SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
[ ] Confidential, For Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
ANNALY MORTGAGE MANAGEMENT, INC.
(Name of Registrant as Specified in Its Charter)
------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: ____________________
(2) Aggregate number of securities to which transaction applies: _______________________
(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act
Rule 0-11:(1) _________________________________________________________
(4) Proposed maximum aggregate value of transaction: ___________________________
(5) Total fee paid _____________________________________________________
[ ] Fee paid previously with preliminary materials:____________________
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Filing Date:
--------------
(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
ANNALY MORTGAGE MANAGEMENT, INC.
12 EAST 41ST STREET, SUITE 700
NEW YORK, NEW YORK 10017
-------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 17, 2002
-------------------
To the Stockholders of ANNALY MORTGAGE MANAGEMENT, INC.:
The 2002 Annual Meeting of Stockholders of Annaly Mortgage Management,
Inc. ("we" or "us") will be held at the Union League Club, 38 East 37th Street,
New York, New York 10178 in the Library, on Friday, May 17, 2002 at 10:00 a.m.,
New York time, for the following purposes:
(1) To elect three Class III directors for a term of three years each;
(2) To ratify the selection of Deloitte & Touche LLP as our independent
auditors for the current fiscal year;
(3) To approve the amendment of our charter to increase the number of
authorized shares to 500,000,000; and
(4) To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
Provision is made on the enclosed proxy card for your direction as to
the matters set forth as Items (1), (2), and (3) above. Further information
concerning these matters is set forth in the accompanying proxy statement.
Holders of record of our common stock at the close of business on March
21, 2002 are entitled to receive notice of and to vote at our 2002 annual
meeting of stockholders and at any adjournment or postponement.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT OUR ANNUAL MEETING
WHETHER OR NOT YOU ARE PERSONALLY ABLE TO ATTEND. IF YOU DO NOT EXPECT TO ATTEND
THE MEETING IN PERSON, WE URGE YOU TO PLEASE SIGN AND DATE THE ACCOMPANYING
PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE. THIS WILL ENSURE THAT YOUR
SHARES ARE VOTED IN ACCORDANCE WITH YOUR WISHES AND THAT A QUORUM WILL BE
PRESENT AT THE ANNUAL MEETING.
By order of the Board of Directors
/s/ Michael A.J. Farrell
MICHAEL A. J. FARRELL
Chairman of the Board,
Chief Executive Officer, and
President
New York, New York
____________, 2002
1
ANNALY MORTGAGE MANAGEMENT, INC.
12 EAST 41ST STREET, SUITE 700
NEW YORK, NEW YORK 10017
----------------------
2002 ANNUAL MEETING OF STOCKHOLDERS
----------------------
PROXY STATEMENT
SOLICITATION
Annaly Mortgage Management, Inc. ("we" or "us") is furnishing this
proxy statement in connection with our solicitation of proxies to be voted at
our 2002 annual meeting of stockholders. We will hold the annual meeting at the
Union League Club, 38 East 37th Street, New York, New York 10178 in the Library
on Friday, May 17, 2002 at 10:00 a.m., New York time, and any postponements or
adjournments thereof. We are sending this proxy statement and the enclosed proxy
to our stockholders commencing on or about _________, 2002. Our principal
executive offices are located at 12 East 41st Street, Suite 700, New York, New
York 10017.
We will solicit proxies primarily by mail but may also solicit proxies
in person, by telephone or facsimile or through our internet website
(www.annaly.com), in each case, by our officers and employees who will not be
additionally compensated for these activities. We will request brokers,
nominees, fiduciaries and other persons holding stock in their names for others,
or holding stock for others who have the right to give voting instructions, to
forward proxy material to their principals and request authority for the
execution of the proxy. We will bear the total cost of soliciting proxies.
TABLE OF CONTENTS
Notice of Annual Meeting of Stockholders 1
Questions and Answers about the Meeting and Voting 3
Voting 6
Proposal I -- Election of Directors 6
Directors 7
Management 9
Security Ownership of Certain Beneficial Owners and Management 10
Executive Compensation 11
Report of the Audit Committee 15
Proposal II -- Ratification of Selection of Independent Auditors 17
Relationship with Independent Auditors 17
Proposal III -- Approval of Amendment to Our Charter to Increase the Number of Authorized Shares 17
Other Business 18
Proposals of Stockholders 18
Section 16(a) Beneficial Ownership Reporting Compliance 18
Other Matters 18
2
QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING
Q: WHAT AM I VOTING ON?
A: (1) Re-election of three directors, Michael A.J. Farrell, Jonathan
D. Green, and John A. Lambiase;
(2) Ratification of Deloitte & Touche LLP as our independent auditors
for 2002; and
(3) A proposal to amend our charter to increase the number of
authorized shares of capital stock.
Q: HOW DOES THE BOARD RECOMMEND I VOTE ON THE PROPOSALS?
A: The Board recommends you vote FOR each of the nominees, FOR the
approval of Deloitte & Touche LLP, and FOR the proposal to amend the
charter to increase the number of authorized shares of capital stock.
Q: WHO IS ENTITLED TO VOTE AT THE MEETING?
A: Stockholders of record as of the close of business on March 21, 2002
(the "Record Date") are entitled to vote.
Q: HOW DO I VOTE?
A: If your common stock is held by a broker, bank or other nominee, you
will receive instructions from them which you must follow in order to
have your shares voted. If you hold your shares in your own name as a
holder of record, you may instruct the proxies how to vote your common
stock by using the toll free telephone number or the Internet voting
site listed on the proxy card or by signing, dating, and mailing the
proxy card in the postage paid envelope that we have provided to you.
Of course, you can always come to the meeting and vote your shares in
person. When you use the telephone system or our internet voting site,
the system verifies that you are a stockholder through the use of a
unique personal identification number that is assigned to you. The
procedure allows you to instruct the proxies how to vote your shares
and to confirm that your instructions have been properly recorded.
Specific directions for using the telephone and Internet voting
systems are on the proxy card. Whichever of these methods you select
to transmit your proxy card without giving specific voting
instructions, the proxies will vote your shares in accordance with
those instructions. If you sign and return a proxy card without giving
specific voting instructions, your shares will be voted FOR the
election of Michael A.J. Farrell, Jonathan D. Green, and John A.
Lambiase as directors, FOR the ratification of Deloitte & Touche LLP
as our independent auditors for 2002, and FOR the proposal to amend
our charter to increase the numbe of authorized shares to 500,000,000.
We are not now aware of any matters to be presented other than those
described in this proxy statement. If any matters not described in the
proxy statement are properly presented at the meeting, the proxies
will use their own judgement to determine how to vote your shares. If
the meeting is adjourned, your common stock may be voted by the
proxies on the new meeting date as well, unless you have revoked your
proxy instructions.
3
Q: WHAT IS THE PROPOSED CHARTER AMENDMENT?
A: Our charter currently allows us to issue up to a combined total of
100,000,000 shares of capital stock. To date we have issued 82,870,659
shares of capital stock. To retain the ability to raise additional
funds through the issuance of additional shares, we need to increase
the number of shares we are currently authorized to issue. The
proposed amendment of our charter raises the total number of
authorized shares are permitted to issue from 100,000,000 shares to
500,000,000 shares. While we have no immediate plans to issue
additional shares of capital stock, the Board believes it is necessary
for us to have the authority to issue additional shares.
Q: HOW WILL VOTING ON ANY OTHER BUSINESS BE CONDUCTED?
A: Other than the three proposals described in this Proxy Statement, we
know of no other business to be considered at the Annual Meeting. If
any other matters are properly presented at the meeting, your signed
proxy card authorizes Michael A.J. Farrell, the our Chairman of the
Board of Directors, Chief Executive Officer, and President, and
Jennifer A. Stephens, our Secretary, to vote on those matters
according to their best judgment.
Q: WHO WILL COUNT THE VOTE?
A: Representatives of Mellon Investor Services LLC, the independent
Inspector of Elections, will count the votes.
Q: WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE PROXY CARD?
A: It probably means your shares are registered differently and are in
more than one account. Sign and return all proxy cards to ensure that
all your shares are voted.
Q: HOW MANY SHARES CAN VOTE?
A: As of the Record Date, 82,870,659 shares of common stock were issued
and outstanding. Holders of our common stock are entitled to one vote
per share for each matter before the meeting.
Q: CAN I CHANGE MY VOTE?
A: Yes. You may change your vote at any time before the proxy is
exercised. You must (a) file with the our Corporate Secretary a
written notice of revocation or (b) timely deliver a valid,
later-dated proxy. Attendance at the Annual Meeting will not have the
effect of revoking a proxy unless you give written notice of
revocation to the Secretary before the proxy is exercised or you vote
by written ballot at the Annual Meeting.
Q: WHAT CONSTITUTES A "QUORUM"?
A: A quorum is a majority of the voting power of the shares entitled to
vote at the meeting. Since there were 82,870,659 eligible votes as of
the Record Date, we will need at least 41,435,330 votes present in
person or by proxy at the Annual Meeting for a quorum to exist.
Q: WHAT HAPPENS IF I ABSTAIN?
A: If you submit a properly signed proxy card, but you abstain on one or
more proposals, you will still be considered present for purposes of
calculating a quorum. Your abstention will not count "for" or
"against" either the election of directors (Proposal One) or the
approval of Deloitte & Touche LLP as our auditors (Proposal Two),
however, an abstention will have the same effect as a vote "against"
the proposed amendment to our charter (Proposal Three).
4
Q: WHAT ARE BROKER NON-VOTES AND HOW WILL THEY BE TREATED?
A: Broker non-votes are shares held by brokers or nominees for which the
broker or nominee (1) lacks discretionary power to vote, and (2) never
received specific voting instructions from the beneficial owner of the
shares. Broker non-votes are counted for purposes of calculating a
quorum. Broker non-votes will not count "for" or "against" either the
election of directors (Proposal One) or the approval of Deloitte &
Touche LLP as our auditors (Proposal Two), however, broker non-votes
will have the same effect as a vote "against" the proposed amendment
to our charter (Proposal Three).
Q: WHO CAN ATTEND THE ANNUAL MEETING?
A: All stockholders as of March 21, 2002 can attend the Annual Meeting,
although seating is limited. If you plan to attend, please check the
box on your proxy card. If your shares are held through a broker and
you would like to attend, please either (1) write write Kathryn Fagan,
Chief Financial Officer, Annaly Mortgage Management, Inc., 12 East
41st Street, Suite 700, New York, New York 10017, or (2) bring to the
meeting a copy of your brokerage account statement or an omnibus proxy
(which you can get from your broker).
Q: WHEN ARE STOCKHOLDER PROPOSALS DUE FOR THE 2003 ANNUAL MEETING?
A: If you are submitting a proposal to be included in next year's proxy
statement pursuant to Rule 14a-8 under the Securities Exchange Act of
1934, we must receive the proposal by , 2002.
Q: HOW WILL WE SOLICIT PROXIES FOR THE ANNUAL MEETING?
A: We are soliciting proxies by mailing this Proxy Statement and proxy
card to the stockholders. In addition to solicitations by mail, some
of our directors, officers and regular employees may, without extra
pay, make additional solicitations by telephone or in person. We will
pay the solicitation costs, and will reimburse banks, brokerage houses
and other custodians, nominees and fiduciaries for their reasonable
expenses in forwarding proxy materials to beneficial owners. We may
also engage a proxy solicitation company in connection with the Annual
Meeting for a fee which is not expected to exceed $2,500 plus
out-of-pocket expenses.
Q: HOW DO I OBTAIN A COPY OF THE ANNUAL REPORT ON FORM 10-K FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION?
A: Our 10-K is actually part of the Annual Report that is being mailed to
you with this Proxy Statement. If you need another copy, please write
Kathryn Fagan, Chief Financial Officer, Annaly Mortgage Management,
Inc., 12 East 41st Street, Suite 700, New York, New York 10017.
5
VOTING
You will only be entitled to vote at the meeting if you were a holder
of record of our common stock at the close of business on the record date, March
21, 2002. There were 82,870,659 shares of common stock outstanding on the record
date, and each stockholder will be entitled to one vote at the meeting for each
share registered in the stockholder's name on the record date. Holders of common
stock are not entitled to cumulate their votes on any matter to be considered at
the meeting. The presence at the meeting, in person or by proxy, of the holders
of a majority of the total number of shares of common stock outstanding on the
record date constitutes a quorum for the transaction of business at the meeting.
All properly executed proxies delivered pursuant to this solicitation
and not revoked will be voted at the annual meeting in accordance with the
directions given. Regarding the election of directors to serve until the 2005
annual meeting of stockholders, in voting by proxy, you may vote in favor of all
nominees, withhold your vote as to all nominees or withhold your vote as to
specific nominees. With respect to the proposal to ratify Deloitte & Touche LLP
as our independent auditors for the current fiscal year, you may vote in favor
of the proposal or against the proposal, or you may abstain from voting. With
respect to proposed amendment to our charter to increase the number of
authorized shares from 100,000,000 to 500,000,000, you may vote in favor of the
proposal or against the proposal, or you may abstain from voting. You should
specify your choices on the enclosed form of proxy. If you do not provide
specific instructions on all the matters to be acted upon, the shares
represented by a signed proxy will be voted FOR the election of all nominees,
FOR the proposal to ratify the selection of Deloitte & Touche LLP as our
independent auditors for the current fiscal year and FOR the proposed amendment
to our charter to increase the number of authorized shares from 100,000,000 to
500,000,000. Directors will be elected by a plurality of the votes cast by the
holders of the shares of common stock voting in person or by proxy at the annual
meeting. Ratification of the selection of our independent auditors will require
the affirmative vote of the holders of a majority of the votes cast. The
proposed amendment to our charter to increase the number of authorized shares
from 100,000,000 to 500,000,000 requires the approval of a majority of the total
number of issued and outstanding shares of our common stock, par value $0.01 per
share. Abstentions will have no effect on the outcome of either the vote on the
election of directors or the vote on the ratification of the selection of
Deloitte & Touche LLP as independent auditors. Broker non-votes will not be
included in vote totals and will have no effect on the outcome of either the
vote on the election of directors or the vote on the ratification of the
selection of Deloitte & Touche LLP as independent auditors. Abstentions will
have the effect of a vote "against" the proposed amendment to our charter to
increase the number of authorized shares from 100,000,000 to 500,000,000. Broker
non-votes will not be included in vote totals and will have the effect of a vote
"against" the proposed amendment to our charter to increase the number of
authorized shares from 100,000,000 to 500,000,000.
If you submit a proxy, you may revoke it at any time prior to the
voting of the proxy by written notice to our Secretary or by attending the
meeting and voting your shares in person.
After the initial mailing of this proxy statement, our officers and
employees may solicit proxies in person, by mail, telephone or facsimile or
through our website, but they will not receive any additional compensation for
this activity. We will pay all expenses with respect to this solicitation of
proxies, including printing and postage costs. Our agents and we will make
arrangements with brokers and other custodians, nominees and fiduciaries to send
proxies and the proxy material to their principals and, upon request, we will
reimburse them for their reasonable expenses in doing so. We may engage an
outside proxy soliciting firm to assist in the solicitation of proxies. We will
pay reasonable fees which do not expect to exceed $2,500 and out-of-pocket costs
and expenses if we elect to engage such a firm.
PROPOSAL I
ELECTION OF DIRECTORS
At the annual meeting, the stockholders will vote to elect three Class
III directors, whose terms will expire at our annual meeting of stockholders in
2005, subject to the election and qualification of their successors or to their
earlier death, resignation or removal.
6
The persons named in the enclosed proxy will vote to elect Michael A.J.
Farrell, Jonathan D. Green, and John A. Lambiase as Class III directors, unless
you withhold the authority of these persons to vote for the election of any or
all of the nominees by marking the proxy to that effect. Both of these
individuals currently are directors.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR MICHAEL A.J. FARRELL,
JONATHAN D. GREEN, AND JOHN A. LAMBIASE AS DIRECTORS TO HOLD OFFICE UNTIL OUR
ANNUAL MEETING OF STOCKHOLDERS IN 2005 AND UNTIL THEIR RESPECTIVE SUCCESSORS ARE
DULY ELECTED AND QUALIFIED. THE PERSONS NAMED IN THE ENCLOSED PROXY WILL VOTE
YOUR PROXY IN FAVOR OF THESE NOMINEES UNLESS YOU SPECIFY A CONTRARY CHOICE IN
YOUR PROXY.
DIRECTORS
We have three classes of directors. Our class I directors serve until
our annual meeting of stockholders in 2003; our class II directors serve until
our annual meeting of stockholders in 2004; and our class III directors to be
elected at this year's meeting will serve until our annual meeting of
stockholders in 2005. Set forth below are the names and certain information on
each of our directors.
CLASS I DIRECTORS
Spencer I. Browne, age 52, was elected on January 28, 1997 to serve as
a director of Annaly. Mr. Browne has held various executive and management
positions with several publicly traded companies engaged in businesses related
to the residential and commercial mortgage loan industry. From August 1988 until
September 1996, Mr. Browne served as President, Chief Executive Officer and a
director of Asset Investors Corporation (AIC), a New York Stock Exchange traded
company he co-founded in 1986. He also served as President, Chief Executive
Officer and a director of Commercial Assets, Inc., an American Stock Exchange
traded company affiliated with AIC, from its formation in October 1993 until
September 1996. In addition, from June 1990 until March 1996, Mr. Browne served
as President and a director of M.D.C. Holdings, Inc., a New York Stock Exchange
traded company and the parent company of a major homebuilder in Colorado. Mr.
Browne also has served as a director of Altiva Financial Corporation since
November 1996 and Convergent Communications, Inc. since December 1999.
Wellington J. St. Claire, age 38, was elected on December 5, 1996 to
serve as Vice Chairman of the Board and a director of Annaly with responsibility
for managing our portfolio. She has been Senior Vice President of Fixed Income
Discount Advisory Company, a registered investment advisor (FIDAC), from March
1995 to the present, Treasurer since July 1994 and Chief Investment Officer
since February 1997. From July 1994 through March 1995 she was a Vice President
of FIDAC. Ms. St. Claire has been the portfolio manager for the Floating Rate
Fund since its inception in August 1994. Prior to joining FIDAC, from March 1992
to July 1994, Ms. St. Claire had been Vice President responsible for asset
selection and financing at Citadel Funding Corporation. Prior to joining Citadel
she had been a trader on the mortgage-backed securities desk at Schroder
Wertheim and Co., Inc. She has attended the New York Institute of Finance for
intense mortgage-backed securities studies.
CLASS II DIRECTORS
Kevin P. Brady, age 46, was elected on January 28, 1997 to serve as a
director. Mr. Brady is the principal of KPB Associates Inc., an accounting firm
that specializes in corporate taxation, finance and software consulting. Mr.
Brady founded KPB Associates Inc. in December 1993. From July 1986 through
November 1993, Mr. Brady worked for PriceWaterhouseCoopers in New York City
where he concentrated on international tax planning for multinational
corporations and held a number of senior management positions. Prior to joining
Price Waterhouse Coopers, Mr. Brady worked in the corporate tax department of
Merck & Co. Mr. Brady is a Certified Public Accountant.
Donnell A. Segalas, age 44, was elected on January 28, 1997 to serve as
a director of Annaly. Mr. Segalas is employed by Phoenix Investment Partners,
Ltd., to oversee sales and marketing for its Alternative Financial Products
division. Prior to joining Phoenix Investment Partners, Ltd., Mr. Segalas was a
Principal of Maplewood Partners, L.L.C., a private equity investment fund from
1997 to January 2001. Prior to his joining Maplewood Partners, Mr. Segalas was a
Managing Director at Rodman & Renshaw, Inc. in the mortgage-backed securities
7
department from 1994 to June 1997. In December 1995, Mr. Segalas was also given
the additional responsibility to manage Rodman & Renshaw's Structured Finance
Group. From 1990 to 1994, Mr. Segalas served as Senior Vice President in the
mortgage-backed securities department at Tucker Anthony, Inc., where he
co-managed the firm's structured finance group. Prior to that time, Mr. Segalas
had been a Senior Vice President at Smith Barney, Inc. and Corporate Vice
President at Drexel Burnham Lambert.
CLASS III DIRECTORS
Michael A. J. Farrell, age 50, was elected on December 5, 1996 to serve
as Chairman of the Board and Chief Executive Officer of Annaly. Since November
1994, he has been the President and CEO of FIDAC. Mr. Farrell is the sole
stockholder of FIDAC. He is a member of the boards of directors of the U.S.
Dollar Floating Rate Fund and the Tellus Asia Recovery Fund. Prior to founding
FIDAC, from February 1992 to July 1994, Mr. Farrell served as President of
Citadel Funding Corporation. From April 1990 to January 1992, Mr. Farrell was a
managing director for Schroder Wertheim & Co. Inc. in the fixed income
department. In addition to being the former Chairman of the Primary Dealers
Operations Committee of the Public Securities Association (from 1981 through
1985) and its mortgage-backed securities division, he is a former member of the
Executive Committee of its Primary Dealers Division. Prior to his employment
with Schroder Wertheim, Mr. Farrell had been President of L.F. Rothschild
Mortgage Capital, Inc., Vice President of Trading at Morgan Stanley and Co.,
Inc., and Senior Vice President of Merrill Lynch and Co., Inc. Mr. Farrell began
his career at E.F. Hutton and Company in 1971. Mr. Farrell has 26 years of
experience in fixed income trading, management and operations.
Jonathan D. Green, age 55, was elected on January 28, 1997 to serve as
a director of Annaly. Mr. Green has been the President and Chief Executive
Officer of Rockefeller Center Management Corporation (RCMC) and Rockefeller
Center Development Corporation (RCDC), subsidiaries of The Rockefeller Group
(RGI), from July 1995 to the present. Mr. Green joined RGI in 1980 as Assistant
Vice President and Real Estate Counsel, was appointed Vice President, Secretary
and General Counsel in 1983, and was elected Chief Corporate Officer in 1991. As
President of RCMC, Mr. Green is responsible for all aspects of RGI's real estate
ownership and management interests in Rockefeller Center in midtown Manhattan.
As President of RCDC, Mr. Green oversees RGI's real estate development projects
including the International Trade Center in Morris County, New Jersey and
Rockefeller Plaza West in midtown Manhattan. Before joining RGI, Mr. Green was
affiliated with the New York City law firm of Thacher, Proffitt & Wood.
John A. Lambiase, age 62, was elected on January 28, 1997 to serve as a
director of Annaly. Mr. Lambiase was managing director in global operations at
Salomon Brothers from 1985 through his retirement in 1991. Mr. Lambiase joined
Salomon in 1979 as director of internal audit. Mr. Lambiase has served as
Chairman of the Mortgage-Backed Securities Clearance Corporation, a member of
the board of directors of Prudential Home Mortgage and a member of the Board of
the National Securities Clearance Corporation, and was a founding director and
Chairman of the Participation Trust Company. Mr. Lambiase also served on
Salomon's Credit Committee. Prior to joining Salomon, from 1972 through 1979,
Mr. Lambiase was President of Loeb Rhodes Wall Street Settlement Corporation
with responsibility for securities clearance of over 130 member firms. Prior to
Loeb Rhodes, Mr. Lambiase had been the Chief Financial Officer and a General
Partner of W.E. Hutton. Mr. Lambiase is a Certified Public Accountant.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
Compensation Committee
The members of our compensation committee are Spencer Browne, John
Lambiase and Donnell Segalas. The compensation committee administers our
Long-Term Stock Incentive Plan (the "Incentive Plan") and recommends changes to
that Plan to our board when appropriate. The compensation committee also
approves compensation for our officers.
Audit Committee
The members of our audit committee are Kevin Brady, Jonathan Green, and
John Lambiase. The audit committee recommends to our board the engagement or
discharge of independent public accountants, reviews the
8
plan and results of the auditing engagement with our Chief Financial Officer and
our independent public accountants, and reviews with our Chief Financial Officer
the scope and nature of our internal auditing system.
Consistent with New York Stock Exchange audit committee structure and
membership requirements, the members of the audit committee are independent
directors. The audit committee operates under a written charter adopted by the
Board.
Nominating Committee
The members of our nominating committee are Spencer Browne, Wellington
St. Claire, and Donnell Segalas. The nominating committee recommends to the
board persons to be nominated as directors or to be elected to fill vacancies on
the board. The nominating committee will consider nominees recommended by our
stockholders. These recommendations should be submitted in writing to our
Secretary.
Meetings
During our fiscal year ended December 31, 2001, our Board of Directors
held five meetings. During 2001, the compensation committee held three meeting,
the audit committee held four meetings and the nominating committee held one
meeting. Each director attended at least 75% of the aggregate number of meetings
held by the Board and 75% of the aggregate number of meetings of each committee
on which the director served.
COMPENSATION OF DIRECTORS
We paid an annual director's fee, effective May 1, 2001, for the year
2001 to each director who is not an officer or employee (an "independent
director") equal to $40,000, a fee of $500 for each meeting of the Board or any
committee attended by each independent director (or $250 for any meeting at
which the director participates by conference telephone call), and reimbursement
of costs and expenses of all directors for attending these meetings.
Our Long-Term Stock Incentive Plan provides that each independent
director, upon appointment to the Board, receives a non-discretionary automatic
grant of non-qualified stock options for the purchase of 5,000 shares of common
stock; these options vest in four equal installments over a period of four years
from the date of grant. In addition, each independent director is entitled to
receive on June 26 of each year that he or she serves as a director options to
purchase an additional 1,250 shares of common stock; these options vest on the
date of grant. The exercise price for each option is the fair market value of
our common stock as of the date on which the option is granted. Independent
directors also are entitled to receive discretionary awards under the Incentive
Plan. On July 31, 1998, we granted to each independent director options to
purchase 6,500 shares of common stock at an exercise price of $8.13, the closing
price of our common stock as of the date of grant; these options vest in four
equal installments on July 31, 1999, 2000, 2001, and 2002. On November 18, 1999,
we granted to each independent director options to purchase 20,000 shares of
common stock at an exercise price of $8.63, the closing price of our common
stock as of the date of grant; these options vest in four equal installments on
November 18, 2000, 2001, 2002 and 2003. On November 29, 2000, we granted to each
independent director options to purchase 3,250 shares of common stock at an
exercise price of $7.94, the closing price of our common stock as of the date of
grant; these options vest in four equal installments on November 29, 2001, 2002,
2003, and 2004.
MANAGEMENT
Name Position
----------------------------------------------------------------------------------------------------------------------
Michael A.J. Farrell Chairman of the Board, Chief Executive Officer, and President
Wellington St. Claire Vice Chairman of the Board and Chief Investment Officer
Kathryn F. Fagan Chief Financial Officer and Treasurer
Jennifer A. Stephens Secretary and Investment Officer
9
Biographical information on Mr. Farrell and Ms. St. Claire is provided
above. Certain biographical information for Ms. Fagan and Ms. Stephens is set
forth below.
Kathryn F. Fagan, age 35, was employed by Annaly on April 1, 1997 in
the positions of Chief Financial Officer and Treasurer. From June 1, 1991 to
February 28, 1997, Ms. Fagan was Chief Financial Officer and Controller of First
Federal Savings & Loan Association of Opelousas, Louisiana. First Federal is a
publicly owned savings and loan that converted to the stock form of ownership
during her employment period. Ms. Fagan's responsibilities at First Federal
included all financial reporting, including reports for internal use and reports
required by the SEC and the Office of Thrift Supervision. Her duties also
included asset/liability management, internal control compliance and the
management of First Federal's investment portfolio. During the period from
September 1988 to May 1992, Ms. Fagan was employed as a bank and savings and
loan auditor by John S. Dowling & Company, a corporation of Certified Public
Accountants. Ms. Fagan is a Certified Public Accountant and has a Masters Degree
in Business Administration.
Jennifer A. Stephens, age 31, was employed by Annaly on December 5,
1996 in the positions of Secretary and Investment Officer. She joined FIDAC at
its inception in July 1994 and becameVice President in March 1995. Ms. Stephens
has been a portfolio manager for the U.S. Dollar Floating Rate Fund since its
inception in August 1994. She has designed several software systems for FIDAC
including portfolio management systems, mortgage-backed security pricing
systems, exposure reporting systems, and accounting systems. Prior to joining
FIDAC, she worked for Citadel Funding Corporation where she assisted in the
management of the funding of mortgage-backed security portfolios. Ms. Stephens
is currently a candidate to become a Chartered Financial Analyst (CFA).
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 21, 2001
relating to the beneficial ownership of our common stock by (i) all persons that
we know beneficially own more than 5% of our outstanding common stock, (ii) each
of our executive officers and directors and (iii) all of our officers and
directors as a group. Except as otherwise indicated, to our knowledge, each
stockholder listed below has sole voting and investment power with respect to
the shares beneficially owned by the stockholder.
Shares Beneficially Owned
--------------------------------------------
Beneficial Owner Number Percent
----------------------------------------------------------------------------------------------------------
Michael A.J. Farrell 216,703 (1) *
Wellington J. St. Claire 174,031 (2) *
Kathryn F. Fagan 45,317 (3) *
Jennifer A. Stephens 38,850 (4) *
Kevin P. Brady 29,338 (5)(9) *
Spencer I. Browne 26,938 (6) *
Jonathan D. Green 29,438 (5) *
John Lambiase 51,938 (7) *
Donnell A. Segalas 68,038 (8) *
All Executive Officers and Directors as a Group
(10 persons) 680,591 (1)(2)(3)(4) 0.8%
(5)(6)(7)(8)
* Represents beneficial ownership of less than one percent of the common stock.
(1) Includes 90,612 shares of common stock subject to vested options granted
under the Incentive Plan to Mr. Farrell that were exercisable as of March
21, 2002 or have or will first become exercisable within 60 days after such
date.
10
(2) Includes 70,333 shares of common stock subject to vested options granted
under the Incentive Plan to Ms. St. Claire that were exercisable as of
March 21, 2002 or have or will first become exercisable within 60 days
after such date.
(3) Includes 32,538 shares of common stock subject to vested options granted
under the Incentive Plan to Ms. Fagan that were exercisable as of March 21,
2002 or have or will first become exercisable within 60 days after such
date.
(4) Includes 26,740 shares of common stock subject to vested options granted
under the Incentive Plan to Ms. Stephens that were exercisable as of March
21, 2002 or have or will first become exercisable within 60 days after such
date.
(5) Includes 21,948 shares of common stock subject to vested options granted
under the Incentive Plan to each of Kevin P. Brady and Jonathan D. Green
that were exercisable as of March 21, 2002 or have or will first become
exercisable within 60 days after such date
(6) Includes 9,563 shares of common stock subject to options granted under the
Incentive Plan to Spencer I. Browne that were exercisable as of March 21,
2002 or have or will first become exercisable within 60 days after such
date.
(7) Includes 3,438 shares of common stock subject to options granted under the
Incentive Plan to John A. Lambiase that were exercisable as of March 21,
2002 or have or will first become exercisable within 60 days after such
date.
(8) Includes 11,188 shares of common stock subject to options granted under the
Incentive Plan to Donnell A. Segalas that were exercisable as of March 21,
2002 or have or will first become exercisable within 60 days after such
date.
(9) Includes 1,500 shares of common stock held by certain members of Mr.
Brady's immediate family.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table below sets forth the aggregate compensation we paid or
accrued during our fiscal years ended December 31, 2001, 2000, and 1999, to our
Chief Executive Officer, our four highest paid other executive officers serving
in their positions at December 31, 2001.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION(1) LONG-TERM
COMPENSATION(2)
------------------------------------------------------------
AWARDS
RESTRICTED SECURITIES
STOCK UNDERLYING
SALARY BONUS AWARDS OPTIONS
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#)
-------------------------------------------------------------------------------------------------------------
Michael A.J. Farrell 2001 $925,000 $750,000(3) $0 0
Chairman of the Board, 2000 $250,000 $150,000(4) $0 30,000
Chief Executive Officer, and 1999 $250,000 $100,000 $0 60,000
President
Wellington J. St. Claire 2001 $718,750 $500,000 $0 0
Vice Chairman and 2000 $200,000 $100,000 $0 13,500
Portfolio Manager 1999 $200,000 $50,000 $0 40,000
Kathryn F. Fagan 2001 $316,667 $150,000 $0 0
Chief Financial Officer 2000 $125,000 $25,000 $0 13,500
and Treasurer 1999 $125,000 $25,000 $0 27,000
Jennifer Stephens 2001 $266,667 $125,000 $0 0
11
Secretary and Investment 2000 $80,250 $30,000 $0 11,000
Officer 1999 $68,750 $25,000 $0 22,000
James P. Fortescue 2001 $194,066 $100,000 $0 0
Senior Vice President and 2000 $60,749 $20,000 $0 7,500
Head of Repo Training 1999 $55,250 $20,000 $0 15,000
(1) None of the executive officers received perquisites or benefits that
totaled the lesser of $50,000 or 10% of his or her salary plus bonus
payments.
(2) At December 31, 2001, Mr. Farrell, Ms. St. Claire, Ms. Fagan, Ms. Stephens,
and Mr. Fortescue, held 114,091, 103,698, 12,779, 12,110, and 7,375 shares
of restricted stock, respectively, with values (based on the closing market
price of our common stock on December 31, 2001, which was $16.00 per share)
of $1,825,456, $1,659,168, $204,464, $193,760, and $94,000 respectively. We
pay dividends on the restricted stock when and as paid on our common stock.
(3) Paid in January 2002.
(4) Paid in January 2001.
EXERCISES AND VALUES OF OPTIONS
The following table sets forth certain information regarding options
exercised during the calendar year 2001, and held at year end, by our executive
officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY
ON VALUE OPTIONS AT FY-END OPTIONS AT FY-END
EXERCISE REALIZED (#) ($)(1)
NAME (#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
-------------------------------------------------------------------------------------------------------------
Michael A.J. Farrell 16,687 $200,244 102,612/69,803 102,612/69,803
Wellington J. St. Claire 33,276 $379,131 70,333/50,126 70,333/50,126
Kathryn F. Fagan 7,530 $59,261 32,538/32,275 32,538/32,275
Jennifer A. Stephens 7,760 $66,234 26,750/25,750 26,750/25,750
James P. Fortescue 1,900 $18,051 17,975/16,375 17,975/16,375
-----------------------
(1) Based on the closing sale price of our common stock on the New York Stock
Exchange on December 31, 2001 ($16.00 per share).
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE-OF-CONTROL
ARRANGEMENTS
We have entered into employment agreements with Mr. Farrell, Ms. St.
Claire, Ms. Fagan, and Ms. Stephens. Each employment agreement provides for a
term through December 31, 2002 and is automatically extended for an additional
year at the end of each year of the employment agreement, unless the officer or
we provide a prior written notice to the contrary. Each employment agreement
provides for annual salaries to Mr. Farrell, Ms. St. Claire, Ms. Fagan, and Ms.
Stephens based upon our book value. Mr. Farrell's employment agreement provides
for an annual salary equal to 0.25% of our book value, Ms. St. Claire's
employment agreements provide for an annual salary equal to 0.20% of our book
value. Ms. Fagan's and Ms. Stephens employment agreement provides for annual
salaries equal to 0.10% of our book value. Our "book value" is defined in the
employment agreements as the aggregate amounts reported on our balance sheet as
"Stockholders' Equity," excluding any
12
adjustments for valuation reserves (i.e., changes in the value of our portfolio
of investments as a result of mark-to-market valuation changes).
Our Board and the compensation committee evaluate base salary quarterly
and upon the raising of additional equity and they may, at their discretion,
raise the salary caps for our executive officers. The board of directors has
waived the salary caps for 2002. Base salaries can also be lowered at
management's discretion based upon our cash flow needs.
Pursuant to the employment agreements, the executive officers are
entitled to participate in our benefit plans, including the Incentive Plan. In
addition, the Board has established a bonus incentive compensation plan for our
executive officers. This program permits the Board, in its discretion, to award
cash bonuses annually to our executive officers. Each employment agreement
provides for the officer to receive his or her base salary and bonus
compensation to the date of the termination of employment by reason of death,
disability or resignation and to receive base compensation to the date of the
termination of employment by reason of a termination of employment for cause as
defined in the employment agreement. Each employment agreement also provides for
the subject officer to receive, in the event that we terminate the officer's
employment without cause, or if the officer resigns for "good reason" (as
defined in the employment agreement), an amount, 50% payable immediately and 50%
payable in monthly installments over the succeeding twelve months, equal to
three times the greater of the officer's combined maximum salary base and actual
bonus compensation for the preceding fiscal year or the average for the three
preceding years of the officer's combined actual base salary and bonus
compensation, subject in each case to a maximum amount of 1% of our book equity
value (exclusive of valuation adjustments) and a minimum amount of $250,000.
Section 280G of the Code may limit our ability to deduct these payments for
Federal income tax purposes. Each employment agreement also contains a
"non-compete" provision prohibiting the officer from managing, controlling,
participating in or operating a competing REIT for a period of one year
following termination of employment following our termination of the officer
without cause or resignation of the subject officer for "good reason." Providing
services to Fixed Income Discount Advisory Company (an affiliate) and its
customers is expressly excluded from operation of the "non-compete" provision.
In addition, all outstanding options and other awards granted to an officer
under our Incentive Plan immediately vest upon his or her termination without
cause or termination for "good reason." "Good reason" under the employment
agreements includes certain events resulting in a change of control of Annaly.
"Change of Control" includes a merger or consolidation of Annaly, a sale of all
or substantially all of our assets, changes in the identity of a majority of the
members of our board (other than due to the death, disability or age of a
director) or acquisitions of more than 9.8% of the combined voting power of our
capital stock, subject to certain limitations. Each agreement requires that the
officer act in accordance with provisions of Maryland law relating to corporate
opportunities.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our compensation committee is comprised solely of the following outside
directors: Spencer I. Browne, John A. Lambiase, and Donnell A. Segalas. None of
them has served as an officer or employee of Annaly or any affiliate or has any
other business relationship or affiliation with Annaly, except his service as a
director.
REPORT OF COMPENSATION COMMITTEE
The compensation structure for our executive officers and directors has
been developed with consideration for the following objectives:
1. Incentives for Management to Maximize Performance. We have designed
its compensation policy to provide the proper incentives to management to
maximize our performance in order to serve the best interests of our
stockholders. We have sought to achieve this objective through the granting of
stock options under the Incentive Plan, the award of compensation pursuant to
our bonus incentive compensation program, and employment agreements with its
executive officers where compensation is dependent upon our book value.
To date, our executive officers, pursuant to the Incentive Plan, have
been granted options to purchase, in the aggregate, 732,576 shares of common
stock with exercise prices ranging from $4.00 to $11.25. These options vest in
equal installments over a three, four or five-year period from the date of
grant.
13
Our Board also has adopted a bonus incentive compensation program for
executive officers. This program permits the compensation committee, in its
discretion, to award bonuses to our officers and employees based upon individual
performance, company performance, or such other factors as the compensation
committee determines to be appropriate. Bonuses may be paid in the form of cash,
stock options or other forms of compensation as determined appropriate by the
compensation committee. In 2001, bonuses were paid in the form of cash. One
important factor considered in these awards was our performance and growth
during 2001.
Pursuant to employment agreements entered into between us and our
executive officers, base compensation for the officers is calculated as a
percentage of our "book value." This arrangement was established based upon our
view at the time that successful performance by us would result in our ability
to raise additional capital.
2. Long-Term Commitment of Management. The committee believes that the
long-term commitment of its current management team is a crucial factor in our
future performance. This team includes Mr. Farrell, Ms. St. Claire and Ms.
Stephens, who have worked together at FIDAC since March 1995 and at Annaly since
its incorporation in November 1996 and its commencement of operations in
February 1997, and Ms. Fagan, who has worked at Annaly since April 1997. To
ensure the long-term commitment of its management team, we, with the approval of
the board of directors entered into employment agreements with Mr. Farrell, Ms.
St. Claire, Ms. Fagan, and Ms. Stephens. Each of these agreements provides for a
term through December 31, 2002 with automatic one-year extensions unless we or
the officer provides written notice to the contrary.
Consistent with the foregoing, we have structured our executive
compensation policies to promote the long-term commitment of management. A
significant portion of management compensation is in the form of stock options.
In addition, as indicated above, over 99% of the stock options granted by us
since inception have been options with vesting periods of four, five, or ten
years.
3. Comparability with Competitors' Compensation Structures. In
assisting us to develop guidelines for its compensation structure, including the
bonus incentive program, the compensation consultant engaged by us looked to the
compensation structures of other publicly held mortgage REITS and other publicly
held companies in the financial services industry. We believe its management
compensation structure is consistent, generally, with the management
compensation structure of comparable companies. We will continue to monitor
whether its compensation structure is consistent with the compensation structure
of its competitors.
4. CEO Compensation. Mr. Farrell's total compensation for 2001 was
established pursuant to his employment agreement which is described under the
caption "Employment Agreements, Termination of Employment and Change-Of-Control
Arrangements." Mr. Farrell's compensation was established using substantially
the same criteria used to determine compensation levels for our other executive
officers which are discussed in this report. Effective May 1, 2001, Mr.
Farrell's salary was set at $1,000,000. For 2001, we determined to pay Mr.
Farrell a bonus of $750,000 (which was paid in January 2002).
5. Compensation of Non-Employee Directors. Upon the recommendation of
our compensation consultant, we granted to each of its non-employee directors
during 2001 options to purchase 1,250 shares vesting immediately . The
compensation consultant has informed the committee that its compensation
structure for non-employee directors is consistent, generally, with the
compensation structure for non-employee directors of comparable companies.
The foregoing report has been furnished by the current members of the
compensation committee:
Spencer I. Browne John A. Lambiase Donnell A. Segalas
PERFORMANCE ANALYSIS
The following graph provides a comparison of our cumulative total
stockholder return and the cumulative stockholder return of the Standard &
Poor's Composite-500 Stock Index ("S&P 500") and the BBG REIT Mortgage Index
(the "BBG Index"), an industry index of 11 tax-qualified mortgage REITs. The
comparison is for the period from October 8, 1997 (the date on which our common
stock commenced trading on the New York Stock Exchange) to December 31, 1999 and
assumes the reinvestment of any dividends. The initial price of our common stock
shown
14
in the graph below is based upon the price to public of $12.00 in our initial
public offering on October 8, 1997. The closing price of our common stock quoted
on the New York Stock Exchange at the close of business on October 8, 1997 was
$12.63 per share. Upon written request, we will provide stockholders with a list
of the REITs included in the BBG Index. The historical information set forth
below is not necessarily indicative of future performance.
[GRAPHICS OMITTED]
10/8/97 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
------- -------- -------- -------- -------- --------
Annaly 100 89 77 92 103 220
S&P 500 Index 100 98 126 151 136 118
BBG REIT Index 100 78 59 47 47 69
The following is the report of the audit committee with respect to our
audited financial statements for the fiscal year ended December 31, 2001. The
information contained in this report shall not be deemed to be "soliciting
material" or to be "filed" with the Securities and Exchange Commission, nor
shall such information be incorporated by reference into any future filing under
the Securities Act of 1933, as amended, or the 1934 Securities Exchange Act, as
amended, except to the extent that we specifically incorporates by reference in
such filing.
REPORT OF THE AUDIT COMMITTEE
Since our inception, we have had an Audit Committee composed entirely
of non-management directors. The members of the Audit Committee meet the
independence and experience requirements of the New York Stock Exchange. In
2001, the Committee met four times. The Committee has adopted, and our Board
of Directors reapproved, a charter outlining the practices it follows.
During the year 2001, at each of its meetings, the Committee met with
the senior member of the our financial management team, and our independent
auditors. The Committee's agenda is established by the Committee's chairman. The
Committee had private sessions, at each of its meetings, with the independent
auditors, at which candid discussions of financial management, accounting and
internal control issues took place.
15
The Committee recommended to the Board of Directors the engagement of
Deloitte & Touche LLP as our independent auditors and reviewed with our
financial managers, the independent auditors, and the director of internal
audit, overall audit scopes and plans, the results of internal and external
audit examinations, evaluations by the auditors of our internal controls and the
quality of our financial reporting.
Management has reviewed the audited financial statements in the Annual
Report with the Audit Committee including a discussion of the quality, not just
the acceptability, of the accounting principles, the reasonableness of
significant judgments, and the clarity of disclosures in the financial
statements. In addressing the quality of management's accounting judgments,
members of the Audit Committee asked for management's representations that our
audited consolidated financial statements have been prepared in conformity with
generally accepted accounting principles, and have expressed to both management
and auditors their general preference for conservative policies when a range of
accounting options is available.
In its meetings with representatives of the independent auditors, the
Committee asks them to address, and discusses their responses to several
questions that the Committee believes are particularly relevant to its
oversight. These questions include:
o Are there any significant accounting judgments made by
management in preparing the financial statements that would
have been made differently had the auditors themselves
prepared and been responsible for the financial statements?
o Based on the auditors' experience, and their knowledge of
us, do our financial statements fairly present to investors,
with clarity and completeness, our financial position and
performance for the reporting period in accordance with
generally accepted accounting principles, and SEC disclosure
requirements?
o Based on the auditors' experience, and their knowledge of
us, have we implemented internal controls and internal audit
procedures that are appropriate?
The Committee believes that, by thus focusing its discussions with the
independent auditors, it can promote a meaningful dialogue that provides a basis
for its oversight judgments.
The Committee also discussed with the independent auditors other
matters required to be discussed by the auditors with the Committee under
Statement on Auditing Standards No. 61, as amended by Statement on Auditing
Standards No. 90 (communications with audit committees). The Committee received
and discussed with the auditors their annual written report on their
independence from us and our management, which is made under Independence
Standards Board Standard No. 1 (independence discussions with audit committees),
and considered with the auditors whether the provision of non-audit services is
compatible with the auditors' independence.
In performing all of these functions, the Audit Committee acts only in
an oversight capacity and, necessarily, in its oversight role, the Committee
relies on the work and assurances of our management, which has the primary
responsibility for financial statements and reports, and of the independent
auditors, who, in their report, express an opinion on the conformity of our
annual financial statements to generally accepted accounting principles.
In reliance on these reviews and discussions, and the report of the
independent auditors, the Audit Committee has recommended to the Board of
Directors, and the Board has approved, that the audited financial statements be
included in our Annual Report on Form 10-K for the year ended December 31, 2001,
for filing with the Securities and Exchange Commission.
The foregoing report has been furnished by the current members of the
audit committee:
Kevin P. Brady Jonathan D. Green John A. Lambiase
16
PROPOSAL II
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The accounting firm of Deloitte & Touche LLP (D&T) has served as our
independent auditors since our formation in November 1996. During this time, it
has performed accounting and auditing services for us. We expect that
representatives of D&T will be present at the meeting, will have the opportunity
to make a statement and will be available to respond to appropriate questions.
If the appointment of D&T is not ratified, the Board of Directors will
reconsider the appointment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
SELECTION OF DELOITTE & TOUCHE LLP AS OUR INDEPENDENT AUDITORS FOR THE YEAR
2002.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Deloitte & Touche LLP has been the independent accounting firm which
has audited our financial statements since our inception. In addition to
performing the audit of our financial statements, D&T provided tax services for
us during 2001. The aggregate fees billed for 2001 for each of the following
categories of services are set forth below:
Audit Fees: The aggregate fees billed by D&T for audit and review of our 2001
financial statements were $196,200.
Financial Information System Design and Implementation Fees: No fees were paid
to D&T for financial information system design and implementation during 2001.
All Other Fees: The fees billed by D&T for tax services during 2001 were $3,000
and for services relating to the public offerings were $62,500.
PROPOSAL III
APPROVAL OF THE AMENDMENT TO OUR CHARTER TO INCREASE
THE NUMBER OF AUTHORIZED SHARES
Our charter currently allows us to issue up to a combined total of
100,000,000 shares of common stock, par value $0.01 per share, and preferred
stock, par value $0.01 per share. As of March 21, 2002 we had 82,870,659 shares
of common stock issued with outstanding and no shares of preferred stock issued
and outstanding. To have the ability to raise additional funds through the
issuance of equity we may need to issue more shares than we are currently
authorized. The proposed amendment of our charter raises the total number of
authorized shares are permitted to issue from 100,000,000 shares to 500,000,000
shares. While we have no immediate plans to issue additional shares of capital
stock, if we issue a significant number of shares of common stock or convertible
preferred stock in a short period of time, there could be a dilution of the
existing common stock and a decrease in the market price of the common stock.
The proposed amendment to our charter deletes the current ARTICLE VI(A)
of our charter and replaces it with the following:
"ARTICLE VI
A. The total number of shares of stock of all classes which the
Corporation has authority to issues is five hundred million (500,000,000)
shares of capital stock, par value one cent ($0.01) per share, amounting in the
aggregate par value to five million dollars ($5,000,000). All of such shares are
initially classified as "Common Stock." The Board of Directors may classify and
reclassify any unissued shares of Common Stock by setting or changing in any one
or more respects the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends, qualifications or terms or conditions
of redemption of such shares."
17
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AMENDMENT TO OUR CHARTER TO INCREASE THE NUMBER OF AUTHORIZED SHARES.
OTHER BUSINESS
As of the date of this proxy statement, we are not aware of any other
matters that will be presented by management for consideration at the annual
meeting. If any other matters properly come before the meeting, the persons
named as proxies in the enclosed form of proxy intend to vote in accordance with
their judgment on the matters presented.
PROPOSALS OF STOCKHOLDERS
Proposals, if any, of our stockholders intended to be presented at the
2003 annual meeting of stockholders must be received by us for inclusion in the
appropriate proxy materials no later than , 2002.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company believes that, during the fiscal year ended December 31,
2001, all filing requirements under Section 16(a) of the Securities Exchange Act
of 1934, as amended, applicable to its officers, directors and greater than ten
percent stockholders were complied with on a timely basis.
OTHER MATTERS
On written request, we will provide without charge to each record or
beneficial holder of our common stock as of March 21, 2002 a copy of our annual
report on Form 10-K for the year ended December 31, 2001, as filed with the
Securities and Exchange Commission. You should address your request to Kathryn
Fagan, Chief Financial Officer, Annaly Mortgage Management, Inc., 12 East 41st
Street, Suite 700, New York, New York 10017.
By Order of the Board of Directors,
/s/ Michael A.J. Farrell
Michael A. J. Farrell
Chairman of the Board, Chief
Executive Officer, and President
18
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
(CONTINUED ON REVERSE SIDE)
PLEASE MARK YOUR VOTE AS INDICATED IN THIS EXAMPLE: [X]
1. Election of Directors:
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY [ ] EXCEPTIONS
listed to the right to vote for all nominess
(except as marked listed to the right
to the contrary)
Nominees: MICHAEL A.J. FARRELL, JONATHAN D. GREEN, JOHN A. LAMBIASE
(Instructions: To withhold authority to vote for any nominee, mark the
"Exceptions" box and write that nominee's name in the space provided below.)
--------------------------------------------------------------------------------
2. Ratification of the selection of Deloitte & Touche LLP as independent
auditors for the Company for the current fiscal year:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Approval of the amendment to our charter to increase the number of
authorized shares to 500,000,000:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Annual Meeting and any adjournment or
postponement thereof.
Please sign, date and return the proxy card using the enclosed envelope.
PLEASE CHECK HERE IF YOU PLAN TO ATTEND
THE ANNUAL MEETING [ ]
Signature_________________________Signature__________________________Date_______
Please sign exactly as your name appears on the left. When signing as an
attorney, executor, administrator, trustee or guardian, please five your full
title. If shares are held jointly, each holder should sign.
[ ] FOLD AND DETACH HERE [ ]
19
ANNALY MORTGAGE MANAGEMENT, INC.
Annual Meeting of Stockholders - May 17, 2002
Revoking all prior proxies, the undersigned hereby appoints Michael
A.J. Farrell and Jennifer A. Stephens, and each of them, proxies,
with full power of substitution, to appear on behalf of the undersigned and
to vote all shares of Common Stock, par value $.01 per share, of Annaly
Mortgage Management, Inc. (the "Company") that the undersigned is entitled
to vote at the Annual Meeting of Stockholders of the Company to be held
at the Union League Club, 38 East 37th Street, New York, New York 10178
in the Library, commencing at 10:00 a.m., New York time, on May 17, 2002,
and at any adjournment or postponement thereof, as fully and effectively as
the undersigned could do if personally present and voting, hereby approving,
ratifying and confirming all that said attorneys and agents or their
substitutes may lawfully do in place of the undersigned as indicated below.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO
INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE
LISTED NOMINEES AS DIRECTORS, FOR THE PROPOSAL TO RATIFY THE SELECTION OF
DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS FOR THE COMPANY FOR THE CURRENT
FISCAL YEAR, AND FOR THE PROPOSAL TO AMEND OUR CHARTER TO INCREASE THE
NUMBER OF AUTHORIZED SHARES TO 500,000,000.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
(Continued and to be signed on reverse side)
[ ] FOLD AND DETACH HERE [ ]
You can now access your Annaly Mortgage Management, Inc. account online.
Access your Annaly Mortgage Management, Inc. stockholder account online
via Investor ServiceDirect(SM) (ISD).
Mellon Investor Services LLC, transfer agent for Annaly Mortgage Management,
Inc., now makes it easy and convenient to get current information on your
shareholder account. After a simple, and secure process of establishing a
Personal Identification Number (PIN), you are ready to long in and access your
account to:
o View Account status o View payment history for dividends
o View certificate history o Make address changes
o View book-entry information o Obtain a duplicate 1099 tax form
o Establish/change your PIN
Visit us on the web at http://www.mellon-investor.com
and follow the instructions shown on this page.
Step 1: FIRST TIME USERS - Establish a PIN Step 2: Log in for Account Access Step 3: Account Status Screen
YOU MUST FIRST ESTABLISH A PERSONAL IDENTIFICATION YOU ARE NOW READY TO LOG IN. TO YOU ARE NOW READY TO ACCESS YOUR
NUMBER (PIN) ONLINE BY FOLLOWING THE DIRECTIONS ACCESS YOUR ACCOUNT PLEASE ENTER ACCOUNT INFORMATION. CLICK ON
PROVIDED IN THE UPPER RIGHT PORTION OF THE WEB YOUR: THE APPROPRIATE BUTTON TO VIEW
SCREEN AS FOLLOWS. YOU WILL ALSO NEED YOUR SOCIAL o SSN OR INITIATE TRANSACTIONS.
SECURITY NUMBER (SSN) AVAILABLE TO ESTABLISH A PIN. o PIN
o Then click on the Submit o Certificate History
Investor ServiceDirect(SM) is currently only available button o Book-Entry Information
for domestic individual and joint accounts. o Issue Certificate
If you have more than one account, o Payment History
o SSN you will now be asked to select o Address Change
the appropriate account. o Duplicate 1099
o PIN
o Then click on the Establish PIN button
Please be sure to remember your PIN, or maintain it
in a secure place for future reference.
For Technical Assistance Call 1-877-978-7778 between
9am-7pm Monday-Friday Eastern Time
20