Letter from the Artisan Partners U.S. Value Team to the Chief Executive Officer of Annaly Capital Management, Inc.

Today James Kieffer, Managing Director and Portfolio Manager of the Artisan Partners U.S. Value Team, delivered the following letter to Wellington Denahan, the Chief Executive Officer of Annaly Capital Management, Inc. Ms. Wellington J. Denahan Chief Executive Officer, Chairman of the Board of Directors Annaly Capital Management, Inc. 1211 Avenue of the Americas New York, NY 10036 Dear Wellington, As you know, Artisan Partners Limited Partnership, on behalf of investment advisory clients in its domestic value investment strategies, has been an investor in Annaly Capital Management for almost a full decade. Our history with your company clearly indicates that we are patient, long-term investors. Nonetheless, I am writing to you now to address a very pertinent issue: share repurchase. You addressed this topic in brief form during the company's first quarter conference call. I found your answer perplexing, and I respectfully disagree with your conclusion that Annaly does not make a good candidate for share repurchase. Annaly's stock is currently selling at a very steep discount to book value. From my perspective this affords management the opportunity to proactively build shareholder value in a very meaningful way. Every share purchased near the current price increases the economic value per share for remaining shareholders. A share repurchase represents anything but a short-term fix. It is over the longer term that a share repurchase delivers value, yet the opportunity to take advantage of a discounted share price tends to be fleeting. I encourage you to give this idea serious consideration. In fact, if I was in your shoes, I would contemplate something along the lines of a Dutch Auction to purchase 20%+ of the company's outstanding shares. The math is just too compelling to pass up. With Annaly stock selling at a large discount to book value, the market is essentially arguing that Annaly cannot earn its cost of capital and does not deserve to exist. I think that you and I both disagree with this viewpoint. But we shouldn't just express our disagreement with words; we should express it via aggressive action. You know the Annaly portfolio better than any outsider. The idea that you can purchase the portfolio at eighty cents on the dollar should sound too good to be true. But, it is not. The opportunity is now. Investing is a game of inches. While that may be a cliché, it is also true. The return differentials between one bond portfolio and another is often measured in single basis points. Consider, though, the impact that a major repurchase program can have on long-term shareholder returns. Let's presume that Annaly shares converge with book value across time. What is the return differential between repurchasing shares and not? By my calculation, it can add over 100 basis points annually to compounded returns. Those are big numbers. Numbers that are—I think you will agree—just too big to pass up. As CEO, one of your primary tasks is capital allocation. You are an expert allocator when it comes to selections for the portfolio. I trust you also have it within your skillset to be an expert allocator at the corporate level and to act now to maximize the per share value of our investment. Warren Buffett regularly reminds us that the underlined part of the previous sentence is all too often lost on corporate boards and CEOs who mistakenly view their task as maximizing the size of the company and maximizing the share price. Maximizing the share price is the market's option. Your task is to maximize the per share value of the business. I encourage you to undertake one of the easiest investment calls of your career and repurchase Annaly shares hand-over-fist. I am available to discuss should you disagree with my viewpoint. Because I feel strongly about this topic, I intend to make the contents of this letter public promptly after delivering it to you. Regards, James C. Kieffer Managing Director, Portfolio Manager Artisan Partners Limited Partnership cc: Michael Haylon Donnell A. Segalas Kevin G. Keyes Kevin P. Brady E. Wayne Nordberg Jonathan D. Green John H. Schaefer Francine J. Bovich View source version on businesswire.com: http://www.businesswire.com/news/home/20150528006335/en/