Western Investment LLC Issues Open Letter to Anworth Mortgage Asset
Urges All Shareholders to Vote the GOLD Proxy Card to Elect Its Independent
SALT LAKE CITY -- April 29, 2014
Western Investment LLC, a significant shareholder of Anworth Mortgage Asset
Corporation with aggregate ownership of approximately 4% of the outstanding
common stock, today released the following open letter to stockholders:
Dear Fellow Stockholder:
Management and the Board of Directors of Anworth Mortgage Asset Corporation
(“Anworth”) has failed you.
Don’t be fooled by management’s attempts to obscure Anworth’s horrible
performance results. When compared to its peers, Anworth has fallen far below
average over ALL relevant periods for the past decade.
ANWORTH’S PERFORMANCE— THE REAL STORY
Don’t be fooled by management’s cherry picked data.
REIT 1 year 3 years 5 years 10 years 10 ½ years
Anworth Mortgage Asset (11.2)% 1.2% 58.5% 1.2% (5.7)%
Annaly Capital (22.3)% (8.2)% 56.3% 69.5% 86.2%
Capstead Mortgage Corp. 9.5% 40.1% 120.9% 172.9% 219.6%
Dynex Capital Inc. (8.1)% 23.2% 116.5% 145.5% 219.4%
MFA Financial, Inc. (1.3)% 51.4% 172.3% 131.8% 135.7%
AVERAGE (5.6)% 26.6% 116.5% 129.9% 165.2%
DIFFERENCE (5.7)% (25.4)% (58.0)% (128.7)% (170.9)%
We are a significant stockholder of Anworth, owning approximately 4.0% of
Anworth’s outstanding shares. We are seeking your support on the GOLD proxy
card FOR the election of our truly INDEPENDENT director nominees to Anworth’s
Board of Directors, none of whom are affiliated with or controlled by Western
We believe Anworth management has failed and it is time for stockholders to
replace the Board with directors who will take action that will lead to
maximum value for investors.
*We believe Anworth has been severely mismanaged to date, and stockholders
have seen over a decade of investment declines. Change is needed in order
to maximize long term value for all stockholders. Stockholders who
invested in Anworth on August 31, 2003 have a cumulative loss of almost
6%, even after giving effect to reinvested dividends.
*Management has collected almost $80 million in fees over the past decade
despite Anworth’s pathetic performance. Management is being
over-compensated for under-performance. To continue to pay management for
such consistently terrible results is outrageous. Stockholders are not
getting fair value for these services.
*Stockholders cannot receive full value for their shares due to Anworth’s
significant discount to per share book value. Anworth’s common stock
trades at a significant discount to its book value. This discount to book
value has magnified the loss to stockholders. Shockingly, on December 31,
2013, the stock price closed at a 29.6% discount to book value.
*Stockholders may incur significant losses if our nominees are not elected.
Anworth’s stock price is currently significantly above the closing price
at the end of 2013. We believe that this increase is primarily
attributable to the possibility of electing a new board. IF THE STATUS QUO
REMAINS, WE FEAR THAT THE STOCK PRICE IS LIKELY TO RETURN TO ITS PRIOR
What has been Anworth management’s response? Anworth recently announced an
investment diversification strategy, including new risky credit based
strategies. We see absolutely no indication that management has the necessary
experience or competence in these new strategies. We fear this strategy could
be a repeat of past failed efforts. In 2002, Anworth pursued another credit
based strategy, which was a colossal failure resulting in the loss of
approximately $151 million. Unbelievably, management’s fees were quadrupled in
2008 following Anworth’s huge losses in 2007. CAN STOCKHOLDERS AFFORD MORE
Over a decade of negative investment performance is too much! We are concerned
with the Board’s failure to take action, and believe NOW is the time to make
changes that are in the best interests of all stockholders.
WESTERN INVESTMENT IS SEEKING TO INCREASE VALUE FOR ALL STOCKHOLDERS.
We submit this request as a fellow stockholder. We have a long-standing policy
of treating all stockholders equally. We have never accepted a benefit that
was not equally available to all stockholders. Additionally, we have never
sought to be paid any fees or put ourselves in a position of control in any
situation in which we have been involved where we have fought for the
betterment of stockholders. We are proud of our public record, and proud of
the role we have played in creating value for stockholders. Every situation
Western Investment has entered into has benefited all stockholders equally.
We believe stockholders are best served by a board that is committed to
maximizing value for stockholders, not for management, which is why we
encourage you to vote for our truly independent director nominees.
WE WANT TO CREATE VALUE FOR ALL STOCKHOLDERS.
Our goal is to help determine the best course of action to maximize value for
all stockholders. We believe Anworth has been severely mismanaged to date, and
stockholders have seen over a decade of investment declines. If elected,
subject to compliance with their fiduciary duties, our nominees will consider
replacing Anworth’s manager with a new manager who will help maximize long
term value for all stockholders. In addition, our nominees would consider
exploring other strategic opportunities to maximize value in order to provide
Anworth’s stockholders an amount equal to or greater than Anworth’s
liquidation value, net of fees and expenses. Because Anworth has performed so
poorly, even with any fees that would be payable in connection with the
termination of Anworth’s management agreement and related expenses, we believe
that stockholders would still be in a better position if Anworth were
liquidated, than if Anworth continues on its existing course. During any
examination period, we would support the directors promptly authorizing an
aggressive repurchase program to permit Anworth to repurchase up to the
maximum amount of its outstanding shares allowed by law (up to approximately
3,000,000 shares per week based on recent trading volume), subject to market
OVER A DECADE OF NEGATIVE INVESTMENT PERFORMANCE IS TOO MUCH.
The total return of a share of Anworth’s common stock has consistently been
the lowest or among the lowest of all comparable mortgage REITs^1 based on
Bloomberg data for total returns, including dividends. Anworth had a total
decline of over 11% for the one year period ended on March 31, 2014 and an
almost 6% negative return over the past 10 ½ years. Such abysmal performance
should not be rewarded with the continued retention of the same failing
manager. We believe the performance is so bad that it justifies stockholders
electing our nominees. Management has been paid over $80 million to generate a
decade of losses.
ANWORTH’S BOOK VALUE DISCOUNT IS UNACCEPTABLE.
Anworth’s shares have also traded at a persistent discount to book value over
the past three years and the discount was a shocking 29.6% on December 31,
2013. When a book value discount is excessive, a selling stockholder is forced
to leave behind a substantial portion of the value underlying the shares at
the time of sale. Any time a stockholder chooses to sell his or her ownership
in a company at a steep discount to book value, that stockholder is harmed no
matter what the company’s discount was at the time the stockholder purchased
their shares of that company. We believe the fair value of a share of common
stock of a company should be at least its book value. The persistent excessive
discount to book value is just another reason why the status quo with the
existing board and management should not continue. In addition, the ratio of
Anworth’s stock price to its book value has consistently been the lowest or
among the lowest of virtually all comparable mortgage REITs^1 based on
Bloomberg data. A liquidation would immediately recapture for stockholders the
lost value from the persistent discount to book value at which Anworth’s
STOCKHOLDERS DESERVE A TOP MANAGER IN THIS DIFFICULT MARKET AND ECONOMIC
Anworth’s Board has failed to adequately address the high fees collected by
Anworth’s manager, despite Anworth’s continued poor price performance and
persistent discount to book value. We believe that Anworth’s manager is being
over-compensated for under-performance. Anworth’s board, it appears, has
concluded that the management fee paid to Anworth’s manager is reasonable in
relation to the services provided. In our opinion, to consistently pay the
manager over $10 million per year for such consistently terrible results is
outrageous. We believe the current board should be replaced and a new board
should be elected who will take action and change the status quo.
STOCKHOLDERS NEED A BOARD COMMITTED TO MAXIMIZING VALUE FOR INVESTORS.
We urge you to vote the GOLD proxy today by following the simple instructions
for telephone or internet voting on the GOLD proxy card. Alternatively, you
can sign, date and return your GOLD proxy in the postage paid envelope
If you have any questions or require assistance in voting, please contact our
proxy solicitor at the numbers provided below. Thank you for your support.
If you have any questions or need assistance voting your Shares, please call:
65 Locust Avenue, Third Floor
New Canaan, Connecticut 06840
Stockholders Call Toll-Free at: (877) 972-0090
Banks and Brokers Call Collect at: (203) 972-9300
You may also contact Western Investment LLC via email at email@example.com
Proxy materials are also available at www.fixmyfund.com
^1 Comparable REITs are defined as all REITs that primarily invest in high
quality residential mortgage assets and have been in existence for over 10
John Glenn Grau, 203-972-9300 ext 11
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