Edgar Filing: ANNALY CAPITAL MANAGEMENT INC

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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 (Amendment No. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [ ]

Check the appropriate box:

[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under Rule 14a-12

Annaly Capital Management, Inc.
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(Name of Registrant as Specified In Its Charter)

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(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:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[ ] 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:

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(2) Form, Schedule or Registration Statement No. :

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(3) Filing Party:

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(4) Date Filed:

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NOTICE OF ANNUAL MEETING OF ANNALY STOCKHOLDERS

To be Held May 29, 2009

To the Stockholders of Annaly Capital Management, Inc.:

We will hold the annual meeting of the stockholders of Annaly on May
29, 2009, at 9:00 a.m., New York time, at the New York Marriott Marquis, 1535
Broadway, New York, New York 10036, to consider and vote on the following
proposals:

o election of three directors for a term of three years each;

o ratification of the appointment of Deloitte & Touche LLP as our
independent registered public accounting firm for the current
fiscal year; and

o any other matters as may properly come before our annual meeting
or any adjournment or postponement thereof.

We will transact no other business at the annual meeting, except for
business properly brought before the annual meeting or any adjournment or
postponement of it by our board of directors.

Only our common stockholders of record at the close of business on
March 27, 2009, the record date for the annual meeting, may vote at the annual
meeting and any adjournments or postponements of it. A complete list of our
common stockholders of record entitled to vote at the annual meeting will be
available for inspection by our stockholders during the 10 business days before
the annual meeting at our executive offices during ordinary business hours for
proper purposes.

Your vote is very important. Please sign, date and return the enclosed
proxy card as soon as possible to make sure that your shares are represented at
the annual meeting. You also may cast your vote in person at the annual meeting.
If your shares are held in an account at a brokerage firm or bank, you must
instruct them on how to vote your shares.

ANNUAL MEETING ADMISSION: If you attend the annual meeting in person,
you will need to present your admission ticket, or an account statement showing
your ownership of our common stock as of the record date, and valid
government-issued photo identification. The indicated portion of your proxy card
or voter instruction card will serve as your admission ticket.

Our board of directors recommends that you vote "FOR" the election of
each of the nominees as directors and "FOR" the ratification of the appointment
of Deloitte & Touche LLP as our independent registered public accounting firm
for the current fiscal year.

By Order of the Board of Directors,

R. Nicholas Singh
Secretary

March 27, 2009
New York, New York

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Important Notice Regarding the Availability of Proxy Materials
for the Shareholder Meeting May 29, 2009. Our Proxy Statement and
2008 Annual Report to Stockholders are available at www.proxyvote.com.

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TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE MEETING........................................1
OUR ANNUAL MEETING.............................................................4
Date, Time and Place of the Annual Meeting............................4
Purpose of the Annual Meeting.........................................4
Stockholder Record Date...............................................4
Voting Rights.........................................................4
Quorum; Effect of Abstention and Broker "Non-Votes"...................4
Votes Required To Approve the Proposals...............................5
Voting of Proxies.....................................................5
Revocability of Proxies...............................................5
Solicitation of Proxies...............................................6
Postponement or Adjournment of Meeting................................6
Annual Meeting Admission Procedures...................................6
Voting................................................................7
PROPOSAL I ELECTION OF DIRECTORS...............................................7
Directors.............................................................8
Class I Directors.....................................................8
Class II Directors....................................................9
Class III Directors..................................................10
CORPORATE GOVERNANCE, DIRECTOR INDEPENDENCE, BOARD MEETINGS
AND COMMITTEES...............................................................11
Corporate Governance.................................................11
Independence of Our Directors........................................11
Board Committees and Charters........................................11
MANAGEMENT....................................................................15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF ANNALY.........................................................17
EXECUTIVE COMPENSATION........................................................19
COMPENSATION OF DIRECTORS.....................................................31
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................32
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION...................33
EQUITY COMPENSATION PLAN INFORMATION..........................................33
REPORT OF THE AUDIT COMMITTEE.................................................34
PROPOSAL II RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM............................................36
Relationship with Independent Registered Public Accounting Firm......36
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.......................37
ACCESS TO FORM 10-K...........................................................37
STOCKHOLDER PROPOSALS.........................................................37
OTHER MATTERS.................................................................38
WHERE YOU CAN FIND MORE INFORMATION...........................................38

ANNALY CAPITAL MANAGEMENT, INC.
1211 AVENUE OF THE AMERICAS, SUITE 2902
NEW YORK, NEW YORK 10036
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2009 ANNUAL MEETING OF STOCKHOLDERS
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PROXY STATEMENT

Annaly Capital Management, Inc. ("we", "our" or "us") is furnishing
this proxy statement in connection with our solicitation of proxies to be voted
at our 2009 annual meeting of stockholders. We will hold the annual meeting at
the New York Marriott Marquis, 1535 Broadway, New York, New York 10036, on May
29, 2009 at 9:00 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 April 15, 2009. Our principal executive
offices are located at 1211 Avenue of the Americas, Suite 2902, New York, New
York 10036.

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QUESTIONS AND ANSWERS ABOUT THE MEETING
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Q: What am I voting on?

A: (1) Election of three directors, Wellington J. Denahan-Norris,
Michael Haylon and Donnell A. Segalas, for terms of three
years; and

(2) Ratification of the appointment of Deloitte & Touche LLP as
our independent registered public accounting firm for 2009.

Q: How does the board of directors recommend that I vote on these
proposals?

A: Our board of directors recommends you vote "FOR" the election of each
of the nominees as directors and "FOR" the ratification of the
appointment of Deloitte & Touche LLP as our independent registered
public accounting firm for the current fiscal year.

Q: Who is entitled to vote at the meeting?

A: Only common stockholders of record as of the close of business on March
27, 2009, the record date, are entitled to vote at the meeting.

Q: What stockholder approvals are required to approve the proposals?

A: 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, and ratification of the appointment of our
independent registered public accounting firm will require the
affirmative vote of the holders of a majority of the votes cast at the
annual meeting.

Q: What do I do if I want to change my vote?

A: Send a later-dated, signed proxy card to our Secretary prior to the
date of the annual meeting or attend the annual meeting in person and
vote. You also may revoke your proxy by sending a notice of revocation
to our Secretary at our address which is provided above.

Q: If my broker holds my shares in "street name," will my broker vote my
shares?

A: If you do not provide your broker with instructions on how to vote your
street name shares, your broker will be able to vote them on each of
the proposals described in this proxy statement. You should, therefore,
be sure to provide your broker with instructions on how to vote your
shares. Stockholders are urged to use telephone or Internet voting if
their broker has provided them with the opportunity to do so. See your
voting instruction form for instructions. If your broker holds your
shares and you attend the annual meeting, please bring a letter from
your broker identifying you as the beneficial owner of the shares and
acknowledging that you will vote your shares.

Q: Who can help answer my questions?

A: If you have any questions or need assistance voting your shares or if
you need additional copies of this proxy statement or the enclosed
proxy card, you should contact:

Annaly Capital Management, Inc.
1211 Avenue of the Americas
Suite 2902
New York, NY 10036
Phone: (212) 696-0100
Facsimile: (212) 696-9809
Email: investor@annaly.com
Attention: Investor Relations

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 R. Nicholas Singh, our Secretary,
to vote on those matters according to their best judgment.

Q: Who will count the vote?

A: Representatives of Broadridge Financial Solutions, Inc., 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, 544,339,786 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: Who can attend the annual meeting?

A: All stockholders of record as of March 27, 2009 can attend the annual
meeting, although seating is limited. If your shares are held through a
broker and you would like to attend, please either (1) write us at
Investor Relations, Annaly Capital Management, Inc., 1211 Avenue of the
Americas, Suite 2902, New York, New York 10036 or email us at
investor@annaly.com, or (2) bring to the meeting a copy of your
brokerage account statement or an omnibus proxy (which you can get from
your broker). In addition, you must bring valid, government-issued
photo identification, such as a driver's license or a passport. If you
plan to attend, please check the box on your proxy card and return it
as directed on the proxy card.

Security measures will be in place at the meeting to help ensure the
safety of attendees. Metal detectors similar to those used in airports
will be located at the entrance to the auditorium and briefcases,
handbags and packages will be inspected. No cameras or recording
devices of any kind, or signs, placards, banners or similar materials,
may be brought into the meeting. Anyone who refuses to comply with
these requirements will not be admitted.

Q: When are stockholder proposals due for the 2010 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 16, 2009.

Q: How will we solicit proxies for the annual meeting?

A: We are soliciting proxies by mailing this proxy statement and proxy
card to our stockholders. In addition to solicitation 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.

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OUR ANNUAL MEETING
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We are furnishing this proxy statement to our stockholders as part of
the solicitation of proxies by our board of directors for use at our annual
meeting.

Date, Time and Place of the Annual Meeting

We will hold our annual meeting on May 29, 2009, at 9:00 a.m., local
time, at the New York Marriott Marquis, 1535 Broadway, New York, New York 10036.

Purpose of the Annual Meeting

At the annual meeting, we are asking holders of record of our common
stock to consider and vote on the following proposals:

o election of three directors for a term of three years each;

o ratification of the appointment of Deloitte & Touche LLP as our
independent registered public accounting firm for the current
fiscal year; and

o any matters as may properly come before our annual meeting or any
adjournment or postponement thereof.

Stockholder Record Date

Only holders of record of our common stock at the close of business on
March 27, 2009, the record date, are entitled to notice of and to vote at the
annual meeting. On the record date, approximately 544,339,786 shares of our
common stock were issued and outstanding.

Voting Rights

Our stockholders are entitled to one vote per share of common stock
held as of the record date for the annual meeting.

Quorum; Effect of Abstention and Broker "Non-Votes"

A quorum will be present at the annual meeting if a majority of the
votes entitled to be cast are present, in person or by proxy. Since there were
544,339,786 eligible votes as of the record date, we will need at least
272,169,894 votes present in person or by proxy at the annual meeting for a
quorum to exist. If a quorum is not present at the annual meeting, we expect
that the annual meeting will be adjourned to solicit additional proxies. Holders
of record of our common stock on the record date are entitled to one vote per
share.

Abstentions will be treated as shares that are present and entitled to
vote for purposes of determining the presence of a quorum. An abstention is the
voluntary act of not voting by a stockholder who is present at a meeting and
entitled to vote. An abstention will not count "for" or "against" the election
of directors or the ratification of Deloitte & Touche LLP as our independent
registered public accounting firm.

A broker "non-vote" occurs when a broker nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary power for that particular item and has not received
instructions from the beneficial owner. Under New York Stock Exchange rules,
brokers that hold shares of our common stock in street name for customers that
are the beneficial owners of those shares may not give a proxy to vote those
shares on certain matters without specific instructions from those customers.
Broker "non-votes" will be treated as present and entitled to vote for purposes
of determining the presence of a quorum. If a stockholder owns shares through a
broker and attends the annual meeting, the stockholder must bring a letter from
that stockholder's broker identifying that stockholder as the beneficial owner
of the shares and acknowledging that you will vote your shares.

Broker non-votes will not count "for" or "against" the election of
directors and the ratification of Deloitte & Touche LLP as our independent
registered public accounting firm.

Votes Required To Approve the Proposals

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 registered public
accounting firm will require the affirmative vote of the holders of a majority
of the votes cast at the annual meeting.

Voting of Proxies

All shares represented by properly executed proxies received in time
for the annual meeting will be voted at the annual meeting in the manner
specified by the stockholders giving those proxies. Properly executed proxies
that do not contain voting instructions will be voted for the election of
directors and for the ratification of Deloitte & Touche LLP as our independent
registered public accounting firm.

The individuals named as proxies by a stockholder may vote for one or
more adjournments of the annual meeting, including adjournments to permit
further solicitations of proxies.

We do not expect that any matter other than the proposals described
above will be brought before the annual meeting. If, however, other matters are
properly presented at the annual meeting, the individuals named as proxies will
vote in accordance with the recommendation of our board of directors.

Revocability of Proxies

Submitting a proxy on the enclosed form will not preclude you from
voting in person at the annual meeting. You may revoke a proxy at any time
before it is voted by filing with us a duly executed revocation of proxy, by
submitting a duly executed proxy to us with a later date or by appearing at the
annual meeting and voting in person. You may revoke a proxy by any of these
methods, regardless of the method used to deliver your previous proxy.
Attendance at the annual meeting without voting will not itself revoke a proxy.

Solicitation of Proxies

We will pay the expenses incurred in connection with the printing and
mailing of this proxy statement. In addition to solicitation by mail, the
directors, officers and our employees, who will not be specially compensated,
may solicit proxies from our stockholders by telephone, facsimile, telegram or
other electronic means or in person. Arrangements also will be made with
brokerage houses and other custodians, nominees and fiduciaries for the
forwarding of solicitation materials to the beneficial owners of shares held of
record by these persons, and we will reimburse them for their reasonable
out-of-pocket expenses. We will bear the total cost of soliciting proxies.

We will mail or send an electronic copy of this proxy statement to each
holder of record of our common stock on the record date.

Stockholders have the option to vote over the internet or by telephone.
Please be aware that if you vote over the internet, you may incur costs such as
telephone and access charges for which you will be responsible.

In accordance with a notice sent to eligible stockholders who share a
single address, we are sending only one proxy statement to that address unless
we received instructions to the contrary from any stockholder at that address.
This practice, known as "householding," is designed to reduce our printing and
postage costs. However, if a stockholder of record residing at such an address
wishes to receive a separate annual report or proxy statement, he or she may
request it orally or in writing by contacting us at Annaly Capital Management,
Inc., 1211 Avenue of the Americas, Suite 2902, New York, New York 10036,
Attention: Investor Relations, by emailing us at investor@annaly.com, or by
calling us at 212-696-0100, and we will promptly deliver to the stockholder the
requested annual report or proxy statement. If a stockholder of record residing
at such an address wishes to receive a separate annual report or proxy statement
in the future, he or she may contact us in the same manner. If you are an
eligible stockholder of record receiving multiple copies of our annual report
and proxy statement, you can request householding by contacting us in the same
manner. If you own your shares through a bank, broker or other nominee, you can
request householding by contacting the nominee.

Postponement or Adjournment of Meeting

If a quorum is not present or represented, our bylaws permit a majority
of stockholders entitled to vote at the annual meeting, present in person or
represented by proxy, to postpone or adjourn the meeting, without notice other
than an announcement.

Annual Meeting Admission Procedures

You should be prepared to present valid government-issued photo
identification for admittance at the annual meeting. In addition, if you are a
record holder of common stock, your name is subject to verification against the
list of our record holders on the record date prior to being admitted to the
annual meeting. If you are not a record holder but hold shares in street name,
that is, with a broker, dealer, bank or other financial institution that serves
as your nominee, you should be prepared to provide proof of beneficial ownership
on the record date, or similar evidence of ownership. If you do not provide
valid government-issued photo identification or comply with the other procedures
outlined above upon request, you will not be admitted to the annual meeting.

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
27, 2009. There were 544,339,786 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 2012
annual meeting of stockholders, in voting by proxy, you may vote in favor of all
the nominees, withhold your vote as to all the 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 registered public accounting firm 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 registered public accounting firm for
the current fiscal year.

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PROPOSAL I
ELECTION OF DIRECTORS
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At the annual meeting, the stockholders will vote to elect three class
I directors, whose terms will expire at our annual meeting of stockholders in
2012, 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 Wellington
J. Denahan-Norris, Michael Haylon and Donnell A. Segalas 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.

OUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR WELLINGTON J.
DENAHAN-NORRIS, MICHAEL HAYLON, AND DONNELL A. SEGALAS AS DIRECTORS TO HOLD
OFFICE UNTIL OUR ANNUAL MEETING OF STOCKHOLDERS IN 2012 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 to be elected
at this year's meeting will serve until our annual meeting of stockholders in
2012. Our class II directors will serve until our annual meeting of stockholders
in 2010 and our class III directors will serve until our annual meeting of
stockholders in 2011. Set forth below are the names and certain information on
each of our directors.

Class I Directors

Wellington J. Denahan-Norris, age 45, was elected on December 5, 1996
to serve as Vice Chairman of the Board and a director. She has responsibility
for managing our portfolio. Ms. Denahan-Norris was appointed our Chief Operating
Officer in January 2006. She was a founder of Fixed Income Discount Advisory
Company, a Delaware corporation and our wholly-owned subsidiary, or FIDAC, and
is its Chief Operating Officer. She has been FIDAC's Senior Vice President 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. Prior to joining FIDAC, from March 1992 to July 1994, Ms.
Denahan-Norris 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.

Michael Haylon, age 50, was elected on June 12, 2008 to serve as a
director. Mr. Haylon was Executive Vice President and Chief Financial Officer of
the Phoenix Companies, Inc. from 2004 until 2007, and Executive Vice President
and Chief Investment Officer of the Phoenix Companies in 2002 and 2003. Phoenix
Companies is a NYSE-listed company with primary businesses in life insurance,
asset management and annuities. From 1995 until 2002, he held the positions of
Executive Vice President of Phoenix Investment Partners, Ltd. a NYSE-listed
company, and President of Phoenix Investment Counsel, where he was responsible
for the management and oversight of $25 billion in closed-end and open-end
mutual funds, corporate pension funds and insurance company portfolios. From
1990 until 1994 he was Senior Vice President of Fixed-Income at Phoenix Home
Life Insurance Company. From 1986 until 1990, he was Managing Director at Aetna
Bond Investors where he was responsible for management of insurance company and
pension fund portfolios. From 1980 until 1984 he was Senior Financial Analyst at
Travelers Insurance Companies. He began his career in 1979 in the commercial
lending program at Philadelphia National Bank. Mr. Haylon has previously served
on the boards of Aberdeen Asset Management and Phoenix Investment Partners. He
has a B.A. from Bowdoin College and a M.B.A. from the University of Connecticut.

Donnell A. Segalas, age 51, was elected on January 28, 1997 to serve as
a director. Mr. Segalas is a principal at Pinnacle Asset Management L.P. where
he is a member of the investment and executive committees. Mr. Segalas manages
new business, distribution and special projects for Pinnacle. Prior to joining
Pinnacle, Mr. Segalas was Executive Vice President for alternative investments
at Phoenix Investment Partners Ltd., a NYSE-listed asset management firm. Prior
to joining Phoenix, 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, Mr. Segalas co-founded a leveraged buyout firm, Maplewood
Partners, L.L.C. Prior to joining Maplewood Partners, Mr. Segalas was a Managing
Director at Rodman & Renshaw, Inc. in its 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 II Directors

Kevin P. Brady, age 53, was elected on January 28, 1997 to serve as a
director. Mr. Brady is a Vice-President in the Tax and Accounting division of
ThomsonReuters. In January of 2008, ThomsonReuters acquired TaxStream, a
software company founded by Mr. Brady, which serves the tax accounting market.
Prior to the acquisition, he served as Chief Executive Officer of TaxStream,
providing product expertise, management and strategic direction for the company.
Mr. Brady is also the Chief Executive Officer of LexStream, a software company
that he founded 2 years ago, which is dedicated to the financial accounting
market. Mr. Brady has served as an independent director of Annaly since 1997 and
has been chair of the audit committee for 7 years, with oversight for financial
disclosure, audit and general accounting activities. He worked in various
accounting and tax positions at PricewaterhouseCoopers from 1986 to 1994 and
Merck from 1980 to 1986. Mr. Brady holds a BA from McGill University, an MBA
from New York University and is a Certified Public Accountant (inactive).

E. Wayne Nordberg, age 70, was elected on May 27, 2005 to serve as a
director. Mr. Nordberg is currently Chairman of Hollow Brook Associates LLC, an
SEC registered investment advisor, which manages or advises $1.2 billion of
investment assets, including the Lafayette College Endowment Fund. From January
2003 to November 2007, Wayne served as a senior director of Ingalls & Snyder
LLC, an NYSE member and registered investment advisor. From 1998 to June 2002,
Mr. Nordberg served as Vice Chairman of the Board of KBW Asset Management, Inc.
KBW is an affiliate of Keefe, Bruyette, & Woods, Inc., a registered investment
advisor offering investment management services to institutions and high net
worth individuals. From 1988 to 1998, he served in various capacities for Lord,
Abbett & Co., a mutual fund company, including partner and director of their
family of funds. Mr. Nordberg received his B.A. in Economics from Lafayette
College, where he is a Trustee Emeritus. He is a member of the Financial
Analysts Federation and The New York Society of Security Analysts, and is a
Trustee of the Atlantic Salmon Federation, The American Museum of Fly Fishing,
The Battery Conservancy, the Property & Environment Research Center, The
Anglers' Club of New York, Glynwood Center and Yellowstone Park Foundation. Mr.
Nordberg also serves on the Investment Committee of The Jackson Laboratory. Mr.
Nordberg is also a director of PetroQuest Energy, Inc., an NYSE-listed company.

Class III Directors

Michael A. J. Farrell, age 57, was elected on December 5, 1996 to serve
as Chairman of the Board and Chief Executive Officer. Mr. Farrell was appointed
our President effective January 1, 2002. He was a founder of FIDAC and, since
November 1994, he has been its President and Chief Executive Officer. He is a
member of the board of directors of the U.S. Dollar Floating Rate 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 32 years of
experience in fixed income trading, management and operations.

Jonathan D. Green, age 62, was elected on January 28, 1997 to serve as
a director. Mr. Green is Vice Chairman of Rockefeller Group International, Inc.,
a wholly owned subsidiary of Mitsubishi Estate Company, Ltd., with interests in
real estate ownership, investment, management and development, and real estate
services collectively operating under the brand of The Rockefeller Group. 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.,
becoming Vice Chairman in January 2009. In his role as Vice Chairman, Mr. Green
is active in formulating the strategic planning for the company and its
subsidiaries, which include Rockefeller Group Development Corporation,
Rockefeller Group Investment Management, Rockefeller Group Technology Solutions,
Inc., and Rockefeller Group Business Centers. Before joining The Rockefeller
Group, Mr. Green was associated with the New York City law firm of Thacher,
Proffitt & Wood. Mr. Green is a member of the Board of Directors of Rockefeller
Group International, Inc. He also serves on the Board of Trustees of the Museum
for African Art, The Leadership Council of Lafayette College, the Board of
Trustees of the Wildlife Conservation Society. Mr. Green graduated from
Lafayette College and the New York University School of Law.

John A. Lambiase, age 69, was elected on January 28, 1997 to serve as a
director. 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.

--------------------------------------------------------------------------------
CORPORATE GOVERNANCE, DIRECTOR INDEPENDENCE,
BOARD MEETINGS AND COMMITTEES
--------------------------------------------------------------------------------

Corporate Governance

We believe that we have implemented effective corporate governance
policies and observe good corporate governance procedures and practices. We have
adopted a number of written policies, including corporate governance guidelines,
code of business conduct and ethics, and charters for our audit committee,
compensation committee and nominating/corporate governance committee.

Independence of Our Directors

New York Stock Exchange rules require that at least a majority of our
directors be independent of our company and management. The rules also require
that our board of directors affirmatively determine that there are no material
relationships between a director and us (either directly or as a partner,
stockholder or officer of an organization that has a relationship with us)
before such director can be deemed independent. We have adopted independence
standards consistent with New York Stock Exchange rules. Our board of directors
has reviewed both direct and indirect transactions and relationships that each
of our directors had or maintained with us, our management and employees. As a
result of this review, our board of directors, based upon the fact that none of
our non-employee directors have any relationships with us other than as
directors and holders of our common stock, affirmatively determined that five of
our directors are independent directors under New York Stock Exchange rules. Our
independent directors are Kevin P. Brady, Jonathan D. Green, Michael Haylon, E.
Wayne Nordberg and Donnell A. Segalas. Michael A.J. Farrell and Wellington J.
Denahan-Norris are not considered independent because they are employees of the
company, and John A. Lambiase is not considered independent because we employ
his son.

Board Committees and Charters

Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics, which sets forth
the basic principles and guidelines for resolving various legal and ethical
questions that may arise in the workplace and in the conduct of our business.
This code is applicable to all employees, officers and directors of the company.

Corporate Governance Guidelines

We have adopted Corporate Governance Guidelines which, in conjunction
with the charters and key practices of our board committees, provide the
framework for the governance of our company.

Other Charters

Our compensation committee, audit committee and nominating/corporate
governance committee have also adopted written charters which govern their
conduct.

Where You Can Find These Documents

Our Code of Business Conduct and Ethics, Corporate Governance
Principles, Compensation Committee Charter, Audit Committee Charter and
Nominating/Corporate Governance Committee Charter are available on our website
(www.annaly.com). We will provide copies of these documents free of charge to
any stockholder who sends a written request to Investor Relations, Annaly
Capital Management, Inc., 1211 Avenue of the Americas, Suite 2902, New York, New
York 10036.

Compensation Committee

We have a standing compensation committee. The members of our
compensation committee are Jonathan D. Green, E. Wayne Nordberg and Donnell A.
Segalas, each of whom is an independent director within the meaning of the rules
of the New York Stock Exchange. The compensation committee administers our
Long-Term Stock Incentive Plan, or Incentive Plan, and recommends changes to the
Incentive Plan to our board of directors when appropriate. The compensation
committee also administers our Executive Performance Plan. The compensation
committee also approves compensation for our officers. For additional
information on the compensation committee, please see "Compensation Committee
Report" below.

Audit Committee

We have a standing audit committee. The members of our audit committee
are Kevin P. Brady, Jonathan D. Green, Michael Haylon and E. Wayne Nordberg.
Each member of our audit committee is an independent director within the meaning
of the rules of the New York Stock Exchange, and Mr. Brady has been designated
as our audit committee's financial expert. The audit committee recommends to our
board of directors the engagement or discharge of independent registered public
accountants, reviews the plan and results of the auditing engagement with our
Chief Financial Officer and our independent registered public accountants, and
reviews with our Chief Financial Officer the scope and nature of our internal
auditing system. The activities of the audit committee are described in greater
detail below under the caption "Report of the Audit Committee."

Nominating/Corporate Governance Committee

We have a standing nominating/corporate governance committee. The
members of our nominating/corporate governance committee are Kevin P. Brady,
Michael Haylon, E. Wayne Nordberg and Donnell A. Segalas. Each of the members of
our nominating/corporate governance committee meets the independence
requirements of the New York Stock Exchange. The nominating/corporate governance
committee recommends to the board of directors persons to be nominated as
directors or to be elected to fill vacancies on the board of directors. The
nominating/corporate governance committee will consider nominees recommended by
our stockholders. These recommendations should be submitted in writing to our
Secretary.

Our nominating/corporate governance committee currently considers the
following factors in making its recommendations to the board of directors:
background, skills, expertise, accessibility and availability to serve
effectively on the board of directors. Our nominating/corporate governance
committee also conducts inquiries into the background and qualifications of
potential candidates.

Our nominating/corporate governance committee uses a variety of methods
for identifying and evaluating nominees for director. Our nominating/corporate
governance committee regularly assesses the appropriate size of the board of
directors, and whether any vacancies on the board of directors are expected due
to retirement or otherwise. In the event that vacancies are anticipated, or
otherwise arise, our nominating/corporate governance committee considers various
potential candidates for director. Candidates may come to the attention of our
nominating/corporate governance committee through current members of our board
of directors, professional search firms, stockholders or other persons. These
candidates are evaluated at regular or special meetings of our
nominating/corporate governance committee, and may be considered at any point
during the year. As described above, our nominating/corporate governance
committee considers properly submitted stockholder nominations for candidates
for the board of directors. Following verification of the stockholder status of
persons proposing candidates, recommendations are aggregated and considered by
our nominating/corporate governance committee at a regularly scheduled or
special meeting. If any materials are provided by a stockholder in connection
with the nomination of a director candidate, such materials are forwarded to our
nominating/corporate governance committee. Our nominating/corporate governance
committee also reviews materials provided by professional search firms or other
parties in connection with a nominee who is not proposed by a stockholder. In
evaluating such nominations, our nominating/corporate governance committee seeks
to achieve a balance of knowledge, experience and capability on the board of
directors.

Communications with the Board of Directors

Interested persons may communicate their complaints or concerns by
sending written communications to the board of directors, committees of the
board of directors and individual directors by mailing those communications to:

Annaly Capital Management, Inc.
[Addressee*]
1211 Avenue of the Americas
Suite 2902
New York, NY 10036
Phone: (212) 696-0100
Facsimile: (212) 696-9809
Email: investor@annaly.com
Attention: Investor Relations

* Audit Committee of the Board of Directors
* Compensation Committee of the Board of Directors
* Nominating/Corporate Governance Committee of the Board of
Directors
* Non-Management Directors
* Name of individual director

These communications are sent by us directly to the specified
addressee.

We require each member of the board of directors to attend our annual
meeting of stockholders except for absences due to causes beyond the reasonable
control of the director. We had seven directors at the time of the 2008 annual
meeting of stockholders and all seven attended the meeting.

Board and Committee Meetings

During 2008, our board of directors held ten meetings. During 2008, the
compensation committee held two meetings, the audit committee held four
meetings, and the nominating/corporate governance committee held one meeting.
Each director attended at least 75% of the aggregate number of meetings held by
our board of directors and 75% of the aggregate number of meetings of each
committee on which the director served.

Meetings of Non-Management Directors

Our corporate governance guidelines require that the board have at
least two regularly scheduled meetings each year for our non-management
directors. These meetings, which are designed to promote unfettered discussions
among our non-management directors, are presided over by Kevin Brady, a
non-management director. During 2008, our non-management directors had two
meetings.

--------------------------------------------------------------------------------
MANAGEMENT
--------------------------------------------------------------------------------

Name Age Position
-------------------------------------------------------------------------------------------------------------------------
Michael A.J. Farrell 57 Chairman of the Board, Chief Executive Officer and President

Wellington J. Denahan-Norris 45 Vice Chairman of the Board, Chief Investment Officer and Chief Operating
Officer

Kathryn F. Fagan 42 Chief Financial Officer and Treasurer

R. Nicholas Singh 50 Executive Vice President, General Counsel, Secretary and Chief
Compliance Officer

Jeremy Diamond 45 Managing Director

Ronald D. Kazel 41 Managing Director

James P. Fortescue 35 Managing Director, Head of Liabilities

Kristopher Konrad 34 Managing Director, Co-head Portfolio Management

Rose-Marie Lyght 35 Managing Director, Co-head Portfolio Management

Biographical information on Mr. Farrell and Ms. Denahan-Norris is
provided above. Certain biographical information for Ms. Fagan, Mr. Singh, Mr.
Diamond, Mr. Kazel, Mr. Fortescue, Mr. Konrad and Ms. Lyght is set forth below.

Kathryn F. Fagan 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. 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 from the University of Southwestern Louisiana.

R. Nicholas Singh was employed by us on February 14, 2005. Mr. Singh is
our Executive Vice President, General Counsel, Secretary and Chief Compliance
Officer. From 2001 until he joined Annaly, he was a partner in the law firm of
McKee Nelson LLP. Mr. Singh has a Bachelors Degree from Carleton College, a
Masters Degree from Columbia University and a J.D. from American University.

Jeremy Diamond was employed by us on March 1, 2002. Mr. Diamond is a
Managing Director of Annaly and FIDAC. From 1990 to March of 2002, he was
President of Grant's Financial Publishing, a financial research company, and
publisher of Grant's Interest Rate Observer. In addition to his responsibilities
as principal business executive, Mr. Diamond conducted security analysis and
financial market research. Mr. Diamond began his career as an analyst in the
investment banking group at Lehman Brothers. Mr. Diamond has a Bachelors Degree
from Princeton University and a Masters Degree in Business Administration from
the Anderson School at UCLA.

Ronald D. Kazel was employed by us on December 3, 2001. Mr. Kazel is a
Managing Director of Annaly and FIDAC. Mr. Kazel is responsible for reviewing
all new business activities for the company. Prior to joining Annaly, Mr. Kazel
was a Senior Vice President in Friedman Billings Ramsey's financial services
investment banking group. During his tenure there, he was responsible for
structuring both private and public equity and debt offerings for financial
services companies, including Annaly's private placement in 1997. Mr. Kazel has
a Bachelors Degree in Finance and Management from New York University.

James P. Fortescue was employed by us on December 5, 1996. Mr.
Fortescue is Managing Director, Head of Liabilities of Annaly and 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.

Kristopher Konrad was employed by us on October 15, 1997. Mr. Konrad is
Managing Director, Co-Head Portfolio Management of Annaly and FIDAC. Mr. Konrad
is the Portfolio Manager for Annaly and has served in this capacity since
December of 2000. Prior to this, he was head of financing for the US Dollar
Floating Rate Fund and assisted with the management of FIDAC's high net worth
separate accounts. Mr. Konrad has a Bachelors Degree in Business from Ithaca
College and has attended the New York Institute of Finance for intense
mortgage-backed securities studies.

Rose-Marie Lyght was employed by us on April 19, 1999. Ms. Lyght is
Managing Director, Co-Head Portfolio Management of Annaly and FIDAC. She has
been involved in the asset selection and financing for the US Dollar Floating
Rate Fund and FIDAC's high net worth separate accounts. Ms. Lyght has a Bachelor
of Science in Finance and a Masters Degree in Business Administration from
Villanova University.

--------------------------------------------------------------------------------
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT OF ANNALY
--------------------------------------------------------------------------------

The following table sets forth certain information as of March 27, 2009
relating to the beneficial ownership of our common stock by (i) each of our
named executive officers and directors, (ii) all of our executive officers and
directors as a group and (iii) all persons that we know beneficially own more
than 5% of our outstanding common stock. Knowledge of the beneficial ownership
of our common stock is drawn from statements filed with the SEC pursuant to
Section 13(d) or 13(g) of the 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.

Beneficial Owner Number Percent
----------------------------------------------------------------------------------------------------------
Michael A.J. Farrell(1) 2,750,867 *
Wellington J. Denahan-Norris(2) 1,113,263 *
Kathryn F. Fagan(3) 337,163 *
Jeremy Diamond(4) 160,415 *
Ronald D. Kazel(5) 153,249 *
Kevin P. Brady(6) 84,400 *
Jonathan D. Green(7) 108,250 *
Michael Haylon(8) 1,250 *
John Lambiase(9) 123,562 *
Donnell A. Segalas(10) 109,350 *
E. Wayne Nordberg(11) 119,750 *
Other executive officers as a group(12) 606,790 *
All executive officers and directors as a group
(14 persons) (1)(2)(3)(4)(5)(6)
(7)(8)(9)(10)(11)(12) 5,668,309 1.04%

* Represents beneficial ownership of less than one percent of the common stock.

(1) Includes 725,913 shares of common stock subject to vested options
granted under the Incentive Plan to Mr. Farrell that were exercisable as
of March 27, 2009 or have or will first become exercisable within 60
days after such date.

(2) Includes 650,000 shares of common stock subject to vested options
granted under the Incentive Plan to Ms. Denahan-Norris that were
exercisable as of March 27, 2009 or have or will first become
exercisable within 60 days after such date.

(3) Includes 175,750 shares of common stock subject to vested options
granted under the Incentive Plan to Ms. Fagan that were exercisable as
of March 27, 2009 or have or will first become exercisable within 60
days after such date.

(4) Includes 117,805 shares of common stock subject to vested options
granted under the Incentive Plan to Mr. Diamond that were exercisable as
of March 27, 2009 or will first become exercisable within 60 days after
such date. Includes 179 shares of common stock held by certain members
of Mr. Diamond's immediate family.

(5) Includes 89,001 shares of common stock subject to options granted under
the Incentive Plan to Mr. Kazel that were exercisable as of March 27,
2009 or have or will first become exercisable within 60 days after such
date. Includes 724 shares of common stock held by certain members of Mr.
Kazel's immediate family.

(6) Includes 63,750 shares of common stock subject to vested options granted
under the Incentive Plan to Mr. Brady that were exercisable as of March
27, 2009 or have or will first become exercisable within 60 days after
such date.

(7) Includes 87,000 shares of common stock subject to options granted under
the Incentive Plan to Mr. Green that were exercisable as of March 27,
2009 or have or will first become exercisable within 60 days after such
date.

(8) Includes 1,250 shares of common stock subject to options granted under
the Incentive Plan to Mr. Haylon that were exercisable as of March 27,
2009 or have or will first become exercisable within 60 days after such
date.

(9) Includes 66,187 shares of common stock subject to options granted under
the Incentive Plan to Mr. Lambiase that were exercisable as of March 27,
2009 or have or will first become exercisable within 60 days after such
date.

(10) Includes 82,000 shares of common stock subject to options granted under
the Incentive Plan to Mr. Segalas that were exercisable as of March 27,
2009 or have or will first become exercisable within 60 days after such
date.

(11) Includes 38,750 shares of common stock subject to options granted under
the Incentive Plan to Mr. Nordberg that were exercisable as of March 27,
2009 or have or will first become exercisable within 60 days after such
date. Includes 9,000 shares of common stock held by certain members of
Mr. Nordberg's immediate family.

(12) Includes 378,250 shares of common stock subject to options granted under
the Incentive Plan that were exercisable as of March 27, 2009 or have or
will first become exercisable within 60 days after such date.

At December 31, 2008, Mr. Farrell, Ms. Denahan-Norris, Ms. Fagan, Mr.
Diamond and Mr. Kazel held 2,024,954, 463,263, 148,913, 42,610, and 54,686
shares of stock, respectively, with values (based on the closing market price of
our common stock on December 31, 2008, which was $15.87 per share) of
$32,136,020, $7,351,984, $2,363,249, $676,221, and $867,867, respectively.

--------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
--------------------------------------------------------------------------------

Compensation Discussion and Analysis

Our Compensation Discussion and Analysis describes our compensation
program, objectives and policies for the executive officers named in this proxy
statement and our executive officers generally. This discussion should be read
together with the compensation tables and related disclosures contained in this
proxy statement.

Overview of Compensation Program and Philosophy

Our principal business objective is to generate income for distribution
to our stockholders as dividends. We believe that our compensation program is
directly linked to our principal business objective of generating income to
return to our stockholders. Our compensation program is designed to meet three
principal goals:

o attract, reward and retain officers and other key employees;

o motivate these individuals to achieve short-term and long-term
corporate goals that enhance stockholder value; and

o support our core values and cultures.

To meet these objectives, we have adopted the following policies:

o we pay compensation that is competitive with the compensation paid by
other leading asset management companies;

o we pay for performance by structuring compensation so that the majority
of cash compensation is comprised of bonuses which are paid only upon
the approval of the compensation committee; and

o we provide long-term incentives in the form of stock options to
incentivize our employees and align their interests with those of our
stockholders.

Pursuant to employment agreements entered into between us and our
executive officers, each executive has a targeted aggregate cash compensation
which is calculated as a percentage of our book value. The targeted compensation
is comprised of a base salary and a potential bonus. Any bonus paid, however,
must be approved by the compensation committee. We have used this approach to
compensate our executives because we believe that only successful performance by
our management would increase our book value. We believe our compensation
policies are particularly appropriate since we are a real estate investment
trust (or REIT). REIT regulations require us to pay at least 90% of our earnings
to shareholders as dividends. As a result, unlike most companies, we cannot grow
our business and our book value by reinvesting our earnings. Rather, our growth
in book value is dependent on sequential access to the capital markets. This
places a unique market discipline on us since we are able to access the capital
markets only if the markets believe our performance warrants it. The result of
our compensation program is that there may be prolonged periods, such as during
1997-2001 and 2003-2006, when we do not access the capital markets and during
which executive compensation is, in effect, frozen because of the employment
contracts. Our Board of Directors and our executive officers believe that our
compensation program is performance based since our executives are paid more
only if our performance warrants it.

While each executive has a targeted aggregate compensation based on our
book value, in determining the particular elements of compensation that will be
used to implement our overall compensation policies, the compensation committee
takes into consideration a number of factors related to our performance, as well
as the performance of the individual executive. In particular, in considering
whether to approve any bonuses, the compensation committee considers our
increase in assets under management, earnings per share, profitability, overall
economic conditions as well as competitive practices among our competitors in
the portfolio management business. The compensation committee also considers the
individual efforts made by the executive in achieving overall company goals.

Although we do not do an annual market assessment of our executive
compensation program, in 2003 we engaged a compensation consultant to look at
the compensation structures of other publicly held mortgage REITs and other
publicly held companies in the financial services and asset management 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.

The principal components of compensation for our executive officers
were:

o base salary;

o bonus compensation; and

o long-term equity incentive compensation.

Base Salary

We pay a base salary to our named executive officers and other
employees to compensate them for services rendered during the fiscal year. Base
salary ranges for named executive officers are determined for each executive
based on his or her position and responsibility by using market data, and were
negotiated with each executive and us. Base salary is intended to be a smaller
component of our executives overall compensation. Generally, an executive's base
salary ranges between 15% to 35% of the executive's overall cash compensation
(assuming the executive receives the full bonus for which he or she is
eligible).

The compensation committee from time to time reviews the base salaries
we pay our executives. In doing so, it considers a number of factors, including
market data, internal review of the executive's compensation compared to other
executive officers, and the individual performance of the executive.

Bonus Compensation

As noted above, pursuant to employment agreements entered into between
us and our executive officers, base compensation and bonus for the officers is
calculated as a percentage of our book value. Any bonus paid, however, is
subject to the discretion of the compensation committee. The compensation
committee also has the right to increase a bonus beyond the targeted
compensation contained in an executive's employment agreement. As discussed
above, this arrangement was established based upon our view that successful
performance by our management would result in our ability to raise additional
capital. Since bonuses must be approved by the compensation committee taking
into account a number of factors relating to our performance, we believe that
our executives are paid for performance.

Long-Term Equity Incentive Compensation

The compensation committee does not use a specific formula to calculate
the number of options awarded to executives under our Incentive Plan. The
compensation committee does not explicitly set future award levels/opportunities
on the basis of what the executives earned from prior awards. While the
compensation committee takes past awards into account, it does not solely base
future awards in view of those past awards. Generally, our Chief Executive
Officer will recommend the amounts of awards to be made to each employee to the
compensation committee. In determining the specific amounts to be granted to
each employee, the Compensation Committee will take into account factors such as
the executive's position, his or her contribution to our performance, market
practices as well as the recommendations of our Chief Executive Officer.

We have not and do not intend to either backdate stock options or grant
stock options retroactively. Presently, we do not have designated dates on which
we grant stock option awards (other than an annual grant to our directors). We
do not, however, intend to time stock options grants with our release of
material nonpublic information for the purpose of affecting the value of
executive compensation.

We have designed our compensation policy in an effort 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 our Long Term Incentive Plan, or
Incentive Plan. To date, our executive officers, pursuant to the Incentive Plan,
have been granted options to purchase, in the aggregate, 4,760,297 shares of
common stock with exercise prices ranging from $4.00 to $17.97. Consistent with
our view that this component of compensation is designed to provide long term
incentives, these options vest in equal installments over four, five or ten year
periods from the date of grant. Consistent with the foregoing, we have
structured our executive compensation policies with the goal of promoting the
long-term commitment of management. In addition, as indicated above, over 98% of
the stock options granted by us since inception have been options with vesting
periods of three, four and five years. The vesting of stock options accelerates
upon a change-in-control.

Perquisites and Fringe Benefits

We do not believe in providing our executives with excessive
perquisites and other fringe benefits. Consistent with our pay-for-performance
mandate, we provide very few executive fringe benefits. Our executive officers
receive health and welfare benefits, such as group medical, group life and
long-term disability coverage, under plans generally available to all other
employees. We believe that our executives should be able to provide for their
retirement needs from the total annual compensation they earn based on our
performance. Accordingly, other than an employer matching contribution which is
the same that we provide all of our employees, we do not offer our executives
any nonqualified pension plans, supplemental executive retirement plans,
deferred compensation plans or other forms of compensation for retirement.

Employment Agreements

As noted above, we have entered into employment agreements with our
executive officers. This is because we believe that the long-term commitment of
its current management team is a crucial factor in our future performance. This
team includes Mr. Farrell and Ms. Denahan-Norris, who have worked together at
FIDAC since November 1994, Ms. Fagan, who has worked with us since April 1997,
Mr. Diamond, who has worked with us since March 2002, and Mr. Kazel, who has
worked with us since December 2001. In an effort to ensure the long-term
commitment of its management team, we, with the approval of our board of
directors, entered into employment agreements with Mr. Farrell, Ms.
Denahan-Norris, Ms. Fagan, Mr. Diamond and Mr. Kazel. Each of these agreements
provided for a term through June 4, 2006 or January 1, 2006 with automatic
one-year extensions unless we or the officer provides written notice to the
contrary. These employment agreements are described below.

We currently have employment agreements with Mr. Farrell, Ms.
Denahan-Norris, Ms. Fagan, Mr. Diamond and Mr. Kazel. Each employment agreement
provides for annual base salaries and bonus payments to Mr. Farrell, Ms.
Denahan-Norris, Ms. Fagan, Mr. Diamond and Mr. Kazel based upon our book value.
Each agreement commenced when we acquired FIDAC on June 4, 2004, had an initial
two year term and is automatically extended for one year at the end of the term
unless we provide (or the officer provides) written notice to the contrary. We
amended Ms. Denahan-Norris' employment agreement on February 25, 2008. Mr.
Farrell's and Ms. Denahan-Norris' employment agreements provide for an annual
base salary and bonus equal to 0.25% of our book value. Ms. Fagan's employment
agreement each provides for annual base salaries and bonuses equal to 0.10% of
our book value. The respective employment agreements with Mr. Diamond and Mr.
Kazel provide for an annual base salary and bonus of 0.050% 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).

Mr. Farrell's and Ms. Denahan-Norris' employment agreements provide for
an annual base salary of $2,430,000. Ms. Fagan's employment agreement provides
for an annual base salary of $972,000. Mr. Diamond's and Mr. Kazel's employment
agreements provide for an annual base salary of $500,000. In addition, all
bonuses paid under these employment agreements are subject to the discretion of
our compensation committee.

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 of directors has established a bonus incentive compensation
plan for our executive officers. This program permits our compensation
committee, in its discretion, to award cash bonuses annually to our executive
officers. Each employment agreement also provides for the subject officer to
receive compensation, in the event that we terminate the officer's employment
without "cause" (as defined in the agreement), or if the officer resigns for
"good reason" (as defined in the agreement). We describe the severance benefits
our named executives receive in "Potential Payments Upon Termination of
Employment" below.

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 for cause or resignation of
the subject officer other than for "good reason." Each agreement requires that
the officer act in accordance with provisions of Maryland law relating to
corporate opportunities.

"Good reason" is generally defined by the employment agreements as the
occurrence of one or more of the following without the executive's written
consent:

o a material breach of the agreement by us;

o a materially significant change in the executive's duties,
authorities or responsibilities;

o the relocation of the executive's principal place of
employment more than 60 miles from New York, New York; and

o our failure to obtain the assumption in writing by any
successor to all or substantially all of our assets or
business within fifteen days upon a merger, consolidation,
sale or similar transaction of its obligations to perform the
executive's employment agreement.

We have a thirty day cure period to cure a breach of the first three items
described above.

"Cause" is generally defined by the employment agreements as the
occurrence of one or more of the following:

o the executive's failure to substantially perform the duties
described in his employment agreement (provided we give the
executive 60 day prior notice of the failure and provide the
executive an opportunity to respond, and, if the failure is
able to be cured, an opportunity to cure the failure);

o acts or omissions constituting recklessness or willful
misconduct on the part of the executive in respect of his
fiduciary obligations to us which is materially and
demonstrably injurious to us; and

o the executive's conviction for fraud, misappropriation or
embezzlement in connection with the our assets.

The employment agreements do not necessarily require payments by us
upon a change of control of us, unless the change of control includes the
failure of our successor to agree to perform its obligations under the
employment agreement. In such a case, the executive would have "good reason" to
terminate the agreement and require us to make severance payments.

Tax Considerations

Section 162(m) of the Internal Revenue Code denies a tax deduction for
compensation in excess of $1 million paid to our Chief Executive Officer and our
three other most highly compensated officers, excluding the Financial Officer,
unless the compensation is paid under a program that has satisfied stockholder
approval requirements and the compensation is "performance-based" within the
meaning of Section 162(m). Currently, the employment agreements of these
officers do not contain performance-based criteria and the compensation program
has not been approved by our stockholders. As a result, portions of the
compensation we pay is subject to the $1 million deduction limitation because it
is not considered performance-based within the meaning of Section 162(m).

During 2005, the compensation committee spent significant portions of
its meetings to determine whether we should take steps to permit us to deduct
compensation in excess of $1 million. As noted above, the compensation committee
has traditionally believed that it is in the best interests of us and our
stockholders that the overall compensation of our officers be calculated as a
percentage of book value. Nevertheless, in view of the non-deductibility of a
portion of the compensation we pay, the compensation committee reviews, from
time to time, its policies to determine whether we should in the future add
performance-based criteria to executive compensation. Adding performance-based
criteria will require amending the existing employment agreements of the
applicable employees.

Compensation Committee Report

The Compensation Committee of the Company has reviewed and discussed
the Compensation Discussion and Analysis required by Item 402(b) of Regulation
S-K with management and, based on such review and discussions, the Compensation
Committee recommended to the Board that the Compensation Discussion and Analysis
be included in this Proxy Statement.

Jonathan D. Green E. Wayne Nordberg Donnell A. Segalas

Summary Compensation Table

The table below sets forth the aggregate compensation we paid or
accrued with respect to the fiscal years ended December 31, 2008, 2007, and
2006, to our Chief Executive Officer and our Chief Financial Officer, and our
three highest paid other executive officers serving in their positions at
December 31, 2008.

Change in
Pension
Value and
Nonqual-
ified All
Deferred Other
Comp- Comp-
Stock Option ensation ensation
Name and Awards Awards Earnings ($) Total
Principal Position Year Salary Bonus ($) ($)(1) ($) (2) ($)
-------------------------------------------------------------------------------------------------------------------------------

Michael A.J. Farrell 2008 $2,430,000 $15,954,557 $0 $568,520 $0 $240 $18,953,317
Chairman of the Board, Chief 2007 $2,430,000 $9,618,020 $0 $400,538 $0 $160 $12,448,718
Executive Officer, and President 2006 $2,430,000 $4,816,609 $0 $424,534 $0 $167 $7,671,310

Wellington J. Denahan-Norris 2008 $2,349,167 $16,954,557 $0 $568,520 $0 $9,440 $19,881,684
Vice Chairman, Chief Investment 2007 $1,945,000 $7,693,416 $0 $372,354 $0 $9,160 $10,019,930
Officer and Chief Operating Officer 2006 $1,945,000 $3,852,287 $0 $376,218 $0 $8,967 $6,182,472

Kathryn F. Fagan 2008 $972,000 $6,381,823 $0 $164,090 $0 $9,440 $7,527,353
Chief Financial Officer and 2007 $972,000 $3,847,208 $0 $124,118 $0 $9,160 $4,952,486
Treasurer 2006 $972,000 $1,926,644 $0 $125,406 $0 $8,967 $3,033,017

Jeremy Diamond 2008 $500,000 $3,176,911 $0 $140,574 $0 $9,440 $3,826,925
Managing Director 2007 $500,000 $1,909,604 $0 $74,266 $0 $9,160 $2,493,030
2006 $500,000 $949,322 $0 $67,244 $0 $8,967 $1,525,533

Ronald D. Kazel 2008 $500,000 $3,176,911 $0 $140,574 $0 $9,440 $3,826,925
Managing Director 2007 $500,000 $1,909,604 $0 $74,266 $0 $9,160 $2,493,030
2006 $500,000 $949,322 $0 $67,244 $0 $8,967 $1,525,533

-----------------------
(1) The amounts in this column reflect the dollar amount recognized for
financial statement reporting purposes for the fiscal year ended December
31, 2008, in accordance with Financial Accounting Standards Board SFAS No.
123 (Revised 2004) - Share-Based Recent Payment, or SFAS 123(R), of awards
pursuant to the Long Term Incentive Plan and thus include amounts from
awards granted in and prior to 2008. Assumptions used in the calculation of
this amount for fiscal years ended December 31, 2008 are included in
footnote 1 to our audited financial statements for the fiscal year ended
December 31, 2008, included in our Annual Report on Form 10-K filed with
the Securities and Exchange Commission.

(2) The amount shown in this column reflects for each named executive officer:

o matching contributions made by us with respect to each of the named
executive officers pursuant to our Section 401(k) plan ($9,200 for each
named executive officer, other than Mr. Farrell who did not receive a
matching contribution); and

o the premiums associated with term life insurance that we provide to our
named executives officers.

The amount attributable to each perquisite or benefit for each named executive
officer does not exceed the greater of $25,000 or 10% of the total amount of
perquisites received by such named executive officer.

We have in effect employment agreements with each of our named
executive officers. The employment agreements set forth minimum base salary
amounts and provide each executive with a targeted aggregate cash compensation
which is calculated as a percentage of our book value. We describe these
employment agreements in "Compensation Discussion and Analysis" above. We
describe the severance payments we may pay to these executives in "Potential
Payments Upon Termination Of Employment" below.

The following table provides information about stock options granted
under our Incentive Plan to our named executive officers in 2008.

Grants of Plan-Based Awards

Estimated Future Payouts Estimated Future Payouts
Under Non-Equity Under Equity Incentive All Other
Incentive Plan Awards Plan Awards Stock All Other
Awards: Option Exercise
Number Awards: of Base
of Number of Price
Shares Securities of
of Stock Underlying Option
Grant Thres- Target Maxi- Thres- Target Maxi- or Units Options Awards
Name Date hold($) ($) mum($) hold($) ($) mum($) (#) (#)(1) ($/sh)
------------------------------------------------------------------------------------------------------
Michael A.J.
Farrell 5/8/2008 200,000 $16.46
9/19/2008 200,000 $15.61

Wellington J.
Denahan-Norris 5/8/2008 200,000 $16.46
9/19/2008 200,000 $15.61

Kathryn F.
Fagan 5/8/2008 53,000 $16.46
9/19/2008 53,000 $15.61

Jeremy
Diamond 5/8/2008 53,000 $16.46
9/19/2008 53,000 $15.61

Ronald D.
Kazel 5/8/2008 53,000 $16.46
9/19/2008 53,000 $15.61

-----------------------
(1) Represents the number of shares of common stock issuable upon exercise of
stock options granted in 2008 under our Incentive Plan. The options vest at
a rate of 25% per year over the first four years of the ten-year option
term.

We describe our Incentive Plan in "Compensation Discussion and
Analysis" above and in "Equity Compensation Plan Information" below.

The following table provides information about outstanding equity awards of
our named executive officers as of the end of 2008.

Outstanding Equity Awards at Fiscal Year-End

Option Awards Stock Awards
Market Equity Equity
Equity Number Value Incentive Incentive
Incentive of of Plan Plan Awards:
Plan Shares Shares Awards: Market or
Awards: or or Number of Payout Value
Number of Number of Number of Units Units Unearned of Unearned
Securities Securities Securities of of Shares, Shares,
Underly-ing Underlying Under- Stock Stock Units or Units or
Un- Unexercised lying Un- That That Other Other Rights
exercised Options (#) exercised Option Option Have Have Rights That Have
Options (#) Unexercis- Unearned Exercise Expiration Not Not That Have Note Yet
Name Exercisable able (1) Options (#) Price($) Date Vested Vested Not Vested Vested
----------------------------------------------------------------------------------------------------------------------
Michael A.J.
Farrell 3,413 8.63 11/18/09
22,500 7.94 11/29/10
200,000 17.97 08/04/13
150,000 17.39 04/19/14
112,500 37,500(2) 17.07 07/07/15
75,000 75,000(3) 11.72 02/13/16
37,500 112,500(4) 15.70 05/17/17
200,000(5) 16.46 05/08/18
200,000(6) 15.61 09/19/18

Wellington J.
Denahan-
Norris
150,000 17.97 08/04/13
150,000 17.39 04/19/14
112,500 37,500(2) 17.07 07/07/15
75,000 75,000(3) 11.72 02/13/16
37,500 112,500(4) 15.70 05/17/17
200,000(5) 16.46 05/08/18
200,000(6) 15.61 09/19/18
Kathryn F.
Fagan 50,000 17.97 08/04/13
50,000 17.39 04/19/14
37,500 12,500(2) 17.07 07/07/15
25,000(3) 11.72 02/13/16
12,500 37,500(4) 15.70 05/17/17
53,000(5) 16.46 05/08/18
53,000(6) 15.61 09/19/18

Jeremy
Diamond 20,000 17.97 08/04/13
20,000 17.39 04/19/14
22,500 7,500(2) 17.07 07/07/15
12,492 19,125(3) 11.72 02/13/16
10,000 30,000(4) 15.70 05/17/17
53,000(5) 16.46 05/08/18
53,000(6) 15.61 09/19/18

Ronald D.
Kazel 15,000 17.97 08/04/13
18,251 17.39 04/19/14
22,500 7,500(2) 17.07 07/07/15
19,125(3) 11.72 02/13/16
10,000 30,000(4) 15.70 05/17/17
53,000(5) 16.46 05/08/18
53,000(6) 15.61 09/19/18
--------------------------------------------------------------------------------------------------------

(1) All options listed above vest at a rate of 25% per year over the first four
years of the ten-year option term.
(2) These options vest on July 7, 2009.
(3) These options vest in two equal annual increments commencing February 13,
2009.
(4) These options vest in three equal annual increments commencing May 17, 2009.
(5) These options vest in four equal annual increments commencing May 8, 2009.
(6) These options vest in four equal annual increments commencing September 19,
2009.

Options Exercised and Stock Vested

The following table sets forth certain information with respect to our
named executive officers regarding options exercised and stock vested during the
calendar year 2008.

Option Awards Stock Awards

Number of
Shares Value Number of Shares
Acquired On Realized on Acquired on Value Realized
Name Exercise(#) Exercise($) Vesting (#) on Vesting ($)
--------------------------------------------------------------------------------------------
Michael A.J. Farrell 101,900 $972,633
Wellington J. Denahan-Norris 78,647 $701,149
Kathryn F. Fagan 16,500 $147,345
Jeremy Diamond 4,633 $17,371
Ronald D. Kazel 11,312 $85,853

Pension Benefits

We do not provide any of our employees with pension benefits. We do, however,
make matching contributions to all our employees, including our named executive
officers, who contribute to our Section 401(k) plan. We make a matching
contribution in cash of 100% of the employee's elective deferral contribution up
to 3% of the employee's pay, and 50% of the employee's pay above 3% up to 5% of
the employee's pay (subject to IRS limits).

Nonqualified Deferred Compensation

We do not provide any of our employees with any nonqualified
deferred compensation plans.

Potential Payments Upon Termination Of Employment

The following summaries set forth potential payments payable to our
named executive officers upon termination of employment or a change in control
of us under their current employment agreements. As discussed above, each of our
named executives has an employment agreement which provides for an annual base
salary and performance bonus which in the aggregate equal a percentage of our
book value. Post employment payments to our executives are determined by
reference to their base salary and performance bonus.

Termination upon Death, Disability or for Cause

An executive's employment with us terminates immediately upon his
death. Thereafter, we are obligated to pay his estate all accrued but unpaid
amounts of his base salary and the pro rata portion of his performance bonus for
the year of his death. The amount of the performance bonus paid in the year of
an executive's death will equal the maximum performance bonus he would have been
entitled to receive for that year (as determined at the end of the year of his
death) multiplied by a ratio equal to the number of days he was employed in the
year of his death, divided by 365. The performance bonus will be paid at the
same time and manner had the executive not died. In addition, the executive's
beneficiaries will receive benefits in accordance with the Company's retirement,
insurance and other applicable programs and plans then in effect.

We are entitled to terminate an executive's employment due to his
disability if he has been absent from the full-time performance of his duties
with the Company for six consecutive months, and if, within thirty days after
written notice by us, he has not returned to the full-time performance of his
duties. We will continue to pay the executive's base salary during the period
that the executive is first absent from the full-time performance of his duties
and until the later of the date he is terminated from employment due to
disability or the date he begins receiving long-term disability payments under
our long term disability plan. In addition, the executive will be entitled to
receive a pro rata portion of the performance bonus for the year of the
executive's termination due to disability. The amount of the pro rata portion of
the performance bonus will be determined in the same manner as described above
upon termination upon an executive's death. In addition, the executive's
beneficiaries will receive benefits in accordance with the Company's retirement,
insurance and other applicable programs and plans then in effect.

If we terminate an executive's employment for "cause" at any time prior
to expiration of the term of the agreement, we will be obligated to pay him all
accrued but unpaid amounts of his base salary and the pro rata portion of his
performance bonus for the year of his termination. The amount of the pro rata
portion of the performance bonus will be determined in the same manner as
described above upon termination upon an executive's death. In addition, the
executive's beneficiaries will receive benefits in accordance with the Company's
retirement, insurance and other applicable programs and plans then in effect.

Termination by Us Other Than for Cause or Termination by the Executive for Good
Reason

If we terminate an executive's employment without "cause", or if the
executive officer resigns for "good reason", we must immediately pay any unpaid
portion of the executive's base salary. In addition, the executive is entitled
to receive a severance payment equal to three times the greater of the
executive's combined maximum base salary and actual performance bonus for the
preceding fiscal year or the average for the three preceding years of the
officer's combined actual base salary and performance bonus compensation. One
half of this severance amount is payable immediately and the remaining 50% is
payable in monthly installments over the succeeding three months.

If any payments, distributions, or benefits provided or to be provided
to the executive under the employment agreement or otherwise are determined to
be subject to the excise tax imposed by Section 4999 of the Internal Revenue
Code on payments related to a change in control (or parachute payments), each
employment agreement provides that such parachute payments will be reduced to an
amount that will avoid imposition of such excise taxes. However, the parachute
payments will not be reduced if it is determined that the officer would have a
greater net after-tax benefit after paying the applicable excise taxes on the
unreduced parachute payments. If the parachute payments are not reduced under
the terms of the employment agreements, Section 280G of the Code may limit our
ability to deduct such payments for Federal income tax purposes.

In addition, if we terminate without cause or if the executive
terminates for good reason, all unexercised stock options owned by the executive
as of the termination date, whether vested or not, become immediately
exercisable. If however, any incentive stock options will not be exercisable for
the first time in a calendar year to the extent that all incentive stock options
exercisable by the executive during that calendar year exceeds $100,000.

Termination by Executive Without Good Reason

If the executive terminates the agreement without good reason, we are
obligated to pay him only all accrued but unpaid amounts of his base salary and
any previously awarded but unpaid performance bonus.

Potential Post-Employment Payments and Payments on a Change in Control

Each of our named executives has the right to terminate employment for
"good reason" and receive severance payment from us. We are not necessarily
required to make payments to an executive upon a change of control of us, unless
the change of control includes the failure of our successor to agree to perform
its obligations under the employment agreement. Such an event would constitute
"good reason" for purposes of the executive's right to terminate the agreement
and receive severance payments.

The following table presents the potential post employment payments and
payments our named executive officers would be entitled under their employment
agreements and assumes that the triggering event took place on December 31,
2008.

Termination Termination
with Cause or without Other Post
Voluntary Cause or for Death or Employment
Name Benefit Termination Good Reason Disability Obligations
---------------------------------------------------------------------------------------------------------
Michael A.J. Farrell Base Salary $0 $7,290,000 $0 $0
Bonus $0 $47,863,671 $0 $0
Stock Options(1) $520,779 $903,154 $520,779 $0
Wellington J.
Denahan-Norris Base Salary $0 $7,290,000 $0 $0
Bonus $0 $50,863,671 $0 $0
Stock Options(1) $317,625 $700,000 $317,625 $0

Kathryn F. Fagan Base Salary $0 $2,916,000 $0 $0
Bonus $0 $19,145,469 $0 $0
Stock Options(1) $2,125 $126,030 $2,125 $0

Jeremy Diamond Base Salary $0 $1,500,000 $0 $0
Bonus $0 $9,530,733 $0 $0
Stock Options(1) $53,546 $151,791 $53,546 $0

Ronald Kazel Base Salary $0 $1,500,000 $0 $0
Bonus $0 $9,530,733 $0 $0
Stock Options(1) $1,700 $99,945 $1,700 $0

-----------------------
(1) We have valued the benefit based on the potential gain executives would
have realized if the stock options had been exercised as of December 31,
2008.

--------------------------------------------------------------------------------
COMPENSATION OF DIRECTORS
--------------------------------------------------------------------------------

We pay an annual director's fee equal to $100,000 to each director who
is not an officer or employee, as well as a fee of $500 for each meeting of our
board of directors or any committee attended by each independent director (or
$250 for any meeting at which the director participates by conference telephone
call). We also reimburse all directors for costs and expenses for attending
these meetings.

Our Incentive Plan provides that each independent director, upon
appointment to our board of directors, 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.

Director Summary Compensation Table

The table below summarizes the compensation paid by us to our
non-employee directors for the fiscal year ended December 31, 2008.

Change in
Pension
Value and
Fees Earned Non-Equity Deferred
or Paid in Option Incentive Plan Compen- All Other
Cash Stock Awards Awards Compen- sation Compensation Total
Name ($) ($) ($)(1) sation($) Earnings($) ($) ($)
----------------------------------------------------------------------------------------------------------------------

Kevin P. Brady $99,083 0 $47,550 0 0 0 $146,633

Jonathan D. Green $99,583 0 $47,550 0 0 0 $147,133

Michael Haylon $56,262 0 $14,525 0 0 0 $70,787

John A. Lambiase $98,083 0 $47,550 0 0 0 $145,633

E. Wayne Nordberg $98,583 0 $47,550 0 0 0 $146,133

Donnell A. Segalas $98,583 0 $47,550 0 0 0 $146,133

-----------------------
(1) Reflects the dollar amount recognized for financial statement reporting
purposes for the fiscal year ended December 31, 2008, in accordance with
Financial Accounting Standards Board SFAS No. 123 (Revised 2004) -
Share-Based Recent Payment, or SFAS 123(R), of awards pursuant to the Long
Term Incentive Plan and thus include amounts from awards granted in and
prior to 2008. Assumptions used in the calculation of this amount for
fiscal years ended December 31, 2008 are included in footnote 1 to our
audited financial statements for the fiscal year ended December 31, 2008,
included in our Annual Report on Form 10-K filed with the Securities and
Exchange Commission. Directors were awarded 1,250 options each during 2008
which vested the day of granting, therefore the option value is equal to
the share price and are valued at $0.00 under SFAS 123(R). As of December
31, 2008, each non-employee director has the following number of options
outstanding: Kevin P. Brady, 106,250; Jonathan D. Green, 129,500; Michael
Haylon, 26,250; John A. Lambiase, 118,687; E. Wayne Nordberg, 81,250; and
Donnell A. Segalas, 124,500.

--------------------------------------------------------------------------------
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------------------------------

This section discusses certain direct and indirect relationships and
transactions involving us and certain persons related to us. A. Alexandra
Denahan, the sister of Wellington J. Denahan-Norris, our Vice Chairman of the
Board, Chief Operating Officer and Chief Investment Officer, is employed by us
as Controller and received $891,633 in salary and bonus during 2008. She was
also granted options to purchase 26,000 shares under our Incentive Plan. Matthew
J. Lambiase, the son of our director, John A. Lambiase, is employed by us as
Executive Vice President, Structured Products, and received $2,941,529 in salary
and bonus for 2008. He was also granted options to purchase 52,000 shares under
our Incentive Plan. Ms. Alexandra Denahan and Mr. Matthew Lambiase are not
executive officers. Ms. Denahan and Mr. Lambiase also participate in other
employee benefit plans and arrangements which are generally made available to
other employees at their level (including health, vacation, Section 401(k) and
insurance plans). The compensation of these individuals was established in
accordance with our employment and compensation practices applicable to
employees with equivalent qualifications, experience and responsibilities.

Approval of Related Person Transactions

Each of our directors, director nominees and executive officers is
required to complete an annual disclosure questionnaire and report all
transactions with us in which they and their immediate family members had or
will have a direct or indirect material interest with respect to us. We review
these questionnaires and, if we determine it necessary, discuss any reported
transactions with the entire board of directors. We do not, however, have a
formal written policy for approval or ratification of such transactions, and all
such transactions are evaluated on a case-by-case basis. If we believe a
transaction is significant to us and raises particular conflict of interest
issues, we will discuss it with our legal counsel, and if necessary, we will
form an independent board committee which has the right to engage its own legal
and financial counsel to evaluate and approve the transaction. An example of
this process was our acquisition of FIDAC from certain of our executive
officers. Other types of transactions, such as employment of individuals who may
be related to our executive officers or directors which are described above, are
discussed by the board of directors, but not approved or ratified by the board.

--------------------------------------------------------------------------------
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
--------------------------------------------------------------------------------

Our compensation committee is comprised solely of the following
non-employee directors: Messrs. Green, Nordberg 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.

--------------------------------------------------------------------------------
EQUITY COMPENSATION PLAN INFORMATION
--------------------------------------------------------------------------------

We have adopted the Incentive Plan for executive officers, key
employees and non-employee directors. The Incentive Plan authorizes the
compensation committee of our board of directors to grant awards, including
incentive stock options, or ISOs, as defined under Section 422 of the Internal
Revenue Code, or 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
up to a ceiling of 8,932,921 shares.

The following table provides information as of December 31, 2008
concerning shares of our common stock authorized for issuance under our existing
Incentive Plan.

Number of securities
Number of securities remaining available
to be issued upon Weighted-average for future issuance
exercise of exercise price of under Incentive Plan
outstanding options, outstanding options, (excluding
Plan Category warrants and rights warrants and rights previously issued)
------------------------------------------------------------------------------------
Equity compensation
plans approved by
security holders 5,180,164 $15.87 2,688,350(1)
Equity compensation
plans not approved
by security holders - - -
---------------------------------------------------------------
Total 5,180,164 $15.87 2,688,350
===============================================================

(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 up to a ceiling of
8,932,921 shares.
(2) We do not have any equity plans that have not been approved by our
shareholders.

--------------------------------------------------------------------------------
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. The
board of directors has determined that Mr. Brady is the audit committee
financial expert and is an independent director within the meaning of the
applicable rules of the Securities and Exchange Commission and the New York
Stock Exchange. In 2008, the Committee met four times. The audit committee has
adopted a written charter outlining the practices it follows. A full text of our
audit committee charter is available for viewing at our website at
www.annaly.com. Any changes in the charter or key practices will be reflected on
our website.

During the year 2008, at each of its meetings, the audit committee met
with the Chief Financial Officer and our independent registered public
accounting firm. The audit committee's agenda is established by the audit
committee's chairman. The audit committee engaged Deloitte & Touche LLP as our
independent registered public accounting firm and reviewed with our Chief
Financial Officer and the independent registered public accounting firm, overall
audit scope and plans, the results of external audit examination, evaluations by
the independent registered public accounting firm of our internal controls and
the quality of our financial reporting.

The audit committee has reviewed and discussed the audited financial
statements with management 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 financial statements have been prepared in conformity with generally
accepted accounting principles in the United States of America, and have
expressed to both management and registered public accounting firm their general
preference for conservative policies when a range of accounting options is
available.

In its meetings with representatives of the independent registered
public accounting firm, the audit committee asks them to address, and discusses
their responses to several questions that the audit 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 registered public
accounting firm themselves prepared and been responsible for
the financial statements?

o Based on the registered public accounting firm's 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 registered public accounting firm's experience,
and their knowledge of us, have we implemented internal
controls that are appropriate?

The audit committee believes that, by thus focusing its discussions
with the independent registered public accounting firm, it can promote a
meaningful dialogue that provides a basis for its oversight judgments.

The audit committee also discussed with the independent registered
public accounting firm other matters required to be discussed by the registered
public accounting firm with the audit committee under the standards of Public
Company Accounting Oversight Board (United States) (required communication with
the audit committee). The audit committee received and discussed with the
registered public accounting firm their annual written report on their
independence from us and our management, which is made pursuant to applicable
requirements of the Public Company Accounting Oversight Board, and considered
with the registered public accounting firm whether the provision of non-audit
services is compatible with the registered public accounting firm's
independence.

In performing all of these functions, the audit committee acts only in
an oversight capacity and, necessarily, in its oversight role, the audit
committee relies on the work and assurances of our management, which has the
primary responsibility for financial statements and reports, and of the
independent registered public accounting firm, who, in their report, express an
opinion on the conformity of our annual financial statements to generally
accepted accounting principles and on the effectiveness of our internal control
over financial reporting as of year end.

In reliance on these reviews and discussions, and the report of the
independent registered public accounting firm, the audit committee has
recommended to our board of directors, and our board of directors has approved,
that the audited financial statements be included in our Annual Report on Form
10-K for the year ended December 31, 2008, 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 E. Wayne Nordberg

--------------------------------------------------------------------------------
PROPOSAL II
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------------------------------

The accounting firm of Deloitte & Touche LLP and its affiliated
entities, or D&T, has served as our independent registered public accounting
firm 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 annual meeting, will have the opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions. If the appointment of 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 REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE YEAR 2009.

Relationship with Independent Registered Public Accounting Firm

In addition to performing the audits of our financial statements and
management's assessment of the effectiveness of the internal control over
financial reporting, D&T provided audit-related services for us during 2008 and
2007. The aggregate fees billed for 2008 and 2007 for each of the following
categories of services are set forth below:

Audit Fees: The aggregate fees billed by D&T for audits and reviews of
our 2008 financial statements were $565,000. The aggregate fees for the audit of
the Company's internal control over financial reporting in 2008 were $170,000.
The aggregate fees billed by D&T for audit and reviews of our 2007 financial
statements were $521,000. The aggregate fees billed by D&T for the audit of the
Company's internal control over financial reporting in 2007 were $165,000.

Audit-Related Fees: The aggregate fees billed by D&T for audit-related
services during 2008 were $19,500. The audit-related services in 2008
principally included due diligence and accounting consultation relating to our
public offerings and annual audit. The aggregate fees billed by D&T for audit
related services during 2007 were $12,700. The audit-related services in 2007
principally included due diligence and accounting consultation relating to our
public offerings.

Tax Fees: The aggregate fees billed by D&T for tax services for 2008
were $24,240. The aggregate fees billed by D&T for tax services for 2007 were
$25,042.

All Other Fees: D&T did not perform any other kinds of services for us
during 2008 and 2007, and we did not pay D&T any additional fees.

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 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. None of
the services related to the Audit-Related Fees described above was approved by
the audit committee pursuant to a waiver of pre-approval provisions set forth in
applicable rules of the Securities and Exchange Commission.

--------------------------------------------------------------------------------
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
--------------------------------------------------------------------------------

We believe that based solely upon our review of copies of forms we have
received or written representations from reporting persons, during the fiscal
year ended December 31, 2008, 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, except that Messrs. Farrell, Green and
Diamond each filed a Form 4 one day late due to administrative errors.

--------------------------------------------------------------------------------
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 27, 2009 a copy of our annual
report on Form 10-K for the year ended December 31, 2008, as filed with the
Securities and Exchange Commission. You should address your request to Investor
Relations, Annaly Capital Management, Inc., 1211 Avenue of the Americas, Suite
2902, New York, New York 10036 or email your request to us at
investor@annaly.com.

We make available on our website, www.annaly.com, under "Financial
Information/SEC Filings," free of charge, our annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to
those reports as soon as reasonably practicable after we electronically file or
furnish such materials to the SEC.

--------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
--------------------------------------------------------------------------------

For a stockholder proposal to be included in the proxy statement for
our 2009 annual meeting, including a proposal for the election of a director,
the proposal must have been received by us at our principal offices no later
than December 16, 2009.

--------------------------------------------------------------------------------
OTHER MATTERS
--------------------------------------------------------------------------------

As of the date of this proxy statement, the board of directors does not
know of any matter that will be presented for consideration at the annual
meeting other than as described in this proxy statement.

--------------------------------------------------------------------------------
WHERE YOU CAN FIND MORE INFORMATION
--------------------------------------------------------------------------------

We file annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information that we file with the SEC at the SEC's public reference room
at Public Reference Room, 100 F Street, N.E., Washington, D.C. 20549.

Please call the SEC at 1-800-SEC-0330 for further information on the
Public Reference Room. These SEC filings are also available to the public from
commercial document retrieval services and at the Internet worldwide web site
maintained by the SEC at http://www.sec.gov. Reports, proxy statements and other
information concerning us may also be inspected at the offices of the New York
Stock Exchange, which is located at 20 Broad Street, New York, New York 10005.

VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting
instructions and for electronic delivery of
information up until 11:59 P.M. Eastern Time
the day before the cut-off date or meeting
date. Have your proxy card in hand when you
access the web site and follow the
instructions to obtain your records and to
create an electronic voting instruction form.

ANNALY CAPITAL MANAGEMENT, INC. Electronic Delivery of Future PROXY MATERIALS
1211 AVE. OF THE AMERICAS, STE 2902 If you would like to reduce the costs incurred
NEW YORK, NY 10036 by our company in mailing proxy materials, you
ATTN: KATHRYN FAGAN can consent to receiving all future proxy
statements, proxy cards and annual reports
----------------------------------- electronically via e-mail or the Internet. To
sign up for electronic delivery, please follow
Investor Address Line 1 the instructions above to vote using the
Investor Address Line 2 Internet and, when prompted, indicate that you
Investor Address Line 3 agree to receive or access proxy materials
Investor Address Line 4 electronically in future years.
Investor Address Line 5
John Sample VOTE BY PHONE - 1-800-690-6903
1234 ANYWHERE STREET Use any touch-tone telephone to transmit your
ANY CITY, ON A1A 1A1 voting instructions up until 11:59 P.M. Eastern
Time the day before the cut-off date or meeting
----------------------------------- date. Have your proxy card in hand when you call
and then follow the instructions.

VOTE BY MAIL
Mark, sign and date your proxy card and return
it in the postage-paid envelope we have provided
or return it to Vote Processing, c/o Broadridge,
51 Mercedes Way, Edgewood, NY 11717.

-----------------------------------------------------------------------------------------------------

CONTROL # ----> 000000000000

NAME

THE COMPANY NAME INC. - COMMON SHARES 123,456,789,012.12345
THE COMPANY NAME INC. - CLASS A 123,456,789,012.12345
THE COMPANY NAME INC. - CLASS B 123,456,789,012.12345
THE COMPANY NAME INC. - CLASS C 123,456,789,012.12345
THE COMPANY NAME INC. - CLASS D 123,456,789,012.12345
THE COMPANY NAME INC. - CLASS E 123,456,789,012.12345
THE COMPANY NAME INC. - CLASS F 123,456,789,012.12345
THE COMPANY NAME INC. - 401 K 123,456,789,012.12345
-----------------------------------------
PAGE 1 OF 2
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: |X|

KEEP THIS PORTION FOR YOUR RECORDS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
DETACH AND RETURN THIS PORTION ONLY

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
_____________________________________________________________________________________________________
For Withhold For All To withhold authority to vote
All All Except for any individual nominee(s),
The Board of Directors recommends that you mark "For All Except" and
vote FOR the following: write the number(s) of the
1. Election of Directors [ ] [ ] [ ] nominee(s) on the line below.
______________________________
Nominees

01 W. Denahan-Norris 02 Michael Haylon 03 Donnell A. Segalas

The Board of Directors recommends you vote FOR the following proposal(s):

2 RATIFICATION OF THE APPOINTMENT OF DELOITTE AND TOUCHE LLP AS INDEPENDENT For Against Abstain
REGISTERED PUBLIC ACCOUNTING FIRM FOR THE COMPANY FOR THE 2009 FISCAL YEAR. [ ] [ ] [ ]

NOTE: Such other business as may properly come before the meeting or any adjournment thereof.

---------------------------------
Investor Address Line 1
Yes No Investor Address Line 2
Please indicate if you plan to attend this meeting [ ] [ ] Investor Address Line 3
Investor Address Line 4
Please sign exactly as your name(s) appear(s) hereon. When signing Investor Address Line 5
as attorney, executor, administrator, or other fiduciary, please John Sample
give full title as such. Joint owners should each sign personally. 1234 ANYWHERE STREET
All holders must sign. If a corporation or partnership, please sign ANY CITY, ON A1A 1A1
in full corporate or partnership name, by authorized officer. ---------------------------------
_______________________________________ _______________________________ SHARES
CUSIP #
_______________________________________ _______________________________ SEQUENCE #
Signature [PLEASE SIGN WITHIN BOX] Date JOB# Signature (Joint Owners) Date
_____________________________________________________________________________________________________

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The 2008
ANNUAL REPORT TO STOCKHOLDERS, 2009 NOTICE & PROXY STATEMENT is/are available at www.proxyvote.com.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

_____________________________________________________________________________________________________

ANNALY CAPITAL MANAGEMENT, INC.
This proxy is solicited by the Board of Directors
Annual Meeting of Shareholders
5/29/2009

Revoking all prior proxies, the undersigned hereby appoints Michael
A.J. Farrell and Nicholas Singh, and each of them, proxies, with full
power of substitution, to appear on behalf of the undersigned and to
vote all shares of Common Stock, par value $.01 per share, of Annaly
Capital Management, Inc. (the "Company") that the undersigned is
entitled to vote at the Annual Meeting of Stockholders of the Company
to be held at the New York Marriott Marquis, 1535 Broadway, New York,
New York 10036, commencing at 9:00 a.m., New York time, on Friday, May
29, 2009, 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.

Continued and to be signed on reverse side
_____________________________________________________________________________________________________