Armour Residential REIT Inc

This management proposal asks shareholders to cast a non‑binding advisory vote to approve the Company’s disclosed 2025 executive compensation (say‑on‑pay). Management seeks endorsement to validate its mix of equity‑based awards and the external manager compensation framework, emphasizing the unique structure where ARMOUR is externally managed by ACM and direct cash compensation to named executive officers is generally paid by ACM; ARMOUR’s role is primarily to grant equity awards. The proxy highlights that prior say‑on‑pay in 2025 received approximately 94% support, and management has used investor outreach to inform pay practices. Key governance context includes ARMOUR’s externally‑managed structure, the Compensation Committee’s oversight of equity grants under the Plan, stock ownership and clawback policies, and limits on annual equity issuance to manage dilution. The Board’s recommendation is premised on aligning executive incentives with long‑term shareholder value, retention of key personnel in a competitive mortgage REIT market, and historically conservative burn rates and vesting schedules. From a risk perspective, the equity awards vest ratably over long multi‑quarter schedules to discourage short‑term risk taking, and the Company points to its clawback policy and governance safeguards. Critically, shareholders must weigh that much of executives’ cash compensation is paid by ACM (outside direct Board control) while ARMOUR controls equity grants — creating a governance nuance in assessing alignment and accountability. Approval is non‑binding but signals shareholder sentiment to the Compensation Committee and could influence future equity grant practices and external manager arrangements. Overall, management frames the proposal as a vote of confidence in their pay program given prior strong stockholder support and ongoing outreach, while investors will evaluate alignment, transparency, and the implications of external management on pay incentives.

This management proposal asks shareholders to indicate, on a non‑binding basis, whether the Company should hold future advisory votes on executive compensation every one, two, or three years. Management and the Board advocate for an annual vote ("ONE (1) YEAR"), arguing that annual say‑on‑pay votes maximize accountability and align with the Company’s annual compensation review and investor outreach cadence. The choice is advisory only; it will not bind the Board but will inform future governance practice. For ARMOUR, which is externally managed and grants equity to align incentives, annual votes allow more frequent feedback on both Board compensation decisions and the interplay between management fees paid to ACM and ARMOUR’s equity awards. Shareholders should weigh administrative burden and vote fatigue against the desire for regular, timely input into compensation policy — frequent votes can increase transparency but may also entrench short‑term responses. The Board’s recommendation reflects its view that annual engagement supports good governance, particularly given the firm’s evolving compensation arrangements and recent investor outreach. From an investor relations perspective, an annual schedule allows the Board to respond more promptly to shareholder concerns evidenced through say‑on‑pay outcomes. The result will be the option receiving the plurality of votes (one, two or three years) and the Board will consider the outcome when setting policy.

This management proposal requests shareholder approval to amend and restate ARMOUR’s 2009 Stock Incentive Plan to increase the share reserve by 1,000,000 shares (from 800,000 to 1,800,000) and to implement several governance and administrative changes. Management argues the increase is necessary to continue granting equity awards to attract, retain and motivate executive officers and other key personnel in a competitive mortgage REIT market, given the firm’s externally‑managed structure and reliance on equity to align incentives. The Board and Compensation Committee frame the proposal as a measured increase — historical burn rates are presented and the Plan includes multi‑year vesting schedules, per‑participant annual limits (reduced to 150,000 shares to reflect reverse split), and a ten‑year term to limit open‑ended dilution. The amended Plan adds an explicit clawback provision and clarifies award types and limits, while maintaining Committee discretion on award terms and use of shares. Approving the Plan prevents disruptive alternatives such as increased cash compensation or ad‑hoc incentive structures that could reduce cash available for distributions. Key governance considerations for investors include the potential dilutive impact of the 1,000,000‑share increase versus the company’s historical conservative equity use and veteran retention needs; management discloses remaining available shares (3,506) and historical burn-rate metrics to justify the requested size. The Board recommends the amendment as aligned with shareholder value creation objectives, but shareholders should weigh dilution risk, plan design safeguards (vesting, limits, clawback), and the interplay between equity awards and management fees paid to the external manager when evaluating the proposal. If approved, the Fourth Amended Plan will be effective April 30, 2026 and the full amended plan text is attached as Appendix A to the proxy for detailed review.