Anworth Mortgage Asset Corporation
Anworth Mortgage Asset — Proxy Contest (May 2014)
29 slides from Anworth Mortgage Asset's proxy contest presentation, May 2, 2014
Slide 1: Anworth Mortgage Asset Corporation Investor Presentation
Western Investment LLC _____________________________________________ Anworth Mortgage Asset Corporation Investor Presentation 1 2609898-7
Slide 2: Ethical Activism
Western Investment LLC Ethical Activism • Western Investment is an investor who has proven over many years to be a catalyst for positive change for all stockholders. Attached is a list of 38 completed activism situations since 2004. • Virtually all completed activism situations resulted in significa
Slide 3: Summary of Completed Closed-end Fund Activism Situations
Western Investment LLC: Summary of Completed Closed-end Fund Activism Situations Date of Initial Activism Ticker Name Filing Activism Result AWP Alpine Global Premier Properties Fund + Tender 20% of shares at 95% of NAV, June 2012 BPS Blackrock Pennsylvania Strategic Municipal Trust + Raised dividen
Slide 4: Western Investment LLC
Western Investment LLC • Western Investment and the other participants own approximately 4.0% of the outstanding shares of Anworth. • We are seeking to elect truly independent directors, none of whom are affiliated with or controlled by Western Investment. • Our interests are aligned with ALL stockh
Slide 5: Our Objectives
Our Objectives • Put true stockholder representatives on the Board and replace the failed incumbents. • Obtain better management to work for improved performance. • Maximize long-term value for stockholders preferably by engaging new management or providing stockholders the liquidity to re-invest in
Slide 6: New Stockholder Representation is Required
New Stockholder Representation is Required • We believe the Board has not, and cannot, properly and effectively serve Anworth’s stockholders. – The Board has failed to adequately address the decade of Anworth’s failed performance and resulting deep discount to book value at which Anworth trades. – T
Slide 7: Anworth Management Has Failed Change is Needed
Anworth Management Has Failed Change is Needed • Investors have experienced over a decade of investment declines. – Stockholders who invested in Anworth on August 31, 2003 have a cumulative loss of almost 6% through March 31, 2014 even after giving effect to reinvested dividends. – Anworth’s common
Slide 8: Don't be mislead by management's cherry picked data
Don’t be mislead by management’s cherry picked data • MANAGEMENT CLAIM: In a letter to investors sent on April 28, 2014, management reported that it had produced a 68.5% cumulative return on investment (including reinvested dividends) over the past five years. (Management did not specify the start a
Slide 9: Management Has Elected to Use the NAREIT Mortgage REIT Index
Management Has Elected to Use the NAREIT Mortgage REIT Index • We do not think that using the NAREIT Mortgage REIT Index is an accurate index to use for comparisons as this index is dominated by REITs with a wide range of investment options, including subprime and commercial lenders. • We selected c
Slide 10: Anworth has been among the lowest of all comparable mortgage REITs for total returns
Anworth has been among the lowest of all comparable mortgage REITs for total returns REIT 1 year 3 years 5 years 10 years 10 ½ years Anworth Mortgage Asset Corporation (11.2)% 1.2% 58.5% 1.2% (5.7)% Annaly Capital Management, Inc. (22.3)% (8.2)% 56.3% 69.5% 86.2% Capstead Mortgage Corp. 9.5% 40.1% 1
Slide 11: Anworth's stock price: A decade of decline
Anworth’s stock price: A decade of decline Stock Price Since IPO (3/11/1998 at $9.00 per share) 11 2609898-7
Slide 12: Comparison of Anworth's stock price versus highest and lowest performing comparable REITs
Comparison of Anworth’s stock price versus highest and lowest performing comparable REITs Total returns of Anworth (ANH) (-6%) vs. Capstead Mortgage Corp (CMO) (+220%) and Annaly Capital Management, Inc. (NLY) (+86%) since 8/31/2003. 12 2609898-7
Slide 13: Anworth significantly trails other investment opportunities
Anworth significantly trails other investment opportunities Anworth performance even lags their hand picked comparison by 50%. This chart was presented by Anworth in their Form 10-K, yet was excluded from their proxy. Our four comps average a gain of 99.1%, which is slightly more than four times the
Slide 14: Discounted Market Value
Discounted Market Value • Anworth shares have traded at a persistent discount to book value over the past three years. • The discount was a shocking 29.6% on December 31, 2013. • While a modest temporary discount to book value might be tolerated, Anworth’s discount to book value is excessive and pun
Slide 15: Anworth significantly trails its peers
Anworth significantly trails its peers Ratio of Average Stock Price to Book Value at the End of Each Calendar Quarter REIT 1 year 3 years 5 years 10 years Anworth Mortgage Asset 83.7% 91.1% 93.9% 96.2% Corporation Annaly Capital Management, Inc. 93.6% 98.9% 101.4% 115.9% Capstead Mortgage Corp. 95.2
Slide 16: Anworth's Risky Diversification Strategy
Anworth’s Risky Diversification Strategy • The new diversification strategy of single family home rentals appears to be a desperate and unqualified attempt by management to make up for past blunders. • On Anworth’s April 30, 2014 quarterly earnings conference call, leading research analysts question
Slide 17: Anworth's Misleading Statements and Half-Truths
Anworth’s Misleading Statements and Half-Truths Anworth states in its April 28 letter to stockholders: • “Your Board’s hedged investment strategy, which it successfully executed during one of the most challenging stock market environments and prolonged economic recessions in history, has produced a
Slide 18: Anworth's Misleading Statements and Half-Truths (continued)
Anworth’s Misleading Statements and Half-Truths (continued) Anworth further states in its April 28 letter to stockholders: • “The only specific transactions Western identifies as part of its plan to “maximize long-term value for all stockholders” are the liquidation and dissolution of your Company.”
Slide 19: What is Western Investment's Strategy
What is Western Investment’s Strategy • Assuming our nominees are elected, the directors would consider a new manager for Anworth. – Fischer Francis Trees & Watts (FFTW), a fixed income specialist, has agreed to manage Anworth should the directors so request. – FFTW is ready to step in right away. –
Slide 20: A First Rate Fixed Income Manager Should Manage Anworth's Assets
A First Rate Fixed Income Manager Should Manage Anworth’s Assets • If elected, our nominees will consider new managers. • Highly respected fixed income specialist, Fischer Francis Trees & Watts (FFTW), has offered to manage the portfolio on an interim basis, if necessary, at a lower rate than the cu
Slide 21: Incumbents: A History of Failure
Incumbents: A History of Failure • Anworth has long-term failed performance. • Book value discount has never been adequately addressed. • Until threatened with a proxy contest, failed to aggressively repurchase shares. • Related Party Transaction: In February 2012, Anworth signed a new sublease for
Slide 22: Incumbents: Lack Expertise to Succeed
Incumbents: Lack Expertise to Succeed • Anworth recently announced an investment diversification strategy. • We fear this strategy could be a repeat of past failed efforts. – In November 2003, Anworth formed Belvedere Trust Mortgage Corporation to acquire mortgage loans and other mortgage- related a
Slide 23: Management: Overpaid for Underperformance
Management: Overpaid for Underperformance • Management has collected almost $80 million in fees over the past decade despite Anworth’s poor performance. Over $11 million per year in 2012 and 2013. • Management sold the external management company to stockholders in 2002 and then re-obtained it for n
Slide 24: Stockholders Deserve:
Stockholders Deserve: • First rate management, not management with a decade of failure. • A Board that represents them, not management. • Directors whose interests are aligned with stockholders. • Effective, engaged oversight of management. • An amelioration of the persistent and overly deep discoun
Slide 25: Our interests are aligned with all Stockholders
Our interests are aligned with all Stockholders What we bring to the Board: • Commitment to Good Governance. • Ownership Representation in the Boardroom. • Active, Engaged Advocacy. • Talent, Expertise and Experience. • Focus on Improving Performance. – Will explore replacing Anworth’s current manag
Slide 26: Our Nominees
Our Nominees • Enormously Qualified • Professional • Accomplished • Experienced 26 2609898-7
Slide 27: Summary of our Nominees
Summary of our Nominees • Paul DeRosa – 33 years as a senior or head fixed income portfolio manager – Managed $10 to $20 billion – Head of proprietary trading and financial derivatives at Citibank – Managed Eastbridge, a US Treasury primary dealer – Highly successful hedge fund manager – Senior Part
Slide 28: Summary of our Nominees (continued)
Summary of our Nominees (continued) • Kenneth Dunn : – 15 years as co-head of fixed income portfolio management at Morgan Stanley – Managed $100 billion – Dean and Professor at David A. Tepper Business School Carnegie-Mellon – Board member: BlackRock (BLK) and NextEra Energy (NEE). BlackRock is the
Slide 29: VOTE THE GOLD PROXY
VOTE THE GOLD PROXY HOW MUCH WORSE COULD THIS BE? CONTINUOUS UNDERPERFORMANCE FOR THE PAST 1, 3, 5 AND 10 YEAR PERIODS PLUS A BOARD WHO HAS FAILED TO EXERCISE ITS FIDUCIARY RESPONSIBILITY TO STOCKHOLDERS. THESE NOMINEES, IF ELECTED, WOULD CONSTITUTE ONE OF THE STRONGEST AND MOST EXPERIENCED BOARDS O