
2021)
($)(3)		  Special one-
time equity
awards
($)(4)		  Total(5)

David L. Finkelstein

  $950,000  $7,200,000  $1,800,000  $5,000,000  $14,950,000

Serena Wolfe

  $750,000  $2,600,000  $400,000  —  $3,750,000

Timothy P. Coffey

  $750,000  $3,200,000  $600,000  $1,250,000  $5,800,000

Anthony C. Green

  $750,000  $2,800,000  $1,100,000  $500,000  $5,150,000

Ilker Ertas(6)

  $750,000  $3,350,000  $1,000,000  —  $5,100,000

Glenn A. Votek

  $500,000  $3,500,000  —  $1,000,000  $5,000,000

(1)

For each NEO other than Messrs. Finkelstein and Votek, 50% of an executive’s 2020 salary covering the period from January 1, 2020 through June 30, 2020 was paid by the Former Manager with the remaining 50% paid by the Company. Mr. Finkelstein received a salary increase from $750,000 to $1,000,000 in connection with his appointment as CEO effective March 13, 2020. Of Mr. Finkelstein’s total base salary for 2020, the Former Manager paid $450,000 and the Company paid $500,000. Of Mr. Votek’s total base salary, the Former Manager paid $375,000 and the Company paid $125,000.

(2)

For Messrs. Finkelstein, Coffey, Green and Ertas and Ms. Wolfe, these amounts represent the annual cash incentives paid by the Company to the relevant executive for his or her service in 2020 and equal the amounts reported as 2020 compensation in the “Bonus” column of the Summary Compensation Table. Mr. Votek’s partial year cash bonus was paid in two pro-rated installments. The first installment ($2,625,000) covered the period from January 1, 2020 through June 30, 2020 and was paid by the Former Manager in connection with the closing of the Internalization. The second installment ($875,000) covered the period from July 1, 2020 through August 31, 2020 and was paid by the Company at the time of Mr. Votek’s retirement.

(3)

These amounts approximate the dollar value of the RSUs and target PSUs that were granted to the NEOs in early 2021 as part of their annual incentive awards for performance in 2020 (ignoring round to whole units) and are based on the closing price of the Company’s common stock on the date of grant (January 29, 2021). In accordance with SEC rules, these amounts do not appear as 2020 compensation in the Summary Compensation Table. Rather, the grant date fair value for these awards will appear as 2021 compensation in the “Stock Awards” column in next year’s Summary Compensation Table. The breakdown between RSUs and PSUs of equity awards for 2020 performance (granted in 2021) to each executive is set forth in the table below:

NEO

 RSUs PSUs

David L. Finkelstein

 $1,800,000            —

Serena Wolfe

 $   300,000 $100,000

Timothy P. Coffey

 $   100,000 $500,000

Anthony C. Green

 $   650,000 $450,000

Ilker Ertas

 $   750,000 $250,000

(4)

For Messrs. Finkelstein, Coffey and Green, these amounts approximate the grant date fair value for the one-time equity awards granted to each NEO upon the closing of the Internalization (ignoring rounding to whole units), which were considered by the MDC Committee as part of such NEOs’ total annual incentive compensation for 2020. Mr. Finkelstein’s award consisted of an equal mix of RSUs and PSUs. Messrs. Coffey and Green’s awards consisted exclusively of RSUs. The amount for Mr. Votek represents a one-time award of RSUs granted

 Annaly Capital Management Inc. 2019 Proxy Statement37


Table of Contents

Compensation Paid by the Manager to the Named Executive Officers

NEO Compensation Philosophy and Process

The key principle of the Manager’s compensation philosophy for all employees, including the NEOs, is to pay for performance. The Manager maintains a rigorous and thorough talent and compensation review process to ensure that its employees are in appropriate roles that maximize their full potential. This process also ensures that there is strong leadership guiding employees and that there is a succession and development plan for each role. The Manager’s goal is to make employee and leadership development an integral part of its culture, supporting each employee and the continued success of the Company.
The key principleto Mr. Votek for his service as Interim CEO and President, which vested on the appointment of Mr. Finkelstein as the Company’s permanent CEO in light of Mr. Votek’s transition upon such appointment to a temporary Senior Advisor role. These amounts are included as 2020 compensation in the “Stock Awards” column of the Manager’sSummary Compensation, philosophy to pay for performance


The Manager’s NEO compensation planning process incorporates key areas of evaluation including:
■external market data
■internal benchmarking
■quantitative and qualitative assessments of Company, group and individual performance

Individuals are evaluated assesses based on mid-year and year-end manager reviews andwhich includes information about how the utilization of a 9-box talent review model, which assesses individual performance and potential. In establishing and reviewing individual NEO compensation packages, the Manager also considers the nature and scope of each NEO’s role and responsibilities, retention considerations and feedback from stakeholders. The Company utilizes a third party compensation consultant to advise on external benchmarking and other compensation practices (as further described below under “Rolegrant date fair value of the Manager’sawards was determined.

(5)

The breakdown of total direct compensation paid or awarded to each executive by the Company versus the Former Manager is set forth in the table below:

  Total Direct Compensation Paid or Awarded by:

NEO

 Former Manager Company

David L. Finkelstein

 $450,000 $14,500,000

Serena Wolfe

 $375,000 $3,375,000

Timothy P. Coffey

 $375,000 $5,425,000

Anthony C. Green

 $375,000 $4,775,000

Ilker Ertas

 $375,000 $4,725,000

Glenn A. Votek

 $3,000,000 $2,000,000

(6)

Total direct compensation amounts for 2020 for Mr. Ertas do not reflect the grant date fair value (approximately $100,000) of an award of RSUs granted in January 2020 to Mr. Ertas for his performance in 2019 prior to his appointment as an executive officer of the Company. This award is reflected in the “Stock Awards” column of the Summary Compensation Consultants” and “Market Compensation Data”).Table.

NEO Compensation PracticesStockholder Outreach and Results of 2020 Say-on-Pay Vote

At the Company’s 2020 Annual Meeting, approximately 96% of the votes cast voted in favor of the advisory resolution on executive compensation (commonly known as a “Say-on-Pay” vote). The Manager’s pay-for-performance philosophy is reflectedMDC Committee carefully reviewed these voting results, along with additional feedback from the Company’s stockholder engagement efforts, when making executive compensation decisions. Since the announcement of the Company’s decision to internalize its management structure in February 2020, the Manager’sCompany initiated outreach to stockholders representing approximately 90% of outstanding shares. During these meetings, the Company solicited feedback on a number of corporate governance and corporate responsibility topics and requested feedback on stockholders’ preferred practices for executive compensation practices:design and disclosure. As further described under “2020 – 2021 Stockholder Engagement Efforts” above, the feedback generated through this engagement meaningfully informed the MDC Committee’s executive compensation decisions in 2020 and, as highlighted below, directly contributed to the MDC Committee’s holistic approach to establishing a compensation program that drives performance, supports the Company’s culture and reflects the insights and priorities of the Company’s long-term investors.

What the Manager Does
■

WHAT THE COMPANY DOES

∎Majority of compensation is “at risk” – for 2020, variable performance-based compensation comprises 90.5%comprised 94% of the CEO’s total compensation and 86% of the other NEOs’ total compensation(1)

■

∎ MDC Committee considered a balanced scorecard reflecting both objective financial and non-financial (including human capital management) goals in determining total incentive awards for 2020

∎Multiple performance metrics – diversified mix of rigorous Company performance metrics, including economic return and core return on equity core return on assets

∎ Enhanced clawback policy covers all NEO incentive-based awards for financial restatements and operating expenses as a percentage of average equitymisconduct

∎ All NEOs are subject to robust stock ownership requirements and as a percentage of average assets, along with group and individual performance objectivesholding restrictions

■

∎Annual assessment of NEO compensation practices against peer companies and best practices

■

External legal review

■

Third-party∎ Annual compensation consultantrisk assessment to ensure compensation program does not encourage excessive risk-taking

■

∎Regular stockholder feedback through robust outreach program


Note: For footnoted information, please refer to “Stockholder Outreach and Results of 2020 Say-on-Pay Vote” in Endnotes section.

What the Manager Does Not Do
■

WHAT THE COMPANY DOES NOT DO

∎  No minimum guaranteed bonus amounts

∎No guaranteed salary increases

■

∎No targetingenhanced severance for terminations in connection with a change in control

∎  No NEO severance payments and benefits exceeding 2.99 times salary and bonus

∎  No “single trigger” cash severance or automatic vesting of specific percentiles versus peersequity awards based solely upon a change in setting compensation levelscontrol of the Company

■

No incentive or additional performance awards for growing assets under management or for exceeding returnbenchmarks

■

∎No excessive perquisites

■

∎No tax gross-ups for change in control excise taxes or on any executive perquisites, other than non-cash relocation benefits

∎  No hedging or pledging of Company stock

∎  No dividends or dividend equivalents on unvested awards paid unless and until the underlying awards are earned and vested

∎  No repricing of options or stock appreciation rights (“SARs”) or the exchange of underwater options or SARs for cash or other awards without stockholder approval

∎  No supplemental executive retirement plans


38Annaly Capital Management Inc. 2019 Proxy Statement

The MDC Committee will continue to consider the outcome of future Say-on-Pay votes, as well as stockholder feedback received throughout the year, and invites stockholders to express their views to the MDC Committee as described under “Communications with the Board.”

Table of ContentsHOW EXECUTIVE COMPENSATION DECISIONSARE MADE

Compensation PaidOverview

The MDC Committee reviews and discusses the performance of the CEO and make recommendations regarding his compensation for review and approval by the Manager toIndependent Directors. For the Named Executive Officersother NEOs, the CEO makes individual compensation recommendations for review and approval by the MDC Committee. In making compensation recommendations and determinations, the MDC Committee utilizes the advice of its independent compensation consultant, reviews compensation-related policies and feedback of long-term investors, considers the terms of applicable employment agreements, analyzes competitive market information and peer group data, and assesses Company and individual performance.

ComponentsThe Company’s Human Capital Management team supports the MDC Committee in the execution of its responsibilities with assistance from the Company’s Finance and Legal teams. The Company’s Chief Administrative Officer and Chief Legal Officer and Chief Corporate Officer oversee the development of materials for each MDC Committee meeting, including market data, historical compensation, and individual and Company performance metrics. No NEO, including the CEO, has a role in determining his or her own compensation.

Role of the NEOs’MDC Committee’s Independent Compensation Consultant

The Manager’sDuring 2020, the MDC Committee retained an independent compensation consultant, Frederic W. Cook & Co. (“F. W. Cook”), to advise the MDC Committee on the Company’s executive compensation program includes both a base salarydesign and a performance-based incentive bonus. Although the Compensation Committee has discretion to grant equity awards of Company common stock to the NEOs (which it has not exercised since the Externalization), the management fee the Company pays to the Manager is paid entirely in cashstructure. In this capacity, F.W. Cook regularly attends meetings and therefore the Manager has no independent ability to provide awards of Company stock as partexecutive sessions of the NEOs’ compensation. To address this limitationMDC Committee. As described above, F.W. Cook also assists the MDC Committee in the Manager’s executive compensation program, the Manager has structured the NEOs’ performance-based incentive bonuses with a mix of both rigorous Company performance metrics and group and individual performance objectives, which aligns the interests of the NEOs with the interestsits review of the Company’s stockholders. This alignment is strengthened by the Company’s stock ownership guidelines, pursuant to which the NEOs purchase shares of the Company’s common stock in the open market (as further described under “Stock Ownership Guidelines/Commitments”).

The table below describes the objectives supported by each of the Manager’s primary compensation elements, along with an overview of the key design features of each element.

Compensation ElementWhat It DoesKey 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
Incentive Bonus

■Provides a competitive annual cash incentive opportunity
■Links executives’ interests with stockholders’ interests
■Incentivizes and rewards superior group 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 and as a percentage of average assets), together with group and 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 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 expensesfor Non-Employee Directors. During 2020, F.W. Cook served solely as a percentage of average equity and as a percentage of average assets, along with group and individual performance objectives. During 2018, Messrs. Votek, Finkelstein, Coffey, and Green received aggregate performance-based incentive bonuses of $28.7 million from the Manager.

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 2018, Messrs. Votek, Finkelstein, Coffey, and Green received aggregate salaries of $3.0 million from the Manager. On an aggregated basis, Messrs. Votek, Finkelstein, Coffey and Green received 9.5% of their total compensation in the form of base salaries and the remaining 90.5% in the form of performance-based incentive bonuses.

2018 NEO Fixed vs. Variable Pay Mix

Annaly Capital Management Inc. 2019 Proxy Statement39

Table of Contents

Compensation Paid by the Managerconsultant to the Named Executive OfficersMDC Committee and did not provide any other services to the Company. The MDC Committee considered F. W. Cook’s independence in light of SEC regulations and NYSE listing standards and concluded that no conflict of interest exists that would prevent F. W. Cook from serving as an independent consultant to the MDC Committee.

Role of the Manager’s Compensation Consultant

During 2018, the Manager retained a third-party compensation consultant 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 considersMDC Committee considered compensation data and practices of a group of peer companies recommended by F.W. Cook (the “Peer“Compensation Peer Group”), as well as current market trends and practices generally, in developing appropriate compensation packages for the NEOs.NEOs in 2020, but without any formulaic benchmarking.

In determining

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Compensation Peer Group

Affiliated Managers Group, Inc.

AGNC Investment Corp.

Ameriprise Financial, Inc.

Arbor Realty Trust

Chimera Investment Corp.

E*TRADE Financial Corp.

Eaton Vance Corp.

Franklin Resources, Inc.

Ladder Capital Corp.

Lazard Ltd.

MFA Financial, Inc.

New York Mortgage Trust

Redwood Trust, Inc.

Raymond James Financial, Inc.

The Carlyle Group L.P.

The MDC Committee uses a separate group of mortgage REIT peers (the “Performance Peer Group”) to evaluate Company performance under the balanced scorecard described above and determine PSU award payouts as described further below. The Performance Peer Group companies have portfolios and investment strategies that most closely resemble the Company’s focus on Agency MBS.

Performance Peer Group

AGNC Investment Corp.

ARMOUR Residential REIT, Inc.

Capstead Mortgage Corp.

Chimera Investment Corp.

Dynex Capital, Inc.

Invesco Mortgage Capital, Inc.

MFA Financial, Inc.

New York Mortgage Trust

Two Harbors Investment Corp.

The MDC Committee reviews the compensation of executives in the Compensation Peer Group at least once per year. A broad range of data is considered by the MDC Committee to ascertain whether the CEO and other NEOs are appropriately positioned above, at or below the median to properly reflect various factors, such as the Company’s performance within the Performance Peer Group, the unique characteristics of the individual’s position, and applicable succession and retention considerations.

EXECUTIVE COMPENSATION DESIGNAND AWARD DECISIONSFOR 2020

Overview

The MDC Committee is committed to establishing an executive compensation program that attracts, retains and incentivizes top executive talent and generates long-term value for stockholders by directly linking compensation payout to Company performance without encouraging unnecessary risk taking. The Company’s executive compensation program primarily consists of base salaries and annual incentive awards delivered part in cash and part in equity awards, which include both RSUs and PSUs. The RSUs and PSUs include time-based and performance-based vesting requirements over multiple years following grant to further encourage sustainable Company performance aligned to long-term stockholder interests. As described further below, in 2020, Messrs. Finkelstein, Coffey and Green also received special one-time equity grants to support continuity during the Company’s transition to an internally-managed REIT amidst a number of senior leadership changes and to provide for immediate alignment of these NEOs’ interests with the interests of the Company’s stockholders. The MDC Committee considered these Internalization awards, both in terms of form and amount, when determining Messrs. Finkelstein’s, Coffey’s and Green’s total annual incentive compensation for 2020. The introduction of equity incentive awards to the Company’s executive compensation program represents a significant shift from the Former Manager’s all-cash compensation structure.

2019 NEO PAY MIX(1)

2020 NEO PAY MIX(2)

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While the MDC Committee views 2020 as a transitional year in terms of the evolution of the Company’s executive compensation framework, the MDC Committee is committed to increasing the relative weighting of long-term equity incentives, including PSUs, as a percentage of total executive compensation opportunity going forward as reflected by the target CEO pay mix for 2021.

2020 CEO PAY MIX(3)

2021 TARGET CEO PAY MIX(4)

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Gray shading indicates at-risk performance-based compensation. Percentages may not sum to 100% due to rounding.

Note: For footnoted information, please refer to “Executive Compensation Design and Award Decisions for 2020” in Endnotes section.

Base Salary

Until the closing of the Internalization on June 30, 2020, the Former Manager considerspaid the base salaries of the NEOs consistent with individual compensation arrangements or agreements between the Former Manager and such executives. Upon the closing of the Internalization, the Company commenced paying the base salaries of the NEOs through the remainder of the year. Base salaries for NEOs are established after considering a variety of factors, including market data, historic pay, internal pay equity, the scope of each NEO’s responsibilities and individual and Company performance. Base salaries for 2020 for Ms. Wolfe and Messrs. Finkelstein, Coffey and Green were paid in accordance with their respective employment agreements. No NEO is entitled (under an employment agreement or otherwise) to any guaranteed salary increase.

  NEOs

Salary           

($) (1)

David L. Finkelstein(2)

$950,000

Serena Wolfe

$750,000

Timothy P. Coffey

$750,000

Anthony C. Green

$750,000

Ilker Ertas

$750,000

(1)

Unless otherwise specified, 50% of an executive’s 2020 salary covering the period from January 1, 2020 through June 30, 2020 was paid by the Former Manager with the remaining 50% paid by the Company. The amounts shown as “Salary” in the Summary Compensation Table for 2020 include only those amounts paid by the Company after the Internalization.

(2)

Mr. Finkelstein received a salary increase from $750,000 to $1,000,000 in connection with his appointment as CEO effective March 13, 2020. Of Mr. Finkelstein’s total base salary for 2020, the Former Manager paid $450,000 and the Company paid $500,000.

2020 Annual Incentives – Cash and Equity Awards

In November 2020, the Company entered into an amended and restated employment agreement with each of Messrs. Finkelstein, Coffey and Green and Ms. Wolfe that provide that such executive is eligible to receive annual incentive awards for 2020 in such amounts as determined by the MDC Committee based upon performance and other factors in accordance with the Company’s compensation policies and procedures. Messrs. Finkelstein’s and Green’s employment agreements do not specify a target amount or a pre-set split between cash, RSUs and/or PSUs for their 2020 incentive awards. Mr. Coffey’s employment agreement specifies a target amount of $3,800,000 with no pre-set split between cash, RSUs and/or PSUs for his 2020 incentive award. Ms. Wolfe’s employment agreement specifies a target amount of $3,000,000, with $2,600,000 targeted as a cash bonus and $400,000 targeted as an award of RSUs and/or PSUs, for her 2020 incentive award. The target amounts for Ms. Wolfe and Mr. Coffey were based on advice from the MDC Committee’s independent compensation consultant following review of relevant Compensation Peer Group compensation data, an assessment of Company and individual performance through the first three quarters of 2020 and other individual factors such as role, responsibility, tenure and retention needs. In addition, the MDC Committee considered the one-time Internalization equity award granted to Mr. Coffey in determining his target incentive amount for 2020. The target amounts for Ms. Wolfe and Mr. Coffey did not represent guarantees and were subject to performance reviews and final determinations by the MDC Committee, as with Messrs. Finkelstein, Green and Ertas (who did not have an employment agreement with the Company).

In January 2021, the MDC Committee determined 2020 incentive award amounts and cash and equity compensation mixes based on advice from its independent compensation consultant after analyzing relevant Compensation Peer Group compensation data, assessing Company performance for 2020 against a balanced scorecard that includes both industry-financial and company-specific dynamicsnon-financial goals, reviewing the NEOs’ individual contributions and achievements, and considering other individual factors such as role, responsibility, tenure and retention needs. In addition, for Messrs. Finkelstein, Coffey and Green, the MDC Committee considered the form and amount of the one-time Internalization equity awards granted to such executives. The MDC Committee believes that determining the total incentive award based on a combined review of financial and non-financial Company goals, together with an assessment of individual performance, ensures that compensation outcomes are aligned to sustainable performance results consistent with the Company’s risk management policies. The MDC Committee also believes that delivering part of the annual incentive through equity awards that vest over time based on continued employment and (for PSUs) continued Company performance encourage a longer-term focus by the NEOs on the Company’s sustainable performance aligned to stockholder interests, and encourage the retention of the NEOs.

For 2020, the MDC Committee assessed corporate achievement against a balanced scorecard of financial and non-financial goals. Objective financial metrics comprised 50% of the total scorecard for 2020 (which is increasing to 60% for 2021). Objective financial metrics for 2020 consisted of Relative Economic Return, Absolute Core Return on Equity and Operating Efficiency. The MDC Committee believes that Relative Economic Return and Absolute Core Return on Equity are key measures of the Company’s financial performance and support sustained value creation for stockholders. Our Operating Efficiency goal of 1.6 – 1.75% operating expense as a percentage of equity reflects the Company’s stated long-term target operating expense ratio that was set in connection with the announcement of the Internalization in February 2020. Risk metrics for 2020 consisted of the Company’s average daily liquid box and its crisis management response, each of which support the Company’s ability to successfully operate in a stressed environment such as the one we experienced in 2020. In addition to objective financial and risk metrics, the remaining 30% of the scorecard for 2020 was comprised of a mix of stakeholder, people and innovation-focused metrics that the MDC Committee believes reflect its commitment to considering progress relating to ESG, human capital management, including diversity and inclusion, and organizational resilience into year-end compensation decisions.

Category

WeightingMeasureCriteriaIllustrative 2020 Performance Highlights

Financial

Performance

50%

Economic Return

(Relative)

Exceeds > 75%

Meets 50 – 75%

Below < 50%

∎ Economic Return: 1.76% (exceeds 75%)

Core Return on

Equity (Absolute)

Exceeds > 10.65%

Meets 9.5-10.65%

Below < 9.50%

∎ Absolute Core Return on Equity: 12.03%

Operating

Efficiency

(Absolute)

Exceeds < 1.6%

Meets 1.6-1.75%

Below > 1.75%

∎ Absolute OpEx to Equity: 1.62%

Risk

20%Liquid Box (Absolute)

Exceeds > threshold

Meets = threshold

Below < threshold

∎ Daily liquidity consistently exceeded threshold, including during pandemic-related volatility

∎ Strengthened liquidity position to mitigate risk across the portfolio

Operational RiskCrisis management

∎ Remote work arrangement did not impair control environment

∎ Effective crisis management during the pandemic

Stakeholder

10%TSR (Relative)

Exceeds > 75%

Meets 50 – 75%

Below < 50%

∎ TSR: 2.43% (exceeds 75%)

Dividend

Stability (Absolute)

Stable dividend throughout 2020

∎ Stable quarterly dividend of $0.22 per share of common stock throughout 2020

GovernanceGovernance enhancements

∎ Internalization closed on June 30, 2020

∎ Released inaugural Corporate Responsibility Report, which outlines Annaly’s ESG goals and commitments

Category

WeightingMeasureCriteriaIllustrative 2020 Performance Highlights

People

10%CultureCulture enhancements

∎ Drove strategic compensation enhancements, including introduction of equity incentives

∎ Effective pandemic management, employee safety and firm operations

∎ Provided technology stipends, telemedicine benefits, mental health resources and mindfulness sessions

∎ Increased internal communications throughout the firm and sponsored virtual events to cultivate our sense of community

Talent DevelopmentManagement development initiatives

∎ Created Management Development Program, including strengths-based executive coaching and development opportunities

∎ Expanded management succession planning efforts across the firm

Inclusion & DiversityInclusion initiatives

∎ Appointed Head of Inclusion and Inclusion Support Committee of Executive Sponsors

∎ Conducted firm-wide unconscious bias trainings

Innovation

10%Cross-Functional InitiativesTechnology enhancements

∎ Replaced vendor technology systems with in-house developed proprietary systems resulting in costs savings and improving efficiencies

Strategic

business

initiatives

∎ Successful execution of strategic plan despite pandemic-related volatility, including multiple residential whole loan securitizations

As described below, the MDC Committee also considered each NEO’s significant individual contributions to the performance of the Company during 2020 to determine their 2020 incentive awards.

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David L. Finkelstein

Chief Executive Officer and

Chief Investment Officer

As CEO and Chief Investment Officer, Mr. Finkelstein is responsible for leading the Company, leading development and implementation of corporate policy and strategy and serving as primary liaison between the Board and management as well as being a primary public face of the firm.

In 2020, Mr. Finkelstein:

∎  As newly appointed CEO, drove the Company’s performance including achievement of the metrics set forth in the balanced scorecard described above

∎  Demonstrated exceptional leadership amidst extreme market and sector volatility caused by the COVID-19 pandemic, significantly enhancing the Company’s liquidity position

∎  Spearheaded the development of the Company’s strategic plan focused on its core expertise in Agency and residential credit markets to enhance the Company’s advantages as a key participant in the U.S. housing finance system

∎  Managed a smooth leadership transition and empowered the other members of executive leadership

∎  Excelled as a spokesman for the Company both internally and externally to effectively convey the firm’s culture and strategy

∎  Guided the Company’s human capital management structure and oversight, sustainability initiatives and remained committed to setting and advancing its diversity aspirations

LOGO

Serena Wolfe

Chief Financial Officer

As Chief Financial Officer, Ms. Wolfe manages the firm’s overall financial condition, as well as financial analysis and reporting. Further to these responsibilities, she also oversees various control functions and shares responsibility for aspects of the Company’s operations and technology groups.

In 2020, Ms. Wolfe:

∎  As newly appointed Chief Financial Officer, she took on responsibility for a number of areas, including treasury, financial planning and analysis and financial reporting as well as joint responsibility for the Company’s Information Technology group

∎  Successfully managed the Company’s finance organization through leadership transition

∎  Represented the Company in relationships with industry organizations, competitors, and outside parties

∎  Worked closely with the Company’s Chief Operating Officer on building and managing the Company’s infrastructure and systems, business planning and performance measurement

∎  Maintained financial reporting processes and internal controls amidst transition to remote work environment, including ensuring all SEC filings and reports were filed on time without need to utilize any extensions provided in response to COVID-19 pandemic

LOGO

Timothy P. Coffey

Chief Credit Officer

As Chief Credit Officer, Mr. Coffey is responsible for overseeing the Company’s middle market lending group, which he established in 2010. Since its inception, the group has originated over $5 billion in investments across 90 portfolio companies with cumulative losses since 2010 of less than $12 million. In 2017, Mr. Coffey became Chief Credit Officer of the Company with risk oversight responsibilities across the firm’s credit strategies.

In 2020, Mr. Coffey:

∎  Directed the Company’s middle market lending group, including strategic direction of the group, financing of its assets and development of key sponsor relationships

∎  Oversaw the development of the corporate lending portfolio, including for the six months ended June 30, 2020 ranking 9th in the U.S. Middle Market Sponsored Bookrunner league table

∎  Led the development and marketing efforts of the Company’s registered investment adviser Annaly Credit Opportunities Management LLC

∎  Oversaw the Company’s credit decisions during the period of extreme market and sector volatility caused by the COVID-19 pandemic

LOGO

Anthony C. Green

Chief Corporate Officer, Chief
Legal Officer and Secretary

As Chief Corporate Officer and Chief Legal Officer, Mr. Green is responsible for overseeing the Company’s legal and compliance groups, corporate responsibility efforts, government relations and various control functions. He also serves as Secretary to the Board.

In 2020, Mr. Green:

∎  Provided the Company with legal advice on strategic initiatives; represented the Company with counterparties, external agencies, and regulatory bodies; directed internal legal activities; and coordinated work conducted by external legal counsel

∎  Closely partnered with the CEO and the Board on all governance and public company matters

∎  Oversaw legal and compliance efforts relating to the internalization of the Company’s management structure, which enhanced alignment with stockholders and increased governance and transparency

∎  Strengthened the Company’s governance practices through a demonstrated strong corporate commitment to improved transparency broadly across internal and external stakeholders

∎  Oversaw legal and compliance aspects of crisis management response to COVID-19 pandemic and coordinated with the Chief Administrative Officer to address the pandemic-related impact on the firm’s human capital management

LOGO

Ilker Ertas

Head of Securitized Products

As Head of Securitized Products, Mr. Ertas is responsible for all securitized product investment activities. Mr. Ertas manages the overall mortgage portfolio with key decision making and portfolio transaction execution, within the guidelines established by the Company’s Asset and Liability Committee.

In 2020, Mr. Ertas:

∎  Played an integral role leading the Company through the pandemic related volatility of March 2020 that included:

∎  Strategic portfolio and counterparty management on both the asset and hedging side of the balance sheet through the height of the market instability to maintain liquidity and protect the firm’s capital

∎  Successful direction of the investment teams in remote work operating environment, maintaining communication and executing trading operations remotely, both with the internal team and external counterparties

∎  Creative evolution of the firm’s investment strategy to adapt to a changing trading environment by reducing leverage

∎  Spearheaded efforts to develop investment alternatives providing additional source of diversification and return generation for the Company’s portfolio

∎  Led the investment teams in hiring and developing new leaders to locate and engage resources efficiently to build new partnerships in order to gain and maintain robust access to attractive asset classes

In light of the corporate and individual achievements highlighted above, along with other individual factors such as role, responsibility, tenure and retention needs, and after considering relevant compensation data from the Compensation Peer Group and one-time Internalization equity awards if applicable, the MDC Committee approved (and in the case of the CEO, the MDC Committee recommended and the Independent Directors approved) the following cash and equity incentive awards for each NEO for 2020. Additional detail about the RSUs and PSUs granted as part of the 2020 annual incentive award follow the table:

NEO  Cash
($)		   

RSUs

($)

   PSUs
($)		   Total(1) 

 

 

David L. Finkelstein

  $7,200,000   $1,800,000   $0   $9,000,000 

 

 

Serena Wolfe

   $2,600,000    $300,000    $100,000    $3,000,000 

 

 

Timothy P. Coffey

   $3,200,000    $100,000    $500,000    $3,800,000 

 

 

Anthony C. Green

   $2,800,000    $650,000    $450,000    $3,900,000 

 

 

Ilker Ertas

   $3,350,000    $750,000    $250,000    $4,350,000 

 

 

(1)

The amounts in this table reflect only the awards determined following year end 2020 and do not include the amounts awarded as Internalization awards to certain NEOs during 2020 described in more detail below. See the 2020 Total Direct Compensation Table above for a complete view of the incentive awards granted to the NEOs for 2020 performance.

2020 Annual Incentives – Grant of RSUs

RSUs granted to the NEOs in early 2021 as part of their total incentive awards for 2020 will vest in three equal installments beginning in January 2022 subject to the NEO’s continued employment. The number of RSUs granted is based on the closing price of the Company’s common stock on the date of grant (January 29, 2021). The following chart summarizes the RSUs granted to the NEOs as part of their total incentive awards for 2020:

   RSUs 
NEO  ($)   (#) 

David L. Finkelstein

   1,800,000    221,675 
  

Serena Wolfe

   300,000    36,946 
  

Timothy P. Coffey

   100,000    12,315 
  

Anthony C. Green

   650,000    80,049 
  

Ilker Ertas

   750,000    92,365 
  

2020 Annual Incentives – Grant of PSUs

Payouts of the PSUs granted to the NEOs in early 2021 as part of their total incentive awards for 2020 will be determined at the end of the performance period (January 1, 2021 – December 31, 2023) based on the achievement of performance targets established by the MDC Committee at the beginning of the performance period. The PSUs utilize two equally-weighted performance measures – Relative Economic Return and Average Core Return on Equity– that the MDC Committee believes represent key measures of the Company’s financial performance and support sustained value creation for stockholders. The MDC Committee added a Total Stockholder Return governor to the portion of the PSU awards tied to Relative Economic Return, which provides that the percentage of applicable target PSUs earned will be capped at 100% if Total Stockholder Return for the three-year performance period is negative. The MDC Committee believes that the Total Stockholder Return governor further enhances the alignment of interests between the NEOs and stockholders.

The number of target PSUs granted is based on the closing price of the Company’s common stock on the date of grant (January 29, 2021). The following chart summarizes the target value and number of PSUs granted to the NEOs as part of their total incentive awards for 2020:

   Target PSUs 
NEO  ($)   (#) 

 

 

David L. Finkelstein(1)

  

 

0

 

  

 

0

 

  

Serena Wolfe

  

 

100,000

 

  

 

12,315

 

  

Timothy P. Coffey

  

 

500,000

 

  

 

61,576

 

  

Anthony C. Green

  

 

450,000

 

  

 

55,419

 

  

Ilker Ertas

  

 

250,000

 

  

 

30,788

 

  
(1)

Mr. Finkelstein was granted 381,098 target PSUs on June 30, 2020 as part of his one-time Internalization Equity Award. See “One-Time Internalization Equity Awards – Grant of PSUs” below.

At the end of the performance period, the MDC Committee will evaluate the Company’s actual performance against the targets it set at the start of the period and determine payouts using the formula set forth below:

Performance Metric (1)  Metric Weight   Performance   Percent of Target PSUs Earned

 

Relative Economic Return(2)

  

 

50%     

 

  

 

<25th Percentile

 

  

    0%

        
  

 

25th Percentile (threshold)

 

  

  50%

        
  

 

50th Percentile (target)(3)

 

  

100%

        
  

 

75th Percentile (above target)(3)

 

  

125%

        
  

 

>90th Percentile (maximum)(3)

 

  

150%

 

Average Core Return on Equity(4)

  

 

50%     

 

  

 

9.0% (threshold)

 

  

    0%

        
  

 

9.5% (below target)

 

  

  75%

        
  

 

10.4% (target)

 

  

100%

        
  

 

10.65% (above target)

 

  

125%

        
  

 

11.25% (maximum)

 

  

150%

 
(1)

For performance results between the achievement levels specified for each performance goal above threshold levels, the number of PSUs for that portion of the award shall be determined by interpolating results on a straight line basis.

(2)

“Economic Return” means the Company’s change in book value plus dividends declared divided by the prior period’s book value. “Relative Economic Return” is defined as the Company’s quartile ranking for the three-year performance period against the Performance Peer Group ranked by Economic Return results.

(3)

The percentage of applicable target PSUs earned is capped at 100% if Total Stockholder Return for the three-year performance period is negative. “Total Stockholder Return” means the Company’s change in its common stock price plus dividends declared divided by the prior period’s common stock price. Share price for the beginning of the performance period is calculated as the average of the NYSE closing prices of the Company’s common stock on the last 15 trading days ending on the first day of the performance period. Share price for the end of the performance period is calculated as the average of the NYSE closing prices of the Company’s common stock on the last 15 trading days ending on the last day of the performance period.

(4)

“Average Core Return on Equity” means the average of the Core Return on Equity for the twelve (12) fiscal quarters during the three-year performance period expressed as an annualized average. “Core Return on Equity” means, for a fiscal quarter, the Company’s “Core return on average equity (excluding PAA)” (defined as Core Earnings (excluding PAA) over average stockholders’ equity for the quarter), as reported in the Company’s Form 10-Q or Form 10-K for the quarter or the respective earnings release. The Company’s Core Earnings measures are non-GAAP measures; see Appendix for a reconciliation of non-GAAP financial measures to most directly comparable GAAP measures.

One-Time Internalization Equity Awards

Prior to the closing of the Internalization, the Company’s NEOs had been compensated by the Former Manager rather than by the Company. As the management fee paid by the Company to the Former Manager had been paid entirely in cash, the Former Manager had no independent ability to provide awards of Company stock as part of the total compensation paid to the NEOs. In order to retain the Company’s long-term NEOs during a uniquely transformative period and provide for immediate alignment of their interests with the interests of the Company’s stockholders, Messrs. Finkelstein, Coffey and Green received long-term equity awards upon the closing of the

Internalization, which vest ratably over three years beginning on the one-year anniversary of the grant date. These one-time equity awards were considered by the MDC Committee when determining the form and amount of each executives’ total annual incentive compensation for 2020 described above. While Messrs. Coffey’s and Green’s Internalization awards were granted solely in the form of RSUs, the MDC Committee determined it was appropriate to award 50% of Mr. Finkelstein’s award in the form of PSUs in connection with his elevation to the role of CEO in March 2020. Ms. Wolfe, who joined the Company in December 2019, and Mr. Ertas, who was first appointed as an executive officer in December 2020, did not receive one-time equity awards in connection with the Internalization.

One-Time Internalization Equity Awards – Grant of RSUs

RSUs granted to the NEOs as part of their Internalization awards will vest in three equal installments beginning in June 2021 subject to the NEO’s continued employment. The number of RSUs granted is based on the closing price of the Company’s common stock on the date of grant (June 30, 2020). The following chart summarizes the RSUs granted to the NEOs as part of their Internalization awards:

   RSUs 
NEO  ($)   (#) 

 

 

David L. Finkelstein

  

 

2,500,000

 

  

 

381,098

 

  

Timothy P. Coffey

  

 

1,250,000

 

  

 

190,549

 

  

Anthony C. Green

  

 

500,000

 

  

 

76,220

 

  

One-Time Internalization Equity Awards – Grant of PSUs

The MDC Committee also granted Mr. Finkelstein 381,098 target PSUs representing 50% of his Internalization award. The number of target PSUs granted is based on the closing price of the Company’s common stock on the date of grant (June 30, 2020). Payout of these PSUs will be determined at the end of the performance period (January 1, 2020 – December 31, 2022) based on the achievement of performance targets established by the MDC Committee prior to the closing of the Internalization. The PSUs utilize two equally-weighted performance measures – Relative Economic Return and Average Core Return on Equity – that the MDC Committee believes represent key measures of the Company’s financial performance and support sustained value creation for stockholders.

At the end of the performance period, the MDC Committee will evaluate the Company’s actual performance against the targets it set for Mr. Finkelstein’s PSUs and determine payouts using the formula set forth below:

Performance Metric (1)  Metric Weight   Performance  Percent of Target PSUs Earned

 

Relative Economic Return(2)

   50%        

<25th Percentile

  

    0%

      
  

25th Percentile (threshold)

  

  50%

      
  

50th Percentile (target)

  

100%

      
  

75th Percentile

  

125%

      
  

>90th Percentile (maximum)

  

150%

 

Average Core Return on Equity(3)

   50%        

9.0% (threshold)

  

    0%

      
  

9.5% (below target)

  

  75%

      
  

10.4% (target)

  

100%

      
  

10.65% (above target)

  

125%

      
  

11.25% (maximum)

  

150%

 

(1)

The performance results between the achievement levels specified for each performance goal above threshold levels, the number of PSUs for that portion of the award shall be determined by interpolating results on a straight line basis. These are the same goals (measured over a different performance period) as used for the PSUs granted to the other NEOs in January 2021 for 2020 performance, except that the MDC Committee did not include a Total Stockholder Return governor on the Relative Economic Return measure when these PSUs were approved at the time of the Internalization.

(2)

“Economic Return” means the Company’s change in book value plus dividends declared divided by the prior period’s book value. “Relative Economic Return” is defined as the Company’s quartile ranking for the three-year performance period against the Performance Peer Group ranked by Economic Return results.

(3)

“Average Core Return on Equity” means the average of the Core Return on Equity for the twelve (12) fiscal quarters during the three-year performance period expressed as an annualized average. “Core Return on Equity” means, for a fiscal quarter, the Company’s “Core return on average equity (excluding PAA)” (defined as Core Earnings (excluding PAA) over average stockholders’ equity for the quarter), as reported in the Company’s Form 10-Q or Form 10-K for the quarter or the respective earnings release. The Company’s Core Earnings measures are non-GAAP measures; see Appendix for a reconciliation of non-GAAP financial measures to most directly comparable GAAP measures.

Dividend Equivalents on RSUs and PSUs

Awards of RSUs and PSUs will accrue dividend equivalents (as additional stock units) as if the awards were outstanding shares of the Company’s common stock, but the dividend equivalents will be paid only if and to the extent the underlying award becomes earned and vested. As a mortgage REIT, dividends are a key component of the Company’s total stockholder return. The MDC Committee believes that allowing dividend equivalents to accrue on outstanding awards will further focus the NEOs on achieving the Company’s financial performance goals and returning earnings to stockholders through dividends.

Other Compensation

The Company maintains a group excess liability coverage policy on behalf of members of the Company’s Operating Committee. Each of the Company’s executive officers are members of the Company’s Operating Committee and receive liability coverage under the policy. The premiums for the policy, which in 2020 was $2,128 for each NEO, was paid by the Company.

Employment Agreements

As discussed above, the Company entered into employment agreements with Messrs. Finkelstein, Coffey and Green and Ms. Wolfe prior to the closing of the Internalization, which were amended and restated in November 2020. The Company entered into these employment agreements to encourage retention of key management through the critical period of implementing the Internalization. Messrs. Finkelstein’s, Coffey’s and Green’s employment agreements expired following payment of their 2020 incentive awards in early 2021. Ms. Wolfe’s employment agreement will expire following payment of her 2021 incentive award in early 2022. The extended term of Ms. Wolfe’s employment agreement was necessary to recruit her to the Company and is consistent with the term of the employment agreement Ms.  Wolfe had entered into with the Former Manager prior to joining the Company in December 2019. For additional information on these employment agreements, please see “Potential Payments upon Termination or Change in Control ” below. Going forward, the Company does not intend for NEOs to be covered by employment agreements except when needed for recruitment or retention purposes.

Severance Arrangements

All of the NEOs are currently eligible to participate in an Executive Severance Plan, which was adopted by the Company effective July 1, 2020. The Executive Severance Plan provides benefits upon a participant’s involuntary termination of employment by the Company without “cause” (as defined in the plan) based on the participant’s title, base salary and average or target cash bonus (depending on the year of termination). Prior to payment of the NEOs’ 2020 incentive awards in early 2021, Messrs. Finkelstein, Coffey, Green and Ertas were also party to employment agreements and/or severance rights agreements that referenced the Executive Severance Plan and included certain additional termination provisions, including, in the case of Messrs. Finkelstein, Coffey and Green, vesting provisions relating to the Internalization awards. As a newly hired employee in December 2019, Ms. Wolfe’s employment agreement included a separate severance arrangement that provides for payment of a flat lump sum benefit under a range of termination scenarios. Pursuant to her employment agreement, following payment of Ms. Wolfe’s 2020 incentive award in early 2021, her severance entitlement in the event of a termination by the Company for “cause” became covered by the Executive Severance Plan. These severance arrangements are more fully described under “Potential Payments upon Termination or Change in Control” below.

The MDC Committee believes that providing appropriate, market-competitive severance benefits helps the Company attract and retain highly qualified executives by mitigating the risks associated with leaving a prior employer to join the Company and by providing income continuity following an unexpected termination. Neither the Executive Severance Plan nor any NEO employment agreement or severance rights agreement provides benefits that are triggered in whole or in part solely by a change in control of the Company, nor do those arrangements include any tax gross-ups on change in control-related excise taxes (or otherwise).

Compensation Paid to the Former Interim CEO and President

In November 2019, Mr. Votek was appointed as Interim CEO and President and a member of the Board. Upon the appointment of Mr. Finkelstein as the Company’s permanent CEO in March 2020, Mr. Votek was appointed to the role of Senior Advisor to the Company for an interim period to assist in the transition of his duties to Mr. Finkelstein. Mr. Votek, who now serves as a Non-Employee Director, retired as Senior Advisor to the Company in August 2020. The decisions for Mr. Votek’s 2020 compensation reflect the temporary nature of his roles as Interim CEO and President and Senior Advisor and do not display the same emphasis on long-term performance-based incentives or focus on retention considerations that are cornerstones of the MDC Committee’s newly designed executive compensation program.

In light of the expectation that Mr. Votek’s service both as Interim CEO and President and Senior Advisor would be time limited, neither the Former Manager nor the MDC Committee determined to adjust the amount or structure of the salary and cash bonus that Mr. Votek had received from the Former Manager for his prior service as the Company’s CFO. Rather than increasing either of the aforementioned elements in connection with Mr. Votek’s elevation to the role of Interim CEO and President, the Board determined to award Mr. Votek a one-time grant of RSUs that vested upon the appointment of a permanent CEO in March 2020 in light of Mr. Votek’s transition upon such appointment to a temporary Senior Advisor role. Following Mr. Votek’s retirement as Senior Advisor and transition to the role of Non-Employee Director, the Company began compensating Mr. Votek for his Board service beginning in September 2020 consistent with the compensation framework described above under “Director Compensation”. No severance payments were made to Mr. Votek upon his retirement as an executive of the Company.

An overview of each element of Mr. Votek’s 2020 total direct compensation from the Former Manager and the Company is set forth below:

Total Direct Compensation ElementContextTotal

Salary

∎ Mr. Votek received a salary and pro rata bonus for his roles as Interim CEO and President and Senior Advisor consistent with the salary and bonus he had received from the Former Manager for his prior role as CFO

$500,0001)

Bonus

$3,500,000(2)

One-Time Stock Award

∎ Mr. Votek received a one-time award of RSUs in connection with his elevation to the role of Interim CEO and President that vested upon Mr. Finkelstein’s appointment as the Company’s permanent CEO

$1,000,000

Non-Employee Director Fees

∎ Upon Mr. Votek’s transition from an Executive Director to a Non-Employee Director, he began receiving fees for his Board and Committee service in September 2020

$60,000(3)

(1)

Of Mr. Votek’s total base salary, the Former Manager paid $375,000 and the Company paid $125,000.

(2)

Mr. Votek’s partial year cash bonus which was paid in two pro-rated installments. The first installment ($2,625,000) covered the period from January 1, 2020 through June 30, 2020 and was paid by the Former Manager in connection with the closing of the Internalization. The second installment ($875,000) covered the period from July 1, 2020 through August 31, 2020 and was paid by the Company at the time of Mr. Votek’s retirement.

(3)

See “Director Compensation” above for additional information.

EXECUTIVE COMPENSATION POLICIES

Stock Ownership Guidelines

Position

Annaly Stock
Ownership

Guideline

Chief Executive Officer

6x base salary

Other Executive Officers

3x base salary

The Company believes that stock ownership guidelines further align the interests of the Company’s executive officers with those of its stockholders by promoting a long-term focus and long-term share ownership. All of the executive officers are subject to robust stock ownership guidelines expressed as a multiple of base salary. Shares counting toward the guideline include shares that are owned outright and any shares of stock received from vested equity awards.

Stock Retention

Executive officers are required to hold shares received under awards (after taxes) until the later of (i) one year after the shares were acquired upon exercise or vesting, or (ii) the date their applicable stock ownership guidelines are met.

Clawback Policy

The MDC Committee has adopted an enhanced clawback policy requiring the recoupment of certain annual cash incentive compensation and equity compensation paid or granted to executive officers within three years preceding: (i) certain accounting restatements, if the executive officer engaged in fraud or misconduct, or recklessly or negligently failed to prevent the fraud or misconduct, that caused or significantly contributed to the need for the accounting restatement, or (ii) the MDC Committee’s determination that an executive officer has engaged in certain “detrimental conduct,” including breach of a fiduciary duty, willful misconduct or gross negligence in connection with employment, illegal activity, intentional violation of Company policies, and conduct otherwise injurious to the Company, its reputation, character or standing.

Prohibition on Hedging Company Securities

Employees, officers and Directors are prohibited from engaging in any hedging transactions with respect to Company securities held by them, including shares acquired in open market transactions or through the Company’s equity compensation program. Such prohibited transactions include 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 Company securities.

Prohibition on Pledging Company Securities

The Company has a policy prohibiting employees, officers and Directors from holding Company securities in a margin account or pledging Company securities as collateral for a loan.

Risks Related to Compensation Policies and Practices

The MDC Committee is responsible for reviewing the Company’s compensation policies and practice to assess whether they could lead to excessive risk taking, the manner in which any compensation-related risks are monitored and mitigated and adjustments necessary to address changes in the Company’s risk profile. The MDC Committee conducted a compensation risk assessment for 2020 with the assistance of its independent compensation consultant and determined that the Company’s compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the Company.

REPORTOFTHE COMPENSATION COMMITTEE

The MDC Committee 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 MDC Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

Vicki Williams (Chair)Kathy Hopinkah HannanJohn H. SchaeferDonnell A. Segalas

Executive Compensation Tables

Summary Compensation Table

The following Summary Compensation Table provides information concerning the compensation of the Company’s NEOs paid or awarded during the fiscal year ended December 31, 2020. As discussed above, the Company began compensating the NEOs following the closing of the Internalization on June 30, 2020. Until such time, the Former Manager paid all compensation, including benefits, to the NEOs (other than a one-time equity award made to the former Interim CEO and President, which vested on the appointment of Mr. Finkelstein as our permanent CEO in March 2020). Accordingly, the Summary Compensation Table only reflects compensation paid or awarded by the Company for 2020. No amounts are reflected for 2019 or 2018 because the Former Manager paid all compensation, including benefits, to its employees (including the NEOs). The Former Manager also made all compensation determinations for its employees (including the NEOs) without any direction by the MDC Committee or the Board and without reference to any specific policies or programs under their oversight. The 2020 Total Direct Compensation table on page 38 , which supplements the Summary Compensation Table below, shows the total direct compensation paid or awarded to each NEO for service in 2020 regardless of source and is inclusive of compensation paid by the Former Manager and compensation paid or awarded by the Company. As explained in the Compensation Discussion and Analysis, the NEOs were also awarded RSUs and PSUs as part of their total annual incentive award for 2020 performance, but because those equity awards were granted in early 2021, in accordance with SEC rules they do not appear in this year’s Summary Compensation Table; however, in order to provide a complete picture of compensation paid or awarded to NEOs for service in 2020, these awards are included in the Total Direct Compensation table. Please see the Compensation Discussion and Analysis for a full discussion as to how the MDC Committee determined cash and equity awards for the NEOs linked to Company and individual performance for 2020.

Name and principal position  Year   Salary
($)		   Bonus
($)(1)		   Stock
awards
($)(2)		   All other
compensation
($)		  Total 

 

 

David L. Finkelstein

Chief Executive Officer,
Chief Investment
Officer and Director

   2020   $500,000   $7,200,000   $5,000,006    $  3,772(3)  $12,703,778 
   2019    —    —    —    —   — 
   2018    —    —    —    —   — 

 

Serena Wolfe(4)

Chief Financial Officer

  

 

 

 

2020

 

 

  

 

$

 

375,000

 

 

  

 

$

 

2,600,000

 

 

  

 

 

 

—

 

 

  

 

 

 

$29,831

 

(5) 

 

 

$

 

3,004,831

 

 

  

 

 

 

2019

 

 

  

 

 

 

—

 

 

  

 

 

 

—

 

 

  

 

 

 

—

 

 

  

 

 

 

—

 

 

 

 

 

 

—

 

 

 

Timothy P. Coffey

Chief Credit Officer

  

 

 

 

2020

 

 

  

 

$

 

375,000

 

 

  

 

$

 

3,200,000

 

 

  

 

$

 

1,250,001

 

 

  

 

 

 

$  4,278

 

(6) 

 

 

$

 

4,829,279

 

 

  

 

 

 

2019

 

 

  

 

 

 

—

 

 

  

 

 

 

—

 

 

  

 

 

 

—

 

 

  

 

 

 

—

 

 

 

 

 

 

—

 

 

  

 

 

 

2018

 

 

  

 

 

 

—

 

 

  

 

 

 

—

 

 

  

 

 

 

—

 

 

  

 

 

 

—

 

 

 

 

 

 

—

 

 

 

Anthony C. Green

Chief Corporate
Officer, Chief Legal
Officer and Secretary

  

 

 

 

2020

 

 

  

 

$

 

375,000

 

 

  

 

$

 

2,800,000

 

 

  

 

$

 

500,003

 

 

  

 

 

 

$  3,772

 

(7) 

 

 

$

 

3,678,775

 

 

  

 

 

 

2019

 

 

  

 

 

 

—

 

 

  

 

 

 

—

 

 

  

 

 

 

—

 

 

  

 

 

 

—

 

 

 

 

 

 

—

 

 

  

 

 

 

2018

 

 

  

 

 

 

—

 

 

  

 

 

 

—

 

 

  

 

 

 

—

 

 

  

 

 

 

—

 

 

 

 

 

 

—

 

 

 

Ilker Ertas(8)

Head of Securitized Products

  

 

 

 

2020

 

 

  

 

$

 

375,000

 

 

  

 

$

 

3,350,000

 

 

  

 

$

 

100,058

 

 

  

 

 

 

$  2,328

 

(9) 

 

 

$

 

3,827,386

 

 

  

 

 

 

    

 

 

  

 

 

 

    

 

 

  

 

 

 

    

 

 

  

 

 

 

    

 

 

  

 

 

 

     

 

 

 

 

 

 

    

 

 

 

Glenn A. Votek

Former Senior Advisor and Former Interim
CEO and President

  

 

 

 

2020

 

 

  

 

$

 

125,000

 

 

  

 

$

 

875,000

 

 

  

 

$

 

999,999

 

 

  

 

 

 

$70,907

 

(10) 

 

 

$

 

2,070,906

 

 

  

 

 

 

2019

 

 

  

 

 

 

—  

 

 

  

 

 

 

—  

 

 

  

 

 

 

—  

 

 

  

 

 

 

—  

 

 

 

 

 

 

—  

 

 

  

 

 

 

2018

 

 

  

 

 

 

—  

 

 

  

 

 

 

—  

 

 

  

 

 

 

—  

 

 

  

 

 

 

—  

 

 

 

 

 

 

—  

 

 

(1)

For the NEOs other than Mr. Votek, the amount in this column represents the cash portion of the annual incentive award approved by the MDC Committee for performance in 2020 and paid by the Company in January 2021. Mr. Votek’s partial year cash bonus was paid in two pro-rated installments. The first installment ($2,625,000) covered the period from January 1, 2020 through June 30, 2020 and was paid by the Former Manager in connection with the closing of the Internalization. The second installment ($875,000) covered the period from July 1, 2020 through August 31, 2020 and was paid by the Company at the time of Mr. Votek’s retirement.

(2)

For Messrs. Finkelstein, Coffey and Green, these amounts equal the grant date fair value of one-time equity awards granted to each executive upon the closing of the Internalization, which were considered by the MDC Committee as part of such executives’ total annual incentive compensation for 2020. Mr. Finkelstein’s award granted upon the closing of the Internalization consisted of an equal

mix of RSUs and PSUs. Messrs. Coffey and Green’s awards award granted upon the closing of the Internalization consisted exclusively of RSUs. The amount for Mr. Ertas represents the grant date fair value of an award of RSUs granted in January 2020 to Mr. Ertas for his performance in 2019 prior to his appointment as an executive officer of the Company. The amount for Mr. Votek represents a one-time award of RSUs granted to Mr. Votek for his service as Interim CEO and President, which vested on the appointment of Mr. Finkelstein as the Company’s permanent CEO in light of Mr. Votek’s transition upon such appointment to a temporary Senior Advisor role. The grant date fair value of the RSUs was determined based on the closing price of the Company’s common stock on the grant date. The grant date fair value of the PSUs awarded to Mr. Finkelstein was determined based on the closing price of the Company’s common stock on the grant date assuming a probable outcome that the PSUs would become earned at target. The grant date fair value of the PSUs assuming maximum (150%) performance would have been $3,750,011. For more information about the assumptions used for determining the grant date fair value of the NEOs’ equity awards, see Note 15, “Long-Term Stock Incentive Plan,” of Notes to the consolidated financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
(3)

Includes Company-paid group excess liability insurance premiums ($2,128) and 401(k) match ($1,644).

(4)

Ms. Wolfe joined the Company as Chief Financial Officer in December 2019.

(5)

Includes Company-paid relocation expenses and related tax gross- ups ($27,703) and group excess liability insurance premiums ($2,128).

(6)

Includes Company-paid group excess liability insurance premiums ($2,128) and 401(k) match ($2,150).

(7)

Includes Company-paid group excess liability insurance premiums ($2,128) and 401(k) match ($1,644).

(8)

Mr. Ertas was appointed as an executive officer of the Company in December 2020.

(9)

Includes Company-paid group excess liability insurance premiums ($2,128) and 401(k) match ($200).

(10)

Includes Company-paid group excess liability insurance premiums ($2,128) and, following his retirement as an executive of the Company on August 31, 2020, costs related to a Bloomberg terminal ($8,579) and fees for serving as a Non-Employee Director ($60,000).

Grants of Plan-Based Awards

The following table summarizes certain information regarding all plan-based awards granted to the NEOs during the year ended December 31, 2020. See “2020 Annual Incentives – Cash and Equity Awards,” “One-Time Internalization Equity Awards,” and “Compensation Paid to the Former Interim CEO and President” in Compensation Discussion and Analysis above for a description of the plan-based awards.

        Estimated future payouts under
equity incentive plan awards
(# of shares of common stock)		       
  Name Grant Date  Type of Award  Threshold  Target  Maximum  All other stock
awards:
Number of
shares of
common stock		  

Grant date fair
value

of stock
awards ($)(1)

 

 

David L. Finkelstein

 

 

6/30/2020

  

 

RSU

  

 

—

  

 

—

  

 

—

  

 

381,098

  

 

 

 

$2,500,003

 

 

  

 

6/30/2020

  

 

PSU

  

 

238,187

  

 

381,098

  

 

571,648

  

 

—

  

 

 

 

$2,500,003

 

 

 

Serena Wolfe

 

 

—

  

 

—

  

 

—

  

 

—

  

 

—

  

 

—

  

 

 

 

—

 

 

 

Timothy P. Coffey

 

 

6/30/2020

  

 

RSU

  

 

—

  

 

—

  

 

—

  

 

190,549

  

 

 

 

$1,250,001

 

 

 

Anthony C. Green

 

 

6/30/2020

  

 

RSU

  

 

—

  

 

—

  

 

—

  

 

76,220

  

 

 

 

$   500,003

 

 

 

Ilker Ertas

 

 

1/31/2020

  

 

RSU

  

 

—

  

 

—

  

 

—

  

 

10,210

  

 

 

 

$   100,058

 

 

 

Glenn A. Votek

 

 

2/11/2020

  

 

RSU

  

 

—

  

 

—

  

 

—

  

 

100,100

  

 

 

 

$   999,999

 

 

(1)

For Messrs. Finkelstein, Coffey and Green, these amounts equal the grant date fair value for the one-time equity awards granted to each executive upon the closing of the Internalization, which were considered by the MDC Committee when determining such NEOs’ total annual incentive compensation for 2020. Mr. Finkelstein’s award consisted of an equal mix of RSUs and PSUs. Messrs. Coffey and Green’s awards consisted exclusively of RSUs. The amount for Mr. Ertas represents the grant date fair value of an award of RSUs granted in January 2020 to Mr. Ertas for his performance in 2019 prior to his appointment as an executive officer of the Company. The amount for Mr. Votek represents the grant date fair value for a one-time award of RSUs granted to Mr. Votek for his service as Interim CEO and President, which vested on the appointment of Mr. Finkelstein as the Company’s permanent CEO in light of Mr.  Votek’s transition upon such appointment to a temporary Senior Advisor role. See Footnote 2 to the Summary Compensation Table for additional information on how the grant date fair value for these awards was determined.

Outstanding Equity Awards at Fiscal Year-End

The following table summarizes certain information regarding outstanding equity awards of the NEOs during the year ended December 31, 2020. All market or payout values in the table shown for stock awards are based on the closing price of common stock on December 31, 2020 of $8.45 per share.

    Stock awards
  Name Grant date Number of shares or
units of stock that have
not vested (#)(1)		 Market value of shares
or units of stock that
have not vested ($)		 Equity incentive plan
awards: Number of
unearned shares, units
or other rights that
have not vested (#)(2)		 Equity incentive plan
awards: market or
payout value of
unearned shares, units
or other rights that
have not vested ($)

 

David L. Finkelstein

 

 

6/30/2020

 

 

404,589

 

 

$3,418,777

 

 

—

 

 

—

  

 

6/30/2020

 

 

—

 

 

—

 

 

606,884

 

 

$5,128,170

 

Serena Wolfe

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

Timothy P. Coffey

 

 

6/30/2020

 

 

202,295

 

 

$1,709,393

 

 

—

 

 

—

 

Anthony C. Green

 

 

6/30/2020

 

 

80,918

 

 

$683,759

 

 

—

 

 

—

 

Ilker Ertas

 

 

1/31/2020

 

 

11,273

 

 

$95,257

 

 

—

 

 

—

(1)

Represents the number of RSUs (including additional RSUs accrued as dividend equivalents) granted to Messrs. Finkelstein, Coffey, Ertas and Green in 2020, which vest in equal installments over three years starting on the first anniversary of the grant date, subject to continued employment.

(2)

Based on the performance through the end of 2020, the number of PSUs shown in the table assumes maximum payout (150%)  and includes additional PSUs accrued as dividend equivalents. The PSUs are subject to cliff vesting following the end of the three-year performance period. For additional details on the performance goals, see “One-Time Internalization Awards –Grant of PSUs” in the Compensation Discussion and Analysis.

Stock Vested

The following table summarizes certain information regarding stock vested for the NEOs during the year ended December 31, 2020.

   Stock Awards
     Name  

Number of shares acquired
upon vesting
(# of shares of

common stock)

  Value realized on vesting ($)

  Glenn A. Votek

  

100,100

  

$690,690

The value realized represents the gross number of shares or units that vested, multiplied by the closing market value the Company’s common stock on the applicable vesting date.

Pension Benefits and Nonqualified Deferred Compensation

The Company did not provide the NEOs with any benefits pursuant to defined benefit plans and nonqualified deferred compensation plans during 2020. The Company’s only retirement plan in which the NEOs were eligible to participate is the 401(k) Plan, which is a tax-qualified defined contribution retirement plan that is generally available to all employees on a non-discriminatory basis, and includes an opportunity to receive employer matching contributions.

Potential Payments upon Termination or Change in Control

All of the NEOs are currently eligible to participate in an Executive Severance Plan, which was adopted by the Company effective July 1, 2020. The Executive Severance Plan provides benefits upon a participant’s involuntary termination of employment by the Company without “cause” (as such term is defined therein) based on the

participant’s title, base salary and average or target cash bonus (depending on the year of termination). Prior to payment of the NEOs’ 2020 incentive awards in early 2021, Messrs. Finkelstein, Coffey, Green and Ertas were also party to employment agreements and/or severance rights agreements that referenced the Executive Severance Plan and included certain additional termination provisions, including, in the case of Messrs. Finkelstein, Coffey and Green, vesting provisions relating to the Internalization awards. As a newly hired employee in December 2019, Ms. Wolfe’s employment agreement included a separate severance arrangement that provided for payment of a flat lump sum benefit under a range of termination scenarios. Pursuant to her employment agreement, following payment and award of Ms. Wolfe’s 2020 incentives in early 2021, her severance entitlement in the event of a termination by the Company for “cause” became covered by the Executive Severance Plan. These severance arrangements are more fully described below.

Ms. Wolfe’s Employment Agreement

Ms. Wolfe is party to an amended and restated employment agreement with the Company, dated as of November 9, 2020. Ms. Wolfe’s employment agreement provides that, in case of her termination of employment (a) due to her death or “disability” before December 31, 2021 or (b) by action of the Company without “cause” or by her for “good reason” (as such terms are defined in her employment agreement) before the payment of the 2020 incentive award in early 2021, she would be entitled to a lump sum payment of $6,750,000 (in addition to certain accrued benefits such as earned but unpaid salary and vested employee benefits). Pursuant to her employment agreement, following payment of her 2020 incentive award in early 2021, Ms. Wolfe became subject to the Executive Severance Plan in the event of a termination by the Company for “cause.”

Other NEO Employment Agreements and Severance Rights Agreements

Messrs. Finkelstein, Coffey and Green were each party to an amended and restated employment agreement with the Company, dated as of November 9, 2020, that expired upon payment of their 2020 incentive awards in early 2021. In addition to these employment agreements, Messrs. Coffey, Green and Ertas were also party to severance rights agreements, dated as of February 12, 2020, that became effective upon the closing of the Internalization and expired upon the payment of their 2020 incentive awards in early 2021. Pursuant to Mr. Finkelstein’s employment agreement and Messrs. Coffey’s, Green’s and Ertas’s severance rights agreements, if any such executive’s employment had been terminated by the Company without ��cause” or by such executive with “good reason” (as defined in the applicable agreement) prior to the payment of his 2020 incentive award in early 2021, he would have been entitled to (i) his base salary through the date of termination, any amounts then owed to him and under any other applicable Company benefit plan and any outstanding properly incurred business expenses, and (ii) any amounts to which he is expressly entitled under the Executive Severance Plan (as described below).

Messrs. Finkelstein’s, Coffey’s and Green’s employment agreements also provided for full, accelerated vesting of their Internalization RSUs under certain circumstances, including a termination of their employment by the Company without “cause” or by the executive with “good reason,” or a result of their death or “disability” (each as defined in the applicable agreement). Pursuant to his employment agreement, Mr. Finkelstein would also have been entitled to continued vesting of his PSUs on December 31, 2020 based on actual performance results, prorated for the performance period worked.

Executive Severance Plan

The Executive Severance Plan provides benefits upon a participant’s involuntary termination of employment by the Company without “cause” (as such term is defined therein). Severance benefits are payable in a lump sum and are calculated based on the participant’s title, base salary and average or target cash bonus (depending on the year of termination), as described below.

If the CEO had an involuntary termination of employment without cause, the CEO would be eligible to receive the following amount of severance benefits:

∎

if the involuntary termination of employment occurred in 2020, the sum of (i) 1.0 times the CEO’s annual base salary and (ii) 1.0 times the CEO’s average cash bonus for the 2018-2019 calendar years; or

∎

if the involuntary termination of employment occurs in a calendar year after 2020, the sum of (i) 1.5 times the CEO’s annual base salary and (ii) 1.5 times the CEO’s target cash bonus for the plan year in which the involuntary termination of employment occurs.

If any other NEO participating in the Executive Severance Plan (Messrs. Coffey, Green and Ertas as of December 31, 2020) had an involuntary termination of employment without cause, the other NEO would be eligible to receive the following amount of severance benefits:

∎

if the involuntary termination of employment occurred in 2020, the sum of (i) 0.75 times the executive’s annual base salary and (ii) 0.75 times the executive’s average cash bonus for the 2018-2019 calendar years; or

∎

if the involuntary termination of employment occurs in a calendar year after 2020, the sum of (i) 1.25 times the executive’s annual base salary and (ii) 1.25 times the executive’s target cash bonus for the plan year in which the involuntary termination of employment occurs.

In addition, a participant who experiences an involuntary termination of employment without cause after March 31st of a calendar year will be eligible to receive a prorated cash bonus payment based on the amount of the participant’s cash bonus earned for the prior year (subject to the Company’s discretion to adjust the cash bonus amount for performance in the current year).

The Executive Severance Plan provides that severance may be recovered if the Company determines within three years after a participant’s separation date that he or she engaged in conduct that constitutes “Detrimental Conduct” under the Company’s clawback policy. For additional information, see “Clawback Policy” in the Compensation Discussion and Analysis above.

Quantification of Termination Payments

The tables below show certain potential payments that would have been made to Messrs. Finkelstein, Coffey, Green and Ertas under the Executive Severance Plan and their respective employment agreements and/or severance rights agreements, and to Ms. Wolfe under her employment agreement, each as in effect on December 31, 2020, assuming such person’s employment had terminated at the close of business on December 31, 2020, under various scenarios, including a change in control.

The tables include only the value of the incremental amounts payable to the NEO arising from the applicable scenario and do not include the value of vested or earned, but unpaid, amounts owed to the applicable NEO as of December 31, 2020 (including, for example, dividend equivalents relating to dividends declared but not paid as of such date, vested but not settled RSUs or PSUs, or the employer 401(k) matches for the NEOs).

The footnotes to the tables describe the assumptions used in estimating the amounts shown in the tables. As used below, the terms “Cause,” “Change in Control,” “Disability,” and “Good Reason,” shall have the respective meanings set forth in the Executive Severance Plan or the executive’s respective employment and/or severance rights agreement as applicable.

Because the payments to be made to a NEO depend on several factors, the actual amounts to be paid out upon an NEO’s termination of employment can only be determined at the time of the NEO’s separation from the Company.

Name

 

Termination by
Company
Without Cause
(other than
within two years
of a Change in
Control)

 

Termination by
Executive for
Good Reason
(other than
within two years
of a Change in
Control)

 

Termination by
Company
Without Cause
(within two years
of a Change in
Control)

 

Termination by
Executive for
Good Reason
(within two years
of a Change in
Control)

  

Death or
Disability

  

Termination by
Company for
Cause or
Voluntary
Termination by
Executive
without Good
Reason

 

David L. Finkelstein

            

Severance

 $11,850,000 $0 $11,850,000  $0   $0   $0 

Bonus

 $7,200,000 $0 $7,200,000  $0   $0   $0 

Accelerated Equity

Awards(1)

 $5,105,375 $5,105,375 $8,478,569  $8,478,569   $8,478,569(2)   $0 

Benefits

 $0 $0 $0  $0   $0   $0 

Total

 $24,155,375 $5,105,375 $27,528,569  $8,478,569   $8,478,569   $0 

Name

 

Termination by
Company
Without Cause
(other than
within two years
of a Change in
Control)

 

Termination by
Executive for
Good Reason
(other than
within two years
of a Change in
Control)

 

Termination by
Company
Without Cause
(within two years
of a Change in
Control)

 

Termination by
Executive for
Good Reason
(within two years
of a Change in
Control)

 

Death or
Disability

 

Termination by
Company for
Cause or
Voluntary
Termination by
Executive
without Good
Reason

Serena Wolfe

      

Severance

 $6,750,000 $6,750,000 $6,750,000 $6,750,000 $6,750,000 $0

Bonus

 $0 $0 $0 $0 $0 $0

Accelerated Equity

Awards(1)

 $0 $0 $0 $0 $0 $0

Benefits

 $0 $0 $0 $0 $0 $0

Total

 $6,750,000 $6,750,000 $6,750,000 $6,750,000 $6,750,000 $0

Timothy P. Coffey

      

Severance

 $4,537,500 $0 $4,537,500 $0 $0 $0

Bonus

 $3,200,000 $0 $3,200,000 $0 $0 $0

Accelerated Equity

Awards(1)

 $1,709,393 $1,709,393 $1,709,393 $1,709,393 $1,709,393 $0

Benefits

 $0 $0 $0 $0 $0 $0

Total

 $9,446,893 $1,709,393 $9,446,893 $1,709,393 $1,709,393 $0

Anthony C. Green

      

Severance

 $6,375,000 $0 $6,375,000 $0 $0 $0

Bonus

 $2,800,000 $0 $2,800,000 $0 $0 $0

Accelerated Equity

Awards(1)

 $683,759 $683,759 $683,759 $683,759 $683,759 $0

Benefits

 $0 $0 $0 $0 $0 $0

Total

 $9,858,759 $683,759 $9,858,759 $683,759 $683,759 $0

Ilker Ertas

      

Severance

 $4,031,250 $0 $4,031,250 $0 $0 $0

Bonus

 $3,350,000 $0 $3,350,000 $0 $0 $0

Accelerated Equity

Awards(1)

 $95,257 $95,257 $95,257 $95,257 $95,257 $0

Benefits

 $0 $0 $0 $0 $0 $0

Total

 $7,476,507 $95,257 $7,476,507 $95,257 $95,257 $0

(1)

The value of accelerated equity awards is based on the closing price of the common stock on December 31, 2020 ($8.45 per share) and include any accrued dividend equivalents. Any PSUs that accelerate for a termination that is not within two years after a Change in Control will remain subject to performance results for the full performance period. Any PSUs that accelerate for a termination that is within two years after a Change in Control will be based on the greater of: (A) an assumed achievement of all relevant performance goals at the “target” level, or (B) the actual level of achievement of all relevant performance goals against target as of the Company’s fiscal quarter end preceding the Change in Control. Per the Company’s 2020 Equity Incentive Plan, if awards are not assumed or replaced in connection with a Change in Control, the awards will vest upon the closing of the transaction.

(2)

In the case of death, the PSU value would be based on the “target” level, resulting in a total payment of $6,837,554.

Compensation Committee Interlocks and Insider Participation

The MDC Committee is comprised solely of the following Independent Directors: Ms. Williams (Chair), Dr. Hannan and Messrs. Hamilton, Segalas and Schaefer. None of them is serving or has served as an officer or employee of the Company or any affiliate or has any other business relationship or affiliation with the Company, except service as a Director. During 2020, none of the Company’s executive officers served on the compensation committee (or other committee serving an equivalent function) of another entity whose executive officers served on the MDC Committee or Board.

CEO Pay Ratio

As required by applicable SEC rules, the Company is providing the following information about the relationship of the annual total compensation of the Company’s median employee to the annual total compensation of Mr. Finkelstein, the Company’s CEO and Chief Investment Officer. For 2020, the Company’s last completed fiscal year:

∎

the annual total compensation of the Company’s median employee was $287,500 (inclusive solely of compensation paid or awarded by the Company and excluding compensation paid by the Former Manager in 2020 prior to the closing of the Internalization); and

∎

the annual total compensation of the CEO as reported in the Summary Compensation Table included elsewhere in this proxy statement, was $12,703,778 (inclusive solely of compensation paid or awarded by the Company).

Based on this information, for 2020 the CEO’s annual total compensation was 44 times that of the annual total compensation of the Company’s median employee (inclusive solely of compensation paid or awarded by the Company and excluding compensation paid by the Former Manager in 2020 prior to the closing of the Internalization).

In addition to the CEO pay ratio required by the SEC’s rules, we are also providing a supplemental CEO pay ratio that includes compensation paid by the Former Manager in 2020 prior to the closing of the Internalization on June 30, 2020. If compensation paid by the Former Manager in 2020 is included, the annual total compensation of the Company’s median employee was $385,000 and the annual total compensation of the CEO was $13,163,534. On that basis, the CEO’s annual total compensation was 34 times that of the annual total compensation of the Company’s median employee.

The Company took the following steps to identify its median employee, as well as to determine the peersannual total compensation of the Company’s median employee and its CEO.

1.

The Company determined that, as of December 31, 2020 its employee population consisted of approximately 180 individuals, all of whom were full-time employees as of the determination date.

2.

To identify the “median employee” from its employee population, the Company used the amount of “gross wages” for the identified employees as reflected in the Company’s payroll records for the period in the fiscal year through the determination date together with any equity awards paid or awarded during the year. For gross wages, the Company generally used the total amount of compensation the employees were paid before any taxes, deductions, insurance premiums, and other payroll withholding. The Company did not use any statistical sampling techniques.

3.

For the annual total compensation of the Company’s median employee (inclusive solely of compensation paid or awarded by the Company), the Company’s identified and calculated the elements of that employee’s compensation for 2020 in accordance with the requirements of Item 402(c)(2)(x), resulting in annual total compensation of $287,500. If compensation paid by the Former Manager in 2020 prior to the closing of the Internalization is added to such amount, annual total compensation of the Company’s median employee increases to $385,000.

4.

For the annual total compensation of the CEO (inclusive solely of compensation paid or awarded by the Company), the Company used the amount reported in the “Total” column of the 2020 Summary Compensation Table included in this proxy statement. If compensation paid by the Former Manager in 2020 prior to the closing of the Internalization is added to such amount, annual total compensation of the CEO increases to $13,163,534.

The required CEO pay ratio information reported above is a reasonable estimate calculated in a manner consistent with whichSEC rules based on the Company competesmethodologies and assumptions described above. SEC rules for assets, stockholdersidentifying the median employee and talent.determining the CEO pay ratio permit companies to employ a wide range of methodologies, estimates and assumptions. As a result, the Manager focuses on peers within the mREIT industry, as well as asset managementCEO pay ratios reported by other companies, that manage mREITs, along withwhich may have employed other asset managerspermitted methodologies or assumptions and financial companies within relevant market capitalization and/or revenue bands. The Manager annually reviews the Peer Group andwhich may update its composition to better reflecthave a significantly different work force structure from the Company’s, competitive landscapeis likely not comparable to the Company’s SEC-required or if necessary, to account for corporate changes, including acquisitions and dispositions.supplemental CEO pay ratios.

The Manager considers both
industry- and company-
specific dynamics to identify
the peers with which the
Company competes for assets,
stockholders and talent

Compensation Peer Group

Affiliated Managers Group, Inc.Eaton Vance Corp.Northern Trust Corporation
AGNC Investment Corp.Franklin Resources, Inc.Raymond James Financial, Inc.
Apollo Global Management, LLCInvesco Ltd.Starwood Property Trust, Inc.
Ameriprise Financial, Inc.Jefferies Financial Group Inc.T. Rowe Price Group, Inc.
Ares Capital CorporationKKR & Co. L.P.The Blackstone Group L.P.
Ares Management Corp.Lazard LtdThe Carlyle Group L.P.
ARMOUR Residential REIT, Inc.Legg Mason, Inc.Waddell & Reed Financial, Inc.
E*TRADE Financial CorporationNew Residential Investment Corp.

40Annaly Capital Management Inc. 2019 Proxy Statement

Table of Contents

Executive Compensation

PROPOSAL

02

 

Advisory Approval of Executive Compensation

The Board is committed to corporate governance best practices and recognizes the significant interest of stockholders in executive compensation matters. The Company is providing this non-binding advisory vote pursuant to Section 14A of the Exchange Act.

In considering this vote, the Company invites its stockholders to review the “Compensation Discussion and Analysis” and “Executive Compensation Tables” above. As described in detail under the headings “Management Structure” and “Compensation Paid by the Manager to the Named Executive Officers” above and “CompensationCompensation Discussion and Analysis” below,Analysis, the CompanyMDC Committee is externally-managed by the Manager pursuant to the Management Agreement between the Manager and the Company. The Manager is responsible for paying all compensation amounts to the NEOs. The Company pays the Manager a management fee, and the Manager uses a portionproud of the proceeds fromsignificant steps taken to re-design the management fee to payexecutive compensation toprogram for 2020 following the NEOs other than Mr. Keyes (who does not receive any compensation for serving asInternalization and is focused on continually enhancing the Company’s Chairman, CEOcompensation framework to reflect strong compensation governance and President, but hasreward sustained value creation. The MDC Committee is committed to establishing an interest in the management fee as an indirect equityholder of the Manager). However, the Company does not determine theexecutive compensation program that the Manager paysattracts, retains and incentivizes top executive talent and generates long-term value for stockholders by directly linking compensation payout to the NEOs, the Company does not allocate any specific portion of the management fee that the Company pays to the compensation of the NEOs, and the Company does not reimburse the Manager for the cost of such compensation. The Manager makes all decisions relating to the compensation of the NEOs based on the factors the Manager determines to be appropriate, including both individual and Company performance and subject to the terms of any employment agreement entered into between the Manager and an individual NEO.without encouraging unnecessary risk taking.

The Company is not party to any employment agreements entered into between the Manager and individual NEOs. However, the Company is party to a Severance and Noncompetition Agreement (the “CEO Severance Agreement”) with Mr. Keyes, which provides for cash severance to be paid by the Company to Mr. Keyes in certain termination events. For more information, see “CEO Severance Agreement” and “Potential Payments upon Termination or Change in Control” below.

The NEOs are eligible to receive equity awards pursuant to the Company’s equity incentive plan, which is administered by the Compensation Committee. No equity awards were made to any of the NEOs in 2018. In 2018, the Company did not pay any compensation to the NEOs.

The Board unanimously 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 non-binding, the Board and Compensationthe MDC Committee value the views of the Company’s stockholders and will consider the voting results when making compensation decisions regardingin the CEO Severance Agreement and the Company’s equity incentive plans.future.

The Board unanimously recommends a voteFOR the Approval of this Resolution.

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Executive Compensation

Compensation Discussion and Analysis

As discussed above, the Manager pays all of the compensation, including benefits, to the NEOs. As a private company not subject to the disclosure requirements of the SEC, the Manager has sole discretion to determine the compensation it pays to its employees, including the NEOs. The Manager makes all compensation determinations for the NEOs without any direction by the Board and without reference to any specific policies or programs under the oversight of the Board or the Compensation Committee. The Manager compensates the NEOs for a variety of services performed for the benefit of the Manager. Thus, the compensation paid by the 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.

Pursuant to the terms of the Management Agreement, the Company pays the Manager a monthly management fee for its management services equal to 1/12thof the sum of: (i) 1.05% of Base Stockholders’ Equity(1), and (ii) 0.75% of Incremental Stockholders’ Equity(2). In addition to the management fee, the Company reimburses the Manager for the cost of certain legal, tax, accounting and other support and advisory services provided by employees of the Manager to the Company. During the year ended December 31, 2018, the Company incurred $179.8 million in management fees and $9.2 million in permitted reimbursement payments under the Management Agreement. None of the reimbursement payments were attributable to compensation of the Company’s NEOs. The proceeds of the management fee are used in part to pay compensation to the NEOs other than Mr. Keyes (who does not receive any compensation for serving as the Company’s Chairman, CEO and President, but has an interest in the management fee as an indirect equityholder of the Manager). The Company does not determine the compensation that the Manager pays to the NEOs, the Company does not allocate any specific portion of the management fee that the Company pays to the compensation of the NEOs, and the Company does not reimburse the Manager for the cost of such compensation.

Accordingly, the Company did not pay any cash compensation to the NEOs, nor did the Company grant them any plan-based awards, for 2018. The Company does not provide the NEOs with pension benefits, perquisites or other personal benefits. As a result, no compensation is includable in the Summary Compensation Table.

The Company is not party to any employment agreements entered into between the Manager and individual NEOs. However, the Company is party to the CEO Severance Agreement with Mr. Keyes, which provides for cash severance to be paid by the Company to Mr. Keyes in certain termination events. For more information, see “CEO Severance Agreement” and “Potential Payments upon Termination or Change in Control” below. No “single-trigger” severance amounts are payable to Mr. Keyes solely upon a change in control of the Company.

The Company believes that providing appropriate severance benefits to Mr. Keyes upon certain termination events helps the Company retain Mr. Keyes’ services as its CEO. The CEO Severance Agreement also allows the Company to protect its interests through noncompetition provisions that continue to apply following Mr. Keyes’ termination as CEO of the Company. In connection with its review and recommendation of the CEO Severance Agreement, a special committee of the Board comprised of four independent Directors considered the executive compensation arrangements of its compensation peer group.

Consideration of “Say-on-Pay” Voting Results

At the Company’s 2018 Annual Meeting, over 94% of the votes cast supported the Company’s Say-on-Pay vote. Upon consideration of the high percentage of votes cast in support of the Say-on-Pay vote, along with additional feedback from engagement with stockholders, the Compensation Committee determined it was appropriate to continue providing detailed quantitative information about the Manager’s executive compensation program in the Company’s proxy materials. For additional details, please see “Compensation Paid by the Manager to the Named Executive Officers” above.

The 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.”

Over 94% of votes cast supported
the Company’s most recent
Say-on-Pay vote

Note: For footnoted information, please refer to “Compensation Discussion and Analysis” in Endnotes section.

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Executive Compensation

Executive Compensation Policies

Stock Ownership Guidelines/Commitments

PositionNumber 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)1130% of Annual Total Compensation5 years
Managing Directors2620% of Annual Total Compensation5 years
Director-Level Employees3210% of Annual Total Compensation5 years
Total70

The stock ownership guidelines outlined above apply to more than 40% of the Manager’s employees. As of December 31, 2018, over 50% of the Manager’s employees had purchased stock in the open market, which includes senior employees subject to the Company’s stock ownership guidelines as well as junior team members.

Stock Holding Period

The Manager’s employees (including the NEOs) 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.

Prohibition on Hedging Company Securities

The Company has a policy prohibiting the Manager’s employees (including the NEOs), employees of the Company and its subsidiaries, and members of the Board from engaging in any hedging transactions with respect to Company securities held by them. Such prohibited transactions include 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 Company securities.

Prohibition on Pledging Company Securities

The Company has a policy prohibiting the Manager’s employees (including the NEOs), employees of the Company and its subsidiaries, and members of the Board from holding Company securities in a margin account or pledging Company securities as collateral for a loan.

Risks Related to Compensation Policies and Practices

As discussed above in “Management Structure,” the Compensation Committee is not entitled to approve compensation decisions made by the Manager and the 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 the Manager uses the management fee to compensate the NEOs. However, in connection with the Compensation Committee’s administration of the Company’s equity incentive plan and oversight of the CEO Severance Agreement, the Compensation Committee conducts an annual risk assessment of the Company’s applicable compensation policies and practices. In 2018, 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 the Company.

Report of the Compensation Committee

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. SchaeferVicki Williams

Note: For footnoted information, please refer to “Stock Ownership Guidelines/Commitments” in Endnotes section.

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Executive Compensation

Executive Compensation Tables and Related Narrative

Summary Compensation Table

The Company did not pay any compensation to the NEOs, and did not reimburse the Manager for any compensation paid to the NEOs, with respect to the years ended December 31, 2018, December 31, 2017 or December 31, 2016.

Grants of Plan-Based Awards

The Company did not grant the NEOs any plan based awards in 2018.

Outstanding Equity Awards at Fiscal Year-End

None of the NEOs had outstanding equity awards at December 31, 2018.

Options Exercised and Stock Vested

No options were exercised by and no stock vested for the NEOs during 2018.
The Company did not pay any cash or equity compensation to the NEOs for 2018. The Company does not provide them with pension benefits, perquisites or other personal benefits.


Pension 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.

CEO Severance Agreement

On August 1, 2018, the Company and Mr. Keyes entered into the CEO Severance Agreement. The term of the CEO Severance Agreement continues through July 31, 2020, and will automatically renew for successive one-year terms unless either party gives written notice (a “Notice of Non-Renewal”) to the other of its intention not to renew at least 180 days prior to the expiration of the then-current term.

Upon (i) the removal of Mr. Keyes as the Company’s Chief Executive Officer without “cause” (as defined in the CEO Severance Agreement), (ii) the resignation of Mr. Keyes with “good reason” (as defined in the CEO Severance Agreement) or (iii) the expiration of the then-current term following a Notice of Non-Renewal provided by the Company (each, a “Severance Event”), the Company shall pay Mr. Keyes a cash payment equal to $30 million (the “Severance Payment”). The Severance Payment shall be payable in 12 equal monthly installments after Mr. Keyes’ separation from service upon or following a Severance Event (the “Severance Period”); provided that if such separation from service occurs within two years immediately following a “change of control” (as defined in the CEO Severance Agreement), the Severance Payment shall be made in a single lump sum. The payment of the Severance Payment shall be subject to the execution of a waiver and release of claims against the Company and its subsidiaries and affiliates and on Mr. Keyes’ continued compliance with applicable noncompetition provisions. For additional information about the CEO Severance Agreement, see “Compensation Discussion and Analysis.”

Potential Payments upon Termination or Change in Control

The following table sets forth quantitative information with respect to potential payments to Mr. Keyes or his beneficiaries upon various termination events described above, assuming termination on December 31, 2018. Other than Mr. Keyes, the Company has no responsibility to provide any payments or benefits to any NEO in connection with a termination of service or change in control.

Type of Termination(1)
ExecutiveBy Company
without Cause		By Executive
with Good Reason		Company
Non-Renewal of
Severance Agreement
Kevin G. Keyes  $30,000,000  $30,000,000  $30,000,000
____________________
1.

Payments are subject to the execution of a waiver and release of claims and compliance with applicable noncompetition provisions.


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Executive Compensation

Compensation Committee Interlocks and Insider Participation

The Compensation Committee is comprised solely of the following Independent Directors: Messrs. Segalas (Chair), Green, Nordberg and Schaefer and Ms. Williams. None of them is serving or has served as an officer or employee of the Company or any affiliate or has any other business relationship or affiliation with the Company, except service as a Director. During 2018, none of the Company’s executive officers served on the compensation committee (or other committee serving an equivalent function) or another entity whose executive officers served on the Compensation Committee or Board.

Ceo Pay Ratio

The Manager is responsible for managing the Company’s affairs pursuant to the Management Agreement and, as of December 31, 2018, directly employed 95% of the individuals who provide services to the Company. The remaining employees are employed by subsidiaries of the Company for regulatory or corporate efficiency reasons. At December 31, 2018, the Company’s measurement date for identifying the median employee, the Company’s subsidiaries had eight 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 $265,000 in 2018. The Company does not provide any compensation to the CEO. As a result, the CEO to median employee pay ratio required to be disclosed under Item 402(u) of Regulation S-K is not applicable.

This information is being provided for compliance purposes. Neither the Compensation Committee nor the Manager used the pay ratio measure in making any compensation decisions.

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Executive Compensation

PROPOSAL
03
Approval of an Amendment to the Company’s Charter to Increase the Number of Authorized Shares of Capital Stock to 3,000,000,000 Shares

As of March 25, 2019, we had 1,442,971,679 shares of common stock, 7,000,000 shares of 7.625% Series C Cumulative Redeemable Preferred Stock, 18,400,000 shares of 7.50% Series D Cumulative Redeemable Preferred Stock, 28,800,000 shares of 6.95% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, 17,000,000 shares of 6.50% Series G Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock, and 2,200,000 shares of 8.125% Series H Cumulative Redeemable Preferred Stock, issued and outstanding.

Our charter currently allows us to issue up to a combined total of 2,000,000,000 shares of capital stock, par value $0.01 per share. The proposed amendment of our charter raises the total number of authorized shares of capital stock we are permitted to issue from 2,000,000,000 shares to 3,000,000,000 shares. Although our charter permits our Board to classify and reclassify any unissued shares of capital stock by setting or changing in any one or more respects the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption of such shares of stock, we commit to allocating all 1,000,000,000 shares as common stock, and will not reallocate any such shares as preferred stock.

The proposed amendment to our charter deletes the current ARTICLE VI(A) of our charter and replaces it with the following:

“ARTICLE VI

A.The total number of shares of stock of all classes which the Corporation has authority to issue is three billion (3,000,000,000) shares of capital stock, par value one cent ($0.01) per share, amounting in the aggregate par value to thirty million dollars ($30,000,000). Of these shares of capital stock, 2,924,050,000 shares are classified as “Common Stock,” 7,000,000 shares are classified as “7.625% Series C Cumulative Redeemable Preferred Stock,” 18,400,000 shares are classified as “7.50% Series D Cumulative Redeemable Preferred Stock,” 28,800,000 shares are classified as “6.95% Series F Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock,” 19,550,000 shares are classified as “6.50% Series G Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock,” and 2,200,000 shares are classified as “8.125% Series H Cumulative Redeemable Preferred Stock.” Our Board may classify and reclassify any unissued shares of capital stock by setting or changing in any one or more respects the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption of such shares of stock.”

The Board declared advisable, and unanimously recommends a voteFORthe approval of an amendment to our charter to increase the number of authorized shares to 3,000,000,000 shares.


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Executive Compensation

Purpose and Background

To retain the ability to issue additional shares of capital stock, we seek to increase the number of shares we are currently authorized to issue for general corporate purposes from 2,000,000,000 shares to 3,000,000,000 shares. As of March 25, 2019, the Company had 1,516,371,679 shares of capital stock issued and outstanding, leaving 483,628,321 shares of capital stock available for future issuances, of which approximately 389,022,880 shares are reserved for future issuance, including shares reserved for future issuance under our Dividend Reinvestment and Share Purchase Plan and upon a conversion of our preferred stock pursuant to the terms thereof. The Board believes that the availability of additional shares is essential for the Company to successfully pursue its business objectives. Approval of an amendment to the Company’s charter increasing the authorized number of shares will provide the Company with valuable flexibility to take advantage of opportunities to raise additional capital for general corporate purposes, investment activity, mergers and acquisitions, and/or stock dividends or splits. Although the Company’s charter permits the Board to classify and reclassify any unissued shares of capital stock by setting or changing in any one or more respects the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications or terms or conditions of redemption of such shares of stock, the Company commits to allocating all 1,000,000,000 shares as common stock, and will not reallocate any such shares as preferred stock. The Company currently does not have any acquisitions or other major transactions planned that would require an increase to the Company’s authorized share capital, and the Board is not proposing the increase with the intent of using the newly-authorized shares as an anti-takeover device.

Potential Effect

Future issuances of common stock or securities convertible into common stock could have a dilutive effect on the earnings per share, book value per share, voting power and percentage interest of holdings of current stockholders. In addition, the availability of additional shares of common stock for issuance could, under certain circumstances, discourage or make more difficult efforts to obtain control of the Company, although that is not the intention of this proposal.

Vote Required

The approval of the proposed amendment to the Company’s charter requires the affirmative vote of the holders of a majority of the total number of issued and outstanding shares of our common stock entitled to vote. Abstentions will have the same effect as votes against this proposal. This proposal is considered a “routine” matter that brokers may vote on without instruction from beneficial owners. As a result, a broker non-vote cannot occur with respect to this proposal. For more information on the voting requirements, see the “Questions and Answers about the Annual Meeting” section in this Proxy Statement.

Conclusion

The Board considers this amendment to the Company’s charter advisable to provide flexibility for future capital needs, including general corporate purposes, investment activity, mergers and acquisitions, and/or stock dividends or splits. Approval of this amendment by the stockholders at the Annual Meeting may avoid the expensive procedure of calling and holding a special meeting of stockholders for such a purpose at a later date.

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Audit Committee Matters

PROPOSAL

PROPOSAL03

04

 

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.

The Audit Committee has appointed Ernst & Young LLP (“Ernst & Young” or “EY”EY”) to serve as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2019,2021, and stockholders are being asked to ratify this appointment at the Annual Meeting as a matter of good corporate governance. Ernst & YoungEY has served as Annaly’s independent registered public accounting firm since 2012. In appointing Ernst & Young,EY, the Audit Committee considered a number of factors, including Ernst & Young’sEY’s independence, objectivity, level of service, industry knowledge, technical expertise, and tenure as the independent auditor. The Company expects that representatives of Ernst & YoungEY 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 & YoungEY is not ratified, the Audit Committee will reconsider the appointment. 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.interest of the Company.

LOGO

The Board unanimously recommends a voteFORthe ratification of the appointment of Ernst & Young LLP as the Company’s Independent Registered Public Accounting Firm for the year ending December 31, 2019.2021.

Report of the Audit CommitteeREPORTOFTHE 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“Board Committees – Audit Committee”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.

The Audit Committee is responsible for the appointment, compensation, retention and oversight of the independent auditors

The Audit Committee has reviewed and discussed Annaly’s audited financial statements with management and with Ernst & Young,EY, the Company’s independent auditor for 2018.

2020.

The Audit Committee has discussed with Ernst & YoungEY the matters required to be discussed by applicable standards adopted by the Public Company Accounting Oversight Board (“PCAOB”), including the critical audit matters set forth in EY’s audit report and matters concerning Ernst & Young’sEY’s independence. Ernst & YoungEY has also provided to the Audit Committee the written disclosures and letter required by the applicable requirements of the Public Company Accounting Oversight BoardPCAOB regarding Ernst & Young’sEY’s communications with the Audit Committee concerning independence. The Audit Committee also discussed with Ernst & YoungEY their independence from the Company and management, and considered whether non-audit services provided by Ernst & YoungEY to the Company are compatible with maintaining Ernst & Young’sEY’s independence. In determining whether to appoint EY as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2021, the Audit Committee took into consideration a number of factors, including historical and recent performance on the Company’s audit, including service level and quality of staff and overall work; EY’s tenure, independence and objectivity; EY’s capability and expertise, including its understanding of the Company’s business and operations and overall industry knowledge; legal and regulatory considerations; data related to audit quality and performance, including recent PCAOB inspection reports on the firm; the appropriateness of EY’s fees; and the results of a management survey of EY’s overall performance.

In reliance on these reviews and discussions, and the report of the independent registered public accounting firm, the Audit Committee has recommended to the Board, and the Board has approved, that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20182020 filed with the SEC.

Kevin P. BradyKathy Hopinkah Hannan (Chair)Thomas HamiltonMichael HaylonE. Wayne NordbergJohn H. SchaeferVicki Williams

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Audit Committee Matters

Relationship with Independent Registered Public Accounting FirmRELATIONSHIPWITH INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The aggregate fees billed for 20182020 and 20172019 by EY for each of the following categories of services are set forth below:

Service Category   2018   2017
Audit(1)$2,708,050$2,569,311
Audit-Related(2)62,00061,000
Tax(3)509,800316,700
All Other(4)134,000–
Total$3,413,850$2,947,011
____________________

Service Category  2020   2019 

 

Audit(1)

  

 

$

 

2,976,625

 

 

  

 

 

 

3,299,225

 

 

  

 

Audit-Related(2)

  

 

 

 

62,000

 

 

  

 

 

 

62,000

 

 

  

 

Tax(3)

  

 

 

 

324,300

 

 

  

 

 

 

430,840

 

 

  

 

All Other(4)

  

 

 

 

180,000

 

 

  

 

 

 

220,000

 

 

  

 

Total(5)

  

 

$

 

3,542,925

 

 

  

 

$

 

4,012,065

 

 

  

1.

Audit 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, accounting consultations and comfort letters and consents related to SEC registration statements.

2.

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.firm.

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 one of the other categories.

5.

EY also provides audit and tax consulting and compliance services to funds that we do not consolidate. The fees for these services are provided to and paid by the funds and therefore are not included in the above table.

The Audit Committee has also adopted policies and procedures for pre-approving all non-audit work performed by the independent registered public accounting firm. The Audit Committee retained EY to provide certain non-audit services in 2018,2020, consisting of tax compliance and consultations, all of which were pre-approved by the Audit Committee. Specifically, the Audit Committee pre-approved the use of EY 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 EY of these non-audit services is compatible with EY maintaining its independence.

In addition to the 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

The Company understands the need for EY to maintain objectivity and independence as the auditor of its financial statements and internal control over financial reporting. In accordance with SEC rules, the Audit Committee requires the lead EY partner assigned to Annaly’s audit to be rotated at least every five years, and the Audit Committee and its chairChair is involved in selecting each new lead audit partner. The Audit Committee approved the hiring of EY to provide all of the services detailed above prior to such independent registered public accounting firm’s engagement. None of the services related to the Audit-Related Fees described 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 partner


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Stock Ownership Information

Security Ownership of Certain Beneficial Owners and ManagementSECURITY OWNERSHIPOF CERTAIN BENEFICIAL OWNERSAND MANAGEMENT

The following table sets forth certain information as of March 25, 201922, 2021 relating to the beneficial ownership, as defined in SEC rules, of the Company’s common stock by (i) each NEO, (ii) each Director and nominee for Director, (iii) all executive officers and Directors as a group, and (iv) all persons that the Company knows beneficially own more than 5% of its outstanding common stock. Under SEC rules, a person is deemed to be a “beneficial owner” orof a security if that person has or shares voting power or investment power, which includes the power to dispose of or to direct the disposition of such security.

Knowledge of the beneficial ownership of the Company’s common stock as shown below 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)
Kevin G. Keyes984,779*
Glenn A. Votek104,846*
David L. Finkelstein300,000*
Timothy P. Coffey38,000*
Anthony C. Green101,000*
Francine J. Bovich98,240*
Kevin P. Brady(4)252,502*
Wellington J. Denahan1,811,272*
Katie Beirne Fallon12,858*
Jonathan D. Green198,379*
Thomas Hamilton(5),(6)250,000*
Kathy Hopinkah Hannan(6)-*
Michael Haylon152,629*
E. Wayne Nordberg(7)214,879*
John H. Schaefer126,474*
Donnell A. Segalas(8)241,052*
Vicki Williams12,858*
All executive officers and Directors as a group (17 people)4,899,768*
BlackRock, Inc.(9)120,128,8389.1%
The Vanguard Group, Inc.(10)119,048,4029.1%
____________________

Beneficial Owner(1)

  Amount and
Nature of
Beneficial
Ownership(2)		   Percent
of
Class(3)		 

David L. Finkelstein

   500,000    *    

 

 

Serena Wolfe

   20,000    *    

 

 

Timothy P. Coffey

   88,000    *    

 

 

Ilker Ertas

   101,970    *    

 

 

Anthony C. Green

   163,500    *    

 

 

Francine J. Bovich

   164,290    *    

 

 

Wellington J. Denahan

   1,849,415    *    

 

 

Katie Beirne Fallon

   53,781    *    

 

 

Thomas Hamilton(4)

   578,143    *    

 

 

Kathy Hopinkah Hannan

   38,143    *    

 

 

Michael Haylon

   173,393    *    

 

 

Eric A. Reeves(5)

   0    *    

 

 

John H. Schaefer

   187,525    *    

 

 

Donnell A. Segalas(6)

   269,602    *    

 

 

Glenn A. Votek

   350,052    *    

 

 

Vicki Williams

   51,001    *    

 

 

All executive officers and Directors as a group (17 people)

   4,588,815    *    

 

 

The Vanguard Group, Inc.(7)

   122,261,013    8.7    

 

 

BlackRock, Inc.(8)

   107,569,802    7.7% 

 

 

*

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 the Company’s knowledge, each stockholder listedDirector and NEO has sole voting and investment power with respect to the shares he or she beneficially owned by the stockholder.owns.

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. The 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 12,500 shares; Jonathan D. Green 50,000 shares; Michael Haylon 50,000 shares; E. Wayne Nordberg 50,000 shares; and Donnell A. Segalas 37,500 shares. The DSUs included in the above table are as follows: Francine J. Bovich 84,740 DSUs; Kevin P. Brady 94,102 DSUs;150,790DSUs; Wellington J. Denahan 12,85822,551 DSUs; Katie Beirne Fallon 12,85830,347 DSUs; Jonathan D. Green 102,629Thomas Hamilton 38,143 DSUs; Kathy Hopinkah Hannan 22,551 DSUs; Michael Haylon 102,629 DSUs; E. Wayne Nordberg 102,629173,393 DSUs; John H. Schaefer 48,980100,031 DSUs; Donnell A. Segalas 94,102160,152 DSUs; and Vicki Williams 12,85851,001 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, and (iii) 1,500 shares owned by Mr. Brady’s daughters. Mr. Brady disclaims beneficial ownership of these 92,750 shares.

5.Includes: (i) 100,000130,000 shares owned by Cure FA Foundation, Inc., and (ii) 50,00080,000 shares owned by the 2012 Hamilton Family Trust.

6.5.Dr. Hannan and

Mr. Hamilton wereReeves was appointed to the Board effective February 13, 2019 and March 6, 2019, respectively.19, 2021.


50Annaly Capital Management Inc. 2019 Proxy Statement

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Stock Ownership Information

7.

Includes: (i) 10,000 shares owned by Olivia Nordberg Trust and (ii) 9,000 shares owned by Mr. Nordberg’s spouse.

8.6.

Includes: (i) 3,000 shares owned by the Hercules Segalas Irrevocable Trust, (ii) 900 shares owned by Mr. Segalas’ 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.

9.

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 February 4, 2019 reporting, as of December 31, 2018, beneficially owning 120,128,838 shares of common stock with the sole power to vote or to direct the vote of 110,212,604 shares of common stock and the sole power to dispose or to direct the disposition of 120,128,838 shares of common stock. This information is based solely on information contained in the Schedule 13G/A filed by Blackrock.

10.7.

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 11, 201910, 2021 reporting, as of December 31, 2018,2020, beneficially owning 119,048,402122,261,013 shares of common stock with the sole power to vote or to direct the vote of 893,469 shares of common stock, the shared power to vote or to direct the vote of 665,2401,259,449 shares of common stock, the sole power to dispose or to direct the disposition of 117,558,870119,070,461 shares of common stock and the shared power to dispose or to direct the disposition of 1,489,5323,190,552 shares of common stock. This information is based solely on information contained in the Schedule 13G/A filed by Vanguard.

Section 16(a) Beneficial Ownership Reporting Compliance

The Company believes that based solely on its review of the reports filed during the fiscal year ended December 31, 2018, and on the written representations of those filing reports, all Section 16(a) forms required to be filed by Annaly’s executive officers, directors and beneficial owners of more than ten percent of its common stock were filed on a timely basis and in compliance with Section 16(a) of the Exchange Act, with the exception of one transaction reported on a Form 5 filed on January 19, 2019, on behalf of David Finkelstein, which was filed late due to an administrative error.

8.Annaly Capital Management

BlackRock, Inc. 2019 Proxy Statement

51
, 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 29, 2021 reporting, as of December 31, 2020, beneficially owning 107,569,802 shares of common stock with the sole power to vote or to direct the vote of 97,991,485 shares of common stock and the sole power to dispose or to direct the disposition of 107,569,802 shares of common stock. This information is based solely on information contained in the Schedule 13G/A filed by Blackrock.


Table of Contents

Other Information

Where You Can Find More InformationWHERE YOU CAN FIND MORE INFORMATION

The Company files annual, quarterly and current reports, proxy statements and other information with the SEC. SEC filings are available to the public from commercial document retrieval services and at the Internet worldwide web site maintained by the SEC at www.sec.gov.

Annaly’s website is www.annaly.com. The Company makes available on this website under “Investors - “Investors—SEC Filings,” free of charge, its annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, as well as proxy statement and other information filed with or furnished to the SEC as soon as reasonably practicable after such materials are electronically submitted to the SEC.

Additionally, on written request, the Company will provide without charge to each record or beneficial holder of the Company’s common stock as of the close of business on March 25, 201922, 2021 (the “Record Date”) a copy of the Company’s Annual Report on Form 10-K for the year ended December 31, 2018,2020, 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 investor@annaly.com.

Stockholder ProposalsSTOCKHOLDER PROPOSALS

Any stockholder intending to propose a matter for consideration at the Company’s 20202022 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 no later than December 11, 2019,8, 2021, in order to be timely.

Pursuant to the Company’s current Amended and Restated Bylaws (“Bylaws”), any stockholder intending to nominate a Director or present a proposal at an annual meeting of stockholders that is not intended to be included in the Proxy Statementproxy statement for such annual meeting must provide written notification not later 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 earlier 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 the 20202022 Annual Meeting must provide written notification of such proposal by December 11, 2019,8, 2021, but in no event earlier than November 11, 2019.8, 2021.

Any such nomination or proposal should be sent to Anthony C. Green, the Chief Corporate Officer, 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 the Company’s Bylaws.

Other MattersOTHER MATTERS

As of the date of this 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.

Questions and Answers About the Annual MeetingQUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

Q

When and where is the Annual Meeting?

A

The Annual Meeting will be held on May 22, 2019,19, 2021, at 9:00 a.m. (Eastern Time) online at www.virtualshareholdermeeting.com/NLY2019.NLY2021. If you plan to attend the 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.


52Annaly Capital Management Inc. 2019 Proxy Statement

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Other Information

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.

Q

Can I vote my shares by filling out and returning the Notice?

A

No. The Notice identifies the items to be considered and 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

Only common stockholders of record as of the close of business on the Record Date (March 25, 2019)22, 2021) are entitled to vote at the Annual Meeting.

Q

How can I vote my shares?

A

You may vote online during the Annual Meeting prior to the closing of the polls at www.virtualshareholdermeeting.com/NLY2019,NLY2021, 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 authorize a proxy to vote 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 21, 2019,18, 2021, the day before the meeting date.

Whichever method you use, each valid proxy received in time will be voted at the Annual Meeting in accordance with your instructions. To ensure that your proxy is voted, it should be received prior to 11:59 p.m., Eastern Time, May 18, 2021, the day before the meeting date. If you submit a proxy without giving instructions, your shares will be voted as recommended by the Board.

Q

What quorum is required for the Annual Meeting?

A

A quorum will be present at the Annual Meeting if a majority of the votes entitled to be cast on any matter are present, in person or by proxy. At the close of business, on the Record Date there were 1,442,971,6791,398,502,906 outstanding shares of the Company’s common stock, each entitled to one vote per 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?

AProposalProposalVote
Required		 VoteDiscretionary
RequiredVoting
Allowed?		 DiscretionaryBoard
Voting Allowed?Recommendation
 Board
Recommendation
(1) Election of Directors listed herein

Majority

No

FOR

MajorityNoFOR
(2) Advisory approval of executive compensation

Majority

No

FOR

MajorityNoFOR
(3) Amendment to our charterMajorityYesFOR
(4)(3) Ratification of the appointment of Ernst & Young LLP

Majority

Yes

FOR

“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; (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 on the matter at the Annual Meeting; and (c) with regard to the proposed amendment to our charter, the affirmative vote of the holders of a majority of the total number of issued and outstanding shares of our common stock entitled to vote on the proposal.


 Annaly Capital Management Inc. 2019 Proxy Statement53
 

Table“Majority” means (a) with regard to an uncontested election of ContentsDirectors, the affirmative vote of a majority of total votes cast for and against the election of each Director nominee; and (b) with regard to the advisory approval of executive compensation and the ratification of the appointment of EY, a majority of the votes cast on the matter at the Annual Meeting.

Other Information“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.”

“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.”

Q

What is the effect of abstentions and “broker non-votes” on the proposals submitted at the Annual Meeting?

A

Abstentions will have no effect on Proposal 1, Proposal 2 or Proposal 4. Abstentions will have the same effect as a vote against Proposal 3.

“Broker non-votes,” if any, will have no effect on Proposal 1 or Proposal 2. As they are routine matters and discretionary voting is allowed, “broker non-votes” are not applicable to Proposal 3 or Proposal 4..

“Broker non-votes,” if any, will have no effect on Proposal 1 or Proposal 2. As it is a routine matters and discretionary voting is allowed, “broker non-votes” are not applicable to Proposal 3.

 

Q

How will my shares be voted if I do not specify how they should be voted?

A

Properly executed proxies that do not contain voting instructions will be voted as follows:

(1)

(1)

Proposal No. 1:1: FOR the election of each Director nominee listed herein;

(2)

(2)

Proposal No. 2:2: FOR the approval, on a non-binding and advisory basis, of the Company’s executive compensation as described in this Proxy Statement; and

(3)

(3)

Proposal No. 3: FOR the approval of the amendment to our charter; and

(4)

Proposal No. 4:3: FOR the ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2019.2021.

 

The Company officers you authorize 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.

Q

What do I do if I want to change my vote?

A

You may revoke a proxy at any time before it is exercised by filing a duly executed revocation of proxy, by submitting a duly executed proxy with a later date, using the phone or online voting procedures, or by participating in the Annual Meeting via live webcast and voting 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. Virtual attendance at the Annual Meeting without voting online will not itself revoke a proxy.

 

Q

How will voting on any other business be conducted?

A

Other than the fourthree proposals described in this Proxy 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, Chairman,David L. Finkelstein, Chief Executive Officer and President,Chief Investment Officer, and Anthony C. Green, Chief Corporate Officer, Chief Legal Officer and Secretary, or either of them acting alone, with full power of substitution in each, to vote on those matters in their discretion.

 

Q

Who will count the vote?

A

Representatives of American Election Services, LLC, the independent inspector of elections, will count the votes.


54Annaly Capital Management Inc. 2019 Proxy Statement

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Other Information

Q

How can I participate inattend the Annual Meeting?

A

All stockholders of record as of the close of business on the Record Date can attend the Annual Meeting online at www.virtualshareholdermeeting.com/NLY2019. You will be able to ask questions during the meeting.NLY2021. An audio broadcast of the Annual Meeting will also be available to stockholders by telephone toll-free at 1-877-328-2502.1-855-450-0066 in the United States or 1-236-714-3499if calling from outside the United States, and providing Conference ID 1577814. 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. 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. Online check-in will begin at 8:30 a.m. (Eastern Time), and you should allow ample time for online check-in procedures. If

Q

Will I be able to ask questions and participate in the Annual Meeting?

A

The virtual meeting will be available to stockholders across the globe via any Internet-connected device and has been designed to provide the same rights to participate as you wishwould have at an in-person meeting, including providing opportunities to view the webcast at a location provided byvote, make statements and ask questions. The Company will respond to as many inquiries that are pertinent to 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 via webcast at Venable LLP’s office, please completeas time allows. Questions that are substantially similar may be grouped and answered once to avoid repetition. Additional information regarding the Reservation Request Form foundrules and procedures for participating in the Annual Meeting will be provided in our rules of conduct for the Annual Meeting, which stockholders can view during the meeting 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 to Venable LLP’s offices.meeting website.

 

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 can access by visiting www.proxyvote.com. Through use of the pre-meeting forum, stockholders can submit questions in advance of the Annual Meeting and view copies of the Company’s proxy materials. The Company will respond to as many inquiries that are pertinent to the Company at the Annual Meeting as time allows.

Q

Why is the Company holding the Annual Meeting online?

A

After yearsThe Company believes that the virtual meeting format allows enhanced participation of, declining attendance by stockholders at Annaly’s in-person annual meetings and marked growth of our internationalinteraction with, its global stockholder base, overwhile also being sensitive to the same time period,public health and travel concerns that stockholders may have in light of the Company moved to an online format for the 2018 Annual Meeting, which enabled increased attendance and participation from locations around the world, reducedcontinuing COVID-19 pandemic. Virtual meetings also reduce costs for both the Company and its stockholders and reflectedreflect the Company’s commitment to environmentally-friendly practices. The Company is excited to one again embrace the virtual meeting format for the 2019 Annual Meeting.

 

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 22, 2019?19, 2021?

A

Prior to the day of the Annual Meeting on May 22, 2019,19, 2021, 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 StatesStates. 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 1-855-449-09911-844-976-0738 in the United States or 1-720-378-59621-303-562-9301 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 the Company solicit proxies for the Annual Meeting?

A

The expense of soliciting proxies will be borne by the Company. Proxies will be solicited principally through the use of mail, but Directors, executive officers and employees, who will not be specially compensated, may solicit proxies from 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.


Annaly Capital Management Inc. 2019 Proxy Statement55

TableThe Company has retained Georgeson Inc., a proxy solicitation firm, to assist it in the solicitation of Contentsproxies in connection with the Annual Meeting. The Company will pay Georgeson a fee of $16,000 for its services. In addition, the Company may pay Georgeson additional fees depending on the extent of additional services requested by the Company and will reimburse Georgeson for expenses Georgeson incurs in connection with its engagement by the Company. In addition to the fees paid to Georgeson, the Company will pay all other costs of soliciting proxies.

Other InformationStockholders 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.

The Company has retained Georgeson Inc., a proxy solicitation firm, to assist it in the solicitation of proxies in connection with the Annual Meeting. The Company will pay Georgeson a fee of $15,000 for its services. In addition, the Company may pay Georgeson additional fees depending on the extent of additional services requested by the Company and will reimburse Georgeson for expenses Georgeson incurs in connection with its engagement by the Company. In addition to the fees paid to Georgeson, 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

What is “Householding” and does Annaly do this?

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 Statement and 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. The Company engages in this practice as it reduces printing and postage costs. However, if a stockholder of record residing at such an address wishes to receive a separate Annual Report or Proxy Statement, he, she or it may request it by writing to Annaly Capital Management, Inc., 1211 Avenue of the Americas, New York, NY 10036, Attention: Investor Relations, by emailing investor@annaly.com, or by calling 212-696-0100, and the Company will promptly deliver the requested Annual Report or Proxy Statement. If a stockholder of record residing at such an address wishes to receive a separate Annual Report or Proxy Statement in the future, he, she or it may contact the Company in the same manner. If you are an eligible stockholder of record receiving multiple copies of the Company’s Annual Report and Proxy Statement, you can request householding by contacting the 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.

Q

Could the Annual Meeting be postponed or adjourned?

A

If a quorum is not present or represented, the Company’s Bylaws and Maryland law permit the chairmanChair of the meeting to adjourn the Annual Meeting, without notice other than an announcement at the Annual Meeting. Additionally, the Board is permitted to postpone the meeting to a date not more than 120 days after the record date for the Annual Meeting without setting a new record date, provided, that the Company must announce the date, time and place to which the meeting is postponed not less than ten days prior to the date of such postponed meeting.

 

Q

Who can help answer my questions?

A

If you have any questions or need assistance voting your shares or if you need copies of this Proxy 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

The Company’s principal executive offices are located at the address above.


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Endnotes

Message from our Chairman, CEO and President (page i)

1.Represents originated or purchased whole loans, commercial mortgage-backed securities and equity assets across the credit investment groups from December 31, 2013 to December 31, 2018.
2.$6.5bn of capital includes: (1) $816mm raised through a common equity offering in July 2017; (2) $720mm raised through a preferred equity offering in July 2017; (3) $857mm raised through a common equity offering in October 2017; (4) $425mm raised through a preferred equity offering in January 2018; (5) $877mm raised through a common equity offering in September 2018; (6) $840mm raised through a common equity offering in January 2019; (7) $251mm raised through the Company’s at-the-market sales program for its common stock, which was entered into in January 2018, net of sales agent commissions and other offering expenses; (8) $975mm of equity issued as partial merger consideration and $288mm of preferred equity assumed in connection with the Hatteras Financial acquisition in April 2016; and (9) $456mm of equity issued as partial merger consideration and $55mm of preferred equity assumed in connection with the MTGE Investment Corp. acquisition in September 2018. These amounts exclude any applicable underwriting discounts and other estimated offering expenses, unless otherwise noted. The July 2017, September 2018 and January 2019 common equity offerings include the underwriters’ full exercise of their overallotment option to purchase additional shares of stock. The July 2017 preferred offering and October 2017 common offering include the underwriters’ partial exercise of their overallotment option to purchase additional shares of preferred and common stock, respectively.
3.$2.4bn of additional borrowing capacity includes $1.5bn in residential whole loan securitizations ($1.1bn closed in 2018 and $394mm closed subsequent to year end in January 2019) and $900mm in additional credit financing capacity ($700mm closed in 2018 and $200mm closed subsequent to year end in January 2019).
4.Represents total shareholder return for the period beginning December 31, 2013 to January 31, 2019.
5.Represents LTM pre-tax margin calculated as pre-tax income divided by total revenue or total gross interest income for each company. Companies with negative pre-tax margins are excluded from the calculation.
6.“Continuing Directors” represent the eleven members of the Board following the 2019 Annual Meeting (assuming all nominees are elected).
7.Employee composition statistics as of December 31, 2018. Annaly is externally managed by Annaly Management Company, LLC (the “Manager”). As of December 31, 2018, the Manager had 162 employees and Annaly’s subsidiaries collectively had 8 employees. For ease of reference, throughout this Annual Report, the employees of the Manager, together with employees of Annaly’s subsidiaries, are referred to as Annaly’s employees.
8.Survey results based on annual internal surveys conducted by Perceptyx from 2015 through 2018.
9.Represents Financial Activities industry sector, which consists of Finance and Insurance and Real Estate and Rental and Leasing sectors as of December 31, 2018.

The Company’s principal executive offices are located at the address above.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Proxy Statement contains certain forward-looking statements which are based on various assumptions (some of which are beyond our control) and may be identified by reference to a future period or periods or by the use of forward-looking terminology, such as “may,” “will,” “believe,” “expect,” “anticipate,” “continue,” or similar terms or variations on those terms or the negative of those terms. Actual results could differ materially from those set forth in forward-looking statements due to a variety of factors, including, but not limited to, risks and uncertainties related to the COVID-19 pandemic, including as related to adverse economic conditions on real estate-related assets and financing conditions; changes in interest rates; changes in the yield curve; changes in prepayment rates; the availability of mortgage-backed securities and other securities for purchase; the availability of financing and, if available, the terms of any financing; changes in the market value of our assets; changes in business conditions and the general economy; our ability to grow our residential credit business; our ability to grow our middle market lending business; credit risks related to our investments in credit risk transfer securities, residential mortgage-backed securities and related residential mortgage credit assets, commercial real estate assets and corporate debt; risks related to investments in mortgage servicing rights; our ability to consummate any contemplated investment opportunities; changes in government regulations or policy affecting our business; our ability to maintain our qualification as a REIT for U.S. federal income tax purposes; and our ability to maintain our exemption from registration under the Investment Company Act of 1940. For a discussion of the risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. We do not undertake, and specifically disclaim any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements, except as required by law.

Endnotes

Annaly at a Glance & Recent Operating Achievements (page 3)2)

1.Represents

Based on market capitalization as of January 31, 2019.March 22, 2021.

Recent Operating Achievements & Annaly’s Shared Capital Model and Strategic Focus (page 3)

Note: Market data as of January 29, 2021. Financial data as of December 31, 2020.

1.

Economic return represents change in book value plus dividends declared over prior period’s book value.

2.Represents: (1) $720mm raised through a preferred

Credit assets represent whole loan, CMBS and equity offering in July 2017; (2) $425mm raised through a preferred equity offering in January 2018; (3) $251mm raised through the Company’s at-the-market sales program for its common stock, which was entered into in January 2018, net of sales agent commissionsassets originated or purchased across Annaly Residential Credit Group (“ARC”), Annaly Commercial Real Estate Group (“ACREG”) and other offering expenses; (4) $975mm of equity issued as partial merger consideration and $288mm of preferred equity assumed in connection with the Hatteras Financial acquisition in April 2016; and (5) $456mm of equity issued as partial merger consideration and $55mm of preferred equity assumed in connection with the MTGE Investment Corp. acquisition in September 2018. These amounts exclude any applicable underwriting discounts and other estimated offering expenses, unless otherwise noted. The July 2017 preferred offering includes the underwriters’ partial exercise of their overallotment option to purchase additional shares of preferred and common stock, respectively.Annaly Middle Market Lending Group (“AMML”).

3.Includes unfunded commitments of $161mm.
4.

Represents the percentage difference of Annaly’s operating expenseexpenses as a percentage of average equity vs. the BBREMTG for 2018. Operating expense is defined as: (i) for internally-managed BBREMTG members, the sum of compensation & benefits, general & administrativeand excludes transaction expenses and other operating expenses less any one-time or transaction related expenses,nonrecurring items for the year ended December 31, 2020.

4.

Amount excludes fees and (ii) for externally-managed BBREMTG members, the sum of net management fees, compensation & benefits (if any), general & administrative expenses and other operating expenses less any one-time or transaction related expenses.commissions. Annaly’s current authorized share repurchase program expires in December 2021.

5.Includes $200mm credit facility closed

Assets represent Annaly’s investments that are on balance sheet, net of debt issued by securitization vehicles, as well as investments that are off-balance sheet in January 2019.

Annaly’s Diversified Shared Capital Model (page 4)

Note: Market data as of January 31, 2019. Financial data as of December 31, 2018.
1.which the Company has economic exposure. Agency assets include to be announced (“TBA”)TBA purchase contracts (market value) of $20.4bn and mortgage servicing rights (“MSRs”).are shown net of debt issued by securitization vehicles of $0.6bn. Residential Credit andassets are shown net of debt issued by securitization vehicles of $2.6bn. Commercial Real Estate assets exclude securitizedinclude CMBX derivatives (market value) of $496.6mm and are shown net of debt issued by securitization vehicles of consolidated variable interest entities (“VIEs”).$2.5bn.

2.6.

Represents the capital allocation for each of the four investment groupsstrategies and is calculated as the difference between each investment strategies’ assets and related financing. IncludesThis calculation includes TBA purchase contracts and excludes non-portfolio related activity and varieswill vary from total stockholders’ equity.


 Annaly Capital Management Inc. 2019 Proxy Statement7.57

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Endnotes

Annaly’s Diversified Shared Capital Model(cont’d)(page 4)

3.Sector rank compares Annaly dedicated capital in each of its four investment groupsstrategies as of December 31, 20182020 (adjusted for P/B as of January 31, 2019)29, 2021) to the market capitalization of the companies in each respective comparative sector as of January 31, 2019. Comparative29, 2021. The companies in each comparative sectors usedare selected as follows: for Agency, Commercial Real Estate and Residential Credit sector ranking are their respective sectorrepresent “Agency Peers” (AGNC, ANH, ARR, CMO, EARN, ORC and TWO), “Commercial Peers” (ABR, ACRE, ARI, BRMK, BXMT, GPMT, KREF, LADR, LFT, LOAN, NREF, RC, SACH, STWD, TRTX and XAN) and “Hybrid Peers” (AJX, CHMI, CIM, DX, EFC, IVR, MFA, MITT, NRZ, NYMT, PMT, RWT and WMC), respectively, within the BBREMTGBloomberg Mortgage REIT Index as of January 31, 2019. Comparative sector used29, 2021 and for Middle Market Lending sector ranking is the S&P BDC Index as of January  31, 2019.
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 of a substantially similar, nature in each respective group.29, 2021.

Growth and Income (page 5)

1.Total return is shown for period of December 31, 2015 through January 31, 2019.
2.The third quarter 2018 common stock dividend is represented as the aggregate $0.30 common stock dividend comprised of (i) the $0.22174 short period dividend paid on September 6, 2018 in connection with the MTGE acquisition and (ii) the $0.07826 remaining dividend paid on September 28, 2018.
3.Line represents the lower bound of the target Federal Funds range.

Delivering Significant Value for Stockholders (page 6)4)

1.Economic return is

Data shown for period of December 31, 2013 to December 31, 2018 and represents changesince Annaly’s initial public offering in book value plus dividends declared over prior period book value.

2.Includes reinvestment of dividends.
3.Source: Bloomberg. mREITs represent BBREMTG Index. Equity REITs represent the RMZ Index. S&P represents the S&P 500 index. Utilities represent the Russell 3000 Utilities Index. Select Financials represents an average of companies in the S5FINL Index with dividend yields greater than 50 basis points higher than the S&P 500 dividend yield as ofOctober 1997 through January 31, 2019. Consumer Staples represents the S5CONS Index. MLPs represent the Alerian MLP Index. Note: Total shareholder return shown for period of December 31, 2013 to January 31, 2019.2021 and includes common and preferred dividends declared.

Stockholder EngagementBoard Composition, Structure and Refreshment (page 8)6)

1.

“Continuing Directors” represent the eleven members of the Board following the 20192021 Annual Meeting (assuming all nominees are elected).

Corporate Responsibility & The Manager and the Management Agreement (page 9)

1.The Corporate Responsibility Committee was initially created as the Public Responsibility Committee in late 2017.
2.“Incremental Stockholders’ Equity” represents the Company’s stockholders’ equity (as defined in the Management Agreement, “Stockholders’ Equity”) in excess of $17.28bn.
3.The “industry average” reflects the average management fee of all externally-managed companies (excluding Annaly) included in the BBREMTG Index as of December 31, 2018. For additional information, including assumptions, about this calculation, please see “Management Agreement Terms” on page 34.
4.For additional information, including assumptions, about this calculation, please see “Continued Cost Savings Related to the Externalization” on page 35.
5.“Base Stockholders’ Equity” represents Stockholders’ Equity of $17.28bn.

Overview of the Manager’s 2018 Executive Compensation Program (page 10)

1.Aggregated bonus amounts for 2018 reflect payments made to NEOs in January 2019 based on 2018 performance.
2.The core performance metrics referred to herein exclude the premium amortization adjustment, which represents the cumulative impact on prior periods, but not the current period, of quarter-over-quarter changes in estimated long-term prepayment speeds related to the Company’s Agency mortgage-backed securities.

Board Composition, Structure and Refreshment (page 11)

1.“Continuing Directors” represent the eleven members of the Board following the 2019 Annual Meeting (assuming all nominees are elected).
2.Directors have self-identified as bringing diversity to the Board by way of gender, race, ethnicity, national origin or other characteristics.

Corporate Governance at AnnalyContinuing Director Diversity (page 13)7)

1.The Corporate Responsibility Committee was initially created as the Public Responsibility Committee in late 2017.
2.“Incremental Stockholders’ Equity” represents Stockholders’ Equity in excess of $17.28bn.

58Annaly Capital Management Inc. 2019 Proxy Statement

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The Board’s Role and Responsibilities (page 20)

1.

“Continuing Directors” represent the eleven members of the Board following the 20192021 Annual Meeting (assuming all nominees are elected).

2.The Corporate Responsibility Committee was initially created

Directors have self-identified as bringing diversity to the Public Responsibility Committee in late 2017.Board by way of gender, race, ethnicity, national origin or other characteristics.

Board Effectiveness, Self-Evaluations and RefreshmentCorporate Governance at Annaly (page 22)10)

1.

“Continuing Directors” represent the eleven members of the Board following the 20192021 Annual Meeting (assuming all nominees are elected).

Management Agreement (page 25)

1.As defined in the Management Agreement.
2.“Incremental Stockholders’ Equity” represents Stockholders’ Equity in excess of $17.28bn.
3.“Base Stockholders’ Equity” represents Stockholders’ Equity of $17.28bn.

Board Committees (page 28)19)

1.The Corporate Responsibility

Mr. Reeves was elected as a Director and appointed as a member of the CR Committee was initially created asand the Public ResponsibilityNCG Committee in late 2017.effective March 19, 2021.

2.Messrs. Brady and Nordberg have

Mr. Segalas has not been renominated as Directorsa Director and will step down from the Board following the Annual Meeting in line with the BoardBoard’s refreshment policy adopted in October 2018.policy.

3.

While Mr. HamiltonVotek has the attributes of a financial expert under SEC rules based on his experience serving in a number of senior financial executive roles, including as the Company’s former CFO, Mr. Votek does not qualify as an Independent Director and is therefore ineligible to serve on the Company’s Audit Committee.

Audit Committee & Corporate Responsibility Committee (page 20)

1.

Mr. Reeves was elected to the Board,as a Director and appointed toas a member of the Audit Committee and the Risk Committee effective March 6, 2019.

4.Dr. Hannan was elected to the Board, and appointed to the AuditCR Committee and the NCG Committee effective February 13, 2019.March 19, 2021.

Audit Committee & Compensation Committee (page 29)

1.Messrs. Brady and Nordberg have2.

Mr. Segalas has not been renominated as Directorsa Director and will step down from the Board following the Annual Meeting in line with the BoardBoard’s refreshment policy adopted in October 2018.

2.Mr. Hamilton was elected as a Director and appointed as a member of the Audit Committee and the Risk Committee effective March 6, 2019.
3.Dr. Hannan was elected as a Director and appointed as a member of the Audit Committee and NCG Committee effective February 13, 2019.policy.

MDC Committee & NCG Committee Corporate Responsibility Committee & Risk Committee (page 30)21)

1.Messrs. Brady and Nordberg have

Mr. Segalas has not been renominated as Directorsa Director and will step down from the Board following the Annual Meeting in line with the BoardBoard’s refreshment policy adopted in October 2018.policy.

2.Dr. Hannan

Mr. Reeves was elected as a Director and appointed as a member of the AuditCR Committee and the NCG Committee effective February 13, 2019.March 19, 2021.

2020 Business Performance Highlights (page 34)

1.

Source: Company filings and Bloomberg. Financial data as of December 31, 2020, unless otherwise noted. Market data as of January 29, 2021.

2.

Total assets represent Annaly’s investments that are on balance sheet, net of securitized debt of consolidated VIEs, as well as investments that are off-balance sheet in which Annaly has economic exposure. Assets include TBA purchase contracts (market value) of $20.4bn and CMBX derivatives (market value) of $496.6mm and are shown net of securitized debt of consolidated VIEs of $5.7bn.

3.The Corporate Responsibility Committee was initially created as

Compares Annaly’s total shareholder return since its IPO on October 8, 1997 through January 29, 2021 against the Public Responsibility Committee in late 2017.total shareholder return of the S&P 500 Index and the BBREMTG Index (excluding Annaly) over the same time period.

4.Mr. Hamilton was elected as

Represents a Director and appointed asnon-GAAP financial measure, see Appendix for a memberreconciliation of the Audit Committee and the Risk Committee effective March 6, 2019.non-GAAP financial measures to most directly comparable GAAP measures.

Overview, Recent ChangesFinancing, Capital and Liquidity & Management Agreement TermsOperational Efficiency (page 34)35)

1.Mr. Keyes does not receive any compensation

Represents a non-GAAP financial measure, see Appendix for serving as the Company’s Chairman, CEO and President, but has an interest in the management fee as an indirect equityholdera reconciliation of the Manager.non-GAAP financial measures to most directly comparable GAAP measures.

2.As defined in the Management Agreement.

Amount excludes fees and commissions.

3.“Incremental Stockholders’ Equity” represents Stockholders’ Equity

Includes three residential whole loan securitizations totaling $1.1bn in excess of $17.28bn.2018, five residential whole loan securitizations totaling $2.1bn in 2019, four residential whole loan securitizations totaling $1.8bn in 2020 and one $257mm residential whole loan securitization in 2021.

4.“Base Stockholders’ Equity” represents Stockholders’ Equity of $17.28bn.
5.Source: Public filings as of year ended December 31, 2018. All base management fees are calculated

Represents operating expense as a percentage of stockholders’average equity except as otherwise specified below. Agency Residential REITs represent the externally-managed agency mortgage REITs included in the BBREMTG Index as of December 31, 2018 and 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, 2018 and includes Blackstone Mortgage Trust, Inc. (“BXMT”), Ares Commercial Real Estate Corp. (“ACRE”), Exantas Capital Corp. (“XAN”), Apollo Commercial Real Estate Finance, Inc. (“ARI”), Starwood Property Trust (“STWD”) and Ready Capital Corp. (“RC”). Non-Agency Residential / Hybrid REITs represents the externally- managed non-agency residential and hybrid mortgage REITs included in the BBREMTG Index as of December 31, 2018 and includes New Residential Investment Corp. (“NRZ”), Two Harbors Investment Corp. (“TWO”), Invesco Mortgage Capital, Inc. (“IVR”), PennyMac Mortgage Investment Trust (“PMT”), AG Mortgage Investment Trust, Inc. (“MITT”), Orchid Island Capital, Inc. (“ORC”), Western Asset Mortgage (“WMC”), Great Ajax Corp (“AJX”), Cherry Hill Mortgage Investment Corp. (“CHMI”), Ellington Residential Mortgage REIT (“EARN”), and Hunt Companies Finance Trust (“HCFT”).

6.For ARR, base management fee is calculated as 1.50% of gross equity raised up to $1.0bn plus 0.75% of gross equity raised in excess of $1.0bn.

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Endnotes

Overview, Recent Changes & Management Agreement Terms(cont’d)(page 34)

7.Of the six Commercial REITs, five have incentive fees in addition to their base management fees. STWD and XAN have incentive fees of 20% above an 8% hurdle. BXMT has an incentive fee of 20% above a 7% hurdle. XAN has an incentive fee of 25% above an 8% hurdle. RC has an incentive fee of 15% above an 8% hurdle. For purposes of this table, the calculation of the mean includes only the five Commercial REITs that have incentive fees.
8.Of the 11 Non-Agency Residential/Hybrid REITs, three 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%. AJX has an incentive fee of 20% above an 8% hurdle. For purposes of this table, the calculation of the mean includes only the three Non-Agency Residential/Hybrid REITs that have incentive fees.

Structure and Amount of the Management Fee & Continued Cost Savings Related to the Externalization (page 35)

1.As defined in the Management Agreement.
2.“Incremental Stockholders’ Equity” represents Stockholders’ Equity in excess of $17.28bn.
3.Although the Manager commenced management of Annaly on July 1, 2013, the 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. The Manager calculated a pro forma management fee, which was the management fee as if the Company was managed by the Manager from January 1, 2013 until July 1, 2013, and the actual amount of cash compensation paid to all of Annaly’s employees from January 1, 2013 until July 1, 2013 reduced the amount of the management fee owed to the Manager.

Annual Review of Manager Performance and Management Fee Considerations (page 36)

1.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 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.2020 annualized. Operating Expenseexpense is defined as: (i) for Internally-Managed Peers,internally-managed peers, the sum of compensation &and benefits, general & administrative expensesG&A and other operating expenses, less any one-time or transaction related expenses and (ii) for Externally-Managed Peers and Annaly,externally-managed peers, the sum of net management fees, compensation &and benefits (if any), general & administrative expensesG&A and other operating expenses, less any one-time or transaction related expenses. Annaly’s 2016 operating expenses exclude costsInternally-managed peers and externally-managed peers represent the respective internally- and externally-managed members of $49mmthe BBREMTG Index as of January  29, 2021.

Stockholder Outreach and Results of 2020 Say-on-Pay Vote (page 39)

1.

Performance-based compensation percentages for 2020 derived from the 2020 Total Direct Compensation Table on page 38.

Executive Compensation Design and Award Decisions for 2020 (page 42)

1.

2019 NEO pay mix based on information provided by the Former Manager to the Company as reported on p. 4 in the Company’s 2020 proxy statement, which was filed with the SEC on April 8, 2020. NEOs included in such calculation included Ms. Wolfe and Messrs. Finkelstein, Coffey, Green and Votek. Mr. Ertas was not an NEO for 2019.

2.

2020 NEO pay mix derived from the 2020 Total Direct Compensation Table on page 38.

3.

2020 CEO pay mix derived from 2020 Total Direct Compensation Table on page 38.

4.

2021 CEO pay mix based on Mr. Finkelstein’s current salary and target incentive awards (comprised of cash, RSUs and PSUs) for performance in 2021, which are expected to be paid or awarded in January 2022.

Appendix - Non-GAAP Reconciliations

To supplement its consolidated financial statements, which are prepared and presented in accordance with GAAP, the Company provides non-GAAP financial measures. These measures should not be considered a substitute for, or superior to, financial measures computed in accordance with GAAP. These non-GAAP measures provide additional detail to enhance investor understanding of the Company’s period-over-period operating performance and business trends, as well as for assessing the Company’s performance versus that of industry peers. Reconciliations of these non-GAAP financial measures to their most directly comparable GAAP results are provided below.

Unaudited, dollars in thousands except per share amounts

  

For the quarters ended

 
  

 

 
  12/31/2020  9/30/2020  6/30/2020  3/31/2020  12/31/2019 

 

 

GAAP to Core Reconciliation

     

 

 

GAAP net income (loss)

 $878,635  $1,015,548  $856,234  ($3,640,189)  $1,209,742 

 

 

Net income (loss) attributable to non-controlling interests

  1,419   (126)   32   66   68 

 

 

Net income (loss) attributable to Annaly

  877,216   1,015,674   856,202   (3,640,255)   1,209,674 

 

 

Adjustments to exclude reported realized and unrealized (gains) losses:

     

 

 

Realized (gains) losses on termination or maturity of interest rate swaps

  (2,092)   427   1,521,732   397,561   4,615 

 

 

Unrealized (gains) losses on interest rate swaps

  (258,236)   (170,327)   (1,494,628)   2,827,723   (782,608) 

 

 

Net (gains) losses on disposal of investments and other

  (9,363)   (198,888)   (246,679)   (206,583)   (17,783) 

 

 

Net (gains) losses on other derivatives

  (209,647)   (169,316)   (170,916)   (206,426)   42,312 

 

 

Net unrealized (gains) losses on instruments measured at fair value through earnings

  (51,109)   (121,255)   (254,772)   730,160   5,636 

 

 

Loan loss provision(1)

  469   (21,818)   72,544   99,993   7,362 

 

 

Other adjustments:

     

 

 

Depreciation expense related to commercial real estate and amortization of intangibles(2)

  11,097   11,363   8,714   7,934   9,823 

 

 

Non-core (income) loss allocated to equity method investments(3)

  28   (1,151)   4,218   19,398   (3,979) 

 

 

Transaction expenses and non-recurring items(4)

  172   2,801   1,075   7,245   3,634 

 

 

Income tax effect on non-core income (loss) items

  (10,984)   13,890   3,353   (23,862)   (418) 

 

 

TBA dollar roll income and CMBX coupon income(5)

  99,027   114,092   97,524   44,904   36,901 

 

 

MSR amortization(6)

  (26,633)   (27,048)   (25,529)   (18,296)   (22,120) 

 

 

Plus:

     

 

 

Premium amortization adjustment (PAA) cost (benefit)

  39,101   33,879   51,742   290,722   (83,892) 

 

 

Core Earnings (excluding PAA)*

  459,046   482,323   424,580   330,218   409,157 

 

 

Dividends on preferred stock

  35,509   35,509   35,509   35,509   35,509 

 

 

Core Earnings (excluding PAA) attributable to common shareholders *

 $423,537  $446,814  $389,071  $294,709  $373,648 

 

 

GAAP net income (loss) per average common share(7)

 $0.60  $0.70  $0.58   ($2.57)  $0.82 

 

 

Core earnings (excluding PAA) per average common share(7) *

 $0.30  $0.32  $0.27  $0.21  $0.26 

 

 

*

Represents a non-GAAP financial measure.

(1)

Includes a $1.0 million reversal of loss provision on the Company’s unfunded loan commitments for the quarter ended December 31, 2020 and $0.2 million, $3.8 million and $0.7 million loss provision on the Company’s unfunded loan commitments for the quarters ended September 30, 2020, June 30, 2020 and March 31, 2020, respectively, which is reported in Other income (loss) in the Company’s Consolidated Statement of Comprehensive Income (Loss).

(2)

Amount includes depreciation and amortization expense related to the Company’s acquisition of Hatteras Financial Corp and Annaly’s 2018 operating expenses exclude costs of $60mm relatedequity method investments.

(3)

The Company excludes non-core (income) loss allocated to the Company’s acquisition of MTGE Investment Corp.

Summary of 2018 NEO Compensation (page 37)

1.Mr. Keyes does not receive any compensation for serving as the Company’s Chairman, CEO and President, but has an interest in the management fee as an indirect equityholder of the Manager.
2.Aggregated bonus amounts for 2018 reflect payments made to NEOs in January 2019 based on 2018 performance.
3.The core performance metrics referred to herein exclude the premium amortization adjustment,equity method investments, which represents the cumulative impactunrealized (gains) losses allocated to equity interests in a portfolio of MSR, which is a component of Other income (loss).

(4)

The quarters ended December 31, 2020 and September 30, 2020 include costs incurred in connection with securitizations of residential whole loans. The quarter ended June 30, 2020 includes costs incurred in connection with the Internalization and costs incurred in connection with the CEO search process. The quarter ended March 31, 2020 includes costs incurred in connection with securitizations of Agency mortgage-backed securities and residential whole loans as well as costs incurred in connection with the Internalization and costs incurred in connection with the CEO search process. The quarter ended December 31, 2019 includes costs incurred in connection with securitizations of Agency mortgage-backed securities and residential whole loans.

(5)

TBA dollar roll income and CMBX coupon income each represent a component of Net gains (losses) on prior periods, but notother derivatives. CMBX coupon income totaled $1.5 million, $1.5 million, $1.6 million, $1.2 million and $1.3 million for the current period,quarters ended December 31, 2020, September 30, 2020, June 30, 2020, March 31, 2020 and December 31, 2019, respectively.

(6)

MSR amortization represents the portion of quarter-over-quarter changes in estimated long-term prepayment speeds relatedfair value that is attributable to the Company’s Agency mortgage-backed securities.

Compensation Discussion and Analysis (page 42)

1.“Base Stockholders’ Equity” represents Stockholders’ Equityrealization of $17.28bn.
2.“Incremental Stockholders’ Equity” represents Stockholders’ Equity in excess of $17.28bn.

Stock Ownership Guidelines/Commitments (page 43)

1.In July 2017, Mr. Keyes voluntarily committed to increase his stock ownership position beyond his Board-approved ownership guideline of $10mm. Mr. Keyes has pledged to meet his enhanced $15mm commitment solely through additional open market purchases ofestimated cash flows on the Company’s common stock.
2.In July 2017, other membersMSR portfolio and is reported as a component of senior management (including each of the other NEOs) voluntarily committed to increase their stock ownership 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.Net unrealized gains (losses) on instruments measured at fair value.


60(7)Annaly Capital Management Inc. 2019 Proxy Statement

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2019 ANNUAL MEETING OF STOCKHOLDERS
RESERVATION REQUEST FORM

If you wish to view Annaly Capital Management, Inc.’s 2019 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 Corporate Officer, 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.

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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.dividends on preferred stock.

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E68909-P18327     KEEP THIS PORTION FOR YOUR RECORDS

TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D45388-P49435 KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY WHEN SIGNED AND DATED.

DETACH AND RETURN THIS PORTION ONLY

ANNALY CAPITAL MANAGEMENT, INC. The Board of Directors recommends you vote FOR the following: 1. Election of Directors Nominees: For Against Abstain 1a. Francine J. Bovich 1b. Wellington J. Denahan 1c. Katie Beirne Fallon 1d. David L. Finkelstein 1e. Thomas Hamilton 1f. Kathy Hopinkah Hannan 1g. Michael Haylon 1h. Eric A. Reeves 1i. John H. Schaefer 1j. Glenn A. Votek 1k. Vicki Williams The Board of Directors recommends you vote FOR proposal 2: 2. Advisory approval of the Company's executive compensation. The Board of Directors recommends you vote FOR proposal 3: 3. Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2021.NOTE: Voting items may include such other business as may properly come before the meeting or any adjournment thereof. For Against Abstain 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


The Board of Directors recommends you vote FOR the following:
1.   Election of Directors.
Nominees:
ForAgainstAbstain
1a.   Kevin G. Keyes
☐☐☐
1b.Thomas Hamilton
☐☐☐
1c.Kathy Hopinkah Hannan
☐☐☐
1d.Vicki Williams
☐☐☐







For address changes and/or comments, please check this box and write them on the back where indicated.



☐

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.






The Board of Directors recommends you vote FOR proposal 2:
ForAgainstAbstain
2.     Advisory approval of the company's executive compensation.
☐☐☐
The Board of Directors recommends you vote FOR proposal 3:
3.Approval of an amendment of our charter to increase the number of authorized shares of capital stock to 3,000,000,000 shares.
☐☐☐
The Board of Directors recommends you vote FOR proposal 4:
4.Ratification of the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2019.☐☐☐

NOTE:Voting items may include such other business as may properly come before the meeting or any adjournment thereof.


Signature [PLEASE SIGN WITHIN BOX]DateSignature (Joint Owners)Date

Table of Contents









LOGO 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:
The 20182020 ANNUAL REPORT TO STOCKHOLDERS and 20192021 NOTICE & PROXY STATEMENT are available at www.proxyvote.com. D45389-P49435 Annaly Capital Management, Inc. Annual Meeting of Stockholders May 19, 2021 This proxy is solicited by the Board of Directors Revoking all prior proxies, the undersigned hereby appoints David L. Finkelstein and Anthony C. Green, and each of them, as proxies for the undersigned, 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 virtual meeting conducted via live webcast to be held at 9:00 a.m., Eastern Time, on Wednesday, May 19, 2021 at www.virtualshareholdermeeting.com/NLY2021, and at any postponement or 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. Continued and to be signed on reverse side









E68910-P18327

Annaly Capital Management, Inc.
Annual Meeting of Stockholders
May 22, 2019
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, as proxies for the undersigned, 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 virtual meeting conducted via live webcast to be held at 9:00 a.m., Eastern Time, on Wednesday, May 22, 2019 at www.virtualshareholdermeeting.com/NLY2019, and at any postponement or 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