What changed in this filing

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Item 1. Business

2024-02-15 compared with 2023-02-16 · 58 added, 186 removed, 372 unchanged (40% of the section changed)

Finkelstein has over 25 years of experience in fixed income investments.

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.

Finkelstein is a member of the Treasury Market Practices Group sponsored by the Federal Reserve Bank of New York.

Finkelstein received his B.A.

in Business Administration from the University of Washington and his M.B.A.

from the University of Chicago, Booth School of Business.

Finkelstein also holds the Chartered Financial Analyst® designation.

Serena Wolfe has served as Chief Financial Officer of Annaly since December 2019.

Prior to joining Annaly in 2019, Ms.

Wolfe served as a Partner at Ernst & Young (“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.

Wolfe was previously also EY’s Global RHC Assurance Leader.

Wolfe practiced with EY for over 20 years, including six years with EY Australia and 16 years with the U.S.

Wolfe currently serves on the boards of Berkshire Grey, Inc.

and Doma Holdings, Inc.

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.

Campbell has served as President of Annaly since December 2022 and Chief Operating Officer of Annaly since June 2020.

Prior to these positions, 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.

Campbell has over 25 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.

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.

Green has served as Chief Corporate Officer of Annaly since January 2019 and as Chief Legal Officer and Secretary of Annaly since March 2017.

Green previously served as Annaly’s Deputy General Counsel from 2009 until February 2017.

Prior to joining Annaly, Mr.

Green was a partner in the Corporate, Securities, Mergers & Acquisitions Group at the law firm K&L Gates LLP.

Green has over 20 years of experience in corporate and securities law.

Green holds a B.A.

in Economics and Political Science from the University of Pennsylvania and a J.D.

in International and Comparative Law from Cornell Law School.

Human Capital

Our Human Capital team oversees our company’s workforce management to ensure its objectives are strategically integrated with the firm’s goals and business plans.

We proactively review human capital management best practices on an ongoing basis to continually enhance our employee experience.

In addition, the Management Development and Compensation (“MDC”) Committee of the Board provides independent oversight of our policies and strategies related to human capital management.

Further, the Chair of the MDC Committee liaises on certain human capital topics with the Chair of the Corporate Responsibility Committee of the Board as appropriate.

As of December 31, 2022, we had 161 employees.

Our People and Culture

Our employees are the driving force behind Annaly’s success, and we are committed to promoting their well-being, engagement, and development to help them reach their highest potential.

Our culture is focused on fostering a diverse, inclusive and rewarding work environment for all employees, with ongoing opportunities for career development, wellness support, and empowerment.

Our culture is built on five core values:

ownership, humility, accountability, collaboration, and diversity, equity and inclusion.

These values are embedded in our professional and personal conduct and are crucial to how we operate our business.

All employees are responsible for upholding these values, which form the bedrock of our culture and are vital to the continued success of our company.

Guided by these values, we are committed to attracting, developing and retaining the best talent, with diverse experiences, perspectives and backgrounds.

We utilize employee surveys, including an engagement survey, to create open and honest feedback channels that foster our ability to actively involve our employees in the design and evolution of our culture, enhance our overall productivity, and mitigate risk.

Our leaders review and incorporate survey feedback to increase employee engagement and drive positive changes throughout our company.

We remain committed to maintaining an environment of consistent feedback as we strive for high employment satisfaction levels.

Diversity, Equity & Inclusion

The diversity of our employees enables our company to cultivate innovation, fresh perspectives and agility.

Diversity, equity and inclusion are essential tenets of our corporate culture.

Our Human Capital team, in coordination with an Inclusion Support

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Committee of Executive Sponsors, is responsible for overseeing and continuing to improve our diversity, equity and inclusion initiatives.

We are committed to promoting diversity, including gender and racial/ethnic diversity, across all levels of our company.

With 53% of total employees in 2022 identifying as either female or racially/ethnically diverse, we are driven by the belief that having a diverse group of employees supports our continued long-term growth.

Our seven employee network groups, which include the Women’s Interactive Network (“WIN”), the Asian American and Pacific Islander Employee Network, the Black Employee Network, the Latin American Employee Network, the Disabilities Within a Family Network, the Veteran’s Employee Network and the Annaly Pride Network, provide targeted development and networking opportunities, knowledge exchanges, mentorship, coaching and volunteer efforts.

Further, we recognize and understand that education, training and candid conversations are key to embedding and advancing diversity, equity and inclusion within our organization and culture.

To further promote and foster such a foundation, our efforts also include offering firm-wide training on topics such as unconscious bias and allyship, hosting various forums for employees to openly discuss their views and providing opportunities for employee connection and networking, as well as actively seeking out feedback through periodic employee surveys.

Compensation, Benefits and Wellness

Our employee compensation program includes base salary, annual incentive bonuses and stock-based awards.

Employee compensation packages are designed to align employee and stockholder interests and to provide incentives to attract, retain and motivate talented employees.

In addition, we invest in a wide range of benefits and wellness initiatives that support healthy lifestyles and choices for our employees.

We offer benefits including health and insurance coverage, health savings and flexible spending accounts, telemedicine benefits, 401(k) plans, paid time off and family care resources.

We also sponsor a wide range of initiatives that promote employee wellness and mental well-being, including access to talk therapy, health coaching and stress management support.

Over the last few years, we have enhanced our parental and family care benefits to provide extended leave and fertility assistance.

COVID-19 has challenged the way we work and operate.

It has tested our resiliency, nimbleness and flexibility of our people and culture.

At Annaly, we understand that we must continue to provide an environment where our employees feel safe, motivated, empowered, and prepared, regardless of whatever challenges arise in the future.

In addition to addressing physical health and safety concerns, we recognize that people’s daily emotional lives and mental health play a key role in their overall wellness.

As such, we continue to evaluate ways to promote and expand our mental health offerings.

Additionally, we recognize that part of meeting employee needs includes institutionalizing broader and longer-term flexibility where appropriate.

Flexibility comes in many forms at Annaly, including vacation and sick time, hybrid work options, and location strategy.

We remain committed to evaluating the evolving definition of flexibility and promoting programs and practices that foster inclusivity and well-being both personally and professionally.

Learning and Development

We seek to invest in and promote talent to cultivate a high-performance culture and build on the capabilities and full potential of our employees.

We offer a number of learning and development programs tailored to our employees’ needs and interests as well as our overall strategic business objectives.

We also have a tuition reimbursement plan that provides financial support toward the cost of furthering employee education in a field directly related to their job.

In 2022, we began offering individual style and culture sessions to new employees to promote professional awareness and understanding of our company’s culture initiatives.

Additionally, we continue to offer knowledge share sessions to all employees that focus on core business strategies and initiatives in an effort to foster holistic and inclusive learning.

Corporate and Employee Philanthropy and Volunteerism

Our corporate giving has been focused on high-impact programs that seek to advance social issues we are committed to, including combating homelessness and advancing the professional development of women and underrepresented groups.

Annaly and our employees endeavor to meaningfully contribute to the communities where we live, work, and invest by partnering with well-established non-profit organizations and through Annaly’s corporate giving, employee volunteerism and our employee charity match program.

partnering with well-established non-profit organizations and through Annaly’s corporate giving, employee volunteerism and our employee charity match program.

Regulatory Requirements

The financial services industry is subject to extensive regulation and supervision, and changes to regulations and supervisory practices are continuously being considered by regulators and policy makers worldwide.

We continue to assess our business, risk management and compliance practices to conform to developments in the regulatory environment.

We have elected, organized and operated in a manner that qualifies us to be taxed as a REIT under the Internal Revenue Code of 1986, as amended and regulations promulgated thereunder (the “Code”).

So long as we qualify for taxation as a REIT, we

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generally will not be subject to U.S.

So long as we qualify for taxation as a REIT, we generally will not be subject to U.S.

federal income tax on our taxable income that is distributed to our stockholders.

Furthermore, substantially all of our assets, other than our taxable REIT subsidiaries (“TRSs”), consists of qualified REIT real estate assets (of the type described in Section 856(c)(5) of the Code).

We regularly monitor our investments and the income from these investments and, to the extent we enter into hedging transactions, we monitor income from our hedging transactions as well, so as to ensure at all times that we maintain our qualification as a REIT and our exemption from registration under the Investment Company Act.

Arcola is a member of FINRA and is subject to regulations of the securities business that include but are not limited to trade practices, use and safekeeping of funds and securities, capital structure, recordkeeping and conduct of directors, officers and employees.

As a self-clearing, registered broker dealer, Arcola is required to maintain minimum net capital by FINRA.

Furthermore, substantially all of our assets, other than our taxable REIT subsidiaries (“TRSs”), consist of qualified REIT real estate assets (of the type described in Section 856(c)(5) of the Code).

We regularly monitor our investments and the income from these investments and, to the extent we enter into hedging transactions, we monitor income from our hedging transactions as well, so as to ensure at all times that we maintain our qualification as a REIT, our exemption from registration under the Investment Company Act and our exemption from registration as a commodity pool operator ("CPO") with the U.S.

Commodity Futures Trading Commission ("CFTC").

Arcola is a member of FINRA, an SEC registered broker-dealer and is subject to regulations of the securities business that include but are not limited to trade practices, use and safekeeping of funds and securities, capital structure, recordkeeping and conduct of directors, officers and employees.

As a self-clearing, registered broker-dealer, Arcola is required to maintain minimum net capital by the SEC and FINRA.

Arcola consistently operates with capital in excess of its regulatory capital requirements as defined by SEC Rule 15c3-1.

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These additional requirements relate to, among other things, maintaining an effective and comprehensive compliance program, recordkeeping and reporting requirements and disclosure requirements.

We also have a subsidiary that operates as a licensed mortgage aggregator and master servicer, which compels it to follow individual state licensing laws and subjects it to supervision and examination by federal authorities, including the CFPB, the U.S.

We also have a subsidiary that operates as a licensed mortgage aggregator and master servicer, which subjects it to individual state licensing laws and to supervision and examination by federal authorities, including the Consumer Financial Protection Bureau ("CFPB"), the U.S.

Department of Housing and Urban Development (“HUD”), the SEC as well as various state licensing, supervisory and administrative agencies.

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These laws and regulations, which are frequently amended and adjusted, have, in recent years, led to an increase in both the scope of the requirements and the intensity of the supervision to which we are subject.

The financial services industry is subject to extensive regulation and supervision in the U.S.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) and the rules thereunder significantly altered the financial regulatory regime within which financial institutions operate.

Other reforms have been adopted or are being considered by other regulators and policy makers worldwide.

We will continue to assess our business, risk management and compliance practices to conform to developments in the regulatory environment.

The CFTC has jurisdiction over the regulation of swaps.

The CFTC has asserted that this causes the operators of mortgage REITs that use swaps as part of their business model to fall within the statutory definition of CPO, and absent relief from the Market Participants Division of the CFTC, such operators generally much register as CPOs or qualify for an exemption from registration.

On December 7, 2012, as a result of numerous requests for no-action relief from the CPO registration requirement for operators of mortgage REITs, the Division of Swap Dealer and Intermediary Oversight (the predecessor to the Market Participants Division) of the CFTC issued no-action relief entitled “No-Action Relief from the Commodity Pool Operator Registration Requirement for Commodity Pool Operators of Certain Pooled Investment Vehicles Organized as Mortgage Real Estate Investment Trusts” that permits a CPO to receive relief from the requirement to register by filing a claim to perfect the use of the relief.

A claim submitted by a CPO will be effective upon filing, so long as the claim is materially complete.

The conditions that must be met relate to initial margin and premiums requirements, net income derived annually from commodity interest positions that are not qualifying hedging transactions, marketing of interests in the mortgage REIT to the public and identification of the entity as a mortgage real estate investment trust in its federal tax filings with the IRS.

We have submitted a claim for the relief set forth in the no-action relief entitled “No-Action Relief from the Commodity Pool Operator Registration Requirement for Commodity Pool Operators of Certain Pooled Investment Vehicles Organized as Mortgage Real Estate Investment Trusts” and believe we meet the criteria for such relief set forth therein.

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We operate in a highly competitive market for investment opportunities.

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(i) 15th anniversary of service on our Board or (ii) 73rd birthday.

• We have adopted a Code of Business Conduct and Ethics, which sets forth the basic principles and guidelines for resolving various legal and ethical

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questions that may arise in the workplace and in the conduct of our business.

• 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, officers and employees.

• We have adopted Corporate Governance Guidelines which, in conjunction with the charters of our Board committees, provide the framework for the governance of our company.

• We have procedures by which any of our employees, officers or directors may raise concerns confidentially about our company’s conduct, accounting, internal controls or auditing matters with the Chair of the Board, the independent directors, or the Chair of the Audit Committee or through our whistleblower phone hotline or e-mail inbox.

• We have an Insider Trading Policy that prohibits our directors, officers and employees, as well as those of our subsidiaries from buying or selling our securities on the basis of material nonpublic information and

prohibits communicating material nonpublic information about our company to others.

• We have procedures by which any of our employees, officers or directors may raise concerns

confidentially about our company’s conduct, accounting, internal controls or auditing matters with the Chair of the Board, the independent directors, or the Chair of the Audit Committee or through our whistleblower phone hotline or e-mail inbox.

• We have adopted an Insider Trading Policy that prohibits our directors, officers and employees, as well as those of our subsidiaries from buying or selling our securities on the basis of material nonpublic information and prohibits communicating material nonpublic information about our company to others.

Our Insider Trading Policy prohibits our directors, officers and employees, from (1) holding our stock in a margin account as eligible collateral, or otherwise pledging our stock as collateral for a loan, or (2) engaging in any hedging transactions with respect to our equity securities held by them.

• Our executive officers are subject to a robust clawback policy, which includes triggers for financial restatements and misconduct.

• Our executive officers are subject to two clawback policies, one that covers financial restatements and a second for misconduct.

• Our executive officers are subject to stock ownership guidelines and holding restrictions.

• In February 2022, we amended our bylaws to allow stockholders holding 25% of our common stock to call a special meeting, reducing the previous majority threshold.

• Stockholders holding 25% of our common stock have the right to call a special meeting.

Distributions

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Subject to the limitations of applicable securities and state corporation laws, we can return capital by making purchases of our own capital stock or through payment of dividends.

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Available Information

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Investment and Market Related Risks

Operational a nd Cyb ersecurit y Risks

Operational and Cybersecurity Risks

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• Differences in timing of interest rate adjustments on our interest earning assets and our borrowings may adversely affect our profitability.

• The discontinuation of LIBOR may affect our results.

• It may be uneconomical to “roll” our TBA dollar roll transactions or we may be unable to meet margin calls on our TBA contracts.

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• Changes in laws or regulations governing our operations or our failure to comply with those laws or regulations may adversely affect our business.

• The increased focus on ESG and climate change issues by investors, governmental bodies and other stakeholders, as well as existing and proposed laws and regulations related to these topics, may adversely affect our business and financial results and damage our reputation.

• We are subject to complex and evolving laws, regulations, rules, standards and contractual obligations regarding data privacy and security, which could increase the cost of doing business, compliance risks and potential liability.

• We are subject to risks and liabilities in connection with sponsoring, investing in and managing new funds and other investment accounts, including potential regulatory risks.

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• Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities.

• The failure of a mezzanine loan or similar debt to qualify as a real estate asset could adversely affect our ability to qualify as a REIT.

• Qualifying as a REIT involves highly technical and complex provisions of the Code.

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• We are subject to counterparty risk and may be unable to seek indemnity or require counterparties to repurchase residential whole loans if they breach representations and warranties, which could cause us to suffer losses.

• Our rights under our repurchase and derivative agreements are subject to the effects of the bankruptcy laws in the event of the bankruptcy or insolvency of us or our lenders.

Investment and Market Related Risks

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• We invest in securities that are subject to mortgage credit risk.

• Our investments in real estate and other securities are subject to changes in credit spreads as well as available market liquidity, which could adversely affect our ability to realize gains on the sale of such investments.

• Geographic concentration exposes investors to greater risk of default and loss.

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• Our hedging strategies may be costly, and may not hedge our risks as intended.

• We are subject to risks of loss from weather conditions, man-made or natural disasters and climate change.

• We are subject to risks of loss from weather conditions, man-made or natural disasters and the direct and indirect effects of climate change.

Operational and Cybersecurity Risks

• Inaccurate models or the data used by models may expose us to risk.

• We are highly dependent on information systems that may expose us to cybersecurity risks.

• We are highly dependent on information systems and networks, many of which are operated by third parties, and any failure of these systems or networks could materially and adversely affect our business.

• Cyberattacks or other information security breaches could adversely affect our business, reputation and financial condition.

• We depend on third party service providers, including mortgage loan servicers and sub-servicers, for a variety of services related to our business.

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• We are subject to reinvestment risk.

• Competition may affect ability and pricing of our target assets.

• Competition may affect availability and pricing of our target assets.

• We may enter into new lines of business, acquire other companies or engage in other strategic initiatives.

• Some of our investments, including those related to non-prime loans, involve credit risk.

• We face possible increased instances of business interruption associated with the effects of climate change and severe weather.

• If we are unable to attract, motivate and retain qualified talent, including our key personnel, it could materially and adversely affect us.

• The market price and trading volume of our shares of common stock may be volatile.

• We may change our policies without stockholder approval.

• COVID-19 has affected the U.S.

economy and our business.

• We may change our policies without stockholder approv al.

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• interest rate volatility increases;

• forced sales, particularly under adverse market conditions, such as those which occurred as a result of the COVID-19 pandemic;

• disruption in the repo market generally or the infrastructure, including technology infrastructure, that supports it;

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The risks associated with margin calls are more acute during periods of economic slowdown or recession.

We experienced margin calls much higher than historical norms during the onset of COVID-19.

If we are unable to satisfy margin calls, our lenders may foreclose on our collateral.

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Significant adverse changes in financial market conditions can result in a deleveraging of the global financial system and the forced sale of large quantities of mortgage-related and other financial assets.

Concerns over economic recession, COVID-19 or other pandemic diseases, geopolitical issues including events such as the war in Ukraine, trade wars, unemployment, inflation, rising interest rates, the availability and cost of financing, the mortgage market, the repurchase agreement market and a declining real estate market or prolonged government shutdown may contribute to increased volatility and diminished expectations for the economy and markets.

Concerns over economic recession, pandemic diseases, geopolitical issues including events such as the war in Ukraine, trade wars, unemployment, inflation, government actions to combat inflation, rising interest rates, the availability and cost of financing, the mortgage market, the repurchase agreement market and a declining real estate market or prolonged government shutdown may contribute to increased volatility and diminished expectations for the economy and markets.

For example, as a result of the financial crises beginning in the summer of 2007 and through the subsequent credit and housing crisis, many traditional mortgage investors suffered severe losses in their residential mortgage portfolios and several major market participants failed or were impaired, resulting in a significant contraction in market liquidity for mortgage-related assets.

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This means that their interest rates may vary over time based upon changes in an objective index, such as:

The rate banks charge each other for short-term Eurodollar loans.

• Treasury Rate.

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Accordingly, in a period of rising interest rates, we could experience a decrease in net income or a net loss because the interest rates on our borrowings adjust faster than the interest rates on our adjustable-rate interest earning assets.

The discontinuation of LIBOR may affect our results.

The United Kingdom Financial Conduct Authority, or FCA, which regulates LIBOR, has announced that all LIBOR tenors relevant to us will cease to be published or will no longer be representative after June 30, 2023.

The FCA's announcement coincided with the March 5, 2021, announcement of LIBOR's administrator, the ICE Benchmark Administration Limited, or IBA, indicating that, as a result of not having access to input data necessary to calculate LIBOR tenors relevant to us on a representative basis after June 30, 2023, IBA would have to cease publication of such LIBOR tenors immediately after the last publication on June 30, 2023.

These announcements mean that any of our LIBOR-based borrowings and assets that mature beyond June 30, 2023 need to be converted to alternative interest rates.

Many of our counterparties are now subject to regulatory guidance not to enter new U.S.

Dollar LIBOR contracts except in limited circumstances.

The Alternative Reference Rates Committee, or ARRC, a committee of private sector entities with ex-officio official sector members convened by the Federal Reserve Board and the Federal Reserve Bank of New York, has recommended the Secured Overnight Financing Rate (“SOFR”), and in some cases, the forward-looking term rate based on SOFR published by CME Group Benchmark Administration Ltd.

(“CME Term SOFR”) plus, in each case, a recommended spread adjustment as the replacement for LIBOR.

The Board of Governors of the Federal Reserve has also named CME Term SOFR as the Board-selected replacement rate for most cash products under the Adjustable Interest Rate (LIBOR) Act of 2021 (the “LIBOR Act”), which governs instruments for which there is no determining person to choose a LIBOR replacement or which have no fallback provisions specifying an alternate replacement rate.

There are significant differences between LIBOR and SOFR, such as LIBOR being an unsecured lending rate while SOFR is a secured lending rate, and SOFR is an overnight rate while LIBOR reflects term rates at different maturities.

If our LIBOR-based borrowings are converted to SOFR or CME Term SOFR, the differences between LIBOR and SOFR, plus the recommended spread adjustment, could result in interest costs that are higher than if LIBOR remained available, which could have a material adverse effect on our results.

Although SOFR or CME Term SOFR are the ARRC's recommended replacement rates, it is also possible that lenders may instead choose alternative replacement rates that may differ from LIBOR in ways similar to SOFR or in other ways that would result in higher borrowing costs for us.

Many floating-rate instruments, including some transactions in which we are issuer or sponsor, reference LIBOR.

US regulators and the ARRC have recommended that all LIBOR-based instruments include robust fallback language dictating what rate will apply when LIBOR ends.

The fallbacks recommended by the ARRC are different for various non-derivative instruments, and not all LIBOR-based instruments will incorporate the recommended fallbacks.

The International Swaps and Derivatives Association (“ISDA”) has implemented fallback language and a protocol that will ensure LIBOR-based derivatives amongst protocol participants fall back to compounded SOFR.

We have opted into the ISDA 2020 IBOR Fallbacks protocol.

However, the variations in fallback language in different financial instruments and the adoption of different replacement rates or methodologies in such fallback language could result in unexpected differences between our LIBOR-based assets and our LIBOR-based interest rate hedges or borrowings.

Certain instruments may be affected by the LIBOR Act.

It is expected that switching existing financial instruments and hedging transactions from LIBOR to SOFR or other replacement rates will include a spread adjustment.

ISDA has described the spread calculation methodology that will apply to derivatives

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that adopt the ISDA recommendations for derivatives, and the ARRC has recommended the same methodology for all cash products, with a one year transition period for consumer assets.

These same spread adjustments will be applied to contracts that transition to a SOFR-based rate under the LIBOR Act.

The adjustment calculation is intended to minimize value transfer between counterparties, borrowers, and lenders, but there is no assurance that the calculated spread adjustment will be fair and accurate or that it will not result in higher interest costs.

We and other market participants have less experience understanding and modeling SOFR-based assets and liabilities than LIBOR-based assets and liabilities, increasing the difficulty of investing, hedging, and risk management.

We use service providers to validate the fair values of certain financial instruments.

These service providers take various approaches to modelling LIBOR cessation.

The process of transition involves operational risks.

References to LIBOR may be embedded in computer code or models, and we may not identify and correct all of those references.

Holders of our fixed-to-floating preferred shares should refer to the relevant prospectus, the LIBOR Act, and related regulation to understand the LIBOR-cessation provisions applicable to that class.

We are considering all available options with respect to our preferred stock, which include liability management actions such as tenders, calls, exchange offers, language amendments, changing the calculation agent, and/or allowing fallbacks to trigger.

Each such class that is currently outstanding becomes callable at the same time it begins to pay a LIBOR-based rate.

It may be uneconomical to “ roll ” our TBA dollar roll transactions or we may be unable to meet margin calls on our TBA contracts.

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Our use of derivatives may expose us to counterparty and liquidity risks.

Most swaps that we enter into must be cleared by a Derivatives Clearing Organization (“DCO”).

DCOs are subject to regulatory oversight, use extensive risk management processes, and might receive “too big to fail” support from the government in the case of insolvency.

Most swaps that we enter into must be executed on a Swap Extension Facility and/or be cleared by a Derivatives Clearing Organization (“DCO”), both of which are regulated by the CFTC.

DCOs are subject to regulatory oversight and use extensive risk management processes, which result in additional expenses and collateral requirements for our swaps relative to uncleared swaps.

We access the DCO through several Futures Commission Merchants (“FCMs”).

For any cleared swap, we bear the credit risk of both the DCO and the relevant FCM, in the form of potential late or unrecoverable payments, potential difficulty or delay in accessing collateral that we have posted, and potential loss of any positive market value of the swap

For any cleared swap, we bear the credit risk of both the DCO and the relevant FCM, in the form of potential late or unrecoverable payments, potential difficulty

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In the event of a default by the DCO or FCM, we also bear market risk, because the asset or liability being hedged is no longer effectively hedged.

Most swaps must be or are traded on a Swap Execution Facility.

We bear additional fees for use of the DCO.

We also bear fees for use of the Swap Execution Facility.

We continue to bear risk of trade errors.

Because the standardized swaps available on Swap Execution Facilities and cleared through DCOs are not as customizable as the swaps available before the implementation of Dodd-Frank Act, we may bear additional basis risk from hedge positions that do not exactly reflect the interest rate risk on the asset being hedged.

or delay in accessing collateral that we have posted, and potential loss of any positive market value of the swap position.

In the event of a default by the DCO or FCM, we also bear market risk, if the asset or liability being hedged is no longer effectively hedged.

We also bear fees for use of the DCO and Swap Execution Facility, as well as risks associated with trade errors.

Because the standardized swaps available on Swap Execution Facilities and cleared through DCOs are not as customizable as uncleared swaps, we may bear additional basis risk from hedge positions that do not exactly reflect the interest rate risk on the asset being hedged.

Futures transactions are subject to risks analogous to those of cleared swaps, except that for futures transactions we bear a higher risk that collateral we have posted is unavailable to us if the FCM defaults.

Some derivatives transactions, such as swaptions, are not currently required to be cleared through a DCO.

Therefore, we bear the credit risk of the dealer with which we executed the swaption.

Therefore, we bear the credit risk of the dealer with which we executed the swaption or other uncleared transaction.

TBA contracts and swaps on CMBX indexes are also not cleared, and we bear the credit risk of the dealer.

Derivative transactions are subject to margin requirements.

Certain derivative transactions are subject to margin requirements.

The relevant contract or clearinghouse rules dictate the method of determining the required amount of margin, the types of collateral accepted and the timing required to meet margin calls.

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Therefore, in some situations a derivative position can be illiquid, forcing us to hold it to its maturity or scheduled termination date.

It is possible that new regulations could be issued governing the derivatives market, or that additional types of derivatives switch to being executed on Swap Execution Facilities or cleared on a DCO.

It is possible that new regulations could be issued governing the derivatives market, including requiring additional types of derivatives to be executed on Swap Execution Facilities or cleared through a DCO.

Ongoing regulatory change in this area could increase costs, increase risks, and adversely affect our business and results of operations.

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To the extent that we are not able to profitably execute future securitizations of residential mortgage loans or other assets, including for the reasons described above or for other reasons, it could have a material adverse impact on our business and financial results.

Risks of Ownership of Our Common Stock

Our charter does not permit ownership of over 9.8% in number of shares or value of our common stock or any class of our preferred stock.

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Risks of Ownership of Our Common Stock

Our charter does not permit ownership of over 9.8% in number of shares or value of our common stock or any class of our preferred stock.

To maintain our qualification as a REIT for U.S.

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• Maryland Business Combination Act.

The Maryland Business Combination Act provides that, subject to certain exceptions and limitations, certain business combinations between a Maryland corporation and an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our outstanding voting stock or an affiliate or associate of ours who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner of 10% or more of the voting power of our then outstanding shares of stock) or an affiliate of any interested stockholder are prohibited for five years after the most recent date on which the stockholder becomes an interested stockholder, and thereafter imposes two super-majority stockholder voting requirements on these combinations, unless, among other conditions, our common stockholders receive a minimum price, as defined in the MGCL, for their shares of stock and the consideration is received in cash or in the same form as previously paid by the

interested stockholder for its shares of stock.

conditions, our common stockholders receive a minimum price, as defined in the MGCL, for their shares of stock and the consideration is received in cash or in the same form as previously paid by the interested stockholder for its shares of stock.

We have opted out of the Maryland Business Combination Act in our charter.

1 unchanged sentence

• Maryland Control Share Acquisition Act.

The Maryland Control Share Acquisition Act provides that, subject to certain exceptions, holders of “control shares” (defined as voting shares that, when aggregated with all other shares controlled by the stockholder, entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares”) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding shares owned by the acquirer, by our officers, or by our employees who are also directors of our company.

We are currently subject to the Maryland Control Share Acquisition Act.

• Title 3, Subtitle 8 of the MGCL:

These provisions of the MGCL permit our Board of Directors, without stockholder approval and regardless of what is provided in our charter or bylaws, to implement

ANNALY CAPITAL MANAGEMENT, INC.

AND SUBSIDIARIES

certain takeover defenses, including adopting a classified board or increasing the vote required to remove a director.

shares owned by the acquirer, by our officers, or by our employees who are also directors of our company.

We are currently subject to the Maryland Control Share Acquisition Act.

• Title 3, Subtitle 8 of the MGCL:

These provisions of the MGCL permit our Board of Directors, without stockholder approval and regardless of what

is provided in our charter or bylaws, to implement certain takeover defenses, including adopting a classified board or increasing the vote required to remove a director.

We have not established a minimum dividend payment level and cannot assure stockholders of our ability to pay dividends in the future.

26 unchanged sentences

Principal and interest payments relating to the securities issued by Fannie Mae and Freddie Mac are only guaranteed by each respective Agency.

In September 2008, Fannie Mae and Freddie Mac were placed into the conservatorship of the FHFA, their federal regulator, pursuant to its powers under The Federal Housing Finance Regulatory Reform Act of 2008, a part of the Housing and Economic Recovery Act of 2008.

In addition to FHFA becoming the conservator of Fannie Mae and Freddie Mac, the U.S.

Department of the Treasury entered into Preferred Stock Purchase Agreements with the FHFA and have taken various actions intended to provide Fannie Mae and Freddie Mac with additional liquidity in an effort to ensure their financial stability.

ANNALY CAPITAL MANAGEMENT, INC.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business