2018 Guide to Effective Proxies

6 TH EDITION | GUIDE TO EFFECTIVE PROXIES 262 CHENIERE ENERGY, INC. • In 2017, over 200 LNG cargoes were produced, loaded and exported from the SPL Project, with deliveries completed to 25 countriesandregionsworldwide. Strategic/Commercial WetookseveralstepstoadvancethecommercializationanddevelopmentofTrain3attheCCLProjectandprogresstowarda finalinvestmentdecision,including: • InDecember2017,weenteredintoanamendedandrestatedEPCcontractwithBechtelOil,GasandChemicals,Inc.forTrain3of theCCLProject.WealsoissuedlimitednoticetoproceedtoBechtel,andprocurementandearlysiteworkhascommenced. • In2017,wemadesignificantprogressonpotentiallong-termcontractingofLNG,ultimatelyleadingtoSPAssignedin2018: • In January 2018, we entered into a 15-year SPA with Trafigura Pte Ltd for the sale of approximately 1.0 mtpa of LNG beginningin2019. • InFebruary2018,weenteredintotwoSPAswithPetroChinaInternationalCompanyLimited,asubsidiaryofChinaNational Petroleum Corporation, for the sale of approximately 1.2 mtpa of LNG through 2043, with a portion of the supply beginningin2018andthebalancebeginningin2023. ThedevelopmentandconstructionoftheSPLandCCLProjectsadvancedasplannedandremainedaheadofschedulein2017.As wecontinuetodeveloptheseprojectsandincreaseLNGproduction,ChenierewillcontinueitstransitionintoanLNGoperator withexpectedstableandgrowingpositivecashflowunderpinnedbylong-termSPAswithinvestmentgradeenergycompanies worldwide.Thebelowgraphshowsourhistoricalrevenuegrowthfrom2015through2017: $271 $1,283 $5,601 $- $2,000 $4,000 $6,000 CEI Consolidated Revenues ($ in millions) 2017 2016 2015 AsChenieretransformsfromadevelopmentcompanyintoanLNGoperator,weintendtocreateandsustainshareholdervalue whilecontinuingtoexploremorefocusedgrowthinitiatives.ChenierehasestablisheditselfasafirstmoverinthedomesticLNG exportmarketandiswellpositionedtobecomeasignificantplayerintheglobalLNGmarket. CheniereEnergy,Inc. NoticeofAnnualMeetingofShareholdersand2018ProxyStatement 31 Total of 07 pages in section FirstMoverinU.S.LNGExports Trains1through4oftheSPLProjectwerethefirstliquefactionfacilitiestohavebeenconstructedandplacedinserviceintheU.S. inover40years.WearecurrentlythelargestLNGexporterintheU.S.andexpecttobeoneofthetopfiveLNGs llersintheworld by2020,representingapproximatelytenpercentoftheglobalLNGmarket.Asoftheendof2017,therewerefourLNGprojects underconstructioninNorthAmericaotherthanCheniere’sSPLProjectandCCLProject.Additionally,thereareapproximately30 LNGprojectsintheregionthathavestartedtheregulatoryprocessforLNGexports.OutsideofNorthAmerica,weestimatethat over35LNGproductionprojectsareundervariousstagesofdevelopment. LiquefactionProjectsUnderpinnedwithLong-Term20-YearContracts Wehaveenteredintolong-termsaleandpurchaseagreements(“SPAs”)betweentherespectiveprojectlevelsubsidiaryandthird parties with fixed fees of approximately $4.3 billion annually to make available an aggregate amount of LNG that is between approximately 85% to 95% of the expected aggregate adjusted nominal production capacity of the seven Trains under constructionorcompleted.AlloftheseSPAshavebeenenteredintowithinvestmentgradeparentcompaniesascounterparties or guarantors and do not have price reopeners. Revenue generally will commence under these SPAs as each applicable Train reachesthedateoffirstcommercialdelivery(“DFCD”). UndertheseSPAs,thecustomerswillpurchaseLNGforapriceconsistingofafixedfeeperMMBtuofLNG(aportionofwhichis subjecttoannualadjustmentforinflation)plusavariablefeeperMMBtuofLNGequaltoapproximately115%ofHenryHub.In certaincircumstances,thecustomersmayelecttocancelorsuspenddeliveriesofLNGcargoes,inwhichcasethecustomerswould stillberequiredtopaythefixedfeewithrespecttothecontractedvolumesthatarenotdeliveredasaresultofsuchcanc llationor suspension.Asaresult,weexpecttogenerateasignificantamountofpredictable,stablecashflowsannually,overthelivesofthe contracts. Forthevolumesnotcontractedbyourprojectlevelsubsidiariesunderlong-termSPAs,wehaveanintegratedmarketingfunction thatisexpectedtohaveaccesstotheexcessLNGavailablefromthesevenTrainsunderconstructionorcompletedattheSPLand CCL Projects and is developing a portfolio of long-, medium- and short-term SPAs. Cheniere Marketing, LLC (together with its subsidiaries,“CheniereMarketing”)haspurchasedLNGfromtheSabinePassterminalandotherlocationsworldwide,transported andunloadedcommercialLNGcargoesandhascapitalizedonopportunitiestooptimizeitsportfolioofassetswiththeintention ofmaximizingmarginsonthesecargoes. Our management team creates value for our shareholders through diligent development (including commercialization), constructionandoperationofthesefacilities,theachievementofambitiouskeymilestonesanddisciplinedcapitalallocation.The Compensation Committee(the“CompensationCommittee”)oftheBoardofDirectors(the“Board”)oftheCompanyconsiders progressagainstthesegoalswhenitdesignsCheniere’sexecutivecompensationprogramforourNEOs. 2017 Performance and Developments 2017wasabreakthroughyearforCheniere.Weachievedsignificantmilestonesthroughouttheorganization,includingfinancially, operationallyandcommercially: Financial • For full year 2017, we achieved Consolidated Adjusted EBITDA of$1.8 billion, which exceeded the stretch performance level underourAnnualIncentiveProgram scorecard.ForadefinitionofConsolidatedAdjustedEBITDAandareconciliationofthis non-GAAPmeasuretonetincome,themostdirectlycomparableGAAPfinancialmeasure,pleaseseeAppendixC. • In June 2017, the DFCD was reached under the 20-year Sale and Purchase Agreement (“SPA”) with Korea Gas Corporation relatingtoTrain3oftheSPLProject. • InAugust2017,theDFCDrelatingtoTrain2oftheSPLProjectwasreachedundertherespective20-yearSPAswithGasNatural FenosaLNGGOM,LimitedandBGGulfCoastLNG,LLC. • Subsequentto2017,theDFCDrelatingtoTrain4oftheSPLProjectwasreachedunderthe20-yearSPAwithGAIL(India)Limited. Operations • WeachievedsubstantialcompletionofTrain3andTrain4oftheSPLProjectinMarch2017andOctober2017,respectively,each of which was ahead of the targeted completion date, meeting the stretch performance level under the Annual Incentive Programscorecard. 30 CheniereEnergy,Inc. NoticeofAnnualMeetingofShareholdersand2018ProxyStatement COMPENSATION DISCUSSION AND ANALYSIS This Compensation Discussion and Analysis (“CD&A”) describes the material elements of the compensation of our Named ExecutiveOfficers(“NEOs”),includingfactorsconsideredinmakingcompensationdecisions.OurNEOsforfiscalyear2017were thefollowingindividuals: Name Position JackA.Fusco Director,PresidentandChiefExecutiveOfficer MichaelJ.Wortley ExecutiveVicePresidentandChiefFinancialOfficer AnatolFeygin ExecutiveVicePresidentandChiefCommercialOfficer SeanN.Markowitz GeneralCounselandCorporateSecretary DouglasD.Shanda SeniorVicePresident,Operations ThisCD&Aisorganizedasfollows: ExecutiveSummary ........................................................................................................................................... page29 ExecutiveCompensationPhilosophy&Objectives ........................................................................................... page36 ComponentsofOurExecutiveCompensationProgram ................................................................................... p ge36 ExecutiveCompensationProcess...................................................................................................................... p ge45 OtherConsiderations......................................................................................................................................... page47 Executive Summary About Our Business CheniereEnergy,Inc.(“Cheniere”)isamarketleaderinthedevelopmentandcommercializationofliquefiednaturalgas(“LNG”) facilitiesintheUnitedStates.Ourvisionistoprovideclean,secureandaffordableenergytotheworld,whileresponsiblydelivering areliable,competitiveandintegratedsourceofLNG,inasafeandrewardingworkenvironment. WeownandoperatetheSabinePassLNGterminalinLouisianawherewearedeveloping,constructingandoperatingnaturalgas liquefactionfacilities(the“SPLProject”)adjacenttotheexistingregasificationfacilities.Wearealsodevelopingandconstructinga secondnaturalgasliquefactionandexportfacilityinTexasattheCorpusChristiLNGterminal(the“CCLProject”). Eachterminalincludesanumberofplanned liquefactiontrains(“Trains”),whichconvertnaturalgasintoLNGsothatitcanbe transportedmoreeconomicallyacrosslongdistances.Eachtrainhasanexpectednominalproductioncapacity,whichispriorto adjusting for planned maintenance, production reliability and potential overdesign, of approximately 4.5 million tonnes per annum(“mtpa”)ofLNGandanadjustednominalproductioncapacityofapproximately4.3to4.6mtpaofLNG.FortheSPLProject, wearedevelopinguptosixTrains.FortheCCLProject,wearecurrentlydevelopinguptothreeTrains. ThefollowingtablesummarizesthecurrentoverallprojectstatusoftheSPLProjectandCCLProject: SPLProject CCLProject LiquefactionTrain Trains1-3 Train4 Train5 Train6 Trains1-2 Train3 ProjectStatus Operational Operational Under Construction Permitted Under Construction Permitted ExpectedSubstantialCompletion Complete Complete 1H2019 — T1-1H2019 T2-2H2019 — ExpectedDFCDWindowStart Complete Complete 2H2019 — T1-1H2019 T2-1H2020 — AfinalinvestmentdecisionforTrain3oftheCCLProjectisexpecteduponobtainingfinancing.Afinalinvestmentdecisionfor Train6oftheSPLProjectisexpecteduponcommercialization,obtainingfinancingandentryintoanengineering,procurement andconstruction(“EPC”)contract. CheniereEnergy,Inc. NoticeofAnnualMeetingofShareholdersand2018ProxyStatement 29 CAPSTEAD MORTGAGE CORPORATION EXECUTIVECOMPENSATION 16 | Capstead2018ProxyStatement EXECUTIVE COMPENSATION Compensation Discussion and Analysis The following Compensation Discussion and Analysis provides information regarding the 2017 compensation of our executive officers identified in the Summary Compensation Table, whom we refer to as our NEOs. The following discussion also contains statements regarding individual and company performance targets and goals. These targets and goals are disclosed in the limited context of our compensation programs and are not statements of management’s expectations or estimates of future results or other guidance. We caution investors not to apply these statementsinothercontexts. Executive Summary OurCompensationPhilosophy. Thecompensationcommittee of our board is responsible for establishing, implementing, and monitoring our compensation programs and practices. Our compensation philosophy is to provide competitive, largely performance-based compensation programs to attract, motivate, andretainemployeesvitaltoourlong-termfinancialsuccessand thecreationofstockholdervalue. Atour2017annualmeetingof stockholders, over 97% of the votes cast supported the compensation paid or awarded our executive officers in 2016. We considered that support when making executive compensation decisions in 2017. As such, minimal changes weremadetoourpayprogramsin2017. Recent Company Performance. We operate as a internally- managed REIT and earn income from investing in a leveraged portfolio of short-duration residential adjustable-rate mortgage “ARM” securities issued and guaranteed by government- sponsored enterprises, either Fannie Mae or Freddie Mac, or by an agency of the federal government, Ginnie Mae. These securities are referred to as “Agency securities”. Because the mortgages underlying our portfolio reset to more current rates within a relatively short period of time, we are positioned to benefit from future recoveries in financing spreads that typically contract during periods of rising interest rates and can experience smaller fluctuations in portfolio values compared to leveraged portfolios containing a significant amount of longer- duration ARM or fixed-rate mortgage securities. Duration is a common measure of market price sensitivity to interest rate movements.Ashorterdurationindicateslessinterestraterisk. Our 2017 performance benefited from higher cash yields as mortgages underlying our portfolio reset higher based on higher prevailing six- and 12-month interest rates. However, our earningsdeclinedduring2017duelargelytothemoreimmediate impact of higher short-term interest rates on our borrowing costs. Additionally, longer term interest rates rose at a slower pace in 2017 than shorter term rates putting downward pressure onportfoliovaluationsandcontributingtorelativelyhighlevelsof mortgageprepaymentsthroughoutmuchoftheyear. For the year, we earned $79.6 million or $0.65 per diluted common share for a return on common equity of 6.0%. Combinedwithportfolioandhedginginstrumentdeclinesinbook value totaling $0.45, we produced a total economic return (change in book value plus dividends) of 1.8%. As a result, our performancemeasuredbyeconomicreturndidnotmeetourpre- established targets, resulting in lower compensation-related expenses associated with the performance-based elements of ourcompensationprograms. With our internally-managed platform and our Agency-focused investment strategy, we led our industry peers in operating cost efficiencyin2017. In November, we repurchased $3.5 million in common shares after reactivating our $100 million common stock repurchase program. Earlier in the year, we raised $51.9 million in 7.50% Series E preferred capital through our at-the-market continuous offeringprogram. 2017 Compensation. We believe a key measure of our financial performance is the economic return we deliver to our stockholders over both short- and long-term time horizons. Economic return is also a common measure of performance used by the broader mortgage REIT investment community. Accordingly, we emphasize economic return in our compensation programs, in addition to other performance metrics. The primary elements of our compensation programs are base salaries, short-term incentives and long-term equity-based incentives. BasedonTargetawardlevels,approximately57%of ourexecutivecompensationavailabletoourNEOsfor2017was performance-based. Actual performance-based pay-out amounts for 2017 totaled approximately 47% reflecting sub- thresholdperformanceunderanumberofperformancemetrics: 2017Average PayMix* *BasedontheSummaryCompensationTableonpage27.A $125,000signingbonusawardedMr.Phillipsisclassifiedwith othercompensation. Other 5% Performance-based Long-term Incentives 29% Performance- based Short-term Incentives 18% BaseSalary 29% Service-based Long-term Incentives 19%