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Annaly Mortgage Management, Inc.
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ANNALY MORTGAGE MANAGEMENT, INC.
1211 AVENUE OF THE AMERICAS, SUITE 2902
NEW YORK, NEW YORK 10036
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 15, 2003
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To the Stockholders of ANNALY MORTGAGE MANAGEMENT, INC.:
The 2003 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, on Thursday, May 15, 2003 at 10:30 a.m., New York
time, for the following purposes:
(1) To elect two directors for a term of three years each;
(2) To ratify the appointment of Deloitte & Touche LLP as our independent
auditors for the current fiscal year;
(3) 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) and (2) 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, 2003 are entitled to receive notice of and to vote at our 2003 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
MICHAEL A. J. FARRELL
Chairman of the Board,
Chief Executive Officer, and
President
New York, New York
March 31, 2003
ANNALY MORTGAGE MANAGEMENT, INC.
1211 AVENUE OF THE AMERICAS, SUITE 2902
NEW YORK, NEW YORK 10036
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2003 ANNUAL MEETING OF STOCKHOLDERS
----------------------
PROXY STATEMENT
Annaly Mortgage Management, Inc. ("we" or "us") is furnishing this
proxy statement in connection with our solicitation of proxies to be voted at
our 2003 annual meeting of stockholders. We will hold the annual meeting at the
Union League Club, 38 East 37th Street, New York, New York 10178 on Thursday,
May 15, 2003 at 10:30 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 March 31, 2003. Our principal executive
offices are located at 1211 Avenue of the Americas, Suite 2902, New York, New
York 10036.
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.
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TABLE OF CONTENTS
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Notice of Annual Meeting of Stockholders.....................................1
Questions and Answers about the Meeting and Voting...........................3
Voting.......................................................................6
PROPOSAL I-- ELECTION OF DIRECTORS*..........................................7
Directors....................................................................7
Management..................................................................10
Security Ownership of Certain Beneficial Owners and Management..............11
Executive Compensation......................................................13
Report of the Audit Committee...............................................19
PROPOSAL II-- RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS*..........20
Additional Information......................................................21
* To be Voted on at the Meeting
2
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QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING
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Q: WHAT AM I VOTING ON?
A: (1) Re-election of two directors, Spencer I Browne and Wellington J.
Denahan, for terms of three years; and
(2) Ratification of the appointment of Deloitte & Touche LLP as our
independent auditors for 2003.
Q: HOW DOES THE BOARD RECOMMEND I VOTE ON THE PROPOSALS?
A: Our Board of Directors (our "Board") recommends you vote FOR each of
the nominees and FOR the ratification of Deloitte & Touche LLP.
Q: WHO IS ENTITLED TO VOTE AT THE MEETING?
A: Only stockholders of record as of the close of business on March 21,
2003 (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 that 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, by using 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.
If you vote by telephone or via our Internet voting site, you do not
need to return your proxy card.
Regardless of which of these methods you select to transmit your proxy
card 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 Spencer I.
Browne and Wellington J. Denahan and FOR the ratification of Deloitte &
Touche LLP as our independent auditors for 2003. 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 or postponed, your common stock may be voted by the proxies
on the new meeting date as well, unless you have revoked your proxy
instructions.
Q: HOW WILL VOTING ON ANY OTHER BUSINESS BE CONDUCTED?
A: Other than the two 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, our Chairman of the Board, Chief
Executive Officer, and President, and Jennifer A. Stephens, our
Secretary, to vote on those matters according to their best judgment.
3
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, 84,646,860 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 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 84,646,860 eligible votes as of
the Record Date, we will need at least 42,323,431 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 ratification of
Deloitte & Touche LLP as our auditors (Proposal Two).
Q: WHAT ARE BROKER NON-VOTES AND HOW WILL THEY BE TREATED?
A: Broker non-votes are shares held by brokers or nominees for whom 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 ratification of Deloitte &
Touche LLP as our auditors (Proposal Two).
Q: WHO CAN ATTEND THE ANNUAL MEETING?
A: All stockholders of record as of March 21, 2003 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 Kathryn
Fagan, Chief Financial Officer, Annaly Mortgage Management, Inc., 1211
Avenue of the Americas, Suite 2902, New York, New York 10036, or (2)
bring to the meeting a copy of your brokerage account statement or an
omnibus proxy (which you can get from your broker).
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Q: WHEN ARE STOCKHOLDER PROPOSALS DUE FOR THE 2004 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 no later than December 1, 2003.
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.
Q: HOW DO I OBTAIN A COPY OF THE ANNUAL REPORT ON FORM 10-K FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION?
A: Our Form 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., 1211 Avenue of the Americas, Suite 2902, New York,
New York 10036. Our Form 10-K is also available on our investor
relations website annaly.com. We make available on this website under
"Financials," free of charge, our annual reports on Form 10-K,
quarterly reports on From 10-Q, current reports on Form 8-K and
amendments to those reports as soon as reasonably practicable after we
electronically file or furnish such materials to the Securities and
Exchange Commission ("SEC").
5
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VOTING
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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, 2003. There were 84,646,860 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 2006
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 the appointment of
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. 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 and FOR the proposal to ratify the appointment of
Deloitte & Touche LLP as our independent auditors for the current fiscal year.
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 appointment of our independent auditors will
require the affirmative vote of the holders of a majority of the votes cast.
Under Maryland law, our charter, and our bylaws, 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 appointment 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 appointment of Deloitte &
Touche LLP as independent auditors.
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.
6
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PROPOSAL I
ELECTION DIRECTORS
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At the annual meeting, the stockholders will vote to elect two Class I
directors, whose terms will expire at our annual meeting of stockholders in
2006, subject to the election and qualification of their successors or to their
earlier death, resignation or removal.
The persons named in the enclosed proxy will vote to elect Spencer I.
Browne and Wellington J. Denahan as Class I 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. Each of these individuals
currently is a director.
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR SPENCER I. BROWNE AND
WELLINGTON J. DENAHAN AS DIRECTORS TO HOLD OFFICE UNTIL OUR ANNUAL MEETING OF
STOCKHOLDERS IN 2006 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.
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DIRECTORS
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We have three classes of directors. Our class I directors to be elected
at this year's meeting will serve until our annual meeting of stockholders in
2006; our class II directors serve until our annual meeting of stockholders in
2004; and our class III directors 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 53, was elected on January 28, 1997 to serve as
a director of us. 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. Denahan, age 39, was elected on December 5, 1996 to serve
as Vice Chairman of the Board and a director of us 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. Denahan 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. Denahan 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 47, was elected on January 28, 1997 to serve as a
director of us. Mr. Brady is the principal of KPB Associates Inc., an accounting
firm that specializes in corporate taxation, finance and software
7
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.
Donnell A. Segalas, age 45, was elected on January 28, 1997 to serve as
a director of us. 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 managing
director at the Far Hills Group where he was in charge of the Private Equity and
Venture Capital fund-raising group. In 1997, he co-founded a leveraged buyout
firm, Maplewood Partners, L.L.C. Prior to his joining Maplewood Partners, Mr.
Segalas was a Managing Director at Rodman & Renshaw, Inc. in the mortgage-backed
securities 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 51, was elected on December 5, 1996 to serve
as Chairman of the Board and Chief Executive Officer of us. Mr. Farrell was
appointed our President effective January 1, 2002. 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 56, was elected on January 28, 1997 to serve as
a director of us. Mr. Green is president and Chief Financial Officer of
Rockefeller-Group International, Inc., a privately held corporation with
interests in real estate ownership, management, and development, real estate
services and telecommunications. He joined The Rockefeller Group in 1980 as
assistant vice president and real estate counsel. In 1983 he was appointed vice
president, secretary and general counsel and in 1990 was elected chief corporate
officer. On July 6, 1995 he was named president and chief executive officer of
Rockefeller Group Development Corporation (RGDC) and Rockefeller Center
Management Corporation (RCMC), both subsidiaries of The Rockefeller Group. In
October 2002 Mr. Green was named President and Chief Executive Officer of
Rockefeller Group International, Inc. In addition, Mr. Green continues to serve
as President and CEO of Rockefeller Group Development Corporation. Mr. Green
oversees the activities of the company's four subsidiaries which include
Rockefeller Group Development Corporation, Cushman & Wakefield, Rockefeller
Group Telecommunications Services and Rockefeller Group Business Centers. As the
President and CEO of Rockefeller Group Development Corporation, he is actively
involved in the day-to-day operations of the company's commercial and industrial
properties ranging from office towers to suburban office parks, foreign trade
zones and high tech data centers in various stages of development. Before
joining The Rockefeller Group, R. Green was affiliated with the New York City
law firm Thacher, Proffit & Wood.
John A. Lambiase, age 63, was elected on January 28, 1997 to serve as a
director of us. 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.
8
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 P. Brady, Jonathan D.
Green, and John A. Lambiase. The audit committee recommends to our Board the
engagement or discharge of independent public accountants, reviews the 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 all independent
directors. The audit committee operates under a written charter adopted by our
Board.
Nominating Committee
The members of our nominating committee are Jonathan Green, Kevin
Brady, 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, 2002, our Board held four
meetings. During 2002, the compensation committee held one 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
our 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 January 1, 2002, for the
year 2002 to each director who is not an officer or employee (an "independent
director") equal to $50,000, a fee of $500 for each meeting of our 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 Incentive Plan provides that each independent director, upon
appointment to our 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.
9
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MANAGEMENT
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NAME POSITION
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Michael A.J. Farrell Chairman of the Board, Chief Executive Officer, and
President
Wellington J. Denahan Vice Chairman of the Board and Chief Investment Officer
Kathryn F. Fagan Chief Financial Officer and Treasurer
Jennifer A. Stephens Executive Vice President and Secretary
James P. Fortescue Senior Vice President and Repurchase Agreement Manager
Biographical information on Mr. Farrell and Ms. Denahan is provided
above. Certain biographical information for Ms. Fagan, Ms. Stephens and Mr.
Fortescue is set forth below.
Kathryn F. Fagan, age 36, was employed by us 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 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 1991, 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 32, was employed by us on December 5, 1996 in
the positions of Secretary and Investment Officer. She currently serves as our
Executive Vice President and Secretary. She joined FIDAC at its inception in
July 1994 and became Vice 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).
James P. Fortescue, age 29,was employed by us on December 5, 1996. Mr.
Fortescue is our Senior Vice President. Mr. Fortescue also serves as a Senior
Vice President of FIDAC. He started with FIDAC in June of 1995 where he was in
charge of finding financing on mortgage backed and corporate bonds for regional
dealers, as well as maintaining a pricing service for a major broker dealer. In
September of 1996 he took over all financing activities for the U.S. Dollar
Floating Rate Fund which included trading and structuring all liabilities,
coordinating trade settlements with broker dealer back offices, and maintaining
the relationships with these dealers. Mr. Fortescue has been in charge of
liability management for us since our inception, and continues to oversee all
financing activities for FIDAC. Mr. Fortescue holds a Bachelors Degree in
Finance from Siena College.
10
--------------------------------------------------------------------------------
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------------------------
The following tables set forth certain information as of March 26, 2003
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 executive officers
and directors as a group. The information set forth in the table describing the
beneficial ownership of those persons we know of who own more than 5% of our
outstanding common stock is drawn from statements filed by such persons with the
SEC pursuant to Section 13(d) or 13(g) of the Securities Act of 1934, as
amended. 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.
AMOUNT AND
NATURE OF SOLE SHARED SOLE SHARED PERCENT
NAME AND ADDRESS OF BENEFICIAL VOTING VOTING INVESTMENT INVESTMENT OF
BENEFICIAL OWNER OWNERSHIP POWER POWER POWER POWER CLASS
------------------------------------- -------------- ------------ ---------- -------------- --------------- ----------
Capital Group International, Inc. 4,187,420(1) 3,004,550 0 4,187,420 0 5.0%
11100 Santa Monica Blvd.
Los Angeles, CA 90025
(1) Capital Group International, Inc. and Capital Guardian Trust Company
filed a Schedule 13 G/A on February 11, 2003 setting forth the
information contained in this table. Capital Group International, Inc.
and Capital Guardian Trust Company each appear to list beneficial
ownership to the same shares. The number of shares of our common stock
that Capital Group International, Inc. or Capital Guardian Trust
Company has the right to acquire beneficial ownership of is not known.
SHARES BENEFICIALLY OWNED
--------------------------------------------------------
BENEFICIAL OWNER NUMBER PERCENT
------------------------------------------------------------- --------------------------- ----------------------------
Michael A.J. Farrell 265,503(1) *
Wellington J. Denahan 204,156(2) *
Kathryn F. Fagan 64,092(3) *
Jennifer A. Stephens 53,600(4) *
James P. Fortescue 32,750(5) *
Kevin P. Brady 43,016(6)(10) *
Spencer I. Browne 31,l82(7) *
Jonathan D. Green 38,116(6) *
John Lambiase 49,438(8) *
Donnell A. Segalas 65,626(9) *
All Executive Officers and Directors as a Group
(10 persons) 847,479(1)(2)(3)(4) 1.0%
(5)(6)(7)(8)(9)(10)
* Represents beneficial ownership of less than one percent of the common stock.
11
(1) Includes 116,900 shares of common stock subject to vested options
granted under the Incentive Plan to Mr. Farrell that were exercisable
as of March 26, 2003 or have or will first become exercisable within 60
days after such date.
(2) Includes 87,673 shares of common stock subject to vested options
granted under the Incentive Plan to Ms. Denahan that were exercisable
as of March 26, 2003 or have or will first become exercisable within 60
days after such date.
(3) Includes 32,813 shares of common stock subject to vested options
granted under the Incentive Plan to Ms. Fagan that were exercisable as
of March 26, 2003 or have or will first become exercisable within 60
days after such date.
(4) Includes 28,490 shares of common stock subject to vested options
granted under the Incentive Plan to Ms. Stephens that were exercisable
as of March 26, 2003 or have or will first become exercisable within 60
days after such date.
(5) Includes 9,000 shares of common stock subject to options granted under
the Incentive Plan to Mr. Fortescue that were exercisable as of March
26, 2003 or have or will first become exercisable within 60 days after
such date.
(6) Includes 29,376 shares of common stock subject to vested options
granted under the Incentive Plan to each of Messrs. Brady and Green
that were exercisable as of March 26, 2003 or have or will first become
exercisable within 60 days after such date.
(7) Includes 2,500 shares of common stock subject to options granted under
the Incentive Plan to Mr. Browne that were exercisable as of March 26,
2003 or have or will first become exercisable within 60 days after such
date.
(8) Includes 12,126 shares of common stock subject to options granted under
the Incentive Plan to Mr. Lambiase that were exercisable as of March
26, 2003 or have or will first become exercisable within 60 days after
such date.
(9) Includes 18,626 shares of common stock subject to options granted under
the Incentive Plan to Mr. Segalas that were exercisable as of March 26,
2003 or have or will first become exercisable within 60 days after such
date.
(10) Includes 1,500 shares of common stock held by certain members of Mr.
Brady's immediate family.
12
--------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
--------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
The table below sets forth the aggregate compensation we paid or
accrued during our fiscal years ended December 31, 2002, 2001, and 2000, to our
Chief Executive Officer, and our four highest paid other executive officers
serving in their positions at December 31, 2002.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION(1) COMPENSATION
-------------------------------- -------------------------------
AWARDS
RESTRICTED SECURITIES
STOCK UNDERLYING
SALARY BONUS AWARDS(2) OPTIONS
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#)
------------------------------------------- ------- ---------------- --------------- --------------- ---------------
Michael A.J. Farrell 2002 $2,391,250 $850,000 $0 0
Chairman of the Board, Chief 2001 $925,000 $750,000 $0 0
Executive Officer, and President 2000 $250,000 $150,000 $0 30,000
Wellington J. Denahan 2002 $1,913,959 $750,000 $0 0
Vice Chairman and Portfolio Manager 2001 $718,750 $500,000 $0 0
2000 $200,000 $100,000 $0 20,000
Kathryn F. Fagan 2002 $949,750 $250,000 $0 0
Chief Financial Officer and Treasurer 2001 $316,667 $150,000 $0 0
2000 $125,000 $25,000 $0 13,500
Jennifer Stephens 2002 $948,016 $250,000 $0 0
Executive Vice President and 2001 $266,667 $125,000 $0 0
Secretary 2000 $80,250 $30,000 $0 11,000
James P. Fortescue 2002 $491,667 $200,000 $0 0
Senior Vice President and 2001 $194,066 $100,000 $0 0
Repurchase Agreement Manager 2000 $60,749 $20,000 $0 7,500
(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, 2002, Mr. Farrell, Ms. Denahan, Ms. Fagan, Ms.
Stephens, and Mr. Fortescue, held 135,091, 115,998, 29,279, 18,610, and
21,500 shares of restricted stock, respectively, with values (based on
the closing market price of our common stock on December 31, 2002,
which was $18.80 per share) of $2,539,711, $2,180,762, $550,445,
$349,868, $404,200, respectively. We pay dividends on the restricted
stock when and as paid on our common stock.
EXERCISES AND VALUES OF OPTIONS
The following table sets forth certain information regarding options
exercised during the calendar year 2002, and held at year end, by our executive
officers.
13
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
SHARES NUMBER OF SECURITIES VALUE OF UNEXERCISED
ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY
ON VALUE OPTIONS AT FY-END OPTIONS AT FY-END
EXERCISE REALIZED (#) ($)(1)
NAME (#) ($)(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---------------------------- ------------ ------------ ------------------------------- ------------------------------
Michael A.J. Farrell 12,000 105,600 130,412/30,000 1,368,086/315,450
Wellington J. Denahan 12,300 131,241 88,158/20,000 926,028/376,000
Kathryn F. Fagan 16,500 175,297 34,813/13500 362,612/141,953
Jennifer A. Stephens 6,500 69,355 34,990/11,000 366,138/115,665
James P. Fortescue 14,100 150,875 11,250/7,500 114,413/78,863
-----------------------
(1) Based on the closing sale price of our common stock on the New York
Stock Exchange on December 31, 2002 ($18.80 per share).
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE-OF-CONTROL
ARRANGEMENTS
We have entered into employment agreements with Mr. Farrell, Ms.
Denahan, Ms. Fagan, and Ms. Stephens. Each employment agreement is automatically
extended for an additional year at the end of each year, unless the officer or
we provide a prior written notice to the contrary. Each employment agreement
provides for annual base salaries to Mr. Farrell, Ms. Denahan, Ms. Fagan, and
Ms. Stephens based upon our book value. Mr. Farrell's employment agreement
provides for an annual base salary equal to 0.25% of our book value, Ms.
Denahan's employment agreement provides for an annual base salary equal to 0.20%
of our book value. Ms. Fagan's and Ms. Stephens' employment agreements each
provide for annual base 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 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 may evaluate base salaries quarterly and upon the raising of
additional equity, and they may, at their discretion, raise the base salary caps
for our executive officers. The 2003 annual base salary for Mr. Farrell was set
at $2.4 million. The 2003 annual base salary for Ms. Denahan was set at $1.9
million. The 2003 annual base salary for each of Ms. Fagan and Ms. Stephens was
set at $972,000. Our Board has waived the base salary caps for our executive
officers for 2002 and 2003. 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 also
entitled to participate in our benefit plans, including the Incentive Plan. In
addition, our Board has established a bonus incentive compensation plan for our
executive officers. This program permits our 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", 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. In
the event that any payments, distributions, or benefits provided or to be
provided to the officer are determined to be subject to the excise tax
14
imposed by Section 4999 of Code, he or she is entitled to receive a payment on
an after-tax basis equal to the excise tax imposed. 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 our affiliate FIDAC 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 us. "Change of Control" includes a merger or consolidation of us, 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.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This section discusses certain direct and indirect relationships and
transactions involving us and any director or executive officer. Last year, the
Board adopted governance principles for determining whether a director would
qualify as an independent director under the new, more restrictive rules
proposed by the New York Stock Exchange. In accordance with those principles,
the Board has determined that all of its non-employee directors are independent
directors.
We have been approached by Mr. Farrell, our Chairman of the Board,
Chief Executive Officer and President, and the sole stockholder of FIDAC, about
the possibility of us acquiring FIDAC. Our board of directors has formed a
special committee of independent directors to consider this matter and the
special committee has retained independent counsel to assist it. We have not
decided whether we will pursue this opportunity and either party may at any time
determine not to proceed with this proposed acquisition. If our board of
directors, based upon the recommendation of the special committee and with Mr.
Farrell abstaining, determines that we should acquire FIDAC, we expect that such
proposed acquisition will be submitted to a vote of our stockholders.
A. Alexandra Denahan, our controller, is the sister of Wellington J.
Denahan, our Vice Chairman of the Board and Chief Investment Officer. A.
Alexandra Denahan, is employed by us and earns compensation in excess of $60,000
annually.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our compensation committee is comprised solely of the following
non-employee directors: Messrs. Browne, Lambiase, and Segalas. None of them has
served as an officer or employee of us or any affiliate or has any other
business relationship or affiliation with us, except his service as a director.
15
EQUITY COMPENSATION PLAN INFORMATION
We have adopted the Incentive Plan for executive officers, key
employees and nonemployee directors. The Incentive Plan authorizes the
Compensation Committee of our Board to grant awards, including incentive stock
options ("ISOs") as defined under Section 422 of the Internal Revenue Code (the
"Code") and options not so qualified ("NQSOs"). The Incentive Plan authorizes
the granting of options or other awards for an aggregate of the greater of
500,000 shares or 9.5% of the outstanding shares of our common stock.
The following table provides information as of December 31, 2002,
concerning shares of our common stock authorized for issuance under our existing
Incentive Plan.
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
FUTURE ISSUANCE UNDER
NUMBER OF SECURITIES TO BE WEIGHTED-AVERAGE EXERCISE INCENTIVE PLAN
ISSUED UPON EXERCISE OF PRICE OF OUTSTANDING (EXCLUDING PREVIOUSLY
PLAN CATEGORY OUTSTANDING OPTIONS OPTIONS ISSUED)
------------------------------ -------------------------- ------------------------- ------------------------
Incentive Plan approved by 512,706 $8.59 7,570,074(1)
shareholders
Incentive Plan not approved
by shareholders - - -
------- ----- ---------
Total 512,706 $8.59 7,570,074
======= ===== =========
(1) The Incentive Plan authorizes the granting of options or other awards for an
aggregate of the greater of 500,000 or 9.5% of the outstanding shares on a fully
diluted basis of our common stock.
16
REPORT OF COMPENSATION COMMITTEE
The compensation structure for our executive officers and directors has
been developed with consideration for the following objectives:
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, 616,741 shares of common
stock with exercise prices ranging from $4.00 to $11.25. These options vest in
equal installments over four, five or ten year periods from the date of grant.
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, our overall 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 2002, bonuses were paid in the form of cash. One
important factor considered in these awards was our performance and growth
during 2002.
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 that successful performance by us would result in our ability to raise
additional capital.
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. Denahan and Ms.
Stephens, who have worked together at FIDAC since March 1995 and at us since its
incorporation in November 1996 and its commencement of operations in February
1997, and Ms. Fagan, who has worked at us since April 1997. To ensure the
long-term commitment of its management team, we, with the approval of our Board
entered into employment agreements with Mr. Farrell, Ms. Denahan, Ms. Fagan, and
Ms. Stephens. Each of these agreements provides for a term through December 31,
2003 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 three, four and five
years.
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 our management
compensation structure is consistent, generally, with the management
compensation structure of comparable companies. We will continue to monitor
whether our compensation structure is consistent with the compensation structure
of its competitors.
CEO Compensation. Mr. Farrell's total compensation for 2002 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 January 15, 2003, Mr.
Farrell's salary was set at $2,430,000. For 2002, we determined to pay Mr.
Farrell a bonus of $850,000 (which was paid in January 2003). Mr. Farrell's
compensation for 2002 was related to our progress over the last year in
achieving strong financial results and his commitment for us to be a leader in
integrity and corporate governance.
17
Compensation of Non-Employee Directors. Upon the recommendation of our
compensation consultant, we granted to each of our non-employee directors during
2002 options to purchase 1,250 shares vesting immediately. The compensation
consultant has informed the committee that our 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 December 31, 1997 to December 31, 2002 and
assumes the reinvestment of any dividends. The initial price of our common stock
shown in the graph below is based upon the price to public of $11.00 on December
31, 1997. 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.
[GRAPHIC OMITTED]
12/31/97 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02
------------------------------------------------------------------------------------
Annaly 100 86 103 116 194 242
S&P 500 Index 100 123 155 141 125 99
BBG REIT Index 100 83 87 94 146 165
18
The following is the report of the audit committee with respect to our audited
financial statements for the fiscal year ended December 31, 2002. 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 Securities Exchange Act of 1934,
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-employee directors. The members of the audit committee meet the
independence and experience requirements of the New York Stock Exchange. In
2002, the Committee met four times. The Committee has adopted a charter
outlining the practices it follows. Any changes in the charter or key practices
will be reflected on our website at www.annaly.com.
During the year 2002, 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.
The Committee engaged Deloitte & Touche LLP as our independent auditors
and reviewed with our financial manager and the independent auditors, 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 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 and
received 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
19
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 our Board, and our
Board has approved, that the audited financial statements be included in our
Annual Report on Form 10-K for the year ended December 31, 2002, 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
--------------------------------------------------------------------------------
PROPOSAL II
RATIFICATION OF APPOINTMENT 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, our audit committee will reconsider
the appointment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS OUR INDEPENDENT AUDITORS FOR THE YEAR
2003.
RELATIONSHIP WITH INDEPENDENT AUDITORS
In addition to performing the audit of our financial statements, D&T
provided tax services for us during 2002. The aggregate fees billed for 2002 and
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 2002 financial statements were $252,500. The aggregate fees billed by D&T
for audit and review of our 2001 financial statements were $196,600.
Audit Related Fees: The aggregate fees billed by D&T for audit related
services during 2002 were $95,000. The aggregate fees billed by D&T for audit
related services during 2001 were $62,500. The audit related services in 2002
and 2001 principally include due diligence and accounting consultation relating
to our public offerings.
Tax Fees: The fees billed by D&T for tax services during 2002 were
$8,000 and during 2001 were $3,000. Fees for tax services include tax
compliance, tax advice, and tax planning.
All Other Fees: Fees for all other services to D&T not described above
totaled $0 for 2002 and $0 for 2001.
The audit committee has also adopted policies and procedures for
pre-approving all non-audit work performed by D&T after January 1, 2003.
Specifically, the audit committee pre-approved the use of D&T for the following
categories of non-audit services: merger and acquisition due diligence and audit
services; tax services; internal control reviews; employee benefit plan audits;
and reviews and procedures that we request D&T to
20
undertake to provide assurances on matters not required by laws or regulations.
In each case, the audit committee also set a specific annual limit on the amount
of such services which we would obtain from D&T, and required management to
report the specific engagements to the audit committee on a quarterly basis, and
also obtain specific pre-approval from the audit committee for any engagement
over five percent of the total amount of revenues estimated to be paid by us to
D&T during the then current fiscal year. Our audit committee approved the hiring
of D&T to provide all of the services detailed above prior to D&T's engagement.
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
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
2004 annual meeting of stockholders must be received by us for inclusion in the
appropriate proxy materials no later than December 1, 2003.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
We believe that, during the fiscal year ended December 31, 2002, all
filing requirements under Section 16(a) of the Securities Exchange Act of 1934,
as amended, applicable to our officers, directors and beneficial owners of more
than ten percent of our common stock were complied with on a timely basis.
ACCESS TO FORM 10-K
On written request, we will provide without charge to each record or
beneficial holder of our common stock as of March 21, 2003 a copy of our annual
report on Form 10-K for the year ended December 31, 2002, as filed with the
Securities and Exchange Commission. You should address your request to Kathryn
Fagan, Chief Financial Officer, Annaly Mortgage Management, Inc., 1211 Avenue of
the Americas, Suite 2902, New York, New York 10036.
We make available on our website, www.annaly.com, under "Financials,"
free of charge, our annual reports on Form 10-K, quarterly reports on From 10-Q,
current reports on Form 8-K and amendments to those reports as soon as
reasonably practicable after we electronically file or furnish such materials to
the SEC.
21
PLEASE MARK YOUR VOTE AS INDICATED IN THIS EXAMPLE: [X]
1. Election of Directors:
[ ] FOR all nominees [ ] WITHHOLD AUTHORITY [ ] EXCEPTIONS
listed to vote for all nominess
(except as marked
to the contrary)
Nominees: SPENCER I. BROWNE, WELLINGTON J. DENAHAN
For terms of three years.
(Instructions: To withhold authority to vote for any nominee, mark the
"Exceptions" box and write that nominee's name in the space provided below.)
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2. Ratification of the selection of Deloitte & Touche LLP as independent
auditors for the Company for the 2003 fiscal year.
[ ] 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.
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By checking the box to the right, I consent to future delivery of [ ]
annual reports, proxy statements, prospectuses and other materials and
shareholder communications electronically via the Internet at a webpage
which will be disclosed to me. I understand that the Company may no
longer distribute printed materials to me from any future shareholder
meeting until such consent is revoked. I understand that I may revoke
my consent at any time by contacting the Company's transfer agent,
Mellon Investor Services LLC, Ridgefield Park, NJ and that costs
normally associated with electronic delivery, such as usage and
telephone charges as well as any costs I may incur in printing
documents, will be my responsibility.
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Fold and Detach Here
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet and telephone voting is available through 11PM Eastern Time
the day prior to annual meeting day.
Your Internet or telephone vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
----------------------------------------- ------ --------------------------------------- -------- ----------------------------------
Internet Telephone Mail
Http://www/eproxy.com/nly 1-800-435-6710
------------------------- Use any touch-tone telephone to vote Mark, sign and date
Use the internet to vote your proxy. your proxy. Have your proxy card in your proxy card
Have your proxy card in hand when you hand when you call. You will be and
access the web site. You will be prompted to enter your control return it in the
prompted to enter your control number, OR number, located in the box below, and OR enclosed postage-paid
located in the box below, to create and then follow the directions given. envelope.
submit an electronic ballot.
----------------------------------------- ------ --------------------------------------- -------- ----------------------------------
If you vote your proxy by Internet or by telephone, you do NOT need to mail back
your proxy card.
ANNALY MORTGAGE MANAGEMENT, INC.
Annual Meeting of Stockholders - May 15, 2003
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, commencing at 10:30 a.m., New York
time, on May 15, 2003, and at any adjournment thereof, as fully and effectively
as the undersigned could do if personally present and voting, hereby approving,
ratifying and confirming all that said attorneys and agents or their substitutes
may lawfully do in place of the undersigned as indicated below.
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 AND FOR THE PROPOSAL TO RATIFY THE SELECTION OF
DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS FOR THE COMPANY FOR THE CURRENT
FISCAL YEAR.
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 direction provided access your account please enter account information. Click on the
in the upper right portion of the web screen as your: appropriate button to view or
follows. You will also need your Social Security o SSN initiate transactions.
Number (SSN) available to establish a PIN. o PIN
o Then click on the Establish o Certificate History
The confidentiality of your personal information is PIN button o Book-Entry Information
protected using secure socket layer (SSL) technology. o Issue Certificate
If you have more than one account, o Payment History
o SSN you will now be asked to select the o Address Change
o PIN appropriate account. o Duplicate 1099
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