SC TO-T/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE TO

AMENDMENT NO. 2

(RULE 14D-100)

Tender Offer Statement Pursuant to Section 14(d)(1) or 13(e)(1)

of the Securities Exchange Act of 1934

MTGE INVESTMENT CORP.

(Names of Subject Company)

MOUNTAIN MERGER SUB CORPORATION

ANNALY CAPITAL MANAGEMENT, INC.

(Offerors)

(Names of Filing Persons)

COMMON STOCK, $0.01 PAR VALUE

(Title of Class of Securities)

55378A105

(CUSIP Number of Class of Securities)

Anthony Green, Esq.

Chief Legal Officer

Annaly Capital Management, Inc.

1211 Avenue of the Americas

New York, New York 10036

(212) 696-1000

(Name, address and telephone number of person authorized to receive notices and communications on behalf of filing persons)

with copies to:

Adam O. Emmerich, Esq.

Ronald C. Chen, Esq.

Wachtell, Lipton, Rosen & Katz

51 West 52nd Street

New York, New York 10019

(212) 403-2000

CALCULATION OF FILING FEE

Transaction Valuation*	Amount of Filing Fee**
$904,346,135	$112,591.09***

* Estimated solely for the purpose of calculating the registration fee pursuant to Rule 0-11 of the Securities Exchange Act of 1934, as amended, based on the product of (i) $19.73, the average of the high and low sales prices per share of MTGE Investment Corp. common stock on May 14, 2018, as reported by Nasdaq, and (ii) 45,836,094 (the number of shares of MTGE Investment Corp. common stock estimated to be outstanding at the time the offer and the merger are consummated).

** The amount of the filing fee, calculated in accordance with Rule 0-11 under the Securities Exchange Act of 1934, as amended, equals 0.0001245 multiplied by the transaction valuation.

*** Previously paid.

☒  Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

Amount Previously Paid: $56,552.34	Filing Party: Annaly Capital Management, Inc.
Form or Registration No.: Form S-4 333-224968	Date Filed: May 16, 2018

☐  Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

Check the appropriate boxes below to designate any transactions to which the statement relates:

☒ third-party tender offer subject to Rule 14d-1.

☐ issuer tender offer subject to Rule 13e-4.

☐ going-private transaction subject to Rule 13e-3.

☐ amendment to Schedule 13D under Rule 13d-2.

Check the following box if the filing is a final amendment reporting the results of the tender offer:  ☐

This Amendment No. 2 (this “Amendment”) amends and supplements the Tender Offer Statement on Schedule TO filed by Annaly Capital Management, Inc. (“Annaly”), a Maryland corporation, and Mountain Merger Sub Corporation, a Maryland corporation and a wholly owned subsidiary of Annaly (“Offeror”), relating to the offer (the “Offer”) by Annaly and Offeror to exchange for each outstanding share of common stock of MTGE Investment Corp., a Maryland corporation (“MTGE”), $0.01 par value per share (“MTGE common stock”), at the election of the holder thereof: (a) $9.82 in cash and 0.9519 shares of Annaly common stock, par value $0.01 per share (“Annaly common stock”); (b) $19.65 in cash (the “all-cash consideration”); or (c) 1.9037 shares of Annaly common stock (the “all-stock consideration”), subject in each case to the election procedures and, in the case of elections to receive the all-cash consideration or the all-stock consideration, to the proration procedures described in the Prospectus (as defined below) and the related Letter of Election and Transmittal (as defined below).

Annaly has filed with the Securities and Exchange Commission (the “SEC”) a Registration Statement on Form S-4 dated May 16, 2018, relating to, among other things, the offer and sale of shares of Annaly common stock to be issued to holders of shares of MTGE common stock in the Offer (as amended, the “Registration Statement”). The terms and conditions of the Offer are set forth in the Prospectus/Offer to Exchange, which is a part of the Registration Statement (the “Prospectus”), and the related letter of election and transmittal (the “Letter of Election and Transmittal”), which are filed as Exhibit (a)(4) and (a)(1)(A), respectively, hereto. Pursuant to General Instruction F to Schedule TO, the information contained in the Prospectus and the Letter of Election and Transmittal, including any prospectus supplement or other supplement thereto related to the Offer hereafter filed with the SEC by Annaly or Offeror, is hereby expressly incorporated into this Schedule TO by reference in response to Items 1 through 11 of this Schedule TO and is supplemented by the information specifically provided for in this Schedule TO. The Agreement and Plan of Merger, dated as of May 2, 2018, by and among Annaly, Offeror and MTGE (the “Merger Agreement”), a copy of which is attached as Exhibit (d)(1) to this Schedule TO, is incorporated into this Schedule TO by reference.

All of the information regarding the Offer as set forth in the Schedule TO, including all exhibits and annexes thereto that were previously filed with the Schedule TO, is hereby expressly incorporated by reference into this Amendment, except that such information is hereby amended and supplemented to the extent specifically provided for herein and to the extent amended and supplemented by the exhibits filed herewith. Capitalized terms used but not defined in this Amendment have the meanings ascribed to them in the Schedule TO.

Item 11. Other Information

Item 11 of the Schedule TO is hereby amended and supplemented by adding a new subsection entitled “Certain Legal Matters” as follows:

“Certain Legal Matters

Subsequent to the public announcement of the proposed acquisition of MTGE by Annaly, three civil actions were filed challenging the adequacy of the disclosures disseminated in connection with the proposed transaction. On May 25, 2018, Jeroen Van Poeck, a purported stockholder of MTGE, commenced an action in the United States District Court for the District of Maryland against MTGE, certain current MTGE directors named therein, Annaly and the Offeror. The complaint, a copy of which is filed hereto as Exhibit (a)(5)(E), asserts claims under Sections 14(e) and 20(a) of the Securities Exchange Act of 1934 challenging the adequacy of the public disclosures made concerning the proposed transaction. The plaintiff seeks, among other things, an injunction preventing consummation of the proposed transaction, rescission of the proposed transaction or damages in the event it is consummated, and the award of attorneys’ fees and expenses. On May 25, 2018, Giampaolo Dell’cqua, a purported stockholder of MTGE, commenced a putative class action in the United States District Court for the District of Maryland against MTGE, certain current and former MTGE directors named therein, Annaly and the Offeror. The complaint, a copy of which is filed hereto as Exhibit (a)(5)(F), asserts claims under Sections 14(e) and 20(a) of the Securities Exchange Act of 1934 challenging the adequacy of the public disclosures made concerning the proposed transaction. The plaintiff seeks, among other things, an injunction preventing consummation of the proposed transaction, rescission of the proposed transaction or damages in the event it is consummated, and the award of attorneys’ fees and expenses. On May 30, 2018, Anthony Franchi, a purported stockholder of MTGE, commenced a putative class action in the United States District Court for the District of Maryland against MTGE, certain current MTGE directors named therein, Annaly and Offeror. The complaint, a copy of which is filed hereto as Exhibit (a)(5)(G), asserts claims under Sections 14(e), 14(d) and 20(a) of the Securities Exchange Act of 1934 challenging the adequacy of the public disclosures made concerning the proposed transaction. The plaintiff seeks, among other things, an injunction preventing consummation of the proposed transaction, rescission of the proposed transaction or damages in the event it is consummated, and the award of attorneys’ fees and expenses. The defendants believe the claims asserted in the actions are without merit.”

Item 12. Exhibits.

Item 12 of the Schedule TO is hereby amended and supplemented by adding the following exhibits:

Exhibit No.	Description
(a)(4)	Prospectus/Offer to Exchange (incorporated by reference to Amendment No. 1 to Annaly’s Registration Statement on Form S-4, filed on May 31, 2018)
(a)(5)(E)	Complaint of Jeroen Van Poeck against MTGE Investment Corp., Randy E. Dobbs, Julia L. Coronado, Robert M. Couch, Annaly Capital Management Inc. and Mountain Merger Sub Corporation, filed in the United States District Court for the District of Maryland, dated May 25, 2018
(a)(5)(F)	Complaint of Giampaolo Dell’Acqua, individually and on behalf of all others similarly situated, against MTGE Investment Corp., Randy E. Dobbs, Julia L. Coronado, Robert M. Couch, Annaly Capital Management Inc. and Mountain Merger Sub Corporation, filed in the United States District Court for the District of Maryland, dated May 25, 2018
(a)(5)(G)	Complaint of Anthony Franchi, individually and on behalf of all others similarly situated, against MTGE Investment Corp., Randy E. Dobbs, Julia L. Coronado, Robert M. Couch, Annaly Capital Management Inc. and Mountain Merger Sub Corporation, filed in the United States District Court for the District of Maryland, dated May 30, 2018

SIGNATURES

After due inquiry and to the best of their knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct.

Dated: May 31, 2018

MOUNTAIN MERGER SUB CORPORATION
By:	/s/ ANTHONY GREEN
	Name:	Anthony Green
	Title:	Chairman of the Board of Directors,
		Chief Executive Officer and President
ANNALY CAPITAL MANAGEMENT, INC.
By:	/s/ ANTHONY GREEN
	Name:	Anthony Green
	Title:	Chief Legal Officer

EX-99.(A)(5)(E)

Exhibit (a)(5)(E)

Case 8:18-cv-01514-GJH Document 1 Filed 05/25/18 Page 1 of 21

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MARYLAND

	Case No.:
JEROEN VAN POECK,
Loofblommestraat 41	COMPLAINT
9051 Gent, Belgium
	DEMAND FOR JURY TRIAL
Plaintiff, v.
MTGE INVESTMENT CORP. 12th Floor
Two Bethesda Metro Center
Bethesda, MD 20814
Montgomery County, MD
RANDY E. DOBBS 12th Floor
Two Bethesda Metro Center
Bethesda, MD 20814
Montgomery County, MD
JULIA L. CORONADO 12th Floor
Two Bethesda Metro Center
Bethesda, MD 20814
Montgomery County, MD
ROBERT M. COUCH 12th Floor
Two Bethesda Metro Center
Bethesda, MD 20814
Montgomery County, MD
ANNALY CAPITAL MANAGEMENT, INC.,
1211 Avenue of the Americas New
York, NY 10036
MOUNTAIN MERGER SUB CORPORATION
1211 Avenue of the Americas New
York, NY 10036
Defendants.

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COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934

Plaintiff Jeroen Van Poeck (“Plaintiff”), by his undersigned attorneys, alleges upon information and belief, except for his own acts, which are alleged on knowledge, as follows:

INTRODUCTION

1. Plaintiff brings this action against MTGE Investment Corp., (“MTGE” or the “Company”) and MTGE’s Board of Directors (collectively, the “Board” or the “Individual Defendants,” as further defined below) for violations of Section 14(e) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”), 15 U.S.C. §§ 78n(e) and 78t(a). Specifically, Defendants solicit the tendering of stockholder shares in connection with the proposed acquisition of the Company by Annaly Capital Management, Inc. (“Parent”), a Maryland corporation, and its direct wholly owned subsidiary Mountain Merger Sub Corporation (“Merger Sub”)(together with Parent, “Annaly”), through a recommendation statement filed with the U.S. Securities and Exchange Commission (the “SEC”), that omits material facts necessary to make the statements therein not false or misleading. Stockholders need this material information to decide whether to tender their shares or pursue their appraisal rights.

2. On May 2, 2018, the Company announced that it had entered into a definitive agreement (the “Merger Agreement”), by which Annaly would commence a tender offer (the “Tender Offer”) to acquire all of the outstanding shares of MTGE common stock for consideration to be paid in cash and shares of Annaly common stock (the “Merger Consideration”), in a transaction valued at approximately $900 million (the “Proposed Transaction”). Pursuant to the terms of the Merger Agreement, for each share of MTGE common stock validly tendered in the exchange offer or converted pursuant to the second-step merger described below, MTGE shareholders may elect to receive: (a) $9.82 in cash and 0.9519 shares of Annaly common stock; (b) $19.65 in cash (the “Cash Consideration Option”); or (c) 1.9037 shares of Annaly common stock (the “Stock Consideration Option”). The Tender Offer, commenced on May 16, 2018, and is set to expire at one minute after at 5:00 p.m., Eastern Time, on June 18, 2018.

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3. In connection with the commencement of the Tender Offer, on May 16, 2018, the Company filed a Recommendation Statement on Schedule 14D-9 (the “Recommendation Statement”) with the SEC. The Recommendation Statement is materially deficient and misleading because, inter alia, it omits to disclose material information concerning: (i) the Sales Process leading up to the Proposed Transaction; (ii) MTGE’s financial projections; (iii) conflicts of interest involving Barclays Capital Inc. (“Barclays”). Without this material information, MTGE stockholders will be forced to decide whether or not to tender their shares based upon materially incomplete and misleading information. The failure to adequately disclose such material information constitutes a violation of §§ 14(e) and 20(a) of the Exchange Act.

4. For these reasons and as set forth in detail herein, the Individual Defendants have violated federal securities laws. Accordingly, Plaintiff seeks to enjoin the Proposed Transaction or, in the event the Proposed Transaction is consummated, recover damages resulting from the Individual Defendants’ violations of these laws. Judicial intervention is warranted here to rectify existing and future irreparable harm to the Company’s stockholders.

JURISDICTION AND VENUE

5. The claims asserted herein arise under §§ 14(e) and 20(a) of the Exchange Act, 15 U.S.C. § 78aa. The Court has subject matter jurisdiction pursuant to § 27 of the Exchange Act, 15 U.S.C. §78aa, and 28 U.S.C. § 1331 (federal question jurisdiction).

6. The Court has personal jurisdiction over each of the Defendants because each conducts business in and maintains operations in this District or is an individual who either is present in this District for jurisdictional purposes or has sufficient minimum contacts with this District as to render the exercise of jurisdiction by this Court permissible under traditional notions of fair play and substantial justice.

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7. Venue is proper in this District under § 27 of the Exchange Act, 15 U.S.C. §78aa, as well as pursuant to 28 U.S.C. § 1391, because: (i) the conduct at issue took place and had an effect in this District; (ii) MTGE maintains its principal place of business in this District and each of the Individual Defendants, and Company officers or directors, either resides in this District or has extensive contacts within this District; (iii) a substantial portion of the transactions and wrongs complained of herein, occurred in this District; (iv) most of the relevant documents pertaining to Plaintiff’s claims are stored (electronically and otherwise), and evidence exists, in this District; and (v) defendants have received substantial compensation in this District by doing business here and engaging in numerous activities that had an effect in this District.

PARTIES

8. Plaintiff is, and has been at all relevant times, the owner of shares of MTGE common stock.

9. Defendant Randy E. Dobbs (“Dobbs”) is the Chair and Lead Independent Director of MTGE. He has served as a director of the Company since 2011.

10. Defendant Julia L. Coronado (“Coronado”) has served as a director of the Company since 2016.

11. Defendant Robert M. Couch (“Couch”) has served as a director of the Company since 2011.

12. Defendants Couch, Coronado, and Dobbs are collectively referred to herein as the “Board” or the “Individual Defendants.”

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13. Defendant MTGE is a corporation organized and existing under the laws of the State of Maryland. The Company maintains its principal executive offices at 2 Bethesda Metro Center, Bethesda, MD 20814. MTGE common stock is traded on the NASDAQ under the ticker symbol “MTGE.” Defendant MTGE and the Individual Defendants are referred to herein as the Defendants.”

14. Defendant Merger Sub, is a Maryland corporation and a direct wholly-owned subsidiary of Parent, and is a party to the Merger Agreement. Defendant Merger Sub is named as a defendant herein solely for the purpose of providing full and complete relief.

15. Defendant Parent is a Maryland corporation, and is a party to the Merger Agreement. Annaly is a leading diversified capital manager that invests in and finances residential and commercial assets. The company is publically traded on the New York Stock Exchange under the ticker symbol “NLY,” and it maintains its headquarters at 1211 Avenue of the Americas New York, NY 10036. Annaly is named as a defendant herein solely for the purpose of providing full and complete relief.

FURTHER SUBSTANTIVE ALLEGATIONS

Company Background

16. MTGE is externally managed, meaning that all of its day-to-day operations and affairs are managed by a third-party manager, MTGE Management, LLC (the “Manager”), a Delaware limited liability company. Pursuant to a management agreement dated July 1, 2016 (the “Management Agreement”), the Manager provides MTGE with executive officers and other services and personnel. The Manager is wholly owned by AGNC Investment Corp. (“AGNC”), who owns approximately 5.7% of MTGE’s outstanding common stock.

17. On February 22, 2018, following informal contact between representatives of Annaly and MTGE, Annaly delivered an unsolicited non-binding written proposal to MTGE that contemplated an acquisition of 100% of MTGE’s capital stock for a mix of cash and Annaly common stock.

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18. Four days later, MTGE’s board held a telephonic meeting to discuss the process for determining whether to continue as an independent company or to pursue a strategic transaction. Central to these discussions was the Management Agreement. In light of the fact that Annaly, or another acquirer, would likely plan to terminate MTGE’s management relationship with the Manager, MTGE would be obligated to pay a termination fee of approximately $42 million to the Manager pursuant to the termination provisions of the Management Agreement. This sizable sum, led the independent directors to discuss the possibility that AGNC, as the parent entity of MTGE’s external manager, would be a logical acquirer of the company and may have interest in making an acquisition proposal if MTGE were to consider a strategic transaction. Given the potential conflicts of interest of AGNC and Mr. Kain, the independent directors also discussed the formation of a special committee of our board consisting of the independent directors to evaluate the Annaly February 22 Proposal and other strategic alternatives.

19. On March 15, 2018, the board, including Gary Kain, who at the time was serving in a dual capacity as MTGE’s Chief Executive Officer and a member of its board in addition to his position as the Chief Executive Officer of AGNC and a member of the AGNC board of directors, unanimously approved the formation of a special committee of independent directors comprised of Defendants Dobbs, Coronado, and Couch (the “Special Committee”).

20. On March 23, 2018, Annaly submitted an updated non-binding written proposal to Mr. Dobbs providing additional detail on the terms on which Annaly would be prepared to acquire MTGE in an all-cash transaction for 95% of MTGE’s book value per share, which equated to $19.71 per share based on MTGE’s book value per share of $20.75 as of December 31, 2017.

21. On March 29, 2018, the Special Committee engaged Barclays as its financial advisor in connection with the consideration of a potential strategic transaction. Following the engagement of the financial advisor, the Special Committee worked closely with Barclays to negotiate and analyze Annaly’s bid, and to continue its consideration of the various alternatives.

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22. On April 10, 2018, Annaly delivered an updated non-binding written proposal to MTGE that increased Annaly’s proposed price to approximately 98.0% of the book value of MTGE’s common stock (which equated to $20.33 per common share net of expenses based on MTGE’s book value per share as of December 31, 2017), and included assurances that Annaly would bear the full cost of the $42 million management termination fee and up to $20 million of additional

23. The following day, April 11, 2018, the Special Committee reviewed Barclays updated valuation analysis of MTGE as well as Annaly’s latest proposal, including the desirability and relative value of a stock consideration component and the potential for a higher after-tax return for shareholders. Following this review, the Special Committee instructed Barclays to contact AGNC again to encourage it to make an alternative proposal, and to reach out to other potential acquirers.

24. Barclays went to work immediately. On April 11, 2018, Barclays reached out to two large REITs (“Company A” and “Company B”, respectively) whom Barclays considered would be the most interested and able to engage in a potential strategic transaction. While Company A declined to pursue an acquisition of MTGE based on its relationship with AGNC, Company B expressed an interest in pursuing an acquisition of MTGE. At MTGE’s direction, Barclays also contacted AGNC, who indicated that it would respond with a proposed valuation of MTGE’s common stock by April 13, 2018.

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25. The following day, AGNC delivered a non-binding written proposal to Barclays to acquire 100% of the shares of MTGE common stock at 95% of the book value of MTGE’s common stock, which represented a price of $19.72 per share net of the termination fee and other expenses based on the book value of MTGE’s common stock as of December 31, 2017. Following further discussions between representatives of AGNC and MTGE, AGNC indicated a willingness to increase its price to 96.0%-96.5% of book value contingent upon the satisfaction of certain conditions. That same day, Company B presented a verbal proposal based on deal consideration comprised 100% of stock of the acquirer, that would likely require a vote of the stockholders of both Company B and MTGE as a condition to closing.

26. Unsatisfied with either offer, the Special Committee directed Barclays to explore an exclusivity arrangement with Annaly, and on April 16, 2018, MTGE and Annaly signed a confidentiality agreement that included mutual confidentiality restrictions, mutual standstill covenants and a 14-day exclusive negotiating period consistent with the terms authorized by the MTGE special committee.

27. Over the next two weeks, Annaly and MTGE, and their respective representatives, continued to conduct due diligence and negotiate the terms of the Merger, and on April 25, 2018, after no new unsolicited proposals had been received from AGNC, Company A, Company B or any other party since MTGE entered into exclusive negotiations with Annaly, MTGE agreed to Annaly’s request to extend exclusivity for seven additional days to May 7, 2018.

28. However, the following day, AGNC delivered an updated unsolicited non-binding written proposal to Barclays that increased its price to 98.25% of book value, which equated to $19.50 per share net of the termination fee and other expenses based on the $19.85 book value of MTGE’s common stock as of April 19, 2018 (the “AGNC April 26 Proposal”). Although the AGNC April 26 Proposal was higher than Annaly’s current proposal, neither the Special Committee nor its advisors were permitted to engage with AGNC with respect to the April 26 Proposal because MTGE was under exclusivity with Annaly.

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29. Immediately following the receipt of the AGNC April 26 Proposal, Barclays contacted Annaly to inform them that MTGE had received an unsolicited offer from AGNC with a higher price.

30. On April 29, 2018, the Special Committee held a telephonic meeting, at which time, Barclays informed the Special Committee that it had just received an enhanced verbal proposal from Annaly to increase its price from 98.0% to 100% of the book value of MTGE’s common stock based on a consideration mix of cash (50%) and Annaly common stock (50%) (the “Annaly April 29 Proposal”). Barclays informed the MTGE special committee that the Annaly April 29 Proposal was $0.35 per share higher than the AGNC April 26 Proposal after adjusting both prices to reflect a $19.75 per fully diluted share book value valuation as of March 31, 2017. Barclays also informed the MTGE special committee that Annaly was keenly focused on signing the merger agreement and announcing the transaction prior to its earnings call scheduled for the morning of May 3, 2018. To facilitate that timetable, Annaly was also prepared to negotiate the Management Agreement amendment with the Manager and deliver a termination notice after the merger agreement was signed and announced.

31. With Annaly once again representing the superior offer, Annaly and MTGE, and their respective representatives, moved quickly to conclude outstanding due diligence issues and finalize the terms of the Merger, and on May 2, 2018, the parties reached an agreement on a number of outstanding terms, including the Merger Consideration and the termination fee.

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32. With the framework of the Merger Agreement in place, on the morning of May 2, 2018, the MTGE special committee held a telephonic meeting, with representatives of Barclays attending, in order to review the sales process and its financial analysis of the proposed economic terms. Following the presentation of Barclays’s fairness opinion, the Special Committee unanimously approved the Merger Agreement and the Proposed Transaction.

33. That same day the independent directors of the Board, following the recommendation of the Special Committee, determined that the merger agreement and the transactions contemplated thereby, including the offer and the merger, were advisable to, and in the best interests of MTGE and its stockholders, and resolved to recommend that the stockholders of MTGE tender their shares in connection with the offer.

34. Following the board meeting, the definitive merger agreement was executed and publicly announced on the afternoon of May 2, 2018 after the close of the market.

The Proposed Transaction

35. In a press release dated May 2, 2018, MTGE announced that it had entered into a Merger Agreement with Annaly pursuant to which Annaly will commence a Tender Offer to acquire all of the outstanding shares of MTGE.

36. The press release states in pertinent part:

NEW YORK & BETHESDA, Md.—(BUSINESS WIRE)—Annaly Capital Management, Inc. (“Annaly”) (NYSE:NLY) and MTGE Investment Corp. (“MTGE”) (Nasdaq:MTGE) today announced the signing of a definitive merger agreement under which Annaly will acquire MTGE for consideration to be paid in cash and shares of Annaly common stock, which values MTGE at $19.65 per share of MTGE common stock based upon the closing price of Annaly common stock on April 30, 2018. The value of the consideration represents a premium of approximately 12% to the 60-day volume-weighted average price of MTGE common stock ending on April 30, 2018.

Subject to the terms and conditions of the merger agreement, a wholly-owned subsidiary of Annaly will commence an exchange offer to acquire all outstanding shares of MTGE common stock. For each share of MTGE common stock validly tendered in the exchange offer or converted pursuant to the second-step merger described below, MTGE shareholders may elect to receive: (a) $9.82 in cash and 0.9519 shares of Annaly common stock; (b) $19.65 in cash (the “Cash Consideration Option”); or (c) 1.9037 shares of Annaly common stock (the “Stock

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Consideration Option”). MTGE shareholders who elect the Cash Consideration Option or Stock Consideration Option will be subject to proration, in each of the exchange offer and the subsequent second step merger, so that the aggregate consideration will consist of approximately 50% of Annaly’s common stock and approximately 50% in cash. In addition to the above consideration, Annaly would assume the existing notional $55 million in MTGE 8.125% Series A cumulative redeemable preferred stock.

The transactions contemplated by the merger agreement, including the exchange offer and the merger, have been approved by the Board of Directors of Annaly and approved by the Board of Directors of MTGE upon the recommendation of the Special Committee of the MTGE Board of Directors, which is comprised entirely of independent directors (the “MTGE Special Committee”).

“This transaction is another milestone in Annaly’s successful history as a disciplined, market leading consolidator,” commented Kevin Keyes, Chairman, CEO and President of Annaly. “The acquisition of MTGE adds complementary assets across three of our four businesses, deepens the breadth of our investment alternatives, is accretive to earnings and provides immediate cost savings and efficiencies to shareholders. This strategic acquisition further enhances our capital base to support continued growth of our investment platforms and creates tremendous value for both of our companies’ shareholders. This marks our third transformative acquisition and solidifies Annaly’s position as the market leader in our industry.”

Randy Dobbs, Chairman and Lead Independent Director of MTGE, said: “We are excited to have reached an agreement with Annaly for the sale of our company and expect that our shareholders will benefit from the increased diversification, scale and liquidity of the Annaly platform.”

Transaction Highlights

• Enhances the scale, liquidity and access to capital of Annaly’s platform: A pro-forma equity base of over $14 billion supports the continued growth of all investment businesses

• Increases investment diversification and optionality: MTGE’s portfolio, which consists of agency and non-Agency residential mortgage backed securities and investments in triple net-leased healthcare real estate, is complementary to Annaly’s existing businesses and expands the number of investment options to 37, furthering Annaly’s ability to pivot as market dynamics change. Pro forma for the transaction, Annaly will have 27% of its capital allocated to credit assets

• Accretive to earnings: Transaction is expected to be accretive to Annaly’s core earnings per share in 2018 and is aligned with Annaly’s current risk profile and capital allocation strategy

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• Enables MTGE shareholders to benefit from a more efficient operating platform: Through ownership of Annaly common stock received in conjunction with the transaction, MTGE’s shareholders will benefit from significant and tangible cost efficiencies generated by Annaly’s scalable operating model as well as participate in upside of shares of Annaly stock

• Reinforces Annaly’s stature as industry leader: Acquisition of MTGE further reinforces Annaly as the largest and most liquid diversified mortgage REIT in the world and would represent Annaly’s 3rd successful acquisition since 2013, with a combined value of approximately $3.3 billion

• Provides a meaningful premium to MTGE’s common stock price: The value of the consideration represents a premium of approximately 12% to the 60-day volume-weighted average price of MTGE’s common stock ending on April 30, 2018 based upon the closing price of Annaly common stock on April 30, 2018

• MTGE shareholders may elect between cash and stock consideration or a combination of both: MTGE shareholders will have an ability to elect between cash and stock consideration (or a combination of both cash and stock consideration), subject to proration rules such that the aggregate transaction consideration will consist of approximately 50% of Annaly’s common stock and approximately 50% in cash

Prior to closing, each of Annaly and MTGE will declare for their respective shareholders a pro rata common dividend based on its last regular quarterly dividend declared prior to closing and the number of days elapsed since the record date for the most recent quarterly dividend, as of the day immediately prior to the closing date.

The exchange offer is subject to customary closing conditions, including the tender for exchange of a majority of all then outstanding shares of MTGE common stock when added to any shares of MTGE common shares owned by Annaly and its wholly-owned subsidiary. Following completion of the exchange offer, the parties will promptly effect a second-step merger without the approval of MTGE shareholders under Maryland law pursuant to which all remaining shares of MTGE common stock not tendered in the exchange offer will be converted into the right to receive the same consideration as in the exchange offer, with the same election options and subject to the same proration rules. The transaction is expected to close during the third quarter of 2018.

Wells Fargo Securities, LLC and Sandler O’Neill + Partners, L.P. served as financial advisors to Annaly, and Wachtell, Lipton, Rosen & Katz served as legal counsel to Annaly. Barclays Capital Inc. served as financial advisor to the MTGE Special Committee, and Cooley LLP served as legal counsel to the MTGE Special Committee.

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The Recommendation Statement Misleads MTGE Stockholders by Omitting Material Information

37. As noted previously, on May 16, 2018, the Company filed the Recommendation Statement with the SEC in support of the Tender Offer commenced by Annaly. As alleged below and elsewhere herein, the Recommendation Statement contains material misrepresentations and omissions of fact that must be cured to allow MTGE stockholders to make an informed decision with regarding tendering their shares. Designed to convince shareholders to tender their shares, the Recommendation Statement is rendered misleading by the omission of critical information concerning: (i) the sales process leading up to the Proposed Transaction; (ii) MTGE’s financial projections; and (iii) conflicts of interest involving Barclays. This material information directly impacts the Company’s expected future value as a standalone entity, and its omission renders the statements made materially misleading and, if disclosed, would significantly alter the total mix of information available to MTGE’s stockholders.

Material Omissions Relating to the Sales Process

38. With regard to the omission of material information relating to the sale process leading up to the Proposed Transaction, the Recommendation Statement indicates that the Board formed a Special Committee composed of Defendants Dobbs, Coronado, and Couch, and delegated to the Special Committee the authority to consider whether to pursue a strategic transaction with Annaly or other interested parties or remain independent, to negotiate the terms and conditions of a possible transaction, to reject or recommend to our board for approval of a possible transaction, and to engage legal and financial advisors. However, the Recommendation Statement implies that the Special Committee differed from, and had separate powers from the Board as a whole, when in reality the Special Committee and the Board were synonymous. Thus,

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by omitting to disclose whether the Special Committee had a charter or other formative document, and by further failing to disclose the reasoning behind the decision to appoint a special committee comprised of the same members as the entire Board, the Recommendation Statement is rendered materially misleading.

39. The omission of this information renders statements in the “Background of the Offer and the Merger” section of the Recommendation Statement false and/or materially misleading in contravention of the Exchange Act.

Financial Forecasts

40. The Recommendation Statement discloses certain financial forecasts for the Company on page 23 of the Recommendation Statement, but fails to provide material information concerning the Company’s financial forecasts, which were developed by the Company’s management and relied upon by the Board, and the Special Committee, in recommending that the shareholders vote in favor of the Proposed Merger.

41. Specifically, the Recommendation Statement provides values for a non-GAAP (Generally Accepted Accounting Principles) financial metric labeled as “Net Spread, Dollar Roll and Healthcare Income, excluding “catch up” amortization,” but fails to provide: (i) any of the line items used to calculate this non-GAAP measures, nor (ii) a reconciliation of this non-GAAP metrics to its most comparable GAAP measures. Nowhere in the Recommendation Statement is this term fully defined, nor does the Recommendation Statement provide a formula for how this metric is calculated.

42. Although the Recommendation Statement attempts to downplay the significance and materiality of these projections, this limited and highly unusual disclosure of this non-GAAP financial metric is materially misleading. As evidenced by MTGE’s First Quarter 2018 Financial Results, similar Non-GAAP financial metrics are routinely reconciled to corresponding GAAP

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metrics. Thus, to cure the materially misleading nature of the forecasts as a result of the omitted information on page 23, Defendants could – and should – provide a reconciliation table of the non-GAAP measures to the most comparable GAAP measures. Without this additional information, the projections provided are themselves inherently misleading.

43. At the very least the Company must disclose the line item forecasts for the financial metrics that were used to calculate the aforementioned non-GAAP measures. Such forecasts are necessary to make the non-GAAP forecasts included in the Recommendation Statement not false and/or materially misleading in contravention of the Exchange Act, because non-GAAP metrics are non-standardized and different companies formulate non-GAAP metrics differently.

44. Defendants failed to disclose the financial projections of MTGE for Q2 2018 to 2020 for: (a) total assets; (b) book value; (c) tangible book value; (d) interest income (and its sub-components), including agency securities, non-agency securities and other; (e) interest expense; (f) net interest income; (g) dollar roll income; (h) healthcare real estate (and its sub-components), including healthcare real estate income and healthcare real estate expense; (i) total operating expenses (and its sub-components), including management fees and G&A expenses; and (j) net income.

45. Defendants also failed disclose the financial projections of Annaly for Q2 2018 to Q3 2019 for: (a) total assets; (b) book value; (c) tangible book value; (d) interest expense; (e) net interest income; (f) compensation and management fee; (g) other general and administrative expenses; and (h) net income.

46. Based on the foregoing, MTGE public shareholders lack critical information necessary to evaluate whether the Proposed Transaction truly maximizes shareholder value and serves their interests. Moreover, without the key financial information and related disclosures, MTGE public shareholders cannot gauge the accuracy and reliability of the financial analyses performed by Barclays, and whether they can reasonably rely on their respective fairness opinions.

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Potential Conflicts on the Part of Barclays

47. The Recommendation Statement provides that “in the past two years, Barclays has not performed any investment banking and financial services for MTGE or Annaly for which it has earned investment banking fees.”

48. This statement is materially misleading. The Recommendation Statement must disclose whether Barclays performed any work for MTGE or Annaly for which it received any fees. The current statement leaves open the possibility that Barclays may have received fees from either MTGE or Annaly for performing work other than “investment banking and financial services.” Moreover, the current statement leaves open the possibility that Barclays may have earned fees other than “investment banking fees” from MTGE or Annaly. Without full disclosure of any work done by Barclays for MTGE or Annaly in the last two years, and any fees received for such work, stockholders may be materially mislead as to Barclays’ potential conflicts of interest. Such disclosure should also include.

49. Item 1015 of Reg M-A plainly requires the disclosure of “any compensation received or to be received as a result of the relationship between” a financial advisor and the subject company or its affiliates. 17 C.F.R. § 229.1015(b)(4). The current disclosure, with respect to both MTGE and Annaly, is misleading and must be corrected. Failure to include information required by SEC regulation renders the Recommendation Statement materially misleading.    

50. Without disclosure of the above referenced information, the Recommendation Statement violates SEC regulations and materially misleads MTGE stockholders. Accordingly, Plaintiff seeks, among other things, the following relief: (i) enjoinment of the Proposed Transaction; or (ii) rescission of the Proposed Transaction in the event that it is consummated and to recover damages resulting from Defendants’ misconduct.

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CLAIMS FOR RELIEF

COUNT I

Claims Against All Defendants for Violations of § 14(e) of the

Securities Exchange Act of 1934

51. Plaintiff incorporates each and every allegation set forth above as if fully set forth herein.

52. Section 14(e) of the Exchange Act provides that it is unlawful “for any person to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading…” 15 U.S.C. § 78n(e).

53. As discussed above, MTGE filed and delivered the Recommendation Statement to its stockholders, which defendants knew or recklessly disregarded contained material omissions and misstatements as set forth above.

54. Defendants violated § 14(e) of the Exchange Act by issuing the Recommendation Statement in which they made untrue statements of material facts or failed to state all material facts necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, in connection with the tender offer commenced in conjunction with the Proposed Transaction. Defendants knew or recklessly disregarded that the Recommendation Statement failed to disclose material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.

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55. The Recommendation Statement was prepared, reviewed and/or disseminated by defendants. It misrepresented and/or omitted material facts, in connection with the Merger as set forth above.

56. In so doing, defendants made untrue statements of material facts and omitted material facts necessary to make the statements that were made not misleading in violation of § 14(e) of the Exchange Act. By virtue of their positions within the Company and/or roles in the process and in the preparation of the Recommendation Statement, defendants were aware of this information and their obligation to disclose this information in the Recommendation Statement.

57. The omissions and incomplete and misleading statements in the Recommendation Statement are material in that a reasonable stockholder would consider them important in deciding whether to tender their shares or seek appraisal. In addition, a reasonable investor would view the information identified above which has been omitted from the Recommendation Statement as altering the “total mix” of information made available to stockholders.

58. Defendants knowingly or with deliberate recklessness omitted the material information identified above from the Recommendation Statement, causing certain statements therein to be materially incomplete and therefore misleading. Indeed, while defendants undoubtedly had access to and/or reviewed the omitted material information in connection with approving the Proposed Transaction, they allowed it to be omitted from the Recommendation Statement, rendering certain portions of the Recommendation Statement materially incomplete and therefore misleading.

59. The misrepresentations and omissions in the Recommendation Statement are material to Plaintiff, and Plaintiff will be deprived of their entitlement to make a fully informed decision if such misrepresentations and omissions are not corrected prior to the expiration of the tender offer.

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COUNT II

Against the Individual Defendants for

Violations of § 20(a) of the 1934 Act

60. Plaintiff repeats and realleges the preceding allegations as if fully set forth herein.

61. The Individual Defendants acted as controlling persons of MTGE within the meaning of Section 20(a) of the 1934 Act as alleged herein. By virtue of their positions as officers and/or directors of MTGE and participation in and/or awareness of the Company’s operations and/or intimate knowledge of the false statements contained in the Recommendation Statement, they had the power to influence and control and did influence and control, directly or indirectly, the decision making of the Company, including the content and dissemination of the various statements that plaintiff contends are false and misleading.

62. Each of the Individual Defendants was provided with or had unlimited access to copies of the Recommendation Statement alleged by Plaintiff to be misleading prior to and/or shortly after these statements were issued and had the ability to prevent the issuance of the statements or cause them to be corrected.

63. In particular, each of the Individual Defendants had direct and supervisory involvement in the day-to-day operations of the Company, and, therefore, is presumed to have had the power to control and influence the particular transactions giving rise to the violations as alleged herein, and exercised the same. The Recommendation Statement contains the unanimous recommendation of the Individual Defendants to approve the Proposed Transaction. They were thus directly involved in the making of the Recommendation Statement.

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64. By virtue of the foregoing, the Individual Defendants violated Section 20(a) of the 1934 Act.

65. As set forth above, the Individual Defendants had the ability to exercise control over and did control a person or persons who have each violated Section 14(d) of the 1934 Act and Rule 14d-9, by their acts and omissions as alleged herein. By virtue of their positions as controlling persons, these defendants are liable pursuant to Section 20(a) of the 1934 Act. As a direct and proximate result of defendants’ conduct, Plaintiff is threatened with irreparable harm.

PRAYER FOR RELIEF

WHEREFORE, Plaintiff demands judgment against defendants jointly and severally, as follows:

(A) declaring that the Recommendation Statement is materially false or misleading;

(B) enjoining, preliminarily and permanently, the Proposed Transaction;

(C) in the event that the transaction is consummated before the entry of this Court’s final judgment, rescinding it or awarding Plaintiff rescissory damages;

(D) directing that Defendants account to Plaintiff for all damages caused by them and account for all profits and any special benefits obtained as a result of their breaches of their fiduciary duties.

(E) awarding Plaintiff the costs of this action, including a reasonable allowance for the fees and expenses of Plaintiff’s attorneys and experts; and

(F) granting Plaintiff such further relief as the Court deems just and proper.

JURY DEMAND

Plaintiff demands a trial by jury.

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Dated: May 25, 2018	LEVI & KORSINSKY LLP
	/s/ Donald J. Enright
	Donald J. Enright
	1101 30th Street, N.W., Suite 115
	Washington, D.C. 20007
	Telephone: (202) 524-4290
	Facsimile: (202) 333-2121
	Email: denright@zlk.com
	Attorneys for Plaintiff

21

EX-99.(A)(5)(F)

Exhibit (a)(5)(F)

Case 8:18-cv-01528-DKC Document 1 Filed 05/25/18 Page 1 of 20

UNITED STATES DISTRICT COURT

DISTRICT OF MARYLAND

	X
GIAMPAOLO DELL’ACQUA, Individually	)
and on Behalf of All Others Similarly Situated,	)
	)
Tunis, Tunisia	)
	)	Civil Action No.
Plaintiff,	)
v.	)	CLASS ACTION COMPLAINT
	)	FOR VIOLATIONS OF
MTGE INVESTMENT CORP.	)	SECTIONS 14(e) AND 20(a) OF
12th Floor	)	THE SECURITIES EXCHANGE
Two Bethesda Metro Center	)	ACT OF 1934
Bethesda, MD 20814	)
Montgomery County, MD	)
	)
GARY D. KAIN	)	JURY TRIAL DEMAND
12th Floor	)
Two Bethesda Metro Center	)
Bethesda, MD 20814	)
Montgomery County, MD	)
	)
RANDY E. DOBBS	)
12th Floor	)
Two Bethesda Metro Center	)
Bethesda, MD 20814	)
Montgomery County, MD	)
	)
JULIA L. CORONADO	)
12th Floor	)
Two Bethesda Metro Center	)
Bethesda, MD 20814	)
Montgomery County, MD	)
	)
ROBERT M. COUCH	)
12th Floor	)
Two Bethesda Metro Center	)
Bethesda, MD 20814	)
Montgomery County, MD	)
	)
ANNALY CAPITAL MANAGEMENT, INC.,	)
1211 Avenue of the Americas	)
New York, NY 10036	)
	)

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MOUNTAIN MERGER SUB	)
CORPORATION	)
1211 Avenue of the Americas	)
New York, NY 10036	)
	)
Defendants.	)
	)
	X

CLASS ACTION COMPLAINT

Plaintiff Giampaolo Dell’Acqua (“Plaintiff”), individually and on behalf of all others similarly situated, alleges the following upon information and belief, including investigation of counsel and review of publicly-available information, except as to those allegations pertaining to Plaintiff, which are alleged upon personal knowledge:

NATURE OF THE ACTION

1. Plaintiff brings this class action on behalf of the public stockholders of MTGE Investment Corp. (“MTGE” or the “Company”) against MTGE’s Board of Directors (the “Board” or the “Individual Defendants”) for their violations of Sections 14(e) and 20(a) of the Securities Exchange Act of 1934, arising out of the Board’s attempt to sell the Company to Annaly Capital Management, Inc. through its wholly-owned subsidiary Mountain Merger Sub Corporation (collectively “Annaly”).

2. Defendants have violated the above-referenced Sections of the Exchange Act by causing a materially incomplete and misleading Schedule 14D-9 Recommendation Statement (the “14D-9”) to be filed with the Securities and Exchange Commission (“SEC”) on May 16, 2018. The 14D-9 recommends that MTGE shareholders tender their shares of MTGE common stock in favor of a proposed transaction (the “Proposed Transaction”) whereby MTGE is acquired by Annaly. The Proposed Transaction was first disclosed on May 2, 2018, when MTGE and Annaly

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announced that they had entered into a definitive merger agreement (the “Merger Agreement”) pursuant to which Annaly will acquire all of the outstanding shares of common stock of MTGE in a mix of cash and stock that values MTGE at approximately $19.65 per share (the “Merger Consideration”). The deal is valued at approximately $900 million and is expected to close in the third quarter of 2018.

3. MTGE invests in and manages real estate-related investments, including residential mortgage-backed securities structured from mortgages guaranteed by a government-sponsored entity. The Company is managed by MTGE Management, LLC, a subsidiary of AGNC Investment Corp. (“AGNC”).

4. A special committee of the MTGE Board, consisting of all of the independent members of the Board, agreed to the Proposed Transaction after engaging in a rushed process, capitulating to Annaly’s demands and for less consideration than proposed by Annaly earlier in the sales process.

5. Furthermore, the 14D-9 is materially incomplete and contains misleading representations and information in violation of Sections 14(e) and 20(a) of the Exchange Act. Specifically, the 14D-9 contains materially incomplete and misleading information concerning the sales process, financial projections prepared by MTGE management, as well as the financial analyses conducted by Barclays Capital Inc. (“Barclays”), MTGE’s financial advisor.

6. For these reasons, and as set forth in detail herein, Plaintiff seeks to enjoin Defendants from taking any steps to consummate the Proposed Transaction unless and until the material information discussed below is disseminated to MTGE’s shareholders. In the event the Proposed Transaction is consummated without the material omissions referenced below being remedied, Plaintiff seeks to recover damages resulting from the Defendants’ violations.

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PARTIES

7. Plaintiff is, and has been at all relevant times, the owner of shares of common stock of MTGE.

8. Defendant MTGE is a corporation organized and existing under the laws of the State of Maryland. The Company’s principal executive offices are located at 2 Bethesda Metro Center, 12^th Floor, Bethesda, Maryland 20814. MTGE common stock trades on NASDAQ under the ticker symbol “MTGE.”

9. Defendant Gary D. Kain has been CEO and a director of the Company since March 2016. Kain previously served as President and Chief Investment Officer. Kain has also served as President of MTGE Management, LLC since April 2011.

10. Defendant Julia L. Coronado has been a director of the Company since 2016.

11. Defendant Robert M. Couch has been a director of the Company since 2011.

12. Defendant Randy E. Dobbs has been a director of the Company since 2011. Dobbs has served as Chair of the Board and Lead Independent Director since May 2016.

13. Defendants Kain, Coronado, Couch and Dobbs are collectively referred to herein as the “Board.”

14. Defendant Annaly Capital Management, Inc. is a Maryland corporation based in New York.

15. Defendant Mountain Merger Sub Corporation is a Maryland corporation and is a wholly owned subsidiary of Annaly Capital Management, Inc.

JURISDICTION AND VENUE

16. This Court has subject matter jurisdiction pursuant to Section 27 of the Exchange Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1331 (federal question jurisdiction) as Plaintiff alleges violations of Section 14(e) and 20(a) of the Exchange Act.

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17. Personal jurisdiction exists over each Defendant either because the Defendant conducts business in or maintains operations in this District, or is an individual who is either present in this District for jurisdictional purposes or has sufficient minimum contacts with this District as to render the exercise of jurisdiction over Defendant by this Court permissible under traditional notions of fair play and substantial justice.

18. Venue is proper in this District under Section 27 of the Exchange Act, 15 U.S.C. § 78aa, as well as under 28 U.S.C. § 1391, because: (i) the conduct at issue took place and had an effect in this District; (ii) MTGE maintains its primary place of business in this District; (iii) a substantial portion of the transactions and wrongs complained of herein, including Defendants’ primary participation in the wrongful acts detailed herein, occurred in this District; and (iv) Defendants have received substantial compensation in this District by doing business here and engaging in numerous activities that had an effect in this District.    

CLASS ACTION ALLEGATIONS

19. Plaintiff brings this action on his own behalf and as a class action on behalf of all owners of MTGE common stock and their successors in interest and/or their transferees, except Defendants and any person, firm, trust, corporation or other entity related to or affiliated with the Defendants (the “Class”).

20. This action is properly maintainable as a class action for the following reasons:

(a) The Class is so numerous that joinder of all members is impracticable. As of May 1, 2018, MTGE had approximately 45.7 million shares outstanding.

(b) Questions of law and fact are common to the Class, including, inter alia, the following:

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(i) Whether Defendants have violated Section 14(e) of the Exchange Act;

(ii) Whether the Individual Defendants have violated Section 20(a) of the Exchange Act;

(iii) Whether Plaintiff and the other members of the Class would be irreparably harmed were the transaction complained of herein consummated; and

(iv) whether the Class is entitled to injunctive relief or damages as a result of Individual Defendants’ wrongful conduct.

(c) Plaintiff is committed to prosecuting this action, is an adequate representative of the Class, and has retained competent counsel experienced in litigation of this nature.

(d) Plaintiff’s claims are typical of those of the other members of the Class.

(e) Plaintiff has no interests that are adverse to the Class.

(f) The prosecution of separate actions by individual members of the Class would create the risk of inconsistent or varying adjudications for individual members of the Class and of establishing incompatible standards of conduct for the party opposing the Class.

(g) Conflicting adjudications for individual members of the Class might as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests.

(h) Plaintiff anticipates that there will be no difficulty in the management of this litigation. A class action is superior to other available methods for the fair and efficient adjudication of this controversy.

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FURTHER SUBSTANTIVE ALLEGATIONS

A. MTGE is Sold After a Rushed Process

21. MTGE aims to generate returns for its stockholders through dividends and asset value appreciation. MTGE’s assets are its investments, which fall into three broad categories: residential mortgage-backed securities structured from mortgages guaranteed by a government agency, residential mortgage-backed securities issued by a private institution, and healthcare and living facilities.

22. Over the course of 2017, MTGE successfully met its aims. On May 3, 2017, announced results for its first quarter of 2017. The Company announced net income of $0.82 per share, net spread and dollar roll income of $0.49 per share, and a dividend of $0.45 per share of common stock. That month, a Wells Fargo analyst increased its price target for MTGE to $18.50 - $20.50 per share.

23. The Company’s success continued in the next quarter. On August 2, 2017, MTGE announced results for its second quarter of 2017. The Company announced net income of $0.91 per share, net spread and dollar roll income of $0.54 per share, and a dividend of $0.45 per share of common stock. The net spread and dollar roll income beat the market consensus estimate of $0.47 per share.

24. MTGE beat the market consensus again in its financial results for third quarter of 2017. On October 30, 2017, the Company announced net income of $1.06 per share, net spread and dollar roll income of $0.50 per share, and a dividend of $0.45 per share of common stock. MTGE’s reported net income was higher than the market consensus of $0.55 per share.

25. The Company ended its year of impressive financial results with an increase in its quarterly dividend. MTGE announced on December 14, 2017 that it would be increasing its dividend to $0.50 per share of common stock from $0.45 per share. The end of 2017 also saw an increase in analyst price targets, with the consensus price target for MTGE being $20.50 per share.

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26. Despite the Company’s recent successes, the Board agreed to sell MTGE to Annaly, entering into the Merger Agreement on May 2, 2018.

27. The process leading to the Merger Agreement was rushed, with a pre-sale market check occurring over the course of three days. Annaly first approached a member of the Board about a potential transaction on January 11, 2018. The Board did not respond. When Annaly approached Defendant Coronado on February 12, 2018 about a potential transaction, Defendant Coronado stated that MTGE was not considering a strategic transaction but Annaly was free to submit a proposal. Annaly did just that, submitting a proposal on February 22, 2018.

28. In response to Annaly’s proposal, the Board stated that it needed more information. Annaly delivered a presentation to the independent directors of the Board on March 1, 2018, and the independent directors informed Annaly that they were evaluating the February 22, 2018 proposal. Two weeks later a special committee was formed to evaluate Annaly’s proposal and consider other strategic alternatives. On March 22, 2018, just one week after being formed, the special committee began interviewing potential financial advisors.

29. Apparently, the special committee was not working fast enough for Annaly, because it submitted an updated proposal on March 23, 2018. Again, Annaly was informed that its proposal was being evaluated. Over the next two weeks, the special committee met three times to discuss and evaluate the proposal and consider strategic alternatives. The special committee asked Barclays to consider other prospective parties for a strategic transaction. But the special committee took too much time in Annaly’s view. On April 10, 2018, Annaly submitted yet another proposal, but this time it told MTGE that it only had three days to consider it.

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30. The special committee scrambled, contacting three parties (including MTGE’s manager’s parent) and demanding an indication of interest by Annaly’s deadline. When the parties could not come up with a proposal that beat Annaly’s, the special committee agreed to enter into an exclusivity agreement with Annaly.

31. The special committee caved to Annaly in other aspects. The special committee asked for a collar on the exchange ratio of Annaly common stock for MTGE common stock. Annaly said no, but offered a seat on the Annaly board for a member of the special committee. The special committee requested that any proposal by AGNC not be subject to a non-solicitation provision. Not only did that not happen, but Annaly proposed a much higher termination fee, and the special committee ultimately agreed to a termination fee higher than Annaly had originally proposed.

32. The quick process impacted the Merger Consideration, leading to a smaller amount paid to the common stockholders. For example, Annaly offered approximately 98% of MTGE’s book value, which was equal to $20.33 per share based on its book value as of December 31, 2017. The special committee did not ask for a specific price per share, but instead agreed to a valuation based on a percentage of the book value. When the Merger Agreement was signed, the book value had decreased, causing the Merger Consideration to be valued at $19.65 per share. The analyses of the Company’s own financial advisor illustrate that the Merger Consideration may not be high enough. For example, Barclays’s Selected Comparable Company Analysis implied a per share equity value for MTGE as high as $21.76, while the Dividend Discount Analysis implied a per share equity value for MTGE as high as $20.75.

B. The Preclusive Deal Protection Devices

33. As part of the Merger Agreement, Defendants agreed to certain preclusive deal protection devices that ensure that no competing offers for the Company will emerge.

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34. By way of example, section 6.3(a) of the Merger Agreement includes a “no solicitation” provision barring the Company from soliciting or encouraging the submission of an acquisition proposal. Section 6.3(a) further demands that the Company cease and terminate all solicitations, discussions or negotiations with any party concerning an acquisition proposal.

35. Despite already locking up the Proposed Transaction by agreeing not to solicit alternative bids, the Board consented to additional provisions in the Merger Agreement that further guarantee the Company’s only suitor will be Annaly. For example, pursuant to section 6.3(c) of the Merger Agreement, the Company must notify Annaly of any offer, indication of interest, or request for information made by an unsolicited bidder. Thereafter, should the Board determine that the unsolicited offer is superior, section 6.3(e) requires that the Board grant Annaly three (3) business days to negotiate the terms of the Merger Agreement to render the superior proposal no longer superior. The negotiation period restarts if the Board determines that the other proposal is still superior. Annaly is able to match the unsolicited offer because, pursuant to section 6.3(c) of the Merger Agreement, the Company must provide Annaly with the identity of the party making the proposal, the material terms of the superior proposal, and all written materials received by the Company, eliminating any leverage that the Company has in receiving the unsolicited offer.

36. In other words, the Merger Agreement gives Annaly access to any rival bidder’s information and allows Annaly a free right to top any superior offer. Accordingly, no rival bidder is likely to emerge and act as a stalking horse for MTGE, because the Merger Agreement unfairly assures that any “auction” will favor Annaly and allow Annaly to piggy-back upon the due diligence of the foreclosed second bidder.

37. In addition, pursuant to section 9.2(b) of the Merger Agreement, MTGE must pay Annaly a termination fee of $35.1 million if the Company decides to pursue another offer, thereby essentially requiring that the alternate bidder agree to pay a naked premium for the right to provide the shareholders with a superior offer.

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38. Ultimately, these preclusive deal protection provisions restrain the Company’s ability to solicit or engage in negotiations with any third party regarding a proposal to acquire all or a significant interest in the Company. The circumstances under which the Board may respond to an unsolicited written bona fide proposal for an alternative acquisition that constitutes or would reasonably be expected to constitute a superior proposal are too narrowly circumscribed to provide an effective “fiduciary out” under the circumstances. Likewise, these provisions also foreclose any likely alternate bidder from providing the needed market check of Annaly’s inadequate offer price.

C. The Materially Incomplete and Misleading 14D-9

39. The Individual Defendants owe the stockholders a duty of candor. They must disclose all material information regarding the Proposed Transaction to MTGE stockholders so that they can make a fully informed decision whether to vote in favor of the Proposed Transaction.

40. On May 17, 2018, Defendants filed the 14D-9 with the SEC. The purpose of the 14D-9 is, inter alia, to provide the Company’s stockholders with all material information necessary for them to make an informed decision on whether to tender their shares in favor of the Proposed Transaction. However, significant and material facts were not provided to Plaintiff and the Class. Without such information, MTGE shareholders cannot make a fully informed decision concerning whether or not to tender their shares.

Materially Misleading Statements/Omissions Regarding the Management-Prepared Financial Forecasts

41. The 14D-9 discloses management-prepared financial projections for the Company which are materially misleading. The 14D-9 indicates that in connection with the rendering of Barclays’s fairness opinion, Barclays “reviewed and analyzed financial and operating information

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with respect to the business, operations and prospects of MTGE . . . [and] Annaly” as well as financial projections for each as prepared by their respective managers. Accordingly, the 14D-9 should have, but failed to, provide certain information in the projections that MTGE’s management provided to the Board and Barclays.

42. Notably, Defendants failed to disclose the financial projections of MTGE for Q2 2018 to 2020 for: (a) total assets; (b) book value; (c) tangible book value; (d) interest income (and its sub-components), including agency securities, non-agency securities and other; (e) interest expense; (f) net interest income; (g) dollar roll income; (h) healthcare real estate (and its sub-components), including healthcare real estate income and healthcare real estate expense; (i) total operating expenses (and its sub-components), including management fees and G&A expenses; and (j) net income.

43. Defendants also failed disclose the financial projections of Annaly for Q2 2018 to Q3 2019 for: (a) total assets; (b) book value; (c) tangible book value; (d) interest expense; (e) net interest income; (f) compensation and management fee; (g) other general and administrative expenses; and (h) net income.

44. This omitted information is necessary for MTGE stockholders to make an informed decision on whether to vote in favor of the Proposed Transaction. The financial projections provided in the 14D-9 do not accurately reflect MTGE’s or Annaly’s short-term or long-term prospects because crucial information was not disclosed. The missing information also prevents stockholders from understanding the companies’ value and how the market had undervalued MTGE.

Materially Incomplete and Misleading Disclosures Concerning Barclays’s Financial Analyses

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45. With respect to the Selected Companies Analysis for both MTGE and Annaly, the 14D-9 fails to disclose the multiples for P/TBV, P/2018E Earnings, and Dividend Yield for each selected company. The 14D-9 also fails to disclose whether Barclays performed any type of benchmarking analysis for MTGE or Annaly in relation to the selected companies.

46. With respect to the Selected Precedent Transactions Analysis, the 14D-9 fails to disclose the individual multiples for Transaction P/BV. The 14D-9 also fails to disclose whether Barclays performed any type of benchmarking analysis for MTGE in relation to the target companies.

47. With respect to the Dividend Discount Analysis for MTGE, the 14D-9 fails to disclose the individual CAPM inputs and assumptions utilized by Barclays to derive the discount rate range of 8.0% to 9.5%, as well as the individual “selected comparable companies” and their respective observed dividend yields, as utilized by Barclays to derive the discount rate range of 10.0% to 12.0%. The 14D-9 also fails to disclose the projected tangible book value on 4Q 2020 (quarter-11) used in the terminal value calculation. The 14D-9 further fails to disclose the implied perpetuity growth rate range resulting from both of Barclays’s analyses.

48. With respect to the Dividend Discount Analysis for Annaly, the 14D-9 fails to disclose the individual CAPM inputs and assumptions utilized by Barclays to derive the discount rate range of 6.0% to 8.0%, as well as the individual “selected comparable companies” and their respective observed dividend yields, as utilized by Barclays to derive the discount rate range of 10.0% to 11.5%. The 14D-9 also fails to disclose the projected tangible book value on 3Q 2019 (quarter-6) used in the terminal value calculation. The 14D-9 further fails to disclose the implied perpetuity growth rate range resulting from both of Barclays’s analyses.

Materially Incomplete and Misleading Disclosures Concerning the Flawed Process

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49. The 14D-9 also fails to disclose material information concerning the sales process. For example, the 14D-9 fails to disclose the approximate per share valuation of proposals offered by Annaly on February 22, 2018 and April 29, 2018.

50. The 14D-9 also fails to disclose the Company’s positioning and outlook relative to its peer group and the reasons provided to continue as a stand-alone company as presented to the special committee by Barclays on April 6, 2018. In addition, the 14D-9 does not disclose information concerning Barclays’s April 9, 2018 presentation of a hypothetical acquisition of the Company by AGNC, as well as Barclays’s valuation analysis of MTGE presented to the special committee on April 11, 2018.

51. The 14D-9 describes Barclays being paid a retainer fee of $125,000 a month as part of its work as a financial advisor to the special committee, yet it does not disclose why Barclays was being paid a retainer fee. The 14D-9 also fails to disclose whether Barclays performed work other than investment banking for either MTGE or Annaly and, if so, the amount of fees it earned for such work.

52. The 14D-9 notes discussions between Annaly and MTGE concerning a seat on the Annaly board for one of the members of the special committee after completion of the Proposed Transaction. However, the 14D-9 does not disclose the result of those discussions or when the issue was resolved.

53. This information is necessary to provide Company stockholders a complete and accurate picture of the sales process and its fairness. Without this information, stockholders were not fully informed as to the defendants’ actions, including those that may have been taken in bad faith, and cannot fairly assess the process. And without all material information, MTGE stockholders are unable to make a fully informed decision in connection with the Proposed Transaction and face irreparable harm, warranting the injunctive relief sought herein.

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54. In addition, the Individual Defendants knew or recklessly disregarded that the 14D-9 omits the material information concerning the Proposed Transaction and contains the materially incomplete and misleading information discussed above.

55. Specifically, the Individual Defendants undoubtedly reviewed the contents of the 14D-9 before it was filed with the SEC. Indeed, as directors of the Company, they were required to do so. The Individual Defendants thus knew or recklessly disregarded that the 14D-9 omits the material information referenced above and contains the incomplete and misleading information referenced above.

56. Further, the 14D-9 indicates that on May 2, 2018, Barclays reviewed with the Board its financial analysis of the Merger Consideration delivered to the Board an oral opinion, which was confirmed by delivery of a written opinion of the same date, to the effect that the Merger Consideration was fair, from a financial point of view, to MTGE shareholders. Accordingly, the Individual Defendants undoubtedly reviewed or were presented with the material information concerning Barclays’s financial analyses which has been omitted from the 14D-9, and thus knew or should have known that such information has been omitted.

57. Plaintiff and the other members of the Class are immediately threatened by the wrongs complained of herein, and lack an adequate remedy at law. Accordingly, Plaintiff seeks injunctive and other equitable relief to prevent the irreparable injury that the Company’s shareholders will continue to suffer absent judicial intervention.

CLAIMS FOR RELIEF

COUNT I

On Behalf of Plaintiff and the Class Against All Defendants for Violations of

Section 14(e) of the Exchange Act and Rule 14a-9

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Case 8:18-cv-01528-DKC Document 1 Filed 05/25/18 Page 16 of 20

58. Plaintiff incorporates each and every allegation set forth above as if fully set forth herein.

59. Defendants have filed the 14D-9 with the SEC with the intention of soliciting MTGE shareholder support for the Proposed Transaction. Each of the Individual Defendants reviewed and authorized the dissemination of the 14D-9, which fails to provide the material information referenced above.

60. In so doing, Defendants made materially incomplete and misleading statements and/or omitted material information necessary to make the statements made not misleading. Each of the Individual Defendants, by virtue of their roles as officers and/or directors of MTGE, were aware of the omitted information but failed to disclose such information, in violation of Section 14(e).

61. Section 14(e) of the Exchange Act provides that it is unlawful “for any person to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading…” 15 U.S.C. § 78n(e).

62. Specifically, and as detailed above, the 14D-9 violates Section 14(e) and Rule 14a-9 because it omits material facts concerning: (i) management’s financial projections; (ii) the value of MTGE shares and the financial analyses performed by Barclays in support of its fairness opinion; and (iii) the sales process.

63. Moreover, in the exercise of reasonable care, the Individual Defendants knew or should have known that the 14D-9 is materially misleading and omits material information that is necessary to render it not misleading. The Individual Defendants undoubtedly reviewed and relied upon the omitted information identified above in connection with their decision to approve and

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recommend the Proposed Transaction; indeed, the 14D-9 states that Barclays reviewed and discussed its financial analyses with the Board during various meetings including on May 2, 2018, and further states that the Board relied upon Barclays’s financial analyses and fairness opinion in connection with approving the Proposed Transaction. The Individual Defendants knew or should have known that the material information identified above has been omitted from the 14D-9, rendering the sections of the 14D-9 identified above to be materially incomplete and misleading.

64. The misrepresentations and omissions in the 14D-9 are material to Plaintiff and the Class, who will be deprived of their right to cast an informed vote if such misrepresentations and omissions are not corrected prior to the vote on the Proposed Transaction. Plaintiff and the Class have no adequate remedy at law. Only through the exercise of this Court’s equitable powers can Plaintiff and the Class be fully protected from the immediate and irreparable injury that Defendants’ actions threaten to inflict.

COUNT II

On Behalf of Plaintiff and the Class against the Individual Defendants for Violations of

Section 20(a) of the Exchange Act

65. Plaintiff incorporates each and every allegation set forth above as if fully set forth herein.

66. The Individual Defendants acted as controlling persons of MTGE within the meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their positions as officers and/or directors of MTGE and participation in and/or awareness of the Company’s operations and/or intimate knowledge of the incomplete and misleading statements contained in the 14D-9 filed with the SEC, they had the power to influence and control and did influence and control, directly or indirectly, the decision making of the Company, including the content and dissemination of the various statements that Plaintiff contends are materially incomplete and misleading.

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67. Each of the Individual Defendants was provided with or had unlimited access to copies of the 14D-9 and other statements alleged by Plaintiff to be misleading prior to the time the 14D-9 was filed with the SEC and had the ability to prevent the issuance of the statements or cause the statements to be corrected.

68. In particular, each of the Individual Defendants had direct and supervisory involvement in the day-to-day operations of the Company, and, therefore, is presumed to have had the power to control or influence the particular transactions giving rise to the Exchange Act violations alleged herein, and exercised the same. The omitted information identified above was reviewed by the Board prior to voting on the Proposed Transaction. The 14D-9 at issue contains the unanimous recommendation of each of the Individual Defendants to approve the Proposed Transaction. They were, thus, directly involved in the making of the 14D-9.

69. In addition, as the 14D-9 sets forth at length, and as described herein, the Individual Defendants were involved in negotiating, reviewing, and approving the Merger Agreement. The 14D-9 purports to describe the various issues and information that the Individual Defendants reviewed and considered. The Individual Defendants participated in drafting and/or gave their input on the content of those descriptions.

70. By virtue of the foregoing, the Individual Defendants have violated Section 20(a) of the Exchange Act.

71. As set forth above, the Individual Defendants had the ability to exercise control over and did control a person or persons who have each violated Section 14(e), by their acts and omissions as alleged herein. By virtue of their positions as controlling persons, these defendants are liable pursuant to Section 20(a) of the Exchange Act. As a direct and proximate result of Individual Defendants’ conduct, Plaintiff and the Class will be irreparably harmed.

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RELIEF REQUESTED

WHEREFORE, Plaintiff demands injunctive relief in his favor and in favor of the Class and against the Defendants jointly and severally, as follows:

A. Declaring that this action is properly maintainable as a Class Action and certifying Plaintiff as Class Representatives and her counsel as Class Counsel;

B. Preliminarily and permanently enjoining Defendants and their counsel, agents, employees and all persons acting under, in concert with, or for them, from proceeding with, consummating, or closing the Proposed Transaction, unless and until Defendants disclose the material information identified above which has been omitted from the 14D-9;

C. In the event that the transaction is consummated prior to the entry of this Court’s final judgment, rescinding it or awarding Plaintiff and the Class rescissory damages;

D. Directing the Defendants to account to Plaintiff and the Class for all damages suffered as a result of their wrongdoing;

E. Awarding Plaintiff the costs and disbursements of this action, including reasonable attorneys’ and expert fees and expenses; and

F. Granting such other and further equitable relief as this Court may deem just and proper.

JURY DEMAND

Plaintiff demands a trial by jury.

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Dated: May 25, 2018	LEVI & KORSINSKY LLP
	/s/ Donald J. Enright
	Donald J. Enright
	1101 30th Street, N.W., Suite 115
	Washington, D.C. 20007
	Telephone: (202) 524-4290
	Facsimile: (202) 333-2121
	Email: denright@zlk.com
	ROWLEY LAW PLLC
	Shane T. Rowley (to be admitted pro hac vice)
	Danielle Rowland Lindahl (to be admitted pro hac vice)
	50 Main Street, Suite 1000
	White Plains, NY 10606
	Tel: (914) 400-1920
	Fax: (914) 301-3514

20

EX-99.(A)(5)(G)

Exhibit (A)(5)(G)

Case 8:18-cv-01563-PJM Document 1 Filed 05/30/18 Page 1 of 18

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MARYLAND

ANTHONY FRANCHI, Individually and On	)
Behalf of All Others Similarly Situated,	)
Sewell, NJ	)
	)
Plaintiff,	)	Case No.
	)
v.	)	JURY TRIAL DEMANDED
	)
MTGE INVESTMENT CORP.	)	CLASS ACTION
12th Floor	)
Two Bethesda Metro Center	)
Bethesda, MD 20814	)
	)
RANDY E. DOBBS	)
12th Floor	)
Two Bethesda Metro Center	)
Bethesda, MD 20814	)
	)
JULIA L. CORONADO	)
12th Floor	)
Two Bethesda Metro Center	)
Bethesda, MD 20814	)
	)
ROBERT M. COUCH	)
12th Floor	)
Two Bethesda Metro Center	)
Bethesda, MD 20814	)
	)
ANNALY CAPITAL MANAGEMENT, INC.	)
2405 York Road, Suite 201	)
Lutherville Timonium, MD 21093	)
	)
MOUNTAIN MERGER SUB	)
CORPORATION,	)
2405 York Road, Suite 201	)
Lutherville Timonium, MD 21093	)
	)
Defendants.	)

Case 8:18-cv-01563-PJM Document 1 Filed 05/30/18 Page 2 of 18

COMPLAINT FOR VIOLATION OF THE SECURITIES EXCHANGE ACT OF 1934

Plaintiff, by his undersigned attorneys, for this complaint against defendants, alleges upon personal knowledge with respect to himself, and upon information and belief based upon, inter alia, the investigation of counsel as to all other allegations herein, as follows:

NATURE OF THE ACTION

1. This action stems from a proposed transaction announced on May 2, 2018 (the “Proposed Transaction”), pursuant to which MTGE Investment Corp. (“MTGE” or the “Company”) will be acquired by Annaly Capital Management, Inc. (“Parent”) and Mountain Merger Sub Corporation (“Merger Sub,” and together with Parent, “Annaly”).

2. On May 2, 2018, MTGE’s Board of Directors (the “Board” or “Individual Defendants”) caused the Company to enter into an agreement and plan of merger (the “Merger Agreement”) with Annaly. Pursuant to the terms of the Merger Agreement, Merger Sub commenced a tender offer (the “Tender Offer”) to acquire all of MTGE’s shares of outstanding common stock. For each share of MTGE common stock owned, MTGE’s stockholders will have the option to elect from three forms of consideration: (i) $9.82 in cash and 0.9519 shares of Parent common stock; (ii) $19.65 in cash; or (iii) 1.9037 shares of Parent common stock. MTGE shareholders who elect to receive the merger consideration in all cash or all Parent stock will be subject to proration so that the aggregate consideration will consist of approximately 50% of Parent’s common stock and approximately 50% in cash. The Tender Offer is set to expire at 5:00 p.m., Eastern Time, on June 18, 2018.

3. On May 16, 2018, defendants filed a Solicitation/Recommendation Statement (the “Solicitation Statement”) with the United States Securities and Exchange Commission (“SEC”) in connection with the Proposed Transaction.

4. The Solicitation Statement omits material information with respect to the Proposed Transaction, which renders the Solicitation Statement false and misleading. Accordingly, plaintiff alleges herein that defendants violated Sections 14(e), 14(d), and 20(a) of the Securities Exchange Act of 1934 (the “1934 Act”) in connection with the Solicitation Statement.

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JURISDICTION AND VENUE

5. This Court has jurisdiction over all claims asserted herein pursuant to Section 27 of the 1934 Act because the claims asserted herein arise under Sections 14(e), 14(d), and 20(a) of the 1934 Act and Rule 14a-9.

6. This Court has jurisdiction over defendants because each defendant is either a corporation that conducts business in and maintains operations within this District, or is an individual with sufficient minimum contacts with this District so as to make the exercise of jurisdiction by this Court permissible under traditional notions of fair play and substantial justice.

7. Venue is proper under 28 U.S.C. § 1391 because a substantial portion of the transactions and wrongs complained of herein occurred in this District.

PARTIES

8. Plaintiff is, and has been continuously throughout all times relevant hereto, the owner of MTGE common stock.

9. Defendant MTGE is a Maryland corporation and maintains its principal executive offices at 2 Bethesda Metro Center, 12^th Floor, Bethesda, Maryland 20814. MTGE’s common stock is traded on the NasdaqGS under the ticker symbol “MTGE.” MTGE is a party to the Merger Agreement.

10. Defendant Randy E. Dobbs (“Dobbs”) is a director of MTGE.

11. Defendant Julia L. Coronado (“Coronado”) is a director of MTGE.

12. Defendant Robert M. Couch (“Couch”) is a director of MTGE.

13. The defendants identified in paragraphs 10 through 12 are collectively referred to herein as the “Individual Defendants.”

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14. Defendant Parent is a Maryland corporation and a party to the Merger Agreement.

15. Defendant Merger Sub is a Maryland corporation, a wholly-owned subsidiary of the Parent, and a party to the Merger Agreement.

CLASS ACTION ALLEGATIONS

16. Plaintiff brings this action as a class action on behalf of himself and the other public stockholders of MTGE (the “Class”). Excluded from the Class are defendants herein and any person, firm, trust, corporation, or other entity related to or affiliated with any defendant.

17. This action is properly maintainable as a class action.

18. The Class is so numerous that joinder of all members is impracticable. As of April 30, 2018, there were approximately 42,797,687 shares of MTGE common stock outstanding, held by hundreds, if not thousands, of individuals and entities scattered throughout the country.

19. Questions of law and fact are common to the Class, including, among others, whether defendants will irreparably harm plaintiff and the other members of the Class if defendants’ conduct complained of herein continues.

20. Plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. Plaintiff’s claims are typical of the claims of the other members of the Class and plaintiff has the same interests as the other members of the Class. Accordingly, plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class.

21. The prosecution of separate actions by individual members of the Class would create the risk of inconsistent or varying adjudications that would establish incompatible standards of conduct for defendants, or adjudications that would, as a practical matter, be dispositive of the interests of individual members of the Class who are not parties to the adjudications or would substantially impair or impede those non-party Class members’ ability to protect their interests.

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22. Defendants have acted, or refused to act, on grounds generally applicable to the Class as a whole, and are causing injury to the entire Class. Therefore, final injunctive relief on behalf of the Class is appropriate.

SUBSTANTIVE ALLEGATIONS

Background of the Company and the Proposed Transaction

23. MTGE was incorporated in March 2011 and commenced operations in August 2011 following the completion of its initial public offering. The Company is externally managed by MTGE Management, LLC, a wholly owned subsidiary of AGNC Investment Corp.

24. MTGE is a hybrid mortgage real estate investment trust (“REIT”) that invests in agency mortgage-backed securities, non-agency mortgage investments, other mortgage-related assets, and skilled nursing and senior living facilities operated by third parties. The Company generates income from the interest earned or lease payments received on its investment assets, net of associated borrowing and hedging costs, and net realized gains and losses on its investments and hedging activities.

25. The Company invests in, finances, and manages a leveraged portfolio of real estate-related investments, which includes agency residential mortgage-backed securities (“agency RMBS”), non-agency securities, other mortgage-related investments, and other real estate investments. Agency RMBS include residential mortgage pass-through certificates and collateralized mortgage obligations (“CMOs”) structured from residential mortgage pass-through certificates for which the principal and interest payments are guaranteed by a government-sponsored enterprise (“GSE”), such as Federal National Mortgage Association (“Fannie Mae”)

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and Federal Home Loan Mortgage Corporation (“Freddie Mac”), or by a U.S. Government agency, such as Government National Mortgage Association (“Ginnie Mae”). Other mortgage-related investments may include mortgage servicing rights (“MSR”), commercial mortgage-backed securities (“CMBS”), prime and non-prime residential mortgage loans, commercial mortgage loans and mortgage-related derivatives. Other real estate investments may include equity and debt investments in healthcare real estate, including skilled nursing, assisted living and independent living facilities, operated by third party operators.

26. MTGE operates to qualify to be taxed as a REIT under the Internal Revenue Code. As a REIT, the Company is required to distribute annually at least 90% of its taxable income, in which case the Company generally will not be subject to U.S. federal or state corporate taxes on its REIT taxable income to the extent that it distributes all of its annual REIT taxable income to its stockholders.

27. On May 2, 2018, the Individual Defendants caused the Company to enter into the Merger Agreement with Annaly.

28. Pursuant to the terms of the Merger Agreement, Merger Sub commenced the Tender Offer to acquire all of MTGE’s shares of outstanding common stock. The Tender Offer is set to expire at 5:00 p.m., Eastern Time, on June 18, 2018.

29. For each share of MTGE common stock owned, MTGE’s stockholders will have the option to elect from three forms of consideration: (i) S9.82 in cash and 0.9519 shares of Parent common stock; (ii) $19.65 in cash; or (iii) 1.9037 shares of Parent common stock. MTGE shareholders who elect to receive the merger consideration in all cash or all Parent stock will be subject to proration so that the aggregate consideration will consist of approximately 50% of Parent’s common stock and approximately 50% in cash.

6

Case 8:18-cv-01563-PJM Document 1 Filed 05/30/18 Page 7 of 18

The Solicitation Statement Omits Material Information, Rendering It False and Misleading

30. Defendants filed the Solicitation Statement with the SEC in connection with the Proposed Transaction.

31. The Solicitation Statement omits material information with respect to the Proposed Transaction, which renders the Solicitation Statement false and misleading.

32. The Solicitation Statement omits material information regarding the Company’s and the valuation analyses performed by the Company’s financial advisor in connection with the Proposed Transaction, Barclays Capital Inc. (“Barclays”).

33. When a banker’s endorsement of the fairness of a transaction is touted to shareholders, the valuation methods used to arrive at that opinion as well as the key inputs and range of ultimate values generated by those analyses must also be fairly disclosed. Moreover, the disclosure of projected financial information is material because it provides stockholders with a basis to project the future financial performance of a company, and allows stockholders to better understand the financial analyses performed by the company’s financial advisor in support of its fairness opinion.

34. Defendants failed to disclose certain financial projections of MTGE and Parent, despite the fact that Barclays was provided with, and relied upon, those projections to perform its valuation analyses to support its “fairness opinion.” Specifically, Barclays relied upon MTGE’s and Parent’s financial projections of tangible book value to perform its Selected Comparable Company Analysis. Selected Precedent Transactions Analysis, and Dividend Discount Analyses of MTGE and Annaly, but defendants failed to disclose those critical projections to stockholders in the Solicitation Statement. This information is material to MTGE stockholders, who are faced with a decision of whether to approve the Proposed Transaction and receive cash and/or Parent stock for their shares, or reject the Proposed Transaction and remain stockholders in the standalone MTGE. Without this information, stockholders are being misled into believing that the merger consideration is fair.

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35. Further, defendants failed to disclose the following financial projections of MTGE for years 2018 through 2020: (i) total assets; (ii) book value; (iii) interest income (and its sub-components), including agency securities, non-agency securities and other; (iv) interest expense; (v) net interest income; (vi) dollar roll income; (vii) healthcare real estate (and its sub-components), including healthcare real estate income and healthcare real estate expense; (viii) total operating expenses (and its sub-components), including management fees and G&A expenses; and (ix) net income.

36. Defendants also failed disclose the following financial projections of Parent for years 2018 through 2020: (i) total assets; (ii) book value; (iii) interest expense; (iv) net interest income; (v) compensation and management fee; (vi) other general and administrative expenses; and (vii) net income.

37. Additionally, the projections of “Net Spread, Dollar Roll and Healthcare Income, excluding ‘catch up’ amortization” for MTGE and “Core Earnings (ex. PAA)” for Parent that are disclosed in the Solicitation Statement are non-GAAP (generally accepted accounting principles) financial measures. The Solicitation Statement, however, fails to provide stockholders with the necessary line item projections for the metrics used to calculate the non-GAAP measures or otherwise reconcile the non-GAAP projections to the most comparable GAAP measures.

38. To avoid misleading stockholders with non-GAAP financial measures in business combinations such as the Proposed Transaction, publicly traded companies must provide a reconciliation of the differences between the non-GAAP financial measures with the most

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comparable financial measures calculated and presented in accordance with GAAP. As such, stockholders are entitled to the line item projections used to calculate MTGE’s and Parent’s non-GAAP projections or a reconciliation of the non-GAAP projections to the most comparable GAAP measures.

39. With respect to Barclays’ Selected Comparable Company Analysis, the Solicitation Statement fails to disclose: (i) the individual multiples and financial metrics for each of the companies observed by Barclays in its analyses; and (ii) MTGE’s find Parent’s financial projections of tangible book value. This information is necessary because, rather than use the range of multiples based on the selected companies to derive the implied values of MTGE and Parent, Barclays made certain “qualitative judgments” to select its chosen range of multiples to make the merger consideration appear fair. Thus, the failure to disclose this information makes the Solicitation Statement misleading.

40. With respect to Barclays’ Selected Precedent Transactions Analysis, the Solicitation Statement fails to disclose: (i) the individual multiples and financial metrics for each of the transactions observed by Barclays in its analysis; and (ii) MTGE’s financial projections of tangible book value. Further, the Solicitation Statement fails to disclose whether Barclays performed a similar analysis using the Company’s projections of “Net Spread, Dollar Roll and Healthcare Income, excluding ‘catch up’ amortization” and, if not, the reason it did not. The failure to disclose this information causes the Solicitation Statement to be misleading in that it makes the merger consideration appear fair.

41. With respect to Barclays’ Dividend Discount Analysis of MTGE, the Solicitation Statement fails to disclose: (i) MTGEs financial projections of tangible book value through 2020; (ii) Barclays’ basis for selecting terminal tangible book value multiples of 0.85x to 0.95x; (iii) the

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perpetuity growth rates implied by Barclays’ analyses; and (iv) the specific inputs and assumptions underlying the different set of discount rates of 10.0% to 12.0% and 8.0% to 9.5% selected by Barclays. The failure to disclose this information causes the Solicitation Statement to be misleading in that it makes the merger consideration appear fair.

42. With respect to Barclays’ Dividend Discount Analysis of Annaly, the Solicitation Statement fails to disclose: (i) Parent’s financial projections of tangible book value; (ii) Barclays’ basis for selecting terminal tangible book value multiples of 0.90x to 1.00x; (iii) the perpetuity growth rates implied by Barclays’ analyses; and (iv) the specific inputs and assumptions underlying the different set of discount rates of 10.0% to 11.5% and 6.0% to 8.0% selected by Barclays. The failure to disclose this information causes the Solicitation Statement to be misleading in that it makes the merger consideration appear fair.

43. The omission of this material information renders the Solicitation Statement false and misleading, including, inter alia, the following sections of the Solicitation Statement; (i) Unaudited Prospective Financial Information; and (ii) Opinion of MTGE Special Committee’s Financial Advisor.

44. The Solicitation Statement omits material information relating to the background leading to the Proposed Transaction. The Company’s stockholders arc entitled to an accurate description of the process the directors used in coming to their decision to support the Proposed Transaction.

45. The Solicitation Statement indicates that the Board established a special committee of directors (the “Special Committee”) to consider and evaluate the Proposed Transaction. The Solicitation Statement, however, fails to clarify that the composition of the Special Committee is the exact same as the composition of the Board. Specifically, Individual Defendants Dobbs,

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Coronado, and Couch are members of each of the Board and the Special Committee. In light of the overlap among the Board and the Special Committee, the Solicitation Statement must disclose to stockholders the purpose of forming the Special Committee with the same members of the Board.

46. Further, the Solicitation Statement indicates that, in connection with their service on the Special Committee, the Special Committee members each earns a cash monthly retainer in the amount of $10,000, and as of the filing of the Solicitation Statement, the Special Committee members earned aggregate tees of $90,000. Thus, the Special Committee members have been provided additional compensation to perform their job as Board members. Such compensation could have served as payments to ensure that the Special Committee (i.e., the Board) approve the Proposed Transaction. Thus, the Solicitation Statement must disclose who proposed that the Special Committee members cam the cash monthly retainer fees, and when that compensation was proposed and approved. This information is necessary for stockholders to understand potential conflicts of interest of management and the Board, as that information provides illumination concerning motivations that would prevent fiduciaries from acting solely in the best interests of the Company’s stockholders. Without this material information, the Solicitation Statement is false and misleading.

47. The omission of this material information renders the Solicitation Statement false and misleading, including, inter alia, the following sections of the Solicitation Statement: (i) Background of the Merger; and (ii) Person/Assets, Retained. Employed, Compensated or Used.

48. The above-referenced omitted information, if disclosed, would significantly alter the total mix of information available to the Company’s stockholders.

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COUNT I

(Claim for Violation of Section 14(c) of the 1934 Act Against Defendants)

49. Plaintiff repeats and realleges the preceding allegations as if fully set forth herein.

50. Section 14(c) of the 1934 Act states, in relevant part, that:

It shall be unlawful for any person to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading . . . in connection with any tender offer or request or invitation for tenders[.]

51. Defendants disseminated the misleading Solicitation Statement, which contained statements that, in violation of Section 14(e) of die 1934 Act, in light of the circumstances under which they were made, omitted to state material facts necessary to make the statements therein not misleading.

52. The Solicitation Statement was prepared, reviewed, and/or disseminated by defendants.

53. The Solicitation Statement misrepresented and/or omitted material facts in connection with the Proposed Transaction as set forth above.

54. By virtue of their positions within the Company and/or roles in the process and the preparation of the Solicitation Statement, defendants were aware of this information and their duty to disclose this information in the Solicitation Statement.

55. The omissions in the Solicitation Statement are material in that a reasonable shareholder will consider them important in deciding whether to tender their shares in connection with the Proposed Transaction. In addition, a reasonable investor will view a full and accurate disclosure as significantly altering the total mix of information made available.

56. Defendants knowingly or with deliberate recklessness omitted the material information identified above in the Solicitation Statement, causing statements therein to be materially incomplete and misleading.

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57. By reason of the foregoing, defendants violated Section 14(e) of the 1934 Act.

58. Because of the false and misleading statements in the Solicitation Statement, plaintiff and the Class are threatened with irreparable harm.

59. Plaintiff and the Class have no adequate remedy at law.

COUNT II

(Claim for Violation of 14(d) of the 1934 Act Against Defendants)

60. Plaintiff repeats and realleges the preceding allegations as if fully set forth herein.

61. Section 14(d)(4) of the 1934 Act states:

Any solicitation or recommendation to the holders of such a security to accept or reject a tender offer or request or invitation for tenders shall be made in accordance with such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

62. Rule 14d-9(d) states, in relevant part:

Any solicitation or recommendation to holders of a class of securities referred to in section 14(d)(1) of the Act with respect to a tender offer for such securities shall include the name of the person making such solicitation or recommendation and the information required by Items 1 through 8 of Schedule 14D-9 (§ 240.l4d-101) or a fair and adequate summary thereof[.]

Item 8 requires that directors must “furnish such additional information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not materially misleading.”

63. The Solicitation Statement violates Section 14(d)(4) and Rule 14d-9 because it omits the material facts set forth above, which renders the Solicitation Statement false and/or misleading.

64. Defendants knowingly or with deliberate recklessness omitted the material information set forth above, causing statements therein to be materially incomplete and misleading.

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65. The omissions in the Solicitation Statement are material to plaintiff and the Class, and they will be deprived of their entitlement to make a fully informed decision with respect to the Proposed Transaction if such misrepresentations and omissions are not corrected prior to the expiration of the exchange offer.

66. Plaintiff and the Class have no adequate remedy at law.

COUNT III

(Claim for Violation of Section 20(a) of the 1934 Act

Against the Individual Defendants and Annaly)

67. Plaintiff repeats and realleges the preceding allegations as if fully set forth herein.

68. The Individual Defendants and Annaly acted as controlling persons of MTGE within the meaning of Section 20(a) of the 1934 Act as alleged herein. By virtue of their positions as officers and/or directors of MTGE and participation in and/or awareness of the Company’s operations and/or intimate knowledge of the false statements contained in the Solicitation Statement filed with the SEC, they had the power to influence and control and did influence and control, directly or indirectly, the decision making of the Company, including the content and dissemination of the various statements that plaintiff contends are false and misleading.

69. Each of the Individual Defendants and Annaly was provided with or had unlimited access to copies of the Solicitation Statement alleged by plaintiff to be misleading prior to and/or shortly after these statements were issued and had the ability to prevent the issuance of the statements or cause them to be corrected.

70. In particular, each of the Individual Defendants had direct and supervisory involvement in the day-to-day operations of the Company, and, therefore, is presumed to have had the power to control and influence the particular transactions giving rise to the violations as alleged

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herein, and exercised the same. The Solicitation Statement contains the unanimous recommendation of the Individual Defendants to approve the Proposed Transaction. They were thus directly connected with and involved in the making of the Solicitation Statement.

71. Annaly also had direct supervisory control over the composition of the Solicitation Statement and the information disclosed therein, as well as the information that was omitted and/or misrepresented in the Solicitation Statement.

72. By virtue of the foregoing, the Individual Defendants and Annaly violated Section 20(a) of the 1934 Act.

73. As set forth above, the Individual Defendants and Annaly had the ability to exercise control over and did control a person or persons who have each violated Section l4(c) of the 1934 Act and Rule 14a-9, by their acts and omissions as alleged herein. By virtue of their positions as controlling persons, these defendants are liable pursuant to Section 20(a) of the 1934 Act.

74. As a direct and proximate result of defendants’ conduct, plaintiff and the Class are threatened with irreparable harm.

75. Plaintiff and the Class have no adequate remedy at law.

PRAYER FOR RELIEF

WHEREFORE, plaintiff prays for judgment and relief as follows:

A. Enjoining defendants and all persons acting in concert with them from proceeding with, consummating, or closing the Proposed Transaction;

B. In the event defendants consummate the Proposed Transaction, rescinding it and setting it aside or awarding rescissory damages;

C. Directing the Individual Defendants to file a Solicitation Statement that does not contain any untrue statements of material fact and that states all material facts required in it or necessary to make the statements contained therein not misleading;

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D. Declaring that defendants violated Sections 14(e), 14(d), and 20(a) of the 1934 Act, as well as Rule 14a-9 promulgated thereunder;

E. Awarding plaintiff the costs of this action, including reasonable allowance for plaintiff’s attorneys’ and experts’ fees; and

F. Granting such other and further relief as this Court may deem just and proper.

JURY DEMAND

Plaintiff hereby demands a trial by jury.

Dated: May 30, 2018	GOLDMAN & MINTON, P.C.
	By:	/s/ Thomas J. Minton
		Thomas J. Minton (No. 03370)
OF COUNSEL:		3600 Clipper Mill Rd., Suite 201
		Baltimore, MD 21211
RIGRODSKY & LONG, P.A.		Telephone: (410) 783-7575
300 Delaware Avenue, Suite 1220		Facsimile: (410) 783-1711
Wilmington, DE 19801		Email: tminton@charmcitylegal.com
Telephone: (302) 295-5310
Facsimile: (302) 654-7530		Attorneys for Plaintiff
RM LAW, P.C.
1055 Westlakes Drive, Suite 300
Berwyn, PA 19312
Telephone: (484) 324-6800
Facsimile: (484) 631-1305

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CERTIFICATION OF PLAINTIFF

I, Anthony Franchi (“Plaintiff”), hereby declare as to the claims asserted under the federal securities laws that:

1. Plaintiff has reviewed the complaint and authorizes its filing.

2. Plaintiff did not purchase the security that is the subject of this action at the direction of Plaintiff’s counsel or in order to participate in any private action.

3. Plaintiff is willing to serve as a representative party on behalf of the class, either individually or as part of a group, and I will testify at deposition or trial, if necessary. I understand that this is not a claim form and that I do not need to execute this Certification to share in any recovery as a member of the class.

4. Plaintiff’s purchase and sale transactions in the MTGE Investment Corp. (NasdaqGS: MTGE) security that is the subject of this action during the class period is/are as follows:

PURCHASES			SALES
Buy Date	Shares	Price per Share	Sell Date	Shares	Price per Share
2/14/18	8	$17.45

Please list additional transactions on separate sheet of paper, if necessary.

5. Plaintiff has complete authority to bring a suit to recover for investment losses on behalf of purchasers of the subject securities described herein (including Plaintiff, any co-owners, any corporations or other entities, and/or any beneficial owners).

Case 8:18-cv-01563-PJM Document 1 Filed 05/30/18 Page 18 of 18

6. During the three years prior to the date of this Certification, Plaintiff has not moved to serve as a representative party for a class in an action filed under the federal securities laws.

7. Plaintiff will not accept any payment for serving as a representative party on behalf of the class beyond Plaintiff’s pro rata share of any recovery, except such reasonable costs and expenses (including lost wages) directly relating to the representation of the class as ordered or approved by the Court.

I declare under penalty of perjury that the foregoing is true and correct.

Executed this 30 day of May, 2018.

/s/ Anthony Franchi

Anthony Franchi

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