Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section
14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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Annaly Capital Management, Inc.
(Name of Registrant as Specified In Its
Charter)
(Name of Person(s) Filing Proxy
Statement, if Other Than the Registrant)
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Table of Contents
Notice of 2017
Annual Meeting of Stockholders
and
Proxy Statement
May 25, 2017, at 9:00 a.m.
The Warwick
Hotel
65 West 54th Street
New York, NY 10019
Table of Contents
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Dear Fellow
Shareholders, |
Shareholder
Outreach:
Communication with 90%
of our 50 Largest Institutional Shareholders |
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One of my first priorities upon
becoming your CEO in September 2015 was expanding and enhancing the
Companys relationships with our retail and institutional shareholders.
Since that time, we have embarked on a comprehensive marketing campaign
including nearly 200 investor meetings. In addition, weve redoubled our
efforts to engage in meaningful dialogue around critical governance
issues. These efforts included outreach to investors representing 65% of
shares held by institutional shareholders, including 45 of our 50 largest
shareholders. We deeply value the insights we have gained from our
shareholders throughout this process and look forward to continuing to
find new ways to engage with as many of you as possible over the coming
year.
Our prudent risk management model is
reflective of the fact that within our shared capital model, our
investment teams interests are aligned with our shareholders. In 2016, we
expanded our Employee Stock Ownership Guidelines whereby over 40% of our
employees were not granted stock, but rather, were asked to purchase
predetermined amounts of shares in the open market based on certain
criteria including seniority, compensation level and role. Establishing
more of an ownership culture for the long term throughout the Firm is
extremely important to me and Im pleased that as of March 31, 2017, all
individuals subject to these guidelines either met, or within the
applicable period are expected to meet the stock ownership guidelines.
This broad-based initiative is not just unique in our industry, it is
unique in all of corporate America.
It is critical to highlight that
while we have made broad investments over the past few years in both our
investment platforms and financing strategies, we have not asked our
shareholders to bear any of the incremental costs for this growth and
diversification. We currently operate our multi-strategy model with four
distinct investment groups, in addition to a servicing platform, on a
highly efficient basis compared to the monoline companies in the industry.
Consequently, our outsized returns are in part attributable to our
diversified, scalable model, with an operating expense to equity ratio of
1.59%, 51% lower than the average of our industry peers.(1) As
a percentage of assets, this ratio is merely 0.23%, or 66% lower than the
average mortgage REIT.(2)
In the
first quarter of 2017, we distributed another $0.30 per share dividend to
our shareholders the same exact quarterly dividend we have now offered
for over three years, or 14 consecutive quarters. It is important to note,
and it is no coincidence, that our outstanding performance during this
time period coincides with the arrival of most of our current investment
and financing teams. In comparison, over that same time period, 75% of the
companies in the residential mREIT sector have cut dividends at least once
in fact, there have been 47 dividend cuts in total within this sector.
Annalys total return of 61% since 2014 has outperformed all
yield-oriented equity strategies and has far exceeded the returns of the
S&P 500 and the Bloomberg Mortgage REIT indices by 66% and 33%,
respectively. Specifically with respect to performance in 2016, despite
the Oil Crash, Brexit and the one of the largest single-quarter moves in
the 10-year Treasury this century, we delivered a total shareholder return
of 19%.
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Employee Stock
Ownership Guidelines:
Over 40% of Employees
Have Been Asked to Purchase NLY Stock |
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Operating
Efficiency:
Diversification Strategy
at Reduced Expense Levels |
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Market Leading
Performance:
Total Return of 61% Since
2014, Exceeding the S&P 500 Index by
66% |
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www.annalyannualmeeting.com |
I |
Table of Contents
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Longevity, Growth and
Evolution:
Annaly
is a Premier,
Diversified Capital Manager |
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Finally, in October of 2017 Annaly
will celebrate its 20th anniversary as a public company. We have come a
long way since the Companys $120 million initial public offering in 1997
to our industry leading model and diversified platform with over $12.5
billion of capital as of December 31, 2016. For the benefit of our
shareholders, Annaly has transformed over time the fundamental strategic
characteristic of all market leaders. Within our four complementary
investment groups, we continue to be uniquely positioned to capture market
share in the competition for superior asset selection and most favorable
financing structures and terms. We have evolved into a diversified capital
manager and equity yield investment option noticeably distinct from the
mortgage REIT universe in terms of our size, liquidity, diversity and
stability.
I am confident and energized by all of our opportunities and
strongly believe we will continue to reward our shareholders while
attracting incremental investors in this challenging marketplace, where
conservatively-valued yield manufacturing businesses like Annaly are
increasingly difficult to find.
I look forward to welcoming many of
you to our 2017 Annual Meeting of Stockholders.
Sincerely,
Kevin Keyes
Chief Executive Officer &
President April 11, 2017 |
(1) |
Represents the % difference of
operating expense as a % of average equity for Annaly vs. the Bloomberg
mREIT Index (BBREMTG) average. |
(2) |
Represents the % difference of
operating expense as a % of average assets for Annaly vs. the BBREMTG
average. |
Notes: From 2012 to 2016. Average
excludes BBREMTG members with market capitalization below $200 million.
Operating Expense is defined as: (i) for internally-managed BBREMTG members, the
sum of compensation & benefits, general & administrative expenses and
other operating expenses, and (ii) for externally-managed BBREMTG members, the
sum of net management fees, compensation & benefits (if any), general &
administrative expenses and other operating expenses.
II |
Annaly Capital Management Inc. 2017 Proxy
Statement |
Table of Contents
Notice of Annual Meeting of
Stockholders
To Be Held May 25, 2017 at 9:00 a.m. (Eastern
Time) |
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The Warwick Hotel, 65 West 54th
Street, New York, NY 10019 |
To the Stockholders of Annaly Capital
Management, Inc.:
We will hold the annual meeting of the
stockholders of Annaly Capital Management, Inc. on May 25, 2017, at 9:00 a.m.
(Eastern Time) at the Warwick Hotel, 65 West 54th Street, New York, NY 10019,
to:
We will also transact any other business
as may properly come before our annual meeting or any adjournment or
postponement thereof. Only our common stockholders of record at the close of
business on March 28, 2017, the record date for the annual meeting, may vote at
the annual meeting and any adjournments or postponements thereof.
Your vote is very important. Please
exercise your right to vote.
To view the Proxy Statement and other
materials about the annual meeting, go to www.annalyannualmeeting.com or
www.proxyvote.com.
If you plan to attend the annual meeting
in person, you will need to present proof of your ownership of our common stock
as of the record date, and valid government-issued photo
identification.
By Order of the Board of
Directors,
Anthony C. Green
Secretary
April
11, 2017
Important Notice Regarding the
Availability of Proxy Materials for the Stockholder Meeting to Be Held
on May 25, 2017. Our Proxy Statement and 2016 Annual Report to
Stockholders are available at
www.proxyvote.com. |
www.annalyannualmeeting.com |
III |
Table of Contents
Proxy Statement
The Board of Directors (the Board) of
Annaly Capital Management, Inc. (Annaly, the Company, we, our or us)
is soliciting proxies in connection with our 2017 annual meeting of stockholders
(the Annual Meeting). We are sending the Notice of Internet Availability of
Proxy Materials, or a printed copy of the proxy materials, as applicable,
commencing on or about April 11, 2017.
Proxy Summary
This summary contains highlights about the
Company and the Annual Meeting. This summary does not contain all of the
information that you should consider in advance of the Annual Meeting, and we
encourage you to read the entire proxy statement and our 2016 Annual Report on
Form 10-K carefully before voting.
2017 Annual Meeting of
Stockholders |
Time and Date: |
Thursday, May 25, 2017 at 9:00 a.m. (Eastern
Time) |
Place: |
The Warwick Hotel, 65 West 54th
Street, New York, NY 10019 |
Record Date: |
March 28, 2017 |
Voting: |
Stockholders are able to vote by Internet
at www.proxyvote.com; telephone at 1-800-690-6903; completing and returning
their proxy card; or in person at the Annual
Meeting |
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Board
Vote Recommendation |
Page Number |
Proposal No. 1:
Election of
Directors |
FOR each Director nominee |
2 |
Proposal No. 2:
Approval, on an
advisory basis, of our executive compensation |
FOR |
25 |
Proposal No. 3:
Advisory vote on
the frequency of future advisory votes to approve our executive
compensation |
EVERY ONE
YEAR |
29 |
Proposal No. 4:
Ratification of the appointment of Ernst
& Young LLP |
FOR |
30 |
Time and Date Thursday, May 25, 2017 at 9:00 a.m. (Eastern
Time)
Place The Warwick Hotel, 65 West 54th Street, New York, NY
10019
Record Date March 28, 2017
Voting Stockholders are entitled to vote by
Internet www.proxyvote.com
Telephone 1-800-690-6903
Mail completing and returning their proxy card
In Person at the Annual Meeting
Information www.annalyannualmeeting.com |
IV |
Annaly Capital Management Inc. 2017 Proxy
Statement |
Table of Contents
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> |
New York Stock Exchange (NYSE): NLY
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> |
Initial public offering (IPO) in
1997 |
> |
Largest mortgage REIT in the world
by market capitalization |
> |
Diversified capital manager with
four investment groups Agency, Commercial Real Estate, Residential
Credit and Middle Market Lending |
> |
Management agreement aligns
interests of our manager and our stockholders |
> |
Conservative leverage ratio relative
to specified peers |
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> |
753% total return since IPO
(including reinvestment of dividends) as of March 31,
2017 |
> |
61.1% total return from the
beginning of 2014 through March 31, 2017 |
> |
Since IPO, declared over $15 billion
in common and preferred dividends; declared over $1.2 billion in
dividends in 2016 |
> |
2016 total return and economic
return (change in book value plus dividends paid) of 19.1%, and 5.4%,
respectively |
> |
Our management team has voluntarily
purchased over 2 million common shares since 2011 |
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We have been externally-managed by Annaly
Management Company LLC (our Manager) since July 2013. Our Manager is
responsible for managing our affairs pursuant to a management agreement. Our
Manager pays all of the compensation, including benefits, to its employees
(which includes our named executive officers (NEOs) other than Mr. Keyes, who
receives no compensation for his services as our Chief Executive Officer, but
has an interest in the management fee as an indirect equityholder of our
Manager). Although certain personnel (but none of our NEOs) are employed by our
subsidiaries for regulatory or corporate efficiency reasons, all compensation
and benefits paid to such personnel by our subsidiaries reduce, on a
dollar-for-dollar basis, the management fee we pay to our Manager. As of
December 31, 2016, our Manager had 148 employees and our subsidiaries
collectively had 41 employees. For ease of reference, throughout this proxy
statement, our NEOs and the other employees of our Manager and our subsidiaries
are sometimes referred to as our employees.
Highlights and
Accomplishments |
Despite challenging market conditions for
mortgage real estate investment trusts (REITs) during 2016, we performed
strongly and achieved a number of significant accomplishments that are discussed
below:
> |
In July 2016, the Company
completed the largest mortgage REIT (mREIT) acquisition in history with
the purchase of Hatteras Financial Corp.
(Hatteras) |
> |
The Company continued its
diversification strategy in 2016 with expansion of investment options and
targeted growth in select credit assets, including the build out of our
residential credit group |
> |
The Company advanced its funding
strategy in 2016 with dedicated financing facilities for our credit groups
while also capitalizing on Federal Home Loan Bank term
funding |
> |
In April 2016, the Company
further aligned management and shareholder interests by expanding its
employee stock ownership guidelines to over 40% of employees
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> |
As of March 31, 2017, all such
individuals met, or were on track to meet, their individual ownership
guidelines |
www.annalyannualmeeting.com |
V |
Table of Contents
Our Diversified Investment
Strategy |
Diversification is a key component of the
Annaly strategy. Since 2010, we have diversified our business model by investing
in credit assets, which complement our primary portfolio of interest rate
sensitive investments. This strategy is designed to achieve stable risk-adjusted
earnings and book value performance over various interest rate and economic
cycles by pairing shorter duration floating-rate credit securities with our
longer duration, fixed-rate agency portfolio. Annaly now has four distinct
investment groups, which provide access to over 25 investment options and
structures. While managing investment decisions, we combine a robust capital
allocation process with careful risk management. This process enables us 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.
Fixed
Rate |
Floating
Rate |
|
Our diversification strategy is reflected
in the following allocation of our equity across four investment groups
Agency, Commercial Real Estate, Residential Credit and Middle Market Lending
as of December 31, 2016.
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(1)
Includes loans held for
sale. |
VI |
Annaly
Capital Management Inc. 2017 Proxy
Statement |
Table of Contents
From our IPO in 1997 through March 31,
2017, we have declared over $15 billion in dividends to our stockholders. In
2016, we declared over $1.2 billion in dividends.
Delivering Significant Value for Stockholders in
2016 |
5.4%
economic return (including reinvestment of
dividends) |
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$1.2
billion dividends declared (including common and preferred
stock dividends) |
Total Common Stock Return
Performance |
Since 2014 (the first full year we were
externally-managed, as more fully described in Our Management Structure below), we have performed well against relevant benchmarks. As illustrated by the graph
below, shares of our common stock (including reinvestment of dividends) have
returned significant value to our stockholders over the long term relative to
both our mREIT peers and other yield-focused investments.
Note: Graph reflects daily market data
from December 31, 2013 through March 31, 2017. For a share performance graph for
the five-year period ended December 31, 2016, please see pages 42-43 of our
Annual Report on Form 10-K for the year ended December 31, 2016 filed with the
Securities and Exchange Commission (SEC) on February 23, 2017.
www.annalyannualmeeting.com |
VII |
Table of Contents
Source: Bloomberg. mREITs represent the
members of the Bloomberg mREIT (BBREMTG) Index; Utilities represent the
members of the Russell 3000 Utility Index; MLPs represent the members of the
Alerian MLP Index; Asset Managers represent the members of the S&P 500 Asset
Management and Custody Bank Index; Banks represent the members of the KBW Bank
Index; and S&P represents the members of the S&P 500
Index.
Economic Return Performance |
Since we have elected to be taxed as a
REIT and therefore must distribute at least 90% of our taxable income to our
stockholders annually, we believe that economic return, comprised of dividends
paid and changes in book value measured over a specified period, is an
especially meaningful performance metric for the Company. Concerns over
increases in interest rates led us to maintain relatively conservative leverage
from the beginning of 2014 through the end of 2016 compared to our Agency mREIT
peers. Our Agency mREIT Peers consist of AGNC Investment Corp. (AGNC), CYS
Investments, Inc. (CYS), Capstead Mortgage Corp. (CMO), Armour Residential
REIT, Inc. (ARR), and Anworth Mortgage Asset Corp. (ANH) (collectively, the
Agency mREIT Peers), and represent the agency mortgage REITs included in the
BBREMTG Index as of December 31, 2016 with market capitalization above $200
million. From the beginning of 2014 through the end of 2016, we generated an
economic return of 21.7% and operated at 26.2% less leverage than this peer
group.
Results of 2016 Say-on-Pay Vote and Stockholder
Outreach |
Since September 2015, we have had a
renewed focus on developing and maintaining relationships with both our retail
and institutional stockholders and have received investor feedback on a variety
of topics, including the Companys diversified investment strategy and our
corporate governance, compensation and management structures. From September
2015 through the end of March 2017, our shareholder outreach
included:
> |
10 non-deal
roadshows encompassing 81 investor meetings |
> |
116
additional one-on-one meetings / phone calls with
stockholders |
> |
New
corporate website with enhanced disclosure |
In addition, following the results of our
2016 advisory resolution on executive compensation (commonly known as a
Say-on-Pay vote), which received support from 53% of votes cast, we promptly
embarked on a multi-pronged effort to solicit feedback from key stakeholders
regarding our compensation and external management structures. These efforts
included:
> |
Outreach to
investors representing 65% of shares held by institutional stockholders,
including 45 of our 50 largest stockholders |
> |
Internal
discussions with our Managers employees |
> |
Analysis of
market practices at peer companies |
> |
Advice from
compensation consultants |
> |
Attendance
at investor conferences |
> |
Discussions
with proxy advisory services and corporate governance research
firms |
Our stockholders generally were supportive
of the enhanced 2016 proxy disclosure we provided to help investors understand
the robust governance processes and procedures around our external management
structure, as well as to enable them to measure the management fee we pay to our
Manager relative to the performance of the Company. Although a number of our
stockholders indicated that they were satisfied with and appreciated the level
and type of disclosure in our 2016 proxy statement, others indicated that they
would like expanded disclosure on our Managers executive compensation program
in order to enable them to fully evaluate such program, including the degree of
alignment between executive pay and Company performance.
VIII |
Annaly
Capital Management Inc. 2017 Proxy
Statement |
Table of Contents
Given that we do not provide any
compensation to our NEOs, we have not previously provided information related to
our Managers executive compensation program for our NEOs and such information
has not previously been provided to us. However, at the request of our
Independent Directors and in response to our conversations with stockholders and
our commitment to continuous improvement and transparency, our Manager has
furnished the following information to the Company about its executive
compensation program:
Our Manager
has agreed to provide information about its executive compensation
program following extensive stockholder
feedback |
> |
With the exception of Mr. Keyes (who
does not receive any direct or indirect compensation from our Manager or
the Company for his services as our Chief Executive Officer, but does have
an interest in the fees paid to our Manager as an equityholder of the
parent of our Manager), each of our other NEOs receives a base salary and
is eligible for a performance-based cash incentive bonus;
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> |
A significant majority of the NEOs
target compensation is performance-based and at-risk;
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> |
Payout of performance-based bonuses
is based on achievement of both rigorous Company and investment group
performance metrics, along with individual performance objectives; and
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> |
Our Manager considers a list of
specified peer companies, together with advice from compensation
consultants, when it develops appropriate compensation packages for our
NEOs. |
In addition, our Independent Directors
have also requested that our Manager establish a framework for isolating the
portion of the management fee allocable to 2017 NEO compensation. While the
parameters of this framework are currently under review, our Independent
Directors have asked our Manager to consider the guidance issued by proxy
advisory firms regarding the level of compensation disclosure sufficient to
facilitate an assessment of an externally-managed issuers pay programs.
Specifically, the Independent Directors
have requested that our Manager establish a compensation framework that will
enable it to provide the Company can disclose with the following information for
disclosure in our 2018 proxy statement:
> |
The portion of the management fee
that is allocated to NEO compensation paid by our Manager;
|
> |
Of this compensation, the breakdown
of fixed vs. variable/incentive pay; and |
> |
The metrics our Manager uses to
measure performance to determine our NEOs variable/incentive
pay. |
We will continue to 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.
Development and Promotion of Key
Executives |
In 2016 and early 2017, the Company
announced management promotions within its senior executive team. In November
2016, David L. Finkelstein, who had been serving as Annalys Chief Investment
Officer, Agency and RMBS, was named Annalys Chief Investment Officer with
oversight of all of Annalys investments and their related investment
operations, and Timothy P. Coffey, Annalys Chief Credit Officer, was promoted
to assume expanded management responsibilities for the Companys risk department
and credit groups. In March 2017, Anthony C. Green, who had been serving as
Annalys Deputy General Counsel, succeeded R. Nicholas Singh as the Companys
Chief Legal Officer and Secretary.
www.annalyannualmeeting.com |
IX |
Table of Contents
Our Manager and Our Management
Agreement |
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> |
All of our NEOs are indirect
owners and/or employees of our Manager |
> |
With the exception of Mr. Keyes,
each of our other NEOs receives compensation paid by our Manager. Mr.
Keyes receives no compensation for his services as our Chief Executive
Officer, although, as an equityholder of the parent of our Manager, Mr.
Keyes has an interest in the fees paid to our Manager |
> |
Our Manager is responsible for the
compensation of its employees (including our NEOs other than Mr. Keyes)
who provide services to the Company. We do not pay any cash or equity
compensation to our executive officers, do not provide pension benefits,
perquisites or other personal benefits, and have no employment agreements
or arrangements to pay any cash severance upon their termination or a
change in control of the Company |
> |
Our Manager receives a flat
management fee equal to 1.05% of our stockholders equity (as defined in
our Management Agreement), which is used to pay the compensation and
benefits of its employees (including our NEOs). However, the Company does
not allocate any specific portion of the management fee we pay to the
compensation of our NEOs |
> |
For 2016, the management fee was
approximately $152 million |
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Over the past several years, our Manager
has made significant investments in personnel corresponding to the
diversification of our investment strategy into more people-intensive asset
classes (including Residential Credit, Commercial Real Estate and Middle Market
Lending assets), as well as to the enhancement of our corporate infrastructure.
These investments include the build out of teams for our Agency, Residential
Credit, Commercial Real Estate and Middle Market Lending groups, and significant
hires in our business support functions, such as risk management, legal and
compliance, finance and information technology, among others.
The costs of these personnel expansions
and improvements have been paid by our Manager rather than by us. Unlike a
number of other externally-managed REITs, we do not reimburse our Manager for
any portion or subset of employment costs, all of which are borne by our
Manager. An increase to these costs does not result in any increase to the
management fee, which is a fixed percentage of our stockholders equity as
described above.
The Independent Directors review the
efforts of our Manager to ensure that our Manager continues to invest in our
personnel. The Board has concluded that the efforts of our Manager to develop
and enhance our personnel have resulted in the establishment of a robust and
high quality management team having a full complement of human capital to drive
our business performance. We believe our management team is best in class in
terms of size, scope and experience compared with our mREIT peers.
X |
Annaly
Capital Management Inc. 2017 Proxy
Statement |
Table of Contents
Despite the costs associated with the
diversification of our investment strategy, our Manager has continued to operate
the business in an efficient manner with appropriately scaled operating costs
(including the management fee). As illustrated by the table below, Annalys
average operating expense levels have remained significantly lower than both our
internally- and externally-managed mREIT peers over the last five
years.
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|
2012 |
2013 |
2014 |
2015 |
2016 |
|
Average |
Annaly |
|
0.19% |
0.22% |
0.24% |
0.25% |
0.25% |
|
0.23% |
Internally-Managed
Peers |
0.54% |
0.91% |
0.87% |
0.73% |
0.44% |
|
0.70% |
Externally-Managed
Peers |
0.60% |
0.66% |
0.75% |
0.79% |
0.66% |
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0.69% |
|
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2012 |
2013 |
2014 |
2015 |
2016 |
|
Average |
Annaly |
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1.45% |
1.66% |
1.61% |
1.58% |
1.65%(1) |
|
1.59% |
Internally-Managed
Peers |
2.72% |
3.83% |
4.13% |
3.84% |
2.48% |
|
3.40% |
Externally-Managed
Peers |
2.20% |
3.06% |
3.57% |
3.75% |
4.06% |
|
3.33% |
Source: Company Filings, SNL and
Bloomberg. Averages are market weighted based on market capitalization as of
Dec. 31st of each respective year.
Note: Internally-Managed Peers and
Externally-Managed Peers represent the respective internally- and
externally-managed members of the BBREMTG Index with market capitalization above
$200 million as of December 31st of each respective year. The average for each
excludes Annaly and companies during years in which they became public or first
listed. Operating Expense is defined as: (i) for Internally-Managed Peers, the
sum of compensation & benefits, general & administrative expenses and
other operating expenses, and (ii) for Externally-Managed Peers, the sum of net
management fees, compensation & benefits (if any), general &
administrative expenses and other operating expenses.
(1) |
Excludes costs of $49 million related to the Companys acquisition
of Hatteras. |
For additional information about our
Manager, our management agreement and executive compensation, see Certain
Relationships and Related Party Transactions, Our Management Structure,
Compensation Paid by our Manager to our Named Executive Officers and
Compensation Discussion and Analysis.
www.annalyannualmeeting.com |
XI |
Table of Contents
We regularly review and update our
practices related to our corporate governance, compensation and management
structures to align the interests of our management team with those of our
stockholders and to respond to stockholder feedback, changes in applicable laws,
regulations and stock exchange requirements, and the evolving needs of our
business. Our current best practices are highlighted below:
Director Independence and
Oversight |
|
Director Qualifications |
|
Stockholder Rights and
Engagement |
|
Good Governance / Corporate
Citizenship |
>7 of 9 Directors are
Independent
>Lead Independent
Director
>Regular executive sessions
of Independent Directors
>Independent Board
committees
>Board oversees a succession
plan for the CEO and other senior executives |
|
>Annual Board and committee
self-evaluations
>Annual assessment of all
Directors to ensure continued match of their skills against the Companys
needs
>Over-boarding policy limits
the number of outside boards on which our Directors can
serve
>2 audit committee
financial experts |
|
>Majority vote standard for
uncontested elections
>Annual stockholder advisory
vote on executive compensation
>No restrictions on
stockholders ability to amend the Companys by-laws
>Active stockholder
engagement program |
|
>Clawback policy with
manager
>Anti-hedging and pledging
policies
>Director and employee stock
ownership guidelines
>Four-year stock holding
period requirement for employees
>Corporate sustainability
initiatives
>Whistleblower procedures
and hotline for auditing and accounting
concerns |
XII |
Annaly
Capital Management Inc. 2017 Proxy
Statement |
Table of Contents
Board Composition and
Refreshment |
The Nominating/Corporate Governance
Committee (the NCG Committee) of the Board seeks to achieve a balance of
knowledge, experience and capability on the Board. Newer directors offer fresh
ideas and perspectives, while deeply experienced directors bring extensive
knowledge of our complex operations. On an annual basis, the NCG Committee
evaluates its overall composition, including director tenure, and rigorously
evaluates all directors to ensure a continued match of their skill sets against
the needs of the Company. The table below summarizes key qualifications, skills,
and attributes most relevant to our Directors service on our Board. For
additional information about individual Directors qualifications and
experience, please see the Director biographies beginning on page 3.
|
|
|
|
|
|
|
|
Skill /
experience |
|
No. of
Directors |
|
Total |
|
|
Audit committee financial expert |
|
|
|
2 |
|
|
Complex and regulated industries |
|
|
|
8 |
|
|
Compliance |
|
|
|
5 |
|
|
Corporate governance |
|
|
|
8 |
|
|
Ethics and social responsibility oversight |
|
|
|
4 |
|
|
Finance and accounting experience |
|
|
|
8 |
|
|
Financial services |
|
|
|
8 |
|
|
Government, public policy and regulatory affairs |
|
|
|
4 |
|
|
Industry knowledge |
|
|
|
9 |
|
|
Information technology |
|
|
|
3 |
|
|
Legal expertise |
|
|
|
4 |
|
|
Mergers & acquisitions |
|
|
|
6 |
|
|
Operations |
|
|
|
9 |
|
|
Other public company board experience |
|
|
|
3 |
|
|
Private company board experience |
|
|
|
5 |
|
|
Public company CEO |
|
|
|
2 |
|
|
Risk management |
|
|
|
9 |
|
|
Strategy development and implementation |
|
|
|
7 |
|
|
|
|
www.annalyannualmeeting.com |
XIII |
Table of Contents
Table of Contents
Table of
Contents
www.annalyannualmeeting.com |
1 |
Table of Contents
Corporate
Governance at Annaly
|
|
|
|
|
Election of
Directors
We have three Classes of Directors.
At the Annual Meeting, our stockholders will vote to elect three Class III
Directors from the nominees named herein, whose terms will expire at our
annual meeting of stockholders in 2020, subject to the election and
qualification of their successors or to their earlier death, resignation
or removal. The Class I and Class II Directors have one year and two
years, respectively, remaining on their terms of office and will not be
voted upon at the Annual Meeting. The table below provides summary
information about each of our Directors.
OUR BOARD OF DIRECTORS HAS
NOMINATED AND RECOMMENDS A VOTE FOR FRANCINE J. BOVICH, JONATHAN D. GREEN
AND JOHN H. SCHAEFER AS DIRECTORS TO HOLD OFFICE UNTIL OUR ANNUAL MEETING
OF STOCKHOLDERS IN 2020 AND UNTIL THEIR RESPECTIVE SUCCESSORS ARE DULY
ELECTED AND QUALIFIED. THE PERSONS NAMED IN THE ENCLOSED PROXY WILL VOTE
YOUR PROXY IN FAVOR OF THESE NOMINEES UNLESS YOU SPECIFY A CONTRARY CHOICE
IN YOUR PROXY. |
|
|
|
|
Name |
Age |
Principal Occupation |
Independent |
Committees |
CLASS III DIRECTORS (NOMINATED
TO SERVE FOR THREE-YEAR TERMS EXPIRING IN 2020) |
Francine J.
Bovich |
65 |
Former Managing
Director |
Yes |
> Audit |
|
|
Morgan Stanley Investment
Management |
|
> NCG |
Jonathan D.
Green* |
70 |
Former Vice
Chairman |
Yes |
> Risk
(Chair) |
|
|
The Rockefeller
Group |
|
> Compensation |
John H. Schaefer |
65 |
Former President
and |
Yes |
> Audit |
|
|
Chief Operating
Officer |
|
>
Compensation |
|
|
Morgan Stanley Global
Wealth Management |
|
> Risk |
CLASS I DIRECTORS (TERMS EXPIRE
IN 2018) |
Wellington J.
Denahan |
53 |
Executive
Chairman |
No |
|
|
|
Annaly Capital Management,
Inc. |
|
|
Michael Haylon |
59 |
Managing Director |
Yes |
> Audit |
|
|
Conning, Inc. |
|
> Risk |
Donnell A.
Segalas |
59 |
Chief Executive Officer
and |
Yes |
>
Compensation |
|
|
Managing Partner |
|
(Chair) |
|
|
Pinnacle Asset Management,
L.P. |
|
> NCG |
CLASS II DIRECTORS (TERMS
EXPIRE IN 2019) |
Kevin G. Keyes |
49 |
Chief Executive Officer and
President |
No |
|
|
|
Annaly Capital Management,
Inc. |
|
|
Kevin P. Brady |
61 |
Chief Executive
Officer |
Yes |
> Audit
(Chair) |
|
|
ARMtech, LLC |
|
> NCG |
|
|
|
|
> Risk |
E. Wayne
Nordberg |
78 |
Chairman |
Yes |
> NCG
(Chair) |
|
|
Hollow Brook Wealth
Management, LLC |
|
>
Compensation |
* |
Lead Independent Director. For
more details, see page 11. |
2 |
Annaly
Capital Management Inc. 2017 Proxy
Statement |
Table of Contents
Corporate
Governance at Annaly |
Nominees to Serve for a Three-Year Term Expiring in 2020
(Class III Directors) |
Francine J.
Bovich
Director
since May 2014 Committees Audit, NCG |
|
Ms. Bovich has over 30 years of investment management
experience lastly serving as a Managing Director of Morgan Stanley
Investment Management from 1993-2010. Since 2011, Ms. Bovich has been a
trustee of The Bradley Trusts. Ms. Bovich has also served as a board
member of The Dreyfus Family of Funds since 2012, and serves as a board
member of a number of registered investment companies within the fund
complex. These funds represent a broad scope of investment strategies
including equities (US, non-US, global, and emerging markets), taxable
fixed income (US, non-US, global and emerging markets), municipal bonds,
and cash management. From 1991 through 2005, Ms. Bovich served as the U.S.
Representative to the United Nations Investment Committee, which advised a
global portfolio of approximately $30 billion. Ms. Bovich is a member of
the Economic Club of New York and an emeritus trustee of Connecticut
College and chair of the Investment Sub-Committee for its endowment. Ms.
Bovich has a B.A. in Economics from Connecticut College and an M.B.A. in
Finance from New York University. |
|
|
|
Director
Qualification Highlights
The Board believes that Ms. Bovichs
qualifications include her significant investment management experience
and her experience serving as a trustee and board member. |
|
|
|
Jonathan D.
Green
Director
since January 1997 Committees Risk (Chair),
Compensation 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. Greens
qualifications include his significant experience as a chief executive,
his diverse and significant background in the real estate industry and his
legal expertise. |
www.annalyannualmeeting.com |
3 |
Table of Contents
Corporate
Governance at Annaly |
John H.
Schaefer
Director since March
2013 Committees Audit,
Compensation and Risk |
|
Mr. Schaefer has over 40 years of
financial services experience including serving as a member of the
management committee of Morgan Stanley from 1998 through 2005 and as
President and Chief Operating Officer of the Global Wealth Management
division of Morgan Stanley. Mr. Schaefer retired in February 2006 and from
2008 through 2012 served as a board member and chair of the audit
committee of USI Holdings Corporation. Mr. Schaefer has a B.B.A. in
Accounting from the University of Notre Dame and an M.B.A. from the
Harvard Graduate School of Business. |
Director Qualification
Highlights
The Board believes that Mr.
Schaefers qualifications include his broad financial services management
experience, including management of strategic planning, capital
management, human resources, internal audit and corporate communications,
as well as his board and audit committee
experience. |
Class I Directors (Terms Expire in
2018) |
Wellington J.
Denahan
Director
since 1997
Chairman of the
Board |
|
Ms. Denahan has served as Chairman
of the Board since November 2012 and Executive Chairman of Annaly since
September 2015. Previously, Ms. Denahan served as Chief Executive Officer
of Annaly from November 2012 to September 2015 and as Co-Chief Executive
Officer of Annaly from October 2012 to November 2012. Ms. Denahan was
elected in December 1996 to serve as Vice Chairman of the Board. Ms.
Denahan was Annalys Chief Operating Officer from January 2006 to October
2012 and Chief Investment Officer from 2000 to November 2012. She was a
co-founder of Annaly. Ms. Denahan has a B.S. in Finance from Florida State
University. |
Director Qualification
Highlights
The Board believes that Ms.
Denahans qualifications include her significant oversight experience
related to fixed income trading operations through years of serving as our
Chief Operating Officer and Chief Investment Officer, her industry
experience and expertise in the mortgage-backed securities markets, and
her operational expertise, including her service as our former Chief
Executive Officer. |
4 |
Annaly
Capital Management Inc. 2017 Proxy
Statement |
Table of Contents
Corporate
Governance at Annaly |
Michael Haylon
Director
since June
2008 Committees Audit, Risk |
|
Mr. Haylon has served as Managing
Director and Head of Asset Management Sales, Products and Marketing at
Conning, Inc., a global provider of investment management solutions,
services and research to the insurance industry, since December 2014. Mr.
Haylon previously served as Managing Director and Head of Investment
Products at Conning, Inc. from January 2012 until December 2014. From
September 2010 to December 2011, Mr. Haylon served as Head of Investment
Product Management at General Re New England Asset Management. He was
Chief Financial Officer of the Phoenix Companies, Inc. from 2004 until
2007, and Executive Vice President and Chief Investment Officer of the
Phoenix Companies in 2002 and 2003. From 1995 until 2002, he held the
position of Executive Vice President of Phoenix Investment Partners, Ltd.,
a NYSE-listed company, and President of Phoenix Investment Counsel, where
he was responsible for the management and oversight of $25 billion in
closed-end and open-end mutual funds, corporate pension funds and
insurance company portfolios. From 1990 until 1994, he was Senior Vice
President of Fixed-Income at Phoenix Home Life Insurance Company. From
1986 until 1990, he was Managing Director at Aetna Bond Investors where he
was responsible for management of insurance company and pension fund
portfolios. From 1980 until 1984 he was Senior Financial Analyst at
Travelers Insurance Companies. He began his career in 1979 in the
commercial lending program at Philadelphia National Bank. Mr. Haylon has
previously served on the boards of Aberdeen Asset Management and Phoenix
Investment Partners. He has a B.A. from Bowdoin College and a M.B.A. from
the University of Connecticut. |
Director Qualification
Highlights
The Board believes that Mr. Haylons
qualifications include his significant leadership and management
experience from his years of management and oversight of large financial
asset portfolios, his prior board experience with other companies and his
expertise in financial matters. |
Donnell A.
Segalas
Director
since January
1997 Committees Compensation (Chair), NCG |
|
Mr. Segalas is the Chief Executive
Officer and a Managing Partner of Pinnacle Asset Management L.P., a New
York-based alternative asset management firm. Additionally, Mr. Segalas is
a member of Pinnacles Investment Committee and sits on the boards of its
offshore funds. Prior to joining Pinnacle in 2003, Mr. Segalas was
Executive Vice President for Alternative Investment Products (AIP) at
Phoenix Investment Partners. Mr. Segalas is a member of the Nantucket
Historical Society. He received a B.A. from Denison
University. |
Director Qualification
Highlights
The Board believes that Mr. Segalas
qualifications include his significant experience from his years of
investing and managing private and public investment vehicles and his
experience serving on investment and executive committees of other
companies. |
www.annalyannualmeeting.com |
5 |
Table of Contents
Corporate
Governance at Annaly |
Class II Directors (Terms Expire in
2019) |
Kevin G. Keyes
Director
since November
2012 |
|
Mr. Keyes has served as Chief
Executive Officer of Annaly since September 2015 and as its President
since October 2012. Previously, Mr. Keyes served as Annalys Chief
Strategy Officer and Head of Capital Markets from September 2010 until
October 2012. Prior to joining Annaly as a Managing Director in 2009, Mr.
Keyes worked for 20 years in senior investment banking and capital markets
roles. From 2005 to 2009, Mr. Keyes served in senior management and
business origination roles in the Global Capital Markets and Banking Group
at Bank of America Merrill Lynch. Prior to that, he worked at Credit
Suisse First Boston from 1997 until 2005 in various capital markets
origination roles and Morgan Stanley Dean Witter from 1990 until 1997 in
the Mergers and Acquisitions Group and Real Estate Investment Banking
Group. Mr. Keyes holds a B.A. in Economics and a B.S. in Business
Administration (ALPA Program) from the University of Notre
Dame. |
Director Qualification
Highlights
Mr. Keyes is our Chief Executive
Officer and brings to our Board a deep understanding of issues that are
important to the Companys growth. Through his role as our Chief Executive
Officer and other senior management positions at the Company, Mr. Keyes
has demonstrated leadership qualities, management capability, business and
industry knowledge and a long-term strategic perspective. In addition, Mr.
Keyes qualifications include over 20 years of experience as an investment
banking and equity capital markets
professional. |
Kevin P. Brady
Director
since 1997 Committees Audit (Chair), NCG, Risk |
|
Mr. Brady is the Chief Executive
Officer of ARMtech, LLC, a venture capital firm that invests and incubates
technology start-ups, which he founded in 2007. ARMtechs current
portfolio includes companies in the financial reporting and data spaces.
Prior to ARMtech, Mr. Brady founded TaxStream, a software company that
specialized in financial reporting, tax and internal controls for
multinational corporations. Mr. Brady served as Chief Executive Officer of
TaxStream from 2002 to 2008, when the company was sold to Thomson-Reuters.
Mr. Brady previously worked for eight years at PricewaterhouseCoopers in
New York City, where he consulted on M&A transactions and
international tax issues. Mr. Brady holds a B.A. from McGill University,
an M.B.A. from New York University and is a Certified Public Accountant
(inactive). He was awarded a patent from the U.S. Patent and Trademark
Office for the invention of the TaxStream
product. |
Director Qualification
Highlights
The Board believes that Mr.
Bradys qualifications include his expertise in financial and accounting
matters as well as his significant experience managing systems and
companies focusing on the financial accounting
market. |
6 |
Annaly
Capital Management Inc. 2017 Proxy
Statement |
Table of Contents
Corporate
Governance at Annaly |
E. Wayne Nordberg
Director
since May
2004 Committees NCG
(Chair), Compensation |
|
Mr. Nordberg has served as Chairman
of Hollow Brook Wealth Management, LLC, a SEC-registered investment
advisor that manages or advises $1.4 billion of investment assets, since
2008. From January 2003 to November 2008, Mr. Nordberg served as a senior
director of Ingalls & Snyder LLC, an NYSE member and registered
investment advisor. From 1998 to June 2002, Mr. Nordberg served as Vice
Chairman of the board of KBW Asset Management, Inc., an affiliate of
Keefe, Bruyette, & Woods, Inc., a registered investment advisor. From
1988 to 1998, he served in various capacities for Lord Abbett & Co., a
mutual fund company, including as partner and director of its family of
funds. Mr. Nordberg received his B.A. from Lafayette College, where he is
a trustee emeritus. He is a member of the Financial Analysts Federation
and the New York Society of Security Analysts and is a Trustee of the
Atlantic Salmon Federation, the American Museum of Fly Fishing and the
National Wildlife Federation Endowment Fund. Mr. Nordberg is also a
director of PetroQuest Energy, Inc. and Reaves Utility Income Fund, both
NYSE-listed companies. |
Director Qualification
Highlights
The Board believes that Mr.
Nordbergs qualifications include his significant experience in serving at
a senior executive level with a SEC-registered investment advisor, his
experience as a director of an asset management company and his service as
a board member of other public
companies. |
Independence of Our
Directors |
Our Corporate Governance Guidelines and
NYSE rules require that at least a majority of our Board members are Independent
Directors. We have adopted the definition of independent director set forth in
Section 303A of the NYSE rules and have affirmatively determined that each
Director (other than Ms. Denahan and Mr. Keyes) has no material relationships
with us (either directly or as partner, stockholder or officer of an
organization that has a relationship with us) and is therefore independent in
accordance with the standards set forth in the NYSE rules and our Corporate
Governance Guidelines.
Director Nomination
Process |
The Nominating/Corporate Governance
(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. Nominees may
be suggested by Directors, members of management, stockholders or professional
search firms. In evaluating a Director nomination, the NCG Committee may review
materials provided by the nominator, a professional search firm or other
party.
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
candidates 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 Companys business and be
willing to devote sufficient time and effort to carrying out their duties and
responsibilities effectively.
Although the NCG Committee does not have a
formal diversity policy, it believes that diversity is an important factor in
determining the composition of the Board. Additionally, the Company endeavors to
have a Board representing diverse experiences at policy-making levels in
business, finance, government, education, law and technology, and in other areas
that are relevant to the Companys business and its status as a public company,
as this contributes to our success and is in the best interests of our
stockholders.
Two new, highly
qualified Independent Directors
have joined the Annaly Board
over the last few
years |
www.annalyannualmeeting.com |
7 |
Table of Contents
Corporate
Governance at Annaly |
Stockholder Recommendation of Director
Candidates |
Stockholders who wish the NCG Committee to
consider their recommendations for Director candidates should submit their
recommendations in writing to our Secretary at our principal executive offices.
Following verification of the stockholder status of persons proposing
candidates, recommendations are aggregated and considered by our NCG Committee
at a regularly scheduled or special meeting. If any materials are provided by a
stockholder in connection with the nomination of a Director candidate, such
materials are forwarded to our NCG Committee. Properly submitted recommendations
by stockholders will receive the same consideration by the NCG Committee as
other suggested nominees.
The Boards Role and
Responsibilities |
We are committed to maintaining a strong
ethical culture and robust governance practices that benefit the long-term
interests of stockholders. Our corporate governance practices
include:
Board Structure |
Director Qualifications |
Stockholder Rights and
Engagement |
Recent Governance
Enhancements |
>7 of 9 Directors are
Independent
>Lead Independent
Director
>Regular executive
sessions of Independent Directors
>Independent Board
committees
>2 Directors are women
(including the Executive Chairman) |
>Annual Board and
committee self-evaluations
>Over-boarding policy
limits the number of outside boards on which our Directors can
serve
>2 audit committee
financial experts
>Annual assessment of all
Directors to ensure continued match of their skills against the Companys
needs
|
>Majority vote standard
for uncontested elections
>Annual stockholder
advisory vote on executive compensation
>No restrictions on
stockholders ability to amend the Companys by-laws
>Active stockholder
engagement program
|
>Clawback policy with
manager
>Anti-pledging
policy
>Stock ownership
guidelines for our Directors and employees
>Four-year stock holding
period requirement for employees
>Corporate sustainability
initiatives |
Full
Board
Risk management begins with our
Board, through review and oversight of our 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
our risk management program, which identifies and quantifies a broad
spectrum of enterprise-wide risks and related action plans, with
management. |
|
|
|
|
|
Risk
Committee
The Risk Committee assists the Board in its
oversight of our risk governance structure, our risk management and risk
assessment guidelines and policies, our risk tolerance, and our capital,
liquidity and funding. |
|
Audit
Committee
The Audit Committee assists the
Board in its oversight of the quality and integrity of our accounting,
internal controls and financial reporting practices, including independent
auditor selection, evaluation and review, and oversight of internal audit. |
Management
Risk assessment and risk
management are the responsibility of our management. A series of
management committees have oversight or decision-making responsibilities
for risk management activities. These management committees include the
Operating Committee, Enterprise Risk Committee, the Asset and Liability
Committee, the Investment Committee, the Validation Committee and the
Financial Reporting and Disclosure
Committee. |
8 |
Annaly
Capital Management Inc. 2017 Proxy
Statement |
Table of Contents
Corporate
Governance at Annaly |
In addition to the risk oversight
processes outlined above, the Board reviews its risk assessment of the
Companys compensation policies and practices applicable to the Companys equity
incentive plans with the Compensation Committee. For additional information on
this review, please see the Risks Related to Compensation Policies and Practices section of this proxy statement. For additional information on the
responsibilities of the Risk Committee and the Audit Committee, please see the
Board Committees section of this proxy statement.
The Audit and
Risk Committees have primary Board oversight of the Companys
risk management framework |
Management Succession
Planning |
The Board oversees and maintains a
succession plan for the Chief Executive Officer and other senior executives. In
carrying out this function, the Board endeavors to ensure that the Companys
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 Commitment and Over-Boarding
Policy |
In order to provide sufficient time for
informed participation in their Board responsibilities:
> |
Directors who also serve as chief
executive officers or hold equivalent positions at other companies should
not serve on more than two other boards of public companies in addition to
the Companys Board; |
> |
Other Directors should not serve on more than four other
boards of public companies in addition to the Companys Board;
and |
> |
A member of the Audit Committee should not serve on the
audit committee of more than two other public
companies. |
All of our Directors are currently in
compliance with this policy. Directors are required to notify the Chairman of
the Board and the chair of the NCG Committee in advance of accepting an
invitation to serve on another public company board.
Communications with the
Board |
Stockholders and other persons interested
in communicating with an individual Director (including the Lead Independent
Director), the Independent Directors as a group, any committee of the Board or
the Board as a whole, may do so by submitting such communication to:
Annaly Capital Management, Inc.
[Addressee]
1211 Avenue of the Americas
New York, NY 10036
Phone: 1-888-8 ANNALY
Facsimile: (212)
696-9809
Email: investor@annaly.com
The Legal Department reviews
communications to the Directors and forwards those communications related to the
duties and responsibilities of the Board. Certain items such as business
solicitation or advertisements, product-related inquiries, junk mail or mass
mailings, resumes or other job-related inquiries, spam and unduly hostile,
threatening, potentially illegal or similarly unsuitable communications will not
be forwarded.
Stockholders
may communicate with any of our Directors, including the Lead
Independent Director |
www.annalyannualmeeting.com |
9 |
Table of Contents
Corporate
Governance at Annaly |
Certain Relationships and Related Party
Transactions |
Approval of Related Party
Transactions |
Each of our Directors, Director nominees
and executive officers is required to report all transactions with us in which
they or an immediate family member had or will have a direct or indirect
material interest with respect to us in an annual disclosure questionnaire and
on an on-going basis. We review these annual questionnaires and any interim
reports and, if we determine it to be necessary, discuss any reported
transactions with the entire Board. Other than as discussed in this section,
there were no reported transactions for 2016 and there is no transaction
currently pending for 2017. We do not, however, have a formal written policy for
approval or ratification of such transactions, and all such transactions are
evaluated on a case-by-case basis. If we believe a transaction could be a
related party transaction or could raise particular conflict of interest issues,
we will discuss it with our legal counsel, and if necessary, we will form an
independent Board committee that has the right to engage its own legal and
financial counsel to evaluate, approve or ratify the transaction.
We have entered into a management
agreement (the Management Agreement) with our Manager. Our management is
conducted by our Manager through the authority delegated to it in the Management
Agreement and pursuant to the policies established by our Board. The Management
Agreement was effective as of July 1, 2013 and was amended in November 2014 and
then amended and restated in April 2016, and may be further amended by agreement
between our Manager and us.
The Management Agreements current term
ends on December 31, 2018 and will automatically renew for successive two-year
terms unless at least two-thirds of our Independent Directors or the holders of
a majority of our outstanding shares of common stock elect to terminate the
agreement in their sole discretion and for any or no reason. At any time during
the term or any renewal term, either party may deliver to the other party prior
written notice of its intention to terminate the Management Agreement no less
than one year prior to its proposed termination date or, but only in the event
our Manager is the terminating party, such earlier date as determined by us in
our sole discretion. There is no termination fee for a termination of the
Management Agreement by either our Manager or us.
The Management Agreement provides that
during its term and, in the event of termination of the Management Agreement by
our Manager without cause, for a period of one year following such termination,
our Manager will not, without our prior written consent, manage any REIT which
engages in the management of mortgage-backed securities in any geographical
region in which we operate.
Pursuant to the terms of the Management
Agreement, we pay our Manager a monthly management fee equal to 1/12th of 1.05%
of our stockholders equity, as defined in the Management Agreement, for its
management services. We incurred approximately $152 million in management fees
under the Management Agreement during the year ended December 31,
2016.
Our management fee of 1.05% of
stockholders equity (as defined in our Management Agreement
) compares favorably to the industry
average |
10 |
Annaly
Capital Management Inc. 2017 Proxy
Statement |
Table of Contents
Board Structure and
Processes
Board Leadership
Structure |
The Board believes that whether to have
the same person occupy the offices of Chairman of the Board and Chief Executive
Officer should be decided by the Board, from time to time, in its business
judgment after considering relevant factors, including the specific needs of the
business and what is in the best interests of the Companys stockholders.
Currently, Ms. Denahan serves as the Executive Chairman and Chairman of the
Board, while Mr. Keyes serve as the Chief Executive Officer and a Director. As
Ms. Denahan and Mr. Keyes are both considered executive officers of the Company,
the Board has designated Mr. Green to serve as the Lead Independent
Director.
We believe that our current leadership
structure is effective and serves the best interests of our stockholders by
providing for a robust independent leadership position on the Board. This
structure allows Mr. Keyes to focus on his duties in managing the day-to-day
operations of the Company, while benefitting from Ms. Denahans invaluable
knowledge and expertise regarding the Companys business. The Lead Independent
Director has the following responsibilities:
Our Lead Independent Director has
significant authority and
responsibilities |
|
|
> |
Presides at all meetings of the
Board in the absence of or at the request of the Chairman of the Board,
including executive sessions of Independent Directors
|
> |
Facilitates communication between
the Independent Directors and the Chairman of the Board and the Chief
Executive Officer |
> |
Advises on the selection of
committee chairs |
> |
Approves the quality, quantity and
timeliness of information sent to the Board |
> |
Approves Board meeting agendas
|
> |
Approves Board meeting schedules to
assure there is sufficient time for discussion of all agenda items
|
> |
Has authority to call meetings of
the Independent Directors |
> |
Authorizes the retention of outside
advisors and consultants who report directly to the Board
|
> |
If requested by stockholders,
ensures that he is available, when appropriate, for consultation and
direct communication with major
stockholders |
|
|
We believe that the Boards independent
oversight function is further enhanced by our policy to hold regular executive
sessions of the Independent Directors without management present and the fact
that a majority of our Directors (and every member of our four standing Board
committees) is independent.
Executive Sessions of
Independent
Directors |
Our Corporate Governance Guidelines
require that the Board have at least two regularly scheduled meetings each year
for our Independent Directors. These meetings, which are designed to promote
unfettered discussions among our Independent Directors, are presided over by our
Lead Independent Director. During 2016, our Independent Directors, without the
participation of Board members who are members of management, held 5 meetings.
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11 |
Table of Contents
Board
Structure and Processes |
Board and Committee
Evaluations |
The Lead Independent Director and the NCG
Committee are responsible for overseeing an annual self-evaluation process for
the Board. The self-evaluation process seeks to identify specific areas, if any,
that need improvement or strengthening in order to increase the effectiveness of
the Board as a whole and its committees. Each standing committee of the Board
evaluates its performance on an annual basis and reports to the Board on such
evaluation.
Board Composition and
Refreshment |
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 our complex operations. On an annual basis, the NCG
Committee evaluates its overall composition, including director tenure, and
rigorously evaluates all directors to ensure a continued match of their skill
sets against the needs of the Company.
Code of Business Conduct and
Ethics |
We have adopted a Code of Business Conduct
and Ethics, which sets forth the basic principles and guidelines for resolving
various legal and ethical questions that may arise in the workplace and in the
conduct of our business. This code is applicable to our Directors, executive
officers and employees.
Corporate Governance
Guidelines |
We have adopted Corporate Governance
Guidelines that, in conjunction with the charters of our Board committees,
provide the framework for the governance of our Company.
Where You Can Find Our
Governing
Documents |
Our Code of Business Conduct and Ethics,
Corporate Governance Guidelines, Compensation Committee Charter, Audit Committee
Charter, NCG Committee Charter and Risk Committee Charter are available on our
website (www.annaly.com). We 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.
The Board has four standing committees:
the Audit Committee, the Compensation Committee, the NCG Committee, and the Risk
Committee. Each committee is governed by a written charter approved by the Board
and is comprised entirely of Independent Directors, as required under the
existing rules of the Securities Exchange Act of 1934, as amended (the Exchange
Act) and the NYSE. In addition, each member of the Audit Committee and the
Compensation Committee meets the additional independence criteria applicable to
directors serving on these committees under the
NYSE listing rules.
All Board committees are composed
entirely of Independent
Directors |
12 |
Annaly
Capital Management Inc. 2017 Proxy
Statement |
Table of Contents
Board
Structure and Processes |
The table below shows the current
membership of each Board committee and number of meetings of each committee held
in 2016.
Director |
Audit Committee |
Compensation Committee |
NCG Committee |
Risk Committee |
Francine J.
Bovich |
M |
|
M |
|
Kevin P. Brady |
C |
|
M |
M |
Jonathan D.
Green(1) |
|
M |
|
C |
Michael Haylon |
M |
|
|
M |
E. Wayne
Nordberg |
|
M |
C |
|
John H. Schaefer |
M |
M |
|
M |
Donnell A.
Segalas |
|
C |
M |
|
2016 Meetings: |
4 |
4 |
3 |
4 |
M =
Member C
= Chairperson |
|
(1) Mr. Green
serves as the Lead Independent Director. For more details, see page
11. |
Committee |
Key Responsibilities |
Audit |
>
|
Recommends to our Board the engagement or
termination of independent registered public accountants |
|
> |
Reviews the plan and results of the auditing
engagement with our Chief Financial Officer and our independent registered
public accountants |
|
> |
Oversees internal audit
activities |
|
> |
Oversees the quality and integrity of our
financial statements and financial reporting process |
|
> |
Oversees the adequacy and effectiveness of
internal control over financial reporting |
The Board has determined that each
Audit Committee member is financially literate, and that Messrs. Brady and
Haylon are audit committee financial experts under applicable SEC rules.
For more information on the Audit Committees responsibilities and
activities, see the Board Oversight of Risk and Report of the Audit Committee sections of this proxy
statement. |
Compensation |
> |
Evaluates the performance of our Manager and the terms of the
Management Agreement |
|
> |
Reviews the fees payable to our
Manager |
|
> |
Administers the Companys equity incentive
plans and other equity compensation programs |
|
> |
Reviews the form and amount of Director
compensation |
|
> |
Evaluates the performance of our
officers |
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13 |
Table of Contents
Board
Structure and Processes |
NCG |
> |
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 |
For more information on the NCG Committees responsibilities
and activities, see the Director Nomination Process section of this
proxy statement. |
Risk |
Assists the Board in its oversight of the
Companys: |
|
> |
risk governance structure |
|
> |
risk management and risk assessment
guidelines and policies regarding market, credit, operational, liquidity,
funding and reputational risk and such other risks as necessary to fulfill
the committees duties and responsibilities |
|
> |
risk tolerance, including risk tolerance
levels and capital targets and limits |
|
> |
capital, liquidity, and
funding |
For more information on the Risk Committees
responsibilities and activities, see the Board Oversight of Risk section
of this proxy statement. |
During 2016, our Board held 15 meetings. Each Director
attended at least 75% of the aggregate number of meetings held by our Board and
each committee on which the Director served.
We expect each member of the Board to
attend our annual meeting of stockholders. All of our Directors attended our
2016 annual meeting of stockholders (the 2016 Annual Meeting).
14 |
Annaly
Capital Management Inc. 2017 Proxy
Statement |
Table of Contents
Board
Structure and Processes |
Compensation of
Directors |
We compensate our Independent Directors.
Any Director who is also an employee or owner of our Manager does not receive
compensation for serving on our Board. Our Compensation Committee is responsible
for reviewing, and recommending to the Board, the form and amount of
compensation paid to our Independent Directors.
The compensation elements paid to our
Independent Directors for service on the Board and its committees for 2016 is
set forth below:
Annual Compensation
Element |
Amount |
Annual Cash
Retainer |
$100,000 |
Deferred Stock Unit
(DSU) Grant |
$135,000 in DSUs |
Lead Independent Director
Retainer |
$30,000 |
Committee Member Retainer |
$8,000 Audit
Committee |
|
$7,000 Compensation
Committee |
|
$7,000 Risk
Committee |
|
$5,000 NCG Committee |
Committee Chair Retainer(1) |
$20,000 Audit
Committee |
|
$10,000 Compensation
Committee |
|
$10,000 Risk
Committee |
|
$10,000 NCG
Committee |
(1)
Committee Chairs received Committee Chair Retainers in addition to, and
not in lieu of, Committee Member
Retainers. |
Each DSU is equivalent in value to one
share of our common stock. DSUs are granted on the date of the annual
stockholder meeting and vest immediately. DSUs convert to shares of our 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. Our Independent Directors are also eligible to receive other
stock-based awards under our equity incentive plan.
We reimburse our Directors for their
reasonable out-of-pocket travel expenses incurred in connection with their
attendance at full Board and committee meetings.
Director Stock Ownership
Guideline |
In 2016, we increased the stock ownership
guideline for our Independent Directors to provide that each Independent
Director should strive to own an amount of our common stock equal to five times
the annual cash retainer. Shares counting toward the guideline include shares
that are owned outright, DSUs, and any other shares held in deferral accounts.
To facilitate achievement of the guideline, we have adopted and implemented a
retention ratio that requires Independent Directors to retain and hold 50% of
the net profit shares from DSUs until the specified ownership level is achieved.
As of March 31, 2017, all of our Independent Directors have met or are on track
to meet their stock ownership guideline.
In 2016, we increased the stock
ownership guideline for Independent Directors to 5x the annual
cash retainer, which is currently
$100,000 |
Role of Compensation
Consultant |
During 2016, our Compensation Committee
retained Frederic W. Cook & Co., a nationally-recognized compensation
consulting firm (F. W. Cook), to assist the Compensation Committee in its
review of the compensation arrangements provided to our Independent Directors.
The Compensation Committee considered F. W. Cooks independence in light of SEC
regulations and NYSE listing standards. The Compensation Committee discussed all
relevant factors, including the services F. W. Cook provided to our Manager
discussed under Compensation Paid by our Manager to our Named Executive Officers below, and concluded that the continued engagement of F. W. Cook does
not raise any conflicts of interest.
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15 |
Table of
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Board Structure and Processes |
The table below summarizes the
compensation paid by us to our Independent Directors for the fiscal year ended
December 31, 2016.
Name |
Fees Earned or Paid in Cash |
Stock Awards(1) |
Total |
Francine J.
Bovich |
$113,000 |
$135,000 |
$248,000 |
Kevin P. Brady |
$140,000 |
$135,000 |
$275,000 |
Jonathan D.
Green |
$154,000 |
$135,000 |
$289,000 |
Michael Haylon |
$115,000 |
$135,000 |
$250,000 |
E. Wayne
Nordberg |
$122,000 |
$135,000 |
$257,000 |
John H. Schaefer |
$122,000 |
$135,000 |
$257,000 |
Donnell A. Segalas |
$122,000 |
$135,000 |
$257,000 |
(1) |
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
our common stock on the date of grant. DSUs are vested at grant and accrue
dividend equivalents as additional DSUs or cash at the election of the
Director. |
The following table sets forth information
with respect to the aggregate outstanding option awards at December 31, 2016 of
each of our Independent Directors. All such option awards have vested. We no
longer grant options as part of our Director compensation program.
Name |
Outstanding Option Awards at
12/31/16 |
Francine J.
Bovich |
|
Kevin P. Brady |
43,750 |
Jonathan D.
Green |
91,250 |
Michael Haylon |
76,250 |
E. Wayne
Nordberg |
91,250 |
John H. Schaefer |
|
Donnell A. Segalas |
78,750 |
16 |
Annaly Capital Management Inc. 2017 Proxy
Statement |
Table of
Contents
Our Management
The following table sets forth certain
information with respect to our executive officers, all of whom are indirect
owners and/or employees of our Manager:
Name |
Age |
Title |
Kevin G. Keyes |
49 |
Chief Executive Officer, President and
Director |
Wellington J.
Denahan |
53 |
Chairman of the Board and Executive Chairman |
Glenn A. Votek |
58 |
Chief Financial Officer |
David L.
Finkelstein |
44 |
Chief Investment Officer |
Timothy P.
Coffey |
43 |
Chief Credit Officer |
Anthony C. Green |
42 |
Chief Legal Officer and
Secretary |
Biographical information on Mr. Keyes and
Ms. Denahan is provided above under the heading Election of Directors. Certain
biographical information for Messrs. Votek, Finkelstein, Coffey and Green is set
forth below.
Glenn A. Votek has served as Chief Financial Officer of Annaly since August
2013. Mr. Votek served as Chief Financial Officer of Fixed Income Discount
Advisory Company (FIDAC) from August 2013 until October 2015 and as Annalys
Chief Administrative Officer from May 2013 until August 2013. Mr. Votek joined
Annaly in May 2013 from CIT Group where he was an Executive Vice President and
Treasurer since 1999 and President of Consumer Finance since 2012. Prior to
that, Mr. Votek worked at AT&T and its finance subsidiary from 1986 until
1999 in various financial management roles. Mr. Votek has a B.S. in Finance and
Economics from the University of Arizona/Kean College and a M.B.A. in Finance
from Rutgers University.
David L. Finkelstein has served as Chief Investment Officer of Annaly since
November 2016. Mr. Finkelstein previously served as Annalys Chief Investment
Officer, Agency and RMBS beginning in February 2015 and as Annalys Head of
Agency Trading beginning in August 2013. Prior to joining Annaly, Mr.
Finkelstein served for four years as an Officer in the Markets Group of the
Federal Reserve Bank of New York where he was the primary strategist and policy
advisor for the MBS purchase program. Mr. Finkelstein has over 20 years of
experience in fixed income investment. Prior to the Federal Reserve Bank of New
York, Mr. Finkelstein held Agency MBS trading positions at Salomon Smith Barney,
Citigroup Inc. and Barclays PLC. Mr. Finkelstein received his B.A. from the
University of Washington and his M.B.A. from the University of Chicago, Booth
School of Business. Mr. Finkelstein also holds the Chartered Financial Analyst®
designation.
Timothy P. Coffey has served as Chief Credit Officer of Annaly since January
2016. Mr. Coffey served as Annalys Head of Middle Market Lending from 2010
until January 2016. Mr. Coffey has over 20 years of experience in leveraged
finance and has held a variety of origination, execution, structuring and
distribution positions. Prior to joining Annaly in 2010, Mr. Coffey served as
Managing Director and Head of Debt Capital Markets in the Leverage Finance Group
at Bank of Ireland. Prior to that, Mr. Coffey held positions at Scotia Capital,
the holding company of Saul Steinbergs Reliance Group Holdings, and SC Johnson
International. Mr. Coffey received his B.A. in Finance from Marquette
University.
Anthony C. Green has served as Chief Legal Officer and Secretary of Annaly
since March 2017. Mr. Green previously served as Annalys Deputy General Counsel
from 2009 until February 2017. Prior to joining Annaly, Mr. Green was a partner
in the Corporate, Securities, Mergers & Acquisitions Group at the law firm
K&L Gates LLP. Mr. Green has over 17 years of experience in corporate and
securities law. Mr. Green holds a B.A. from the University of Pennsylvania and a
J.D. and LL.M. from Cornell Law School.
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17 |
Table of
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Stock Purchases by Executive Officers
since 2011 |
Since 2011, our executive officers have
purchased over 2 million shares of our common stock (including open market
purchases, dividend reinvestments, and option exercises) with an aggregate
purchase price of $23.1 million as set forth in the table below.
Executive Officer |
Shares Purchased |
Purchase
Price(1) |
|
None of our NEOs has ever
sold shares of
our common stock |
Kevin G. Keyes |
606,908 |
$ |
6,895,000 |
|
Wellington J.
Denahan |
1,059,871 |
$ |
12,311,000 |
|
Glenn A. Votek |
61,266 |
$ |
640,000 |
|
David L.
Finkelstein |
200,000 |
$ |
2,122,000 |
|
Timothy P.
Coffey |
30,000 |
$ |
304,000 |
|
Anthony C. Green |
77,750 |
$ |
843,000 |
|
TOTAL |
2,035,794 |
$ |
23,115,000 |
|
(1) Rounded to the nearest
thousand.
18 |
Annaly
Capital Management Inc. 2017 Proxy
Statement |
Table of
Contents
Our Management Structure
Following our management
externalization transaction (the Externalization), which was approved by
approximately 83% of our stockholders on May 23, 2013, we became
externally managed by our Manager. Pursuant to the terms of the Management
Agreement, we pay our Manager a management fee and our Manager pays all of
the compensation to our management personnel (including our NEOs). The
Compensation Committee annually reviews the management fee and the
performance of our Manager, including the accomplishments discussed
beginning on page IV of the Proxy Summary. The Independent Directors then
consider the Compensation Committees recommendations when determining
whether to renew or amend the terms of the Management Agreement. Based on
the review and factors described in more detail below, the Independent
Directors have determined that the Management Agreement continues to be in
the best interests of the Company and our stockholders. For additional
information, see Certain Relationships and Related Party Transactions,
Compensation Paid by our Manager to our Named Executive Officers and
Compensation Discussion and Analysis.
|
|
Our Management Agreement compares
favorably to the management agreements of our externally-managed
peers |
Management Agreement
Terms |
We believe that the terms and conditions
of the Management Agreement compare favorably to the terms and conditions that
exist between our externally-managed mREIT peers and their respective managers.
In particular, as illustrated by the table below, when compared to the median
for the peer comparison, (i) the management fee paid to our Manager is lower as
a percentage of stockholders equity, (ii) the term of the Management Agreement
was of a shorter duration, and (iii) the Management Agreement has no termination
fee, which is expressed in the table below as a multiple of trailing average
annual management fees.
|
Mean |
Median |
Min |
Max |
|
Agency Residential
REITs |
|
|
|
|
|
Base management fee(1) |
1.13% |
1.13% |
1.05% |
1.20% |
1.05% |
Initial term in years |
6.0 |
6.0 |
2.0 |
10.0 |
2.0 |
Termination fee multiple(2) |
4.4x |
4.4x |
3.3x |
5.5x |
None |
Incentive fee |
None |
None |
None |
None |
None |
Commercial REITs |
|
|
|
|
|
Base management fee |
1.50% |
1.50% |
1.50% |
1.50% |
1.05% |
Initial term in years |
2.8 |
3.0 |
2.0 |
3.0 |
2.0 |
Termination fee multiple |
3.1x |
2.9x |
2.1x |
5.0x |
None |
Incentive fee(3) |
21% above 8% hurdle |
20% above 8% hurdle |
None |
25% above 8% hurdle |
None |
Non-Agency Residential / Hybrid REITs |
|
|
|
|
|
Base management fee |
1.50% |
1.50% |
1.50% |
1.50% |
1.05% |
Initial term in years |
2.5 |
3.0 |
1.0 |
3.0 |
2.0 |
Termination fee multiple(4) |
3.1x |
3.2x |
1.0x |
5.0x |
None |
Incentive fee(5) |
N/A |
N/A |
None |
25% above 10% hurdle |
None |
Source: Public filings as of year ended
December 31, 2016. All base management fees are calculated as a percentage of
stockholders equity and all termination fees are calculated as a multiple of
the average annual base management fee during the prior 24-month period, except
as otherwise specified below. Agency Residential REITs represent the Agency
mREIT Peers, with the exception of AGNC, CYS and CMO, which are
internally-managed companies; Commercial REITs represent the externally-managed
commercial mortgage REITs included in the BBREMTG Index as of December 31, 2016
with market capitalization above $200 million and includes Blackstone Mortgage
Trust, Inc. (BXMT), Ares Commercial Real Estate Corp. (ACRE), Resource
Capital Corp. (RSO), Apollo Commercial Real Estate Finance, Inc. (ARI), and
Starwood Property Trust, Inc. (STWD); Non-Agency Residential/Hybrid REITs
represents the externally-managed non-agency residential and hybrid mortgage
REITs included in
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19 |
Table of
Contents
the BBREMTG Index as of December 31,
2016 with market capitalization above $200 million and includes New Residential
Investment Corp. (NRZ), Western Asset Mortgage Capital Corp. (WMC), AG
Mortgage Investment Trust, Inc. (MITT), PennyMac Mortgage Investment Trust
(PMT), Invesco Mortgage Capital Inc. (IVR) and Two Harbors Investment Corp.
(TWO).
(1) |
For ARR, base
management fee is calculated as 1.5% of gross equity raised up to $1.0
billion plus 0.75% of gross equity raised in excess of $1.0
billion. |
(2) |
ARRs termination fee
is calculated as the greater of (a) the base management fee calculated
prior to the effective date of agreement termination for the remainder of
the term or (b) 3x the base management fee during the preceding full 12
months. |
(3) |
Of the five Commercial
REITs, four have incentive fees in addition to their base management fees.
STWD and RSO have incentive fees of 20% above an 8% hurdle. BXMT has a 20%
incentive fee above a 7% hurdle. RSO has a 25% incentive fee above an 8%
hurdle. For purposes of this table, the calculation of the mean includes
only the four Commercial REITs that have incentive fees. |
(4) |
NRZs termination fee
is calculated using the prior 12-month period. Pursuant to the terms of
its management agreement, PMTs termination fee is calculated as a
multiple of the base management fee and a performance incentive fee. For
purposes of this table, we have disregarded any impact from this
performance incentive fee on PMTs termination fee
multiple. |
(5) |
Of the six Non-Agency
Residential/Hybrid REITs, two 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 above
8%. |
Structure and Amount of the
Management Fee |
The Compensation Committee annually
reviews both the structure of the management fee as well as the amount of such
fee to determine whether they incentivize the management team to work towards
the Companys desired goals to the benefit of long-term stockholder interests.
The Compensation Committee has determined that the use of a management fee
formulated as a percentage of stockholders equity (as defined in our Management
Agreement) represents a responsible and prudent method of compensating the
management team. In particular, in the context of an mREIT that uses leverage as
a key component of its business strategy, the Compensation Committee believes
that providing for a contractually required payment structured as an incentive
fee may misalign the goals of the management team 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 27, aligns the
management team to the goals of the Company. We believe that focusing the
management fee on the preservation and growth of the Companys book value
incentivizes our Manager to achieve long-term performance that protects
our stockholders equity as realized losses decrease such equity and,
ultimately, the management fee.
Additionally, for our Manager to
earn a larger management fee, the stockholders equity of the Company
would need to increase. As a result, the growth of the stockholders
equity is an alignment between the interests of our stockholders and the
management team. Further, this alignment is stronger in the REIT industry
than in other businesses. REIT regulations require us to pay at least 90%
of our earnings to stockholders as
dividends. As a result, unlike most companies, we cannot grow our business
and our book value by reinvesting our earnings. This places a unique
market discipline on us. |
|
The Compensation Committee
annually reviews the structure and amount of the management fee
to determine whether it appropriately incentivizes the management
team |
We also believe that our management fee
structure is more favorable to our stockholders than if it were 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.
Clawback for the Management
Fee |
Pursuant to the 2016 amendment and
restatement of the Management Agreement, the Company is entitled to receive
reimbursement from our 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 our Manager.
Continued Cost Savings Related to the
Externalization |
We believe that the Externalization has
materially reduced the Companys compensation-related costs. When comparing the
management fees we paid for the fiscal years ended December 31, 2013, 2014, 2015
and 2016 against the estimated compensation costs (including tax costs) we would
have paid for the same period if those costs remained what they were in 2012, we
estimate that the Externalization has resulted in total compensation savings
(calculated in accordance with GAAP) of approximately $138 million.
20 |
Annaly
Capital Management Inc. 2017 Proxy
Statement |
Table of
Contents
As illustrated by the table below, the
management fee for each of 2013(1), 2014, 2015 and 2016 is
significantly lower than our 2012 compensation expenses (which is represented by
the dashed blue line):
Management Fee / Compensation Expense
|
(1) |
Although our Manager commenced
management of Annaly on July 1, 2013, our 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. We calculated a pro forma management fee, which was the
management fee as if we were managed by our Manager from January 1, 2013
until July 1, 2013, and the actual amount of cash compensation paid to all
of our employees from January 1, 2013 until July 1, 2013 reduced the
amount of the management fee owed to our Manager. |
(2) |
Assumes compensation costs for
each of 2013, 2014, 2015 and 2016 would have remained what they were in
2012 (the last full year prior to the
Externalization). |
Annual Review of Manager Performance
and Management Fee Considerations |
The Compensation Committee annually
reviews our performance and management fee against both our historical
results and our mREIT peers, based on a number of metrics, including those
discussed above in the Proxy Summary and the expense ratios discussed
below. |
|
We annually review both
our performance and the terms and conditions of our Management
Agreement |
Peer Comparison of Operating Expenses as a
Percentage of Average Assets and Average Stockholders
Equity |
The Compensation Committee reviews our
total operating expenses (including the management fee), as a percentage of both
our average assets and our average stockholders equity. The Compensation
Committee believes these ratios, which allow us to compare the performance of
our Manager to both our internally- and externally-managed mREIT peers, measure
the extent to which we operate in an economically efficient manner.
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21 |
Table of Contents
|
|
|
2012 |
2013 |
2014 |
2015 |
2016 |
|
Average |
Annaly |
|
0.19% |
0.22% |
0.24% |
0.25% |
0.25% |
|
0.23% |
Internally-Managed
Peers |
0.54% |
0.91% |
0.87% |
0.73% |
0.44% |
|
0.70% |
Externally-Managed
Peers |
0.60% |
0.66% |
0.75% |
0.79% |
0.66% |
|
0.69% |
|
|
|
2012 |
2013 |
2014 |
2015 |
2016 |
|
Average |
Annaly |
|
1.45% |
1.66% |
1.61% |
1.58% |
1.65%(1) |
|
1.59% |
Internally-Managed
Peers |
2.72% |
3.83% |
4.13% |
3.84% |
2.48% |
|
3.40% |
Externally-Managed
Peers |
2.20% |
3.06% |
3.57% |
3.75% |
4.06% |
|
3.33% |
Source: Company Filings, SNL and
Bloomberg. Averages are market weighted based on market capitalization as of
Dec. 31st of each respective year.
Note: Internally-Managed Peers and
Externally-Managed Peers represent the respective internally- and
externally-managed members of the BBREMTG Index with market capitalization above
$200 million as of December 31st of each respective year. The average for each
excludes Annaly and companies during years in which they became public or first
listed. Operating Expense is defined as: (i) for Internally-Managed Peers, the
sum of compensation & benefits, general & administrative expenses and
other operating expenses, and (ii) for Externally-Managed Peers, the sum of net
management fees, compensation & benefits (if any), general &
administrative expenses and other operating expenses.
(1) |
Excludes costs of $49
million related to the Companys acquisition of
Hatteras. |
In its review of these operating expense
ratios, the Compensation Committee noted that the Company has outperformed both
our internally- and externally-managed mREIT peers over the last five fiscal
years. In this regard, the Compensation Committee has viewed the Companys
performance as an indicator that, among other things, our Manager has managed
the Company in an efficient manner with appropriately scaled operating costs
(including the management fee).
22 |
Annaly Capital Management Inc. 2017 Proxy
Statement |
Table of Contents
Compensation Paid by our Manager to our
Named Executive Officers
As discussed throughout this proxy
statement, we pay our Manager a management fee, the purpose of which is not to
provide compensation to our NEOs, but rather to compensate our Manager for the
services it provides for the day-to-day management of Annaly. The proceeds of
the management fee are used by our Manager in part to pay compensation to our
Managers personnel, including our NEOs other than Mr. Keyes (who does not
receive any compensation for serving as our Chief Executive Officer, but has an
interest in the management fee as an indirect equityholder of our Manager);
however, the Company does not allocate any specific portion of the management
fee we pay to the compensation of our NEOs and we do not reimburse our Manager
for the cost of such compensation. Our Manager makes all decisions relating to
compensation it pays to our NEOs based on the factors, including individual and
Company performance, it determines to be appropriate and subject to any
employment agreements entered into between our Manager and individual
NEOs.
Given that we do not provide any
compensation to our NEOs, we have not previously provided information related to
our Managers executive compensation program for our NEOs and such information
has not been previously provided to us. However, at the request of our
Independent Directors and in response to our conversations with stockholders
following the 2016 Say-on-Pay vote and our commitment to continuous improvement
and transparency, our Manager has furnished the following information to the
Company about its executive compensation program:
> |
With the exception of Mr. Keyes (who
does not receive any direct or indirect compensation from our Manager or
the Company for his services as our Chief Executive Officer, but does have
an interest in the fees paid to our Manager as an equityholder of the
parent of our Manager), each of our other NEOs receives a base salary and
is eligible for a performance-based cash incentive bonus as further
described under Components of Our NEOs Compensation
below; |
> |
A significant majority of the
NEOs target compensation is performance-based and
at-risk; |
> |
Payout of performance-based
bonuses is based on achievement of both rigorous Company and investment
group performance metrics, along with individual performance objectives;
and |
> |
Our Manager considers a list of
specified peer companies (set forth below under Company Market Data),
together with advice from compensation consultants, including F. W. Cook,
when it develops appropriate compensation packages for our NEOs.
|
In addition, our Independent Directors
have also requested that our Manager establish a framework for isolating the
portion of the management fee allocable to 2017 NEO compensation. While the
parameters of this framework are currently under review, our Independent
Directors have asked our Manager to consider the guidance issued by proxy
advisory firms regarding the level of compensation disclosure sufficient to
facilitate an assessment of an externally-managed issuers pay programs.
Specifically, the Independent Directors
have requested that our Manager establish a compensation framework that will
enable it to provide the Company with the following information for disclosure
in our 2018 proxy statement:
> |
The portion
of the management fee that is allocated to NEO compensation paid by our
Manager; |
> |
Of this
compensation, the breakdown of fixed vs. variable/incentive pay;
and |
> |
The metrics
our Manager uses to measure performance to determine our NEOs
variable/incentive pay. |
For additional information on our
stockholder outreach efforts following the 2016 Say-on-Pay vote, please see
Compensation Discussion & Analysis Consideration of Say-on-Pay Voting Results below.
www.annalyannualmeeting.com |
23 |
Table of Contents
Compensation
Paid by our Manager to our Named Executive
Officers |
Components of our NEOs
Compensation |
Our Managers executive compensation
program includes both a base salary and a performance-based cash incentive
bonus. Although our Compensation Committee has discretion to grant equity awards
of Company common stock to our NEOs (which it has not exercised since our
Externalization), the management fee we pay to our Manager is paid entirely in
cash and therefore our Manager has no independent ability to provide awards of
Company stock as part of our NEOs compensation. To address this limitation on
our Managers executive compensation program, our Manager has structured our
NEOs performance-based cash incentive bonuses with a mix of both rigorous
Company performance metrics and individual performance objectives. The table
below describes the objectives supported by each of our Managers primary
compensation elements, along with an overview of the key design features of each
element.
Compensation
Element |
What It
Does |
Key Measures |
Base
Salary |
>Provides a
level of fixed pay appropriate to an executives 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 Cash Incentive
Bonus |
>Provides a
competitive annual cash incentive opportunity
>Links
executives interests to those of our stockholders |
>Based on
achievement of both rigorous Company performance metrics and individual
performance objectives |
Our Manager considers compensation data
and practices of a group of peer companies (the Peer Group), as well as
current market trends and practices generally, in developing appropriate
compensation packages for our NEOs.
In determining the Peer Group, our Manager
considers both industry and company-specific dynamics to identify the peers with
which we compete for assets, stockholders and talent. As a result, our Manager
focuses on peers within the mREIT industry, as well as asset management
companies that manage mREITs, along with other asset managers and financial
companies within relevant market capitalization and/or revenue bands. Our
Manager annually reviews the Peer Group and may update its composition to
better reflect the Companys competitive
landscape or, if necessary, to account for corporate changes, including
acquisitions and dispositions.
Our Manager considers both
industry and company-specific dynamics to identify the peers with
which we compete for assets, stockholders and
talent |
Compensation
Peer Group |
> |
Affiliated Managers Group, Inc. |
> |
Janus Capital Group
Inc. |
> |
AG Mortgage Investment Trust, Inc. |
> |
KKR & Co.
L.P. |
> |
AGNC Investment Corp. |
> |
Leucadia National
Corporation |
> |
American Capital, Ltd. |
> |
MFA Financial,
Inc. |
> |
Ameriprise Financial, Inc. |
> |
New Residential Investment
Corp. |
> |
Anworth Mortgage Asset Corporation |
> |
New York Mortgage Trust,
Inc. |
> |
Apollo Commercial Real Estate Finance, Inc. |
> |
Newcastle Investment
Corp. |
> |
Apollo Global Management LLC |
> |
Northern Trust
Corporation |
> |
Ares Capital Corporation |
> |
NorthStar Asset Management
Group Inc. |
> |
Ares Management LP |
> |
PennyMac Mortgage
Investment Trust |
> |
ARMOUR Residential REIT, Inc. |
> |
Redwood Trust,
Inc. |
> |
Blackstone Mortgage Trust, Inc. |
> |
SEI Investments
Company |
> |
Colony Capital, Inc. |
> |
Starwood Property Trust,
Inc. |
> |
Eaton Vance Corp. |
> |
T. Rowe Price Group,
Inc. |
> |
Fortress Investment Group LLC |
> |
The Blackstone Group
L.P. |
> |
Franklin Resources, Inc. |
> |
The Carlyle Group
L.P. |
> |
Invesco Ltd. |
> |
Two Harbors Investment
Corp. |
> |
Invesco Mortgage Capital Inc. |
> |
Waddell & Reed
Financial, Inc. |
24 |
Annaly
Capital Management Inc. 2017 Proxy
Statement |
Table of Contents
Executive Compensation
|
|
|
|
|
Advisory Approval of Our
Executive Compensation
Our Board is committed to corporate
governance best practices and recognizes the significant interest of
stockholders in executive compensation matters. We are providing this
advisory vote pursuant to Section 14A of the Exchange Act.
As described in detail under the
headings Our Management Structure and Compensation Paid by our Manager to our Named Executive Officers above and Compensation Discussion and Analysis below, we are externally-managed by our Manager pursuant to the
Management Agreement between our Manager and us. Our Manager is
responsible for paying all compensation expense associated with managing
us and our subsidiaries. We pay our Manager a management fee, and our
Manager uses the proceeds from the management fee to pay compensation to
our Managers personnel, including our NEOs other than Mr. Keyes (who does
not receive any compensation for serving as our Chief Executive Officer,
but has an interest in the management fee as an indirect equityholder of
our Manager); however, the Company does not allocate any specific portion
of the management fee we pay to the compensation of our NEOs and we do not
reimburse our Manager for the cost of such compensation. Our Manager makes
all decisions relating to the compensation of our NEOs based on the
factors our Manager determines to be appropriate, including both
individual and Company performance, and subject to the terms of any
employment agreement entered into between our Manager and an individual
NEO. Our Compensation Committee has no authority to influence or determine
how our Manager compensates our NEOs. Our Manager does not consult with
the Compensation Committee prior to making compensation determinations for
our NEOs, including how much such officers are paid.
Our NEOs are eligible to receive
equity awards pursuant to our equity incentive plan, which is administered
by the Compensation Committee. No equity awards were made to any of our
NEOs in 2016. In 2016, we did not pay any compensation to our
NEOs.
The Board recommends that the
stockholders vote in favor of the following resolution:
RESOLVED, that the compensation
paid to the Companys named executive officers, as disclosed pursuant to
Item 402 of Regulation S-K, including the Compensation Discussion and
Analysis, compensation tables and narrative discussion, is hereby
APPROVED.
While this vote is advisory and not
binding on us, our Board and Compensation Committee value the views of our
stockholders and will consider the voting results when making compensation
decisions regarding our equity incentive plans.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR THE APPROVAL OF THIS RESOLUTION. |
|
|
|
|
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25 |
Table of Contents
Our NEOs for 2016 are:
Name |
Title |
Kevin G. Keyes |
Chief Executive Officer (CEO), President and
Director |
Glenn A. Votek |
Chief Financial Officer (CFO) |
David L.
Finkelstein |
Chief Investment Officer (CIO) |
Timothy P.
Coffey |
Chief Credit Officer (CCO) |
Anthony C. Green |
Chief Legal Officer (CLO)
and Secretary |
Compensation Discussion and
Analysis |
As discussed above, our Manager pays all
of the compensation, including benefits, to its employees (including our NEOs
other than Mr. Keyes). Although certain personnel (but none of our NEOs) are
employed by our subsidiaries for regulatory or corporate efficiency reasons, all
compensation and benefits paid to such personnel by our subsidiaries reduce, on
a dollar-for-dollar basis, the management fee we pay to our Manager. The
proceeds of the management fee are used in part to pay compensation to our
Managers personnel, including our NEOs other than Mr. Keyes (who does not
receive any compensation for serving as our Chief Executive Officer, but has an
interest in the management fee as an indirect equityholder of our Manager);
however, the Company does not allocate any specific portion of the management
fee we pay to the compensation of our NEOS and we do not reimburse our Manager
for the cost of such compensation.
Accordingly, we did not pay any cash
compensation to our NEOs, nor did we grant them any plan-based awards, for 2016.
We do not provide our NEOs with pension benefits, perquisites or other personal
benefits. The Company is not party to any employment agreements entered into
between our Manager and individual NEOs, and we do not have any arrangements to
pay such individuals any cash severance upon their termination or a change in
control of the Company. As a result, no compensation is includable in the
Summary Compensation Table for the NEOs.
Pursuant to the terms of the Management
Agreement, we pay our Manager a monthly management fee equal to 1/12th of 1.05%
of our stockholders equity, as defined in the Management Agreement, for its
management services, which was approximately $152 million during the year ended
December 31, 2016.
Our Manager, which is a private company
that is not subject to the disclosure requirements of the SEC, has sole
discretion to determine the compensation it pays to its employees, including our
NEOs. Under the terms of the management agreement, our Compensation Committee
has no decision-making role related to and is not entitled to approve our
Managers compensation decisions. Our Manager does not consult with the
Compensation Committee prior to making any compensation determinations for our
NEOs. Rather, as discussed above, the Compensation Committee is responsible for
annually reviewing the performance of, and fees paid to, our Manager under the
Management Agreement and for making recommendations to the independent members
of the Board. For additional information, please see Certain Relationships and Related Party Transactions, Our Management Structure and Compensation Paid by our Manager to our Named Executive Officers above.
As noted above, the Company has no
specific compensation arrangements for our Managers employees who are furnished
pursuant to the Management Agreement to serve as the Companys NEOs, and our
Manager makes all compensation determinations for its employees without any
direction by the Board and without reference to any specific policies or
programs under the oversight of the Board. Our Manager compensates its employees
(including our NEOs) for a variety of services performed for the benefit of our
Manager. Thus the compensation paid by our Manager to its employees who are
serving as the Companys NEOs is not considered to be part of the Companys
executive compensation program.
26 |
Annaly
Capital Management Inc. 2017 Proxy
Statement |
Table of Contents
Consideration of Say-on-Pay Voting
Results |
At our 2016 Annual Meeting, 53% of the
votes cast supported our advisory resolution on the fiscal year 2015
compensation of our NEOs (commonly known as a Say-on-Pay vote). While the
Say-on-Pay vote received majority support, the Compensation Committee was disappointed with the percentage of votes cast
against the proposal. The Company promptly embarked on a multi-pronged effort to
gather feedback from key stakeholders regarding our compensation and external
management structures. These efforts included:
We reached out to
investors representing 65% of shares held by institutional
investors |
> |
Outreach to investors representing
65% of shares held by institutional stockholders, including 45 of our 50
largest stockholders |
> |
Internal discussions with our
Managers employees |
> |
Analysis of market practices at peer
companies |
> |
Advice from compensation consultants
|
> |
Attendance at investor conferences
|
> |
Discussions with proxy advisory
services and corporate governance research
firms |
During the course of this review, we
identified that certain stockholders and other key stakeholders would like the
Company to provide expanded disclosure on our Managers executive compensation
program in order to enable them to fully evaluate such program, including the
degree of alignment between executive pay and Company performance. In order to
address these concerns, our Manager has provided the Company with certain
qualitative information about its executive compensation program for this proxy
statement. In addition, our Independent Directors specifically requested that
our Manager establish a framework for isolating the portion of the management
fee allocable to 2017 NEO compensation so that the Company can provide related
quantitative information in our 2018 proxy statement. For additional details,
please see Compensation Paid by our Manager to our Named Executive Officers
Changes for 2017 above.
We 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.
Executive Compensation
Policies |
Stock Ownership Guidelines for
Certain Employees |
To align the interests of the employees of
our Manager with those of our stockholders, the Board instituted expanded stock
ownership guidelines for certain employees of our Manager, including our
executive officers, in 2016. These guidelines provide for the following
ownership levels:
Position |
Number of Individuals |
Required
Ownership of Annaly Stock |
Timeframe to Meet
Guideline |
Chief Executive Officer |
1 |
$10,000,000 |
April 12, 2019 |
Executive Chairman |
1 |
1,673,134 shares |
April 12, 2016 |
Other Operating Committee Members |
7 |
30%
of Annual Total Compensation |
5 years |
Managing Directors |
20 |
20%
of Annual Total Compensation |
5 years |
Director-Level Employees |
33 |
10%
of Annual Total Compensation |
5 years |
Total |
62 |
|
|
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27 |
Table of Contents
These stock ownership guidelines apply to
more than 40% of our Managers employees. As of March 31, 2017, all such
individuals either met or, within the applicable period, are expected to meet
the stock ownership guidelines.
Under a policy adopted by the Compensation
Committee in 2016, our Managers employees (including our executive officers) are required to hold for a period of
four years the net after-tax shares of Company stock they receive through stock
option exercises or vesting of equity incentive awards.
In 2016, we adopted expansive stock
ownership guidelines and a four-year stock holding period
requirement |
Prohibition on
Hedging Company
Securities |
We have a policy prohibiting our Managers
employees (including our executive officers) from engaging in any hedging
transactions with respect to our equity securities held by them, which includes
the purchase of any financial instrument (including forward contracts and zero
cost collars) designed to hedge or offset any decrease in the market value of
our equity securities.
Prohibition on
Pledging Company
Securities |
In 2016, we adopted a policy prohibiting
our Managers employees (including our executive officers) from holding Company
securities in a margin account or pledging Company securities as collateral for
a loan.
Risks Related
to Compensation Policies and
Practices |
As discussed above in Our Management Structure, our Compensation Committee is not entitled to approve compensation
decisions made by our Manager and our 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 our Manager uses the
management fee to cover its operating expenses, including employee compensation.
However, in connection with the Compensation Committees administration of the
Companys equity incentive plan, the Committee conducts an annual risk
assessment of the Companys compensation policies and practices applicable to
such plan. In 2016, the Compensation Committee determined that these
compensation policies and practices do not create risks that are reasonably
likely to have a material adverse effect on us.
Executive Compensation
Tables |
Summary Compensation
Table |
We did not pay any compensation to our
NEOs with respect to the years ended December 31, 2016, December 31, 2015 or
December 31, 2014.
Grants of Plan-Based
Awards |
We did not grant our NEOs any plan based
awards in 2016.
Outstanding
Equity Awards at Fiscal
Year-End |
None of our NEOs had outstanding equity
awards at December 31, 2016.
We did not pay any cash or equity
compensation to our NEOs for 2016. We do not provide them with
pension benefits, perquisites or other personal
benefits. |
28 |
Annaly
Capital Management Inc. 2017 Proxy
Statement |
Table of Contents
Options
Exercised and Stock
Vested |
No options were exercised and no stock
vested for our NEOs during 2016.
Pension
Benefits and Nonqualified Deferred
Compensation |
We do not provide our NEOs any benefits
pursuant to defined benefit plans and nonqualified deferred compensation
plans.
Potential
Payments upon Termination or Change in
Control |
We are not responsible for any amounts
payable or any additional vesting of outstanding equity awards for any
termination of service by any of our NEOs. No amounts would have been payable by
us to any of our NEOs upon a change in control as of December 31,
2016.
Compensation Committee
Report |
The Compensation Committee of the Company
has reviewed and discussed the Compensation Discussion and Analysis required by
Item 402(b) of Regulation S-K with management and, based on such review and
discussions, the Compensation Committee recommended to the Board that the
Compensation Discussion and Analysis be included in this proxy
statement.
Donnell A. Segalas (Chair) Jonathan D. Green E. Wayne
Nordberg John H. Schaefer
Compensation Committee Interlocks and
Insider
Participation |
Our Compensation Committee is comprised
solely of the following Independent Directors: Messrs. Segalas (Chair), Green,
Nordberg and Schaefer. None of them is serving or has served as an officer or
employee of us or any affiliate or has any other business relationship or
affiliation with us, except his service as a Director, and there are no other
Compensation Committee interlocks that are required to be reported under the
rules and regulations of the Exchange Act.
|
|
|
|
|
Advisory Vote on the Frequency of
Future Advisory Votes to Approve our Executive Compensation
As required pursuant to Section 14A
of the Exchange Act, we are seeking a vote from stockholders as to how
frequently (a Say-on-Frequency vote) we should hold Say-on-Pay votes. By
voting on this proposal, stockholders may indicate whether they would
prefer that we conduct future Say-on-Pay votes once every one, two or
three years. Stockholders may also abstain from casting a vote on this
proposal.
The Board has determined that
conducting a Say-on-Pay vote every year is the most appropriate
alternative for the Company. In reaching this recommendation, the Board
considered that holding an annual Say-on-Pay vote is consistent with the
preference expressed by our stockholders in response to our prior
Say-on-Frequency vote in 2011, where a majority of the votes cast voted to
hold an annual Say-on-Pay vote. In addition, the Board recognizes that
holding a Say-on-Pay vote on an annual basis is a corporate governance
best practice and is consistent with the Companys policy of facilitating
communications of stockholders with the Board and its various committees,
including the Compensation Committee.
Although the Board intends to
carefully consider the voting results of this proposal, the vote is
advisory and not binding on the Company or the Board. The Board may decide
that it is in the best interests of stockholders and the Company to hold
an advisory vote to approve our executive compensation more or less
frequently than the frequency preferred by stockholders.
THE BOARD OF DIRECTORS RECOMMENDS
THAT YOU SELECT EVERY ONE YEAR FOR THE FREQUENCY OF FUTURE ADVISORY
VOTES TO APPROVE OUR EXECUTIVE COMPENSATION. |
|
|
|
|
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29 |
Table of Contents
Audit Committee Matters
|
|
|
|
|
Ratification of Appointment of
Independent Registered Public Accounting Firm
The Audit Committee is responsible
for the appointment, compensation, retention, and oversight of the
Companys independent registered public accounting firm.
Our Audit Committee has appointed
Ernst & Young LLP (Ernst & Young or E&Y) to serve as our
independent registered public accounting firm for the fiscal year ending
December 31, 2017, and stockholders are asked to ratify the selection at
the Annual Meeting as a matter of good corporate governance. Ernst &
Young has served as our independent registered public accounting firm
since 2012. In appointing Ernst & Young, the Audit Committee
considered a number of factors, including Ernst & Youngs
independence, objectivity, level of service, industry knowledge, technical
expertise, and tenure as our independent auditor. We expect that
representatives of Ernst & Young will be present at the Annual
Meeting, will have the opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions. If the
appointment of Ernst & Young is not ratified, our Audit Committee will
reconsider the appointment.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE FOR THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR
2017. |
|
|
|
|
Report of the Audit
Committee |
The Audit Committee has reviewed and
discussed our audited financial statements with management and with Ernst &
Young, our independent auditors for 2016.
The Audit Committee has discussed with
Ernst & Young the matters required to be discussed by Statement on Auditing
Standards No. 61, as amended.
The Audit Committee has received from
Ernst & Young the written statements required by Public Company Accounting
Oversight Board (PCAOB) Rule No. 3526, Communications with Audit Committees
Concerning Independence, and has discussed Ernst & Youngs independence
with Ernst & Young.
The Audit Committee is responsible
for the appointment, compensation, retention and oversight
of our independent
auditors |
In reliance on these reviews and
discussions, and the report of the independent registered public accounting
firm, the Audit Committee has recommended to our Board, and our Board has
approved, that the audited financial statements be included in our Annual Report
on Form 10-K for the year ended December 31, 2016 for filing with the
SEC.
The foregoing report has been furnished by
the Audit Committee:
Kevin P. Brady
(Chair) Francine J. Bovich
Michael Haylon John H. Schaefer
30 |
Annaly
Capital Management Inc. 2017 Proxy
Statement |
Table of Contents
Relationship with Independent Registered
Public Accounting
Firm |
The aggregate fees billed for 2016 and
2015 by E&Y for each of the following categories of services are set forth
below:
Service Category |
2016 |
2015 |
Audit |
$2,416,392 |
$2,144,350 |
Audit-Related |
30,000 |
127,500 |
Tax |
239,900 |
223,310 |
All Other |
|
|
Total |
$2,685,292 |
$2,495,160 |
(1) For
2015, $15,000 that was included in Tax fees in our 2016 proxy statement
has been reclassified to Audit fees. |
Audit fees primarily relate to integrated
audits of our annual consolidated financial statements and internal control over
financial reporting under Sarbanes-Oxley Section 404, reviews of our quarterly
consolidated financial statements, audits of our subsidiaries financial
statements and comfort letters and consents related to SEC registration
statements.
Audit-Related fees are primarily for
assurance and related services that are traditionally performed by the
independent registered public accounting firm and include due diligence and
accounting consultations.
Tax fees are primarily for preparation of
tax returns and compliance services and tax consultations.
All Other fees are for those services not
described in one of the other categories.
The Audit Committee has also adopted
policies and procedures for pre-approving all non-audit work performed by our
independent registered public accounting firm. The Audit Committee retained
E&Y to provide certain non-audit services in 2016, all of which were
pre-approved by the Audit Committee. Specifically, the Audit Committee
pre-approved the use of E&Y for the following categories of non-audit
services:
> |
accounting
consultations on matters addressed during the audit or interim
reviews |
> |
agreed upon
procedures in connection with financing arrangements of certain Company
subsidiaries |
> |
tax
compliance and consultations |
In addition to these non-audit services,
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.
We understand the need for E&Y to
maintain objectivity and independence as the auditor of our financial statements
and our internal control over financial reporting. In accordance with SEC rules,
the Audit Committee requires the lead E&Y partner assigned to our audit to
be rotated at least every five years, and the Audit Committee and its chair is
involved in selecting each new lead audit partner. Our Audit Committee approved
the hiring of E&Y to provide all of the services detailed above prior to
such independent registered public accounting firms 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 |
www.annalyannualmeeting.com |
31 |
Table of Contents
Stock Ownership Information
Security Ownership of
Certain Beneficial Owners and
Management |
The following table sets forth certain
information as of March 28, 2017 relating to the beneficial ownership of our
common stock by (i) each NEO, (ii) each Director, (iii) all of our executive
officers and Directors as a group, and (iv) all persons that we know
beneficially own more than 5% of our outstanding common stock. Knowledge of the
beneficial ownership of our common stock is drawn from statements filed with the
SEC pursuant to Section 13(d) or 13(g) of the Exchange Act.
Beneficial
Owner(1) |
Amount and Nature of Beneficial
Ownership(2) |
Percent
of Class(3) |
Kevin
G. Keyes |
656,908 |
* |
Wellington J. Denahan |
2,223,134 |
* |
Glenn
A. Votek |
61,266 |
* |
David
L. Finkelstein |
200,000 |
* |
Timothy P. Coffey |
38,000 |
* |
Anthony C. Green |
77,750 |
* |
Kevin
P. Brady(4) |
244,704 |
* |
Jonathan D. Green |
197,074 |
* |
Michael Haylon |
136,324 |
* |
Donnell A. Segalas |
209,954 |
* |
E.
Wayne Nordberg(5) |
213,574 |
* |
John
H. Schaefer |
94,155 |
* |
Francine J. Bovich |
45,692 |
* |
All
executive officers and Directors as a group (13 people) |
4,398,535 |
* |
BlackRock, Inc.(6) |
91,946,636 |
9.0% |
The
Vanguard Group, Inc.(7) |
78,782,459 |
7.7% |
* |
|
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 our
knowledge, each stockholder listed has sole voting and investment power
with respect to the shares beneficially owned by the
stockholder. |
(2) |
|
For purposes of
this table, beneficial ownership is determined in accordance with Rule
13d-3 under the Exchange Act, pursuant to which a person or group of
persons is deemed to have beneficial ownership of any shares of common
stock that such person, or such group of persons, has the right to acquire
within 60 days of the date of determination. In light of the nature of
vested options, we have 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: Wellington J. Denahan 550,000
shares; Kevin P. Brady 43,750 shares; Jonathan D. Green 91,250 shares;
Michael Haylon 76,250 shares; Donnell A. Segalas 78,750 shares; E. Wayne
Nordberg 91,250 shares. The DSUs included in the table above are as
follows: Kevin P. Brady 55,054 DSUs; Jonathan D. Green 60,074 DSUs;
Michael Haylon 60,074 DSUs; Donnell A. Segalas 55,054 DSUs; E. Wayne
Nordberg 60,074 DSUs; John H. Schaefer 28,112 DSUs; and Francine J. Bovich
45,692 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, 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. Bradys wife, (iii) 1,500 shares owned by Mr. Bradys
daughter, and (iv) 9,000 shares owned by Mr. Bradys mother. Mr. Brady
disclaims beneficial ownership of these 101,750
shares. |
(5) |
|
Includes: (i)
10,000 shares owned by the Olivia Nordberg Trust and (ii) 9,000 shares
owned by Mr. Nordbergs spouse. |
(6) |
|
BlackRock, Inc., 55
East 52nd Street, New York, NY 10055, as a parent holding company or
control person of certain named funds (BlackRock), filed a Schedule
13G/A on January 19, 2017 reporting, as of December 31, 2016, beneficially
owning 91,946,636 shares of common stock with the sole power to vote or to
direct the vote of 83,299,090 shares of common stock, the shared power to
vote or to direct the vote of zero shares of common stock, the sole power
to dispose or to direct the disposition of 91,946,636 shares of common
stock and the shared power to dispose or to direct the disposition of zero
shares of common stock. This information is based solely on information
contained in the Schedule 13G/A filed by
Blackrock. |
(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 9, 2017 reporting, as of December 31, 2016, beneficially
owning 78,782,459 shares of common stock with the sole power to vote or to
direct the vote of 839,393 shares of common stock, the shared power to
vote or to direct the vote of 440,856 shares of common stock, the sole
power to dispose or to direct the disposition of 77,539,383 shares of
common stock and the shared power to dispose or to direct the disposition
of 1,243,076 shares of common stock. This information is based solely on
information contained in the Schedule 13G/A filed by
Vanguard. |
32 |
Annaly
Capital Management Inc. 2017 Proxy
Statement |
Table of Contents
Stock
Ownership Information |
Section 16(a) Beneficial Ownership Reporting
Compliance |
We believe that based solely on our review
of the reports filed during the fiscal year ended December 31, 2016 and on the
written representations of those filing reports, all filing requirements under
Section 16(a) of the Exchange Act, as amended, applicable to our executive
officers, Directors and beneficial owners of more than ten percent of our common
stock were complied with on a timely basis.
Other Information
On written request, we will provide
without charge to each record or beneficial holder of our common stock as of
March 28, 2017 (the Record Date) a copy of our annual report on Form 10-K for
the year ended December 31, 2016, as filed with the SEC. You should address your
request to Investor Relations, Annaly Capital Management, Inc., 1211 Avenue of
the Americas, New York, NY 10036 or email your request to us at
investor@annaly.com.
You may also access such report on our
website, www.annaly.com, under Investors - SEC Filings.
Any stockholder intending to present a
proposal at our 2018 annual meeting of stockholders and have the proposal
included in the proxy statement for such meeting must, in addition to complying
with the applicable laws and regulations governing submissions of such
proposals, submit the proposal in writing to us no later than December 12,
2017.
Pursuant to our Amended and Restated
Bylaws (Bylaws), any stockholder intending to nominate a Director or present a
proposal at an annual meeting of our stockholders, that is not intended to be
included in the proxy statement for such annual meeting, must notify us in
writing not less than 120 days nor more than 150 days prior to the first
anniversary of the date of the proxy statement for the preceding years annual
meeting. Accordingly, any stockholder who intends to submit such a nomination or
such a proposal at our 2018 annual meeting of stockholders must notify us in
writing of such proposal by December 12, 2017, but in no event earlier than
November 12, 2017.
Any such nomination or proposal should be
sent to 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 our Bylaws.
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.
www.annalyannualmeeting.com |
33 |
Table of Contents
Questions and Answers about the
Annual Meeting |
Q: |
When and where is the Annual
Meeting? |
|
A: |
The Annual Meeting will be held
on Thursday, May 25, 2017 at 9:00 a.m. (Eastern Time) at the Warwick
Hotel, 65 West 54th Street, New York, NY 10019. |
|
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 28, 2017) are
entitled to vote at the Annual Meeting. |
|
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 are present,
in person or by proxy. Since there were 1,018,971,441 outstanding shares
of common stock, each entitled to one vote per share, as of the Record
Date, we will need at least 509,485,721 votes present in person or by
proxy at the Annual Meeting for a quorum to exist. If a quorum is not
present at the Annual Meeting, we expect that the Annual Meeting will be
adjourned to solicit additional proxies. |
|
Q: |
What are the voting
requirements that apply to the proposals discussed in this proxy
statement? |
|
A: |
|
Majority means (a) with regard to an
uncontested election of Directors, the affirmative vote of a majority of all the
votes cast on the election of each Director; provided, however, that in a
contested election of Directors where the number of nominees exceeds the number
of Directors to be elected, the Directors shall be elected by a plurality of the
votes cast; and (b) with regard to the advisory approval of our executive
compensation and the ratification of the appointment of Ernst & Young, a
majority of the votes cast at the Annual Meeting.
Plurality means, with regard to the
advisory vote on the frequency of future advisory votes to approve our executive
compensation, the option (every one, two or three years) receiving the greatest
number of for votes will be considered the frequency recommended by
stockholders.
Discretionary voting occurs when a bank,
broker, or other holder of record does not receive voting instructions from the
beneficial owner and votes those shares in its discretion on any proposal as to
which the rules of the NYSE permit such bank, broker, or other holder of record
to vote. When banks, brokers, and other holders of record are not permitted
under the NYSE rules to vote the beneficial owners shares on a proposal, and
there is at least one other proposal on which discretionary voting is allowed,
the affected shares are referred to as broker non-votes.
Q: |
What is the effect of
abstentions and broker non-votes? |
|
A: |
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. |
|
|
Abstentions and broker non-votes,
if any, will have no effect on any of the proposals submitted at the
Annual Meeting. |
34 |
Annaly
Capital Management Inc. 2017 Proxy
Statement |
Table of Contents
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) |
Proposal No. 1: FOR the election
of Directors; |
|
|
(2) |
Proposal No. 2: FOR the approval,
on a non-binding basis, of our executive compensation; |
|
|
(3) |
Proposal No. 3: For EVERY ONE
YEAR with regard to the frequency of future advisory votes to approve our
executive compensation; and |
|
|
(4) |
Proposal No. 4: FOR the
ratification of the appointment of Ernst & Young LLP as our
independent registered public accounting firm. |
|
|
The Company officers
you appoint as proxies may vote for one or more adjournments of the Annual
Meeting, including adjournments to permit further solicitations of
proxies. |
|
|
We do not expect that
any matter other than the proposals described above will be brought before
the Annual Meeting. If, however, other matters are properly presented at
the Annual Meeting, the Company officers appointed as proxies will vote in
accordance with the recommendation of our Board. |
|
Q: |
What do I do if I
want to change my vote? |
|
A: |
You may revoke a proxy
at any time before it is voted by filing with us a duly executed
revocation of proxy, by submitting a duly executed proxy to us with a
later date or by appearing at the Annual Meeting and voting in person. You
may revoke a proxy by any of these methods, regardless of the method used
to deliver your previous proxy. Attendance at the Annual Meeting without
voting will not itself revoke a proxy. |
|
Q: |
How will voting on
any other business be conducted? |
|
A: |
Other than the four
proposals described in this proxy statement, we know 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, our Chief Executive Officer and President, and Anthony C. Green,
our Secretary, to vote on those matters in their discretion. |
|
Q: |
Who will count the
vote? |
|
A: |
Representatives of
Broadridge Financial Solutions, Inc., the independent Inspector of
Elections, will count the votes. |
|
Q: |
Who can attend the
Annual Meeting? |
|
A: |
All stockholders of
record as of the Record Date can attend the Annual Meeting, although
seating is limited. If your shares are held through a broker and you would
like to attend, please either (1) write us at Investor Relations, Annaly
Capital Management, Inc., 1211 Avenue of the Americas, New York, NY 10036
or email us at investor@annaly.com, or (2) bring a copy of your brokerage
account statement or an omnibus proxy (which you can get from your broker)
to the Annual Meeting. |
|
|
In addition, you must
bring a valid, government-issued photo identification, such as a drivers
license or a passport. If you plan to attend the Annual Meeting, please
check the box on your proxy card when you return your proxy or follow the
instructions on your proxy card to vote and confirm your attendance by
telephone or Internet. In addition, if you are a record holder of common
stock, your name is subject to verification against the list of our record
holders on the Record Date prior to being admitted to the Annual Meeting.
If you are not a record holder but hold shares in street name, that is,
with a broker, dealer, bank or other financial institution that serves as
your nominee, you should be prepared to provide proof of beneficial
ownership on the Record Date, or similar evidence of ownership. If you do
not comply with the procedures outlined above, you will not be admitted to
the Annual Meeting. |
|
|
Security measures will
be in place at the Annual Meeting to help ensure the safety of attendees.
Metal detectors similar to those used in airports may be located at the
entrance to the meeting room and briefcases, handbags and packages may be
inspected. No cameras or recording devices of any kind, or signs,
placards, banners or similar materials, may be brought into the Annual
Meeting. Anyone who refuses to comply with these requirements will not be
admitted. |
www.annalyannualmeeting.com |
35 |
Table of Contents
Q: |
How will we 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 our Directors, executive officers and
employees, who will not be specially compensated, may solicit proxies from
our stockholders by telephone, facsimile or other electronic means or in
person. Also, the Company will reimburse banks, brokerage houses and other
custodians, nominees and fiduciaries for any reasonable expenses in
forwarding proxy materials to beneficial owners. |
|
|
We have retained Innisfree
M&A Incorporated, a proxy solicitation firm, to assist us in the
solicitation of proxies in connection with the Annual Meeting. We will pay
Innisfree a fee of $15,000 for its services. In addition, we may pay
Innisfree additional fees depending on the extent of additional services
requested by us and will reimburse Innisfree for expenses Innisfree incurs
in connection with its engagement by us. In addition to the fees paid to
Innisfree, we 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 companys proxy statement and annual report
from a company, bank, broker or other intermediary, unless one or more of
these stockholders notifies the company, bank, broker or other
intermediary that they wish to continue to receive individual copies. We
engage in this practice as it reduces our printing and postage costs.
However, if a stockholder of record residing at such an address wishes to
receive a separate annual report or proxy statement, he or she may request
it orally or in writing by contacting us at Annaly Capital Management,
Inc., 1211 Avenue of the Americas, New York, NY 10036, Attention: Investor
Relations, by emailing us at investor@annaly.com, or by calling us at
212-696-0100, and we 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 or she may contact us in the same manner. If you are an
eligible stockholder of record receiving multiple copies of our annual
report and proxy statement, you can request householding by contacting us
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, our Bylaws permit the chairman of the meeting to postpone or
adjourn the Annual Meeting, without notice other than an announcement at
the Annual Meeting. |
|
Q: |
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
Our principal executive offices are
located at the address above.
36 |
Annaly
Capital Management Inc. 2017 Proxy
Statement |
Table of Contents
Where You Can Find More
Information |
We file annual, quarterly and current
reports, proxy statements and other information with the SEC. You may read and
copy any reports, statements or other information that we file with the SEC at
the SECs public reference room at Public Reference Room, 100 F Street, N.E.,
Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for
further information on the Public Reference Room. These SEC filings are also
available to the public from commercial document retrieval services and at the
Internet worldwide web site maintained by the SEC at www.sec.gov.
Reports, proxy statements and other information concerning us may also be
inspected at the offices of the NYSE, which is located at 20 Broad Street, New
York, NY 10005.
Our website is www.annaly.com. We make
available on this website under Investors - SEC Filings, free of charge, our
annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K and amendments to those reports as soon as reasonably practicable after
we electronically file or furnish such materials to the SEC.
www.annalyannualmeeting.com |
37 |
Table of Contents
Table of Contents
Table of Contents
ANNALY
CAPITAL MANAGEMENT, INC.
1211 AVENUE OF THE AMERICAS
NEW YORK, NY
10036
ATTN: GLENN A. VOTEK
VOTE BY
INTERNET - www.proxyvote.com |
Use the Internet to transmit your voting instructions and
for electronic delivery of information up until 11:59 p.m. Eastern Time
the day before the meeting date. Have your proxy card in hand when you
access the web site and follow the instructions to obtain your records and
to create an electronic voting instruction form. |
|
ELECTRONIC DELIVERY OF FUTURE
PROXY MATERIALS |
If you would like to reduce the costs incurred by our
company in mailing proxy materials, you can consent to receiving all
future proxy statements, proxy cards and annual reports electronically via
e-mail or the Internet. To sign up for electronic delivery, please follow
the instructions above to vote using the Internet and, when prompted,
indicate that you agree to receive or access proxy materials
electronically in future years. |
|
VOTE BY
PHONE - 1-800-690-6903 |
Use any touch-tone telephone to transmit your voting
instructions up until 11:59 p.m. Eastern Time the day before the meeting
date. Have your proxy card in hand when you call and then follow the
instructions. |
|
VOTE BY
MAIL |
Mark, sign and date your proxy card and return it in the
postage-paid envelope we have provided or return it to Vote Processing,
c/o Broadridge, 51 Mercedes Way, Edgewood, NY
11717. |
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: |
E26881-P89845 |
|
KEEP THIS PORTION FOR YOUR RECORDS |
|
DETACH AND RETURN THIS PORTION
ONLY |
THIS PROXY CARD IS VALID ONLY
WHEN SIGNED AND DATED. |
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. |
Jonathan D. Green |
|
☐ |
☐ |
☐ |
|
|
|
|
|
|
|
|
|
|
1c. |
John H. Schaefer |
|
☐ |
☐ |
☐ |
|
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 1 YEAR on proposal 3: |
|
1
Year |
2 Years |
3 Years |
Abstain |
|
|
|
|
|
|
|
|
|
3. |
Advisory vote on the frequency of future
advisory votes to approve the company's executive compensation. |
|
⬜ |
⬜ |
⬜ |
⬜ |
The Board of Directors recommends you
vote FOR proposal 4: |
For |
Against |
Abstain |
|
|
|
|
|
4. |
Ratification of the appointment of Ernst & Young LLP
as our independent registered public accounting firm for 2017. |
⬜ |
⬜ |
⬜ |
|
|
|
|
|
NOTE: Voting items may
include such other business as may properly come before the meeting or any
adjournment thereof. |
|
|
|
Please indicate if you plan to attend this
meeting. |
Yes |
|
No |
|
⬜ |
|
⬜ |
For address changes and/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.
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature [PLEASE SIGN WITHIN BOX] |
Date |
|
|
Signature (Joint Owners) |
Date |
|
Table of Contents
Annaly Capital Management,
Inc.
1211 Avenue of the Americas,
New York, NY 10036
Important Notice Regarding the
Availability of Proxy Materials for the Annual Meeting:
The 2016 ANNUAL REPORT TO STOCKHOLDERS and 2017 NOTICE & PROXY
STATEMENT are available at
www.proxyvote.com.
Annaly Capital Management, Inc.
Annual
Meeting of Stockholders
May 25, 2017
This proxy is solicited by the Board
of Directors
Revoking all prior proxies, the
undersigned hereby appoints Kevin G. Keyes and Anthony C. Green, and each of
them, proxies, with full power of substitution, to appear on behalf of the
undersigned and to vote all shares of Common Stock, par value $.01 per share, of
Annaly Capital Management, Inc. (the "Company") that the undersigned is entitled
to vote at the Annual Meeting of Stockholders of the Company to be held at the Warwick
Hotel, 65 West 54th Street, New York, New York 10019, commencing at 9:00 a.m., New York
time, on Thursday, May 25, 2017, and at any adjournment thereof, as fully and
effectively as the undersigned could do if personally present and voting, hereby
approving, ratifying and confirming all that said attorneys and agents or their
substitutes may lawfully do in place of the undersigned as indicated below.
The Shares represented by this proxy
when properly executed, will be voted as directed. If no directions are given, this proxy will be voted in accordance with
the Board of Directors' recommendations as listed on the reverse side of this
card and at their discretion on any other matter that may properly come before
the meeting.
Address
Changes/Comments: |
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(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
This regulatory filing also includes additional resources:
nly_courtesy-pdf.pdf
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