NLY Annaly Capital Management Inc

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 Management, Inc.

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Message from our Chief Executive Officer & Chief Investment Officer

Dear Fellow Stockholders,

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

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

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

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

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

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

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

Sincerely,

David L. Finkelstein

Chief Executive Officer & Chief Investment Officer

April 7, 2021

Notice of Annual Meeting of Stockholders

To the Stockholders of Annaly Capital Management, Inc.:

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

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

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

The Company’s Board of Directors (“Board”) is soliciting proxies in connection with the Annual Meeting. The Company is sending the Notice of Internet Availability of Proxy Materials (“Notice”), or a printed copy of the proxy materials, as applicable, commencing on or about April 7, 2021.

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

All stockholders are cordially invited to attend the Annual Meeting, which will be conducted via a live webcast. The Company believes that the virtual meeting format allows enhanced participation of, and interaction with, our global stockholder base, while also being sensitive to the public health and travel concerns that our stockholders may have in light of the continuing COVID-19 pandemic. During the upcoming virtual meeting, you may ask questions and will be able to vote your shares electronically from your home or any remote location with Internet connectivity. You may also submit questions in advance of the Annual Meeting by visiting www.proxyvote.com. The Company will respond to as many inquiries that are pertinent to the Company at the Annual Meeting as time allows.

An audio broadcast of the Annual Meeting will also be available to stockholders by telephone toll-free at 1-855-450-0066 in the United States or 1-236-714-3499 if calling from outside the United States, and providing Conference ID 1577814. If you plan to attend the Annual Meeting online or listen to the telephonic audio broadcast, you will need the 16-digit control number included in your Notice, on your proxy card or on the instructions that accompany your proxy materials. Please note that listening to the audio broadcast will not be deemed to be attending the Annual Meeting, and you cannot ask questions or vote from such audio broadcast. The Annual Meeting will begin promptly at 9:00 a.m. (Eastern Time). Online check-in will begin at 8:30 a.m. (Eastern Time), and you should allow ample time for the online check-in procedures.

By Order of the Board of Directors,

Anthony C. Green

Chief Corporate Officer, Chief Legal Officer and Secretary

April 7, 2021

Proxy Summary

This summary contains highlights about the Company and the Annual Meeting. This summary does not contain all of the information that you should consider in advance of the Annual Meeting, and the Company encourages you to read the entire Proxy Statement and the Company’s 2020 Annual Report on Form 10-K carefully before voting.

VOTING Stockholders may vote by
INTERNET www.proxyvote.com
TELEPHONE 1-800-690-6903
MAIL completing and returning their proxy card
ONLINE at the Annual Meeting   INFORMATION www.proxydocs.com/NLY

 

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ANNALY AT A GLANCE

EVOLUTION OF ANNALY

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

EXECUTIVE COMPENSATION FOLLOWING THE INTERNALIZATION

Prior to the closing of the Internalization, the Company had been externally-managed by Annaly Management Company LLC (the “Former Manager”) and the Former Manager (rather than the Company) had employed and compensated the Company’s named executive officers (“NEOs”). Upon the closing of the Internalization on June 30, 2020, the Company began directly compensating our NEOs and the newly renamed Management Development and Compensation (“MDC”) Committee assumed oversight of the Company’s executive compensation program. While 2020 represents a transitional year for the Company’s executive compensation program, the MDC Committee is proud of the significant steps taken to re-design it for 2020 and is committed to institutionalizing a market competitive program that incentivizes strong performance, drives alignment with stockholders and reflects best practices, market insights and robust governance as reflected by the additional compensation enhancements adopted by the MDC Committee for 2021.

Former Manager’s Approach to Executive Compensation Prior to Internalization				MDC Committee’s Approach to Executive Compensation Post- Internalization				Further Executive Compensation Enhancements for 2021
∎ NEOs were employed and compensated by the Former Manager rather than the Company with no direction or guidance from the MDC Committee on NEO pay ∎ NEO compensation was paid solely in cash – no equity compensation ∎ Prior year proxy statements disclosed compensation paid to the NEOs on an aggregate basis rather than an individual basis				∎ NEOs are directly employed and compensated by the Company under the oversight of the MDC Committee ∎ NEOs receive a meaningful portion of their annual incentive compensation in the form of equity incentives, which include performance stock units (“PSUs”) ∎ 2021 proxy statement discloses total compensation paid to each NEO for 2020, including compensation paid by the Former Manager for the first half of the year, along with compensation paid by the Company				∎ For the CEO, increasing the relative weighting of equity as a percentage of total target compensation opportunity to approximately 50% ∎ For all NEOs, increasing the proportion of PSUs as a percentage of total equity compensation (with a majority of the NEOs, including the CEO, at approximately 50% for 2021 and all NEOs at approximately 50% for 2022) ∎ Institutionalizing a formulaic approach to determining NEO annual incentive opportunities with 75% based on corporate/organizational metrics and 25% based on individual metrics

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

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RECENT OPERATING ACHIEVEMENTS

ANNALY’S SHARED CAPITAL MODEL AND STRATEGIC FOCUS

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

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

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DELIVERING SIGNIFICANT VALUE FOR STOCKHOLDERS

Since inception, Annaly has declared nearly $21 billion in cumulative common and preferred dividends to stockholders, returning significant value to stockholders.

STOCKHOLDER OUTREACH AND RESULTS OF 2020 SAY-ON-PAY VOTE

The Company is committed to ongoing engagement with both retail and institutional stockholders through a wide range of mediums, including: in-person and virtual meetings, conferences, phone calls, electronic communication and social media. Following the results of Annaly’s 2020 advisory resolution on executive compensation (commonly known as a “Say-on-Pay” vote), which received support from approximately 96% of votes cast, the Company has continued its multi-pronged stockholder outreach campaign to solicit feedback on a number of issues, including (i) the Company’s executive compensation practices and disclosures, (ii) the Company’s human capital management, (iii) the Company’s diversity and inclusion efforts, and (iv) the Company’s corporate responsibility and environmental, social and governance (“ESG”) initiatives.

Annaly’s stockholder engagement efforts generated significant feedback for both the Board and management and have resulted in a number of enhancements to the Company’s management structure and its corporate governance, corporate responsibility and compensation practices and disclosures over the last few years. Annaly’s stockholders have been instrumental to, and supportive of, these governance and disclosure enhancements and the Company looks forward to continuing to find innovative ways to engage over the course of 2021 and beyond.

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

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2020 – 2021 STOCKHOLDER ENGAGEMENT EFFORTS

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BOARD COMPOSITION, STRUCTURE AND REFRESHMENT

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

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As evidenced by the composition of our Board, the Company is committed to seeking out highly qualified candidates of diverse gender and race, as well as taking into account other factors that promote principles of diversity. Over the last few years, the Board had adopted a number of enhancements that are intended to result in regular Board refreshment. In December 2018, the Company announced that the Board had amended the Company’s bylaws to declassify the Board over a three-year period with all Directors standing for annual election commencing with this year’s Annual Meeting. The Board has also adopted an enhanced refreshment policy requiring that Independent Directors may not stand for re-election following the earlier of their 15^th anniversary of service on the Board or their 73^rd birthday. In extraordinary circumstances, the Board may determine that an Independent Director may stand for re-election after having reached such age or term limit for up to three additional one-year terms.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”)

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

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

Note: For footnoted information, please refer to “Continuing Director Diversity” in Endnotes section.

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

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

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Table of Contents

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Corporate Governance at Annaly

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

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

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

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DIRECTOR NOMINEES

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RECENT CORPORATE GOVERNANCE AND CORPORATE RESPONSIBILITY HIGHLIGHTS

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GOVERNING DOCUMENTS

Code of Business Conduct and Ethics

The Board has adopted a Code of Business Conduct and Ethics (the “Code of Conduct”), which sets forth the basic principles and guidelines for resolving various legal and ethical questions that may arise in the workplace and in the conduct of business. This Code of Conduct is applicable to the Company’s Directors, executive officers and employees, and is also a “code of ethics” as defined in Item 406(b) of Regulation S-K. The Company will make any legally required disclosures regarding amendments to, or waivers of, provisions of the Code of Conduct on the Company’s website.

Corporate Governance Guidelines

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

Other Governance Policies

The Company’s Directors, executive officers and employees are also subject to the Company’s other governance policies, including a Foreign Corrupt Practices Act and Anti-Bribery Compliance Policy, an Insider Trading Policy, and a Regulation FD Policy.

Where You Can Find the Code of Conduct, Corporate Governance Guidelines and Committee Charters

The Code of Conduct, Corporate Governance Guidelines, MDC Committee Charter, Audit Committee Charter, NCG Committee Charter, Corporate Responsibility Committee Charter and Risk Committee Charter are available on Annaly’s website (www.annaly.com). The Company will provide copies of these documents free of charge to any stockholder who sends a written request to Investor Relations, Annaly Capital Management, Inc., 1211 Avenue of the Americas, New York, NY 10036.

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Board Committees

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

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

Director		Audit Committee		MDC Committee		NCG Committee		CR Committee		Risk Committee
Francine J. Bovich								•
Wellington J. Denahan†								•
Katie Beirne Fallon						•
David L. Finkelstein
Thomas Hamilton		•		•						•
Kathy Hopinkah Hannan		E		•		•
Michael Haylon*		• E								•
Eric A. Reeves(1)						•		•
John H. Schaefer		•		•						•
Donnell A. Segalas(2)				•		•		•
Glenn A. Votek(3)								•		•
Vicki Williams		•
% of Independent Members:		100%		100%		100%		67%		60%
2020 Meetings:		7		11		5		3		4

•

Member

Chair

E

Audit Committee Financial Expert

†

Vice Chair of the Board            * Independent Chair of the Board

Committee Membership Determinations

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

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

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

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

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Board Structure and Processes

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

BOARD LEADERSHIP STRUCTURE

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

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

INDEPENDENCE OF DIRECTORS

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

EXECUTIVE SESSIONS OF INDEPENDENT DIRECTORS

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

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BOARD OVERSIGHT OF RISK

As part of their risk oversight responsibilities, the Audit Committee and Risk Committee held two joint meetings in 2020. The Audit Committee and Risk Committee receive regular reports from management throughout the year on cybersecurity and related risks. In addition to the risk oversight processes outlined above, the Board annually reviews its risk assessment of the Company’s compensation policies and practices applicable to the Company’s equity incentive plans. For additional information on this review, please see the “Risks Related to Compensation Policies and Practices” section of this Proxy Statement.

CEO PERFORMANCE REVIEWS AND MANAGEMENT SUCCESSION PLANNING

The Independent Chair of the Board and the Chair of the MDC Committee jointly coordinate and lead the Board’s annual performance evaluation of the CEO, which reflects input from all Non-Employee Directors. The Board oversees and maintains a succession plan for the CEO and other senior executives. Executive succession and talent development are a regular agenda item for the Board and, at least once per year, the Board has a fulsome discussion of talent at each business and functional leadership level across the Company. In carrying out this function, the Board endeavors to ensure that the Company’s management has the capabilities to cause the Company to operate in an efficient and business-like fashion in the event of a vacancy in senior management, whether anticipated or sudden.

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BOARD EFFECTIVENESS, SELF-EVALUATIONS AND REFRESHMENT

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

The NCG Committee is also responsible for overseeing an annual self-evaluation process for the Board. The self-evaluation process seeks to identify specific areas, if any, that need improvement or strengthening in order to increase the effectiveness of the Board as a whole and its members and committees.

DIRECTOR CRITERIA AND QUALIFICATIONS

The NCG Committee seeks to achieve a balance of knowledge, experience and capability on the Board and considers a wide range of factors when assessing potential Director nominees, including a candidate’s background, skills, expertise, diversity, accessibility and availability to serve effectively on the Board. All candidates should (i) possess the highest personal and professional ethics, integrity and values, exercise good business judgment and be committed to representing the long-term interests of the Company and its stockholders, and (ii) have an inquisitive and objective perspective, practical wisdom and mature judgment. It is expected that

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all Directors will have an understanding of the Company’s business and be willing to devote sufficient time and effort to carrying out their duties and responsibilities effectively.

CONSIDERATION OF BOARD DIVERSITY

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

DIRECTOR NOMINATION PROCESS

The NCG Committee is responsible for identifying and screening nominees for Director and for recommending to the Board candidates for nomination for election or re-election to the Board and to fill Board vacancies. The NCG Committee also seeks to maintain an ongoing list of potential Board candidates. Nominees may be suggested by Directors, members of management, stockholders or professional search firms. In evaluating a Director nomination, the NCG Committee may review materials provided by the nominator, a professional search firm or any other party.

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

COMMUNICATIONS WITH THE BOARD

Stockholders and other persons interested in communicating with an individual Director (including the Independent Chair of the Board), the Independent Directors as a group, any committee of the Board or the Board as a whole, may do so by submitting such communication to:

Annaly Capital Management, Inc.

[Addressee]

1211 Avenue of the Americas

New York, NY 10036

Phone: 1-888-8 ANNALY

Facsimile: (212) 696-9809

Email: investor@annaly.com

The Legal Department reviews all communications to the Directors and forwards those communications related to the duties and responsibilities of the Board to the appropriate parties. Certain items such as business solicitation or advertisements, product-related inquiries, junk mail or mass mailings, resumes or other job-related inquiries, spam and unduly hostile, threatening, potentially illegal or similarly unsuitable communications will not be forwarded.

DIRECTOR ATTENDANCE

During 2020, the Board held 13 meetings. All Directors attended at least 75% of the aggregate number of meetings of the full Board and the Committees on which they served, during the period in which they served, in 2020.

The Company encourages each member of the Board to attend the Annual Meeting. All of the Company’s then-Directors attended the 2020 Annual Meeting of Stockholders (the “2020 Annual Meeting”). Mr. Reeves was elected as a Director effective March 19, 2021 and therefore did not attend the 2020 Annual Meeting.

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BOARD COMMITMENT AND OVER-BOARDING POLICY

In response to revised policies and commentary from leading institutional investors and the considerable time commitment and responsibilities associated with Board and Committee service, in 2020 the Board refined its Director “over-boarding” policy to provide that:

All Directors are currently in compliance with this policy. Directors are required to notify the Independent Chair of the Board and the Chair of the NCG Committee in advance of accepting an invitation to serve on another public company board.

DIRECTOR ORIENTATION AND CONTINUING EDUCATION

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

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Approval of Related Party Transactions

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

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

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

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

Closing of the Internalization and Termination of the Management Agreement

On February 12, 2020, the Company entered into an internalization agreement (the “Internalization Agreement”) with the Former Manager and certain affiliates of the Former Manager. Pursuant to the Internalization Agreement, the Company agreed to acquire all of the outstanding equity interests of the Former Manager and the Former Manager’s direct and indirect parent companies. In connection with the closing of the Internalization, on June 30, 2020, the Company acquired all of the assets and liabilities of the Former Manager, and the Company transitioned from an externally-managed real estate investment trust (“REIT”) to an internally-managed REIT. At the closing, all employees of the Former Manager became employees of the Company. The parties also terminated the Amended and Restated Management Agreement by and between the Company and the Former Manager (the “Management Agreement”) and therefore the Company no longer pays a management fee to, or reimburses expenses of, the Former Manager.

Prior to the closing of the Internalization, the Former Manager, under the Management Agreement and subject to the supervision and direction of the Board, was responsible for (i) the selection, purchase and sale of assets for the Company’s investment portfolio; (ii) recommending alternative forms of capital raising; (iii) supervising the Company’s financing and hedging activities; and (iv) day to day management functions. The Former Manager also performed such other supervisory and management services and activities relating to the Company’s assets and operations as appropriate. In exchange for the management services, the Company paid the Former Manager a monthly management fee, and the Former Manager was responsible for providing personnel to manage the Company. Prior to the closing of the Internalization, the Company had paid the Former Manager a monthly management fee for its management services in an amount equal to 1/12th of the sum of (i) 1.05% of Stockholders’ Equity (as defined in the Management Agreement) up to $17.28 billion, and (ii) 0.75% of Stockholders’ Equity (as defined in the Management Agreement) in excess of $17.28 billion. The Company did not pay the Former Manager any incentive fees. For the six months ended June 30, 2020 prior to the closing of the Internalization, the compensation and management fee computed in accordance with the Management Agreement was $77.9 million.

Prior to the closing of the Internalization, the Company reimbursed the Former Manager for certain services in connection with the management and operations of the Company and its subsidiaries as permitted under the terms of the Management Agreement. Such reimbursable expenses included the cost for certain legal, tax, accounting and other support and advisory services provided by employees of the Former Manager to the Company. Pursuant to the Management Agreement, until the closing of the Internalization, the Company reimbursed the Former Manager for the cost of such services, provided such costs were no greater than those that would be payable to comparable third party providers. Expense reimbursements and related waivers were routinely reviewed with the Audit Committee of the Board in conformance with established policies. For the six months ended June 30, 2020 prior to the closing of the Internalization, reimbursement payments to the Former Manager were $14.2 million. None of the reimbursement payments were attributable to compensation of the Company’s executive officers.

The Former Manager

The Former Manager is a Delaware limited liability company and, until the closing of the Internalization, was indirectly owned by certain members of the Company’s management. The Company acquired the Former Manager in connection with the Internalization, which closed on June 30, 2020.

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COMPENSATION OF DIRECTORS

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

The annual compensation elements paid to the Non-Employee Directors for service on the Board and its standing Committees for 2020 are set forth below:

Each DSU is equivalent in value to one share of the Company’s common stock. DSUs are granted on the date of the annual stockholder meeting and vest immediately. DSUs convert to shares of the Company’s common stock one year after the date of grant unless the Director elects to defer the settlement of the DSUs to a later date. DSUs do not have voting rights. DSUs pay dividend equivalents in either cash or additional DSUs at the election of the Director. Directors are also eligible to receive other stock-based awards under the Company’s 2020 Equity Incentive Plan, which includes certain limits on awards to Non-Employee Directors.

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

Director Stock Ownership Guidelines

The stock ownership guidelines for Independent Directors provides that each Independent Director should strive to own an amount of the Company’s common stock equal to five times the annual cash retainer. Shares counting toward the guideline include shares that are owned outright, DSUs and any other shares held in deferral accounts. To facilitate achievement of the guideline, the Board has adopted and implemented a “retention ratio” that requires Non-Employee Directors to retain and hold 50% of the net profit shares from DSUs until the specified ownership level is achieved. As of the date of this proxy statement, all of the Non-Employee Directors had met or were on their way to meeting their stock ownership guideline.

Role of the Independent Compensation Consultant

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

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Director Compensation

The table below summarizes the compensation paid by the Company to the Non-Employee Directors for the fiscal year ended December 31, 2020.

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Executive Officers

The following table sets forth certain information with respect to the Company’s executive officers:

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

Serena Wolfe has served as Chief Financial Officer of the Company since December 2019. Prior to joining the Company in 2019, Ms. Wolfe served as a Partner at Ernst & Young LLP (“EY”) since 2011 and as its Central Region Real Estate Hospitality & Construction (“RHC”) leader from 2017 to November 2019, managing the go-to-market efforts and client relationships across the sector. Ms. Wolfe was previously also EY’s Global RHC Assurance Leader. Ms. Wolfe practiced with EY for over 20 years, including six years with EY Australia and 16 years with the U.S. practice. Ms. Wolfe graduated from the University of Queensland with a Bachelor of Commerce in Accounting. She is a Certified Public Accountant in the states of New York, California, Illinois and Pennsylvania.

Steven F. Campbell has served as Chief Operating Officer of Annaly since June 2020. Prior to this position, Mr. Campbell served in a number of other senior roles at Annaly, including as Head of Business Operations from September 2019 to June 2020, Head of Credit Operations and Enterprise Risk from February 2018 to September 2019, Chief Operating Officer of Annaly Commercial Real Estate Group from December 2016 to February 2018 and Head of Credit Strategy from April 2015 to February 2018. Mr. Campbell has over 20 years of experience in financial services. Prior to joining Annaly in 2015, Mr. Campbell held various roles over six years at Fortress Investment Group LLC, including serving as a Managing Director in the Credit Funds business. Prior to that, Mr. Campbell held positions at General Electric Capital Corporation and D.B. Zwirn & Co, L.P. with a focus on credit and debt restructuring. Mr. Campbell received a B.B.A. from the University of Notre Dame and a M.B.A. from the University of Chicago, Booth School of Business.

Timothy P. Coffey has served as Chief Credit Officer of the Company since January 2016. Mr. Coffey served as the Company’s Head of Middle Market Lending from 2010 until January 2016. Mr. Coffey has over 20 years of experience in leveraged finance and has held a variety of origination, execution, structuring and distribution positions. Prior to joining the Company in 2010, Mr. Coffey served as Managing Director and Head of Debt Capital Markets in the Leverage Finance Group at Bank of Ireland. Previously, Mr. Coffey held positions at Scotia Capital, the holding company of Saul Steinberg’s Reliance Group Holdings and SC Johnson International. Mr. Coffey received his B.A. in Finance from Marquette University

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

Anthony C. Green has served as Chief Corporate Officer of the Company since January 2019 and as Chief Legal Officer and Secretary of the Company since March 2017. Mr. Green previously served as the Company’s Deputy General Counsel from 2009 until February 2017. Prior to joining the Company, Mr. Green was a partner in the Corporate, Securities, Mergers & Acquisitions Group at the law firm K&L Gates LLP. Mr. Green has over 20 years of experience in corporate and securities law. Mr. Green holds a B.A. in Economics and Political Science from the University of Pennsylvania and a J.D. and LL.M. in International and Comparative Law from Cornell Law School.

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Compensation Discussion and Analysis

This Compensation Discussion and Analysis describes the key features of the Company’s executive compensation program and the Management Development and Compensation Committee’s approach in deciding compensation for the Company’s named executive officers (“NEOs”) for performance in 2020:

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

EXECUTIVE SUMMARY

Introduction

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

In February 2020, the Company entered into an agreement (the “Internalization Agreement”) to acquire its Former Manager and transition from an externally-managed REIT to an internally-managed REIT (the “Internalization”). At the same time, the Company entered into employment agreements and/or severance rights agreements with certain of its NEOs that would become effective upon the closing of the Internalization when the NEOs would become employees of the Company. The executive employment agreements, severance rights agreements and the Internalization Agreement were negotiated by a special Board committee comprised exclusively of Independent Directors that had been formed to consider such transactions. The employment agreements, which initially included minimum guaranteed bonus amounts for 2020, reflected the importance to the Board of retaining the Company’s senior management team through and beyond the Internalization during a time when the Company was also conducting a search process to identify a permanent CEO.

The Company appointed Mr. Finkelstein as the Company’s permanent Chief Executive Officer (“CEO”) in March 2020 and the Company’s Interim CEO and President Mr. Votek transitioned to the role of Senior Advisor to the Company. Mr. Votek retired as Senior Advisor in August 2020 and currently serves as a Non-Employee Director. Given the temporary nature of Mr. Votek’s executive roles in 2020, this Compensation Discussion & Analysis primarily focuses on compensation decisions in respect of the Company’s current active NEOs. (For a discussion of the compensation paid to Mr. Votek in 2020, please refer to the section titled “Compensation Paid to the Former Interim CEO and President” below.)

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

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

Executive Compensation Prior to the Internalization

Prior to July 1, 2020, the Company was externally-managed by the Former Manager. Until such time, the Former Manager paid all compensation, including benefits, to its employees (including the NEOs). The Former Manager also made all compensation determinations for its employees (including the NEOs) without any direction by the MDC Committee or the Board and without reference to any specific policies or programs under their oversight. Thus, the compensation paid by the Former Manager to its employees who served as the Company’s NEOs from January 1, 2020 through June 30, 2020 (other than a one-time equity award made by the Board to the former Interim CEO and President, which vested on the appointment of a permanent CEO in March 2020) was not part of the Company’s executive compensation program and was not paid or awarded by the Company. However, in order to enable the Company’s stockholders to make an informed Say-on-Pay vote and to provide a complete picture of all compensation paid or awarded to the NEOs for 2020, the Company is disclosing executive compensation for 2020 paid or awarded by both the Former Manager and the Company in this proxy statement. See “2020 Total Direct Compensation Table” later in this discussion.

Executive Compensation Following the Internalization

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

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

Further Executive Compensation Enhancements for 2021

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

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Philosophy and Program Objectives

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

2020 Business Performance Highlights⁽¹⁾

Total Assets(2)		Capital Allocation				Economic Return Q4’20 / FY 2020				Total Shareholder Return Since Annaly’s IPO(3)
$101.6bn		78% Agency		22% Credit		5.1% / 1.8%
∎ Annaly generated core earnings(4) of $1.10 per average share of common stock for the year, which is $0.19 in excess of the dividend   ∎ Portfolio continues to be well-positioned to generate attractive returns with strong focus on Agency MBS   –  $95 billion in highly liquid Agency portfolio, representing 93% of total assets(2)   ∎ Credit businesses conservatively positioned with low leverage and limited exposure to industries most affected by COVID-19   –  Full-year credit originations of $2.4 billion were down nearly 50% year-over-year given cautious approach to underwriting

Note: For footnoted information, please refer to “2020 Business Performance Highlights” in Endnotes section.

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