Revised EST Armour

8/14/2019 Revised EST Armour

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ProposedMergerwith

100%AGENCY

RESIDENTIAL

MORTGAGE

REIT

August26,2009


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2

TransactionHighlights

ARMOURisanexternallymanagedrealestateinvestmenttrustthatwillinvest,onaleveredbasis,in

Agencyresidentialmortgagebackedsecurities

Transactionwillprovideupto$250millionofequitycapital

Managementteamledbytwoexecutiveswithfortyeightyearsofcombinedexperienceinmortgages,

assetbackedsecuritiesandAgencymortgageREITmanagement

Strongfocusonriskmanagementinportfoliocompositionandhedging

Shareholderfriendlyfeestructure:1.5%ofshareholders equity;0.75%above$1billion;noincentive/

performancefees

Currentlypricedatapproximately1.04xbookvaluepershare*

StrongcorporategovernanceseparateChairmanandCEOroles

Expectedclose:4Q2009

Tradingsymbols

(NYSE

Amex

LLC

US):

EST

(stock),

EST.WS

(warrant),

EST.U

(unit)

ARMOURResidentialREIT,Inc.togopublicviaamergerwithEnterpriseAcquisitionCorp.

* Assumes$250milliontransaction,financialdataasofMarch31,2009andstockpriceasofAugust26,2009(seepage15forcalculation)


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3

TeamIntroduction

Name Current/Prior Experience

ScottJ.Ulm

CoCEO,CIO,

HeadofRisk

Management

2005present,CEOofLitchfieldCapitalHoldings,astructuredfinancemanager 19862005,heldvariousseniorpositionswithCreditSuisseinNewYorkandLondon,including:

GlobalHeadofAssetBackedSecurities

HeadofUSandEuropeanDebtCapitalMarkets

GlobalCoHeadofCollateralizedDebtObligations

MemberofFixedIncomeOperatingCommitteeandEuropeanInvestmentBankingOperating

Committee

JeffreyJ.Zimmer

CoCEO,President

20032008,Cofounder,PresidentandCEOofBiminiCapitalManagement,apubliclytradedREITwithupto$4bnofagencymortgageassets

19902003,ManagingDirectoratRBS/GreenwichCapitalinMortgageBackedandAssetBackedDepartments

19841990,workedatDrexelBurnhamLambertinInstitutionalMortgageBackedSalesDanielC.Staton

ARMOURNon

ExecutiveChairman

EnterprisePresident,

ChiefExecutive

OfficerandDirector

1999Present,IndependentDirectorofPublicStorage(NYSE:PSA),ChairmanoftheCompensationCommittee

19971999,ChairmanofStorageRealtyTrust;FoundingDirectorfrom19941997

In1999,ledmergerofStorageRealtyTrustwithPublicStorage

19972007,PresidentoftheWalnutGroupandStatonCapital,privateinvestmentfirms 19931997,COOandFoundingDirectorofDukeRealtyInvestments,Inc.(NYSE:DRE);GeneralManagerand

PartnerofDukeAssociatesfrom19811993

MarcH.Bell

ARMOURDirector

EnterpriseChairman

oftheBoardand

Treasurer

2003

present,

Managing

Director

of

Marc

Bell

Capital

Partners

LLC,

a

private

investment

firm

Specializesinmedia,entertainment,realestate,anddistressedassets

2004present,PresidentandCEOofFriendFinderNetworks,Inc. 19982001,Founder,ChairmanandCEOofGlobixCorporation,afullservicecommercialISP


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4

Overview

2

4

1

3 Attractiveexistingmarketopportunities Agency

residential

MBS

valuations

are

at

historically

very

attractive

levels

and

can

provide

mid

to

high

teens

returnonequitywithmoderateleverage

MortgagemarketdisarrayhascreatedgreaterthannormalAgencymortgagesupply

Mortgageindustrycapacityreduction,creditandhomevaluationissuesmakeprepaymentsmuchmoreinelastic

Managementteam,relationshipsandinfrastructure

ARMOURwillbemanagedbyexperiencedmortgageandcapitalmarketsprofessionalswhohavesuccessfully

executedmortgageinvestmentstrategies

Relationshipswithdealersalreadyestablished

Backofficeinplace;supportstaffidentified

Compellingstrategyandattractive,riskadjustedreturns

Highteens

gross

return

on

equity

in

agovernment

guaranteed

liquid

asset

class

with

moderate

leverage

and

extensiveriskmitigation

Lowdurationassetportfolioandextensiveuseofswapstolimit raterisk

Targetedequitydurationof11.5years

Targeting40%ofunleveredequityincash,tripletheamountofcomparableREITs

ChangeinAgencystrategywouldrequirecharteramendmentbyshareholdervote

Transactionstructureandmetrics

Enterprisemanagementcancelling6.15mmexistingshares(98%offounders shares)toreducedilutiontoexisting

shareholders

SubstantialcommitmentfromEnterprisesponsorsofupto$17.5million,includingupto$10millionincommonshares

Warrantstrikemovedto$11.00;expirationmovedto2012

Aggregatetransactioncostsapproximately50%lessthantraditionalIPO

Attractivevaluationrelativetocomparables


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5

ARMOURInvestmentStrategy

Mid tohighteensgrossequityreturninaU.S.Agencyguaranteedliquidassetclass

ARMOURbelievesthenextmoveinratesislikelytobeupandincorporatesa

significantamountofratehedginginitsstrategy

Nonetheless,todayslowratefinancingenvironmentseemslikelytopersistfora

while

Income

Valuation

ARMOURcreatedatjustoverbookvalueapproximately1.04x

MedianpubliclytradedAgencyREITscurrentlyvaluedat1.12xBookValueand

1.32xHistoricalBookValue

Continuedmid tohigh teensdividendperformancemaydrivefurthermultiple

expansion

Risk

Management

Risksaddressedandreducedthrough:

Lowgrossassetduration(2.02.5)

Rateprotectionfrom6065%swapofnontrueARMpositions

Conservative(fast)

prepayment

assumptions

built

into

yields

Substantialliquidity40%ofunleveredequityincashNotes:

(1) Financialdataasof3/31/09andmarketdataasof8/26/09

(2) Financialdataasof6/30/09andmarketdataasof8/26/09.Bookvaluecalculatedascommonequitypershareandhistoricalbookvaluecalculatedas

commonequitylessaccumulatedothercomprehensiveincomeper share


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6

ARMOURsObjectiveisSuperiorRiskAdjustedReturns

ARMOURis100%investedinU.S.Agencyguaranteedassets

ARMOUR's riskmanagement

and

liquidity

strategies

mitigate

funding,

rate change

and

prepayment

risks:

Lowgrossassetdurationportfolio(2.5orlower)

Extensiveuseofswaps(6065%oftrueARMs swapped)

Maintainhighcashbalancestoprovidefinancialflexibility(40%ofunleveredequityincash)

Lowequityduration(balancesheetduration)throughtheuseofswapsandcash(1.5orlower)

Conservative(faster)

prepayment

assumptions

used

in

booking

the yields

on

its

investments

ARMOURs expectedprepaymentrateisatthehighendofhistoricalexperience

SlowerprepaymentswillcauseARMOURs portfolioyieldtorise

Unemployment,housepricedepreciation,andrisingratesacttodepressprepaymentrates

ARMOURwill

produce

mid

to

high

teens

returns

(fully

distributed)

in

todays

market,

with

tightly

controlledrisks


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7

AttractiveMarketOpportunity

Todaysmarket

conditions

are

exceptionally

favorable

for

the

implementation

of

ARMOURs

business

plan

Agencymortgagespreadsarehistoricallyveryattractivevs.swapsandfundingratesValuation

Supply Thefreezeinthenonagencysecuritizationmarketanddismantlingofthe

independentprivatelabelmortgageindustryforcesmostnewmortgagesthrough

theAgencies

Borrowers

Borrowershavebecomeinelasticintheirabilitytorefinance,duetodeteriorating

householdcreditanddecreasinghousingprices

Mortgagerefinancingcapacityhasalsobeengreatlyreduced

As

a

result,

prepayment

speeds

and

volatility

are

likely

to

both be

reduced

Government U.S.GovernmentsupportforFNMAandFHLMCisnolongerambiguous,however

Agencysecurityprices/yieldsdonotfullyreflectthissupport

InterestRates

Favorablelowfundingratesandthesteepyieldcurveboostyieldsandarelikelyto

persistthoughthe

ARMOUR

business

can

be

profitable

in

most

yield

curve

environments


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8

Example:Two

Year

Swap

Rate

vs.

the

FNMA

15

Year

5.5%

Pass

Through

Yield

MortgageValuationsHistoricallyAttractivevs.SwapRates

Sprea

d

Difference

AbsoluteRa

tes


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ARMOURProxyPortfolioSnapshot

Noon Wednesday8/26/09TimeandDatePortfoliowasCalculated


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10

ProxyPortfolio

Detailsgenerated

from

live

dealer

offerings

and

live

market

prices

Pool#4Pool#3Pool#2Pool#1

102.375105.187105.718105.133104.723DollarPriceatOffering

3.251%

1.82

39.5

5.06%

100.00%

Weighted

Average

3.572

2.4

40

5.0530

30.00%

PrePayPenalty

Hybrid

(14mthold5/1)

FNMA&FreddieMACMortgagePools

2.907

1.4

50

5.6620

21.50%

SeasonedHigh

Coupon7/1

(now4/1)

3.5042.996AssetClassWeightedAverageCurrentYield

2.70.9YieldBook

Gross

Average

Asset

Duration

5918WeightedAverageMonthstoReset

3.8015.5140WeightedAverageCoupon

20.00%28.50%AssetClassPercentageofPortfolio

NewIssue5/1

LowCoupon

ARM

14Months

toReset

Source:Bloomberg,ARMOURanalysis


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11

ARMOURProxyPortfolioYieldandPrepaymentStressTest

ArmoursProxy

Portfolio

yield

remains

robust

even

at

significantly

stressed

prepayment

speeds

Source:BloombergMortgageResearch(type"BMMI")isthesourceofthehistorcalFNMA12MonthLiborResetNonConvertibleHybridARMCPRdata

Notes:

(1)2002productionprecededhousingboomandhadcouponswhichwereapproximately175basispointshigherthantoday'scoupons

(2)Fortoday'snewissuelowcoupon5/1's,dealersanticipate15CPRlifespeeds

(3)The2002vintage5/1producthadacoupon175basispointshigherandprecededtherunupinhousingprices.Notethatthenextfastestyearwas2003at28.7CPR

78.8CPR


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12

GrossROEOpportunity

Detailsgenerated

from

live

dealer

offerings

and

live

market

prices

LeveredPortfolio $ 1,706,977,810 3.251% 55,498,372$ 27.75%

REPOBorrowings

$

1,613,094,030

0.385% (6,210,412)$3.11%

UnleveredEquityinCash $ 39,512,488 0.300% 118,537$ 0.06%

UnleveredEquityinBonds $ 59,268,732 3.251% 1,926,984$ 0.96%

GrossIncome(1)>> 51,333,481$ 25.67% (12,305,685)$ 6.15%


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13

Mid toHighTeensROEOpportunitiesToday

ProxyportfoliogrossROEopportunities,inclusiveoffinancingandhedges,sinceMay08haveranged

from14%to26%at8xdebttoequityleverage

Assumes6065%ofnontrueARMassetsareswappedout

Assumesgrossassetdurationatorbelow2.5

Assumesequitydurationatorbelow1.5

19.51%As

of

8/26,with62.1%

ofNonTrue

ARMAssets

SwappedOut

Source:Bloomberg,ARMOURanalysis

8xDebttoEquityLeverage5/2/08 8/26/09

12.00

14.00

16.00

18.00

20.00

22.00

24.00

26.00

05/02/08 08/05/08 11/08/08 02/11/09 05/17/09 8/26/09


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14

Ticker Stock Price

Market Cap

($mm)2Q 2009 Cashas % of Equity 2Q 2009 P/BV

2Q 2009P/Historical BV Dividend Yield

NLY $17.49 $9,521 15.6% 1.12x 1.34x 11.4%

MFA 7.83 1,741 17.1 1.06 1.05 11.2

HTS 30.09 1,089 10.8 1.26 1.41 14.0

CMO 13.88 880 13.3 1.23 1.43 16.1

ANH 7.51 754 0.1 1.04 1.09 16.0

AGNC 26.06 391 22.2 1.26 1.32 13.0

CYS 13.98 254 19.4 1.10 0.82 na

Median 15.6% 1.12x 1.32x 14.5%

PubliclyTradedAgencyREITs

Source:FactSet,SNL;marketdataasof8/26/09;financialdataasof6/30/09

Notes:

(1) 2nd Quarter2009Price/BookValuecalculatedascommonequitypershare

(2) 2nd Quarter2009Price/HistoricalBookValuecalculatedascommonequitylessaccumulatedothercomprehensiveincomepershare

(Anworth)


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15

NoRedemption MaxRedemption

ProFormaEquityValue($mm), $237.3 $100.2

SharesOutstanding(#mm) 25.1 10.8ProFormaBVPS $9.45 $9.32

Priceper

Share

(8/26/09)

$9.86

$9.86

Price/ProFormaBVPS 1.04x 1.06x

AgencyREITMedianP/BVPS 1.12x 1.12x

InvestmentOpportunity

Investmentstructure

and

elimination

of

sponsor

promote

creates

pro

forma

company

at

an

attractive

valuationrelativetopubliclytradedpeers

Notes: Reflects6.15mmsharesretiredfromESTsponsors;doesnotincludeeffectofoutofthemoneywarrants

(1) Assumes14.3mmsharesrepurchasedatcashintrustvalueof$9.98pershare

(2) Assumesofferingfeesanddeferredunderwriters expenseof$9.9mminNoRedemptionand$5.6mminMaxRedemption scenarios

(3) EnterprisefinancialdataasofMarch31,2009

(4) IncludesAGNC,ANH,CMO,CYS,HTS,MFAandNLY;marketdataasofAugust26,2009;financialdataasofJune30,2009


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16

TransactionStructure

MergerSteps ProFormaCompany

Enterprise

Public

Shareholders

Enterprise

AcquisitionCorp.

ARMOUR

MergerCorp.

Armour

Residential

REIT

Merger

EnterpriseAcquisitionCorp.mergeswith

ARMOURMergerCorp.

ArmourResidentialREITis100%ownerof

MergedEntity

NewARMOUR

Public

Shareholders

Armour

ResidentialREIT

Armour

Residential

ManagementLLC

Management

Agreement

EnterpriseAcquisitionCorp.sharesexchangedfor

ArmourResidentialREITshares

ArmourResidentialManagementLLCestablishes

managementagreementwithREIT


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17

InvestmentSummary

Market

Opportunity

Historicallyattractivemortgagevaluationsversusswapsandfundingrates

Beneficialandpersistentrateenvironment

Benignprepaymentenvironmentduetoborrowerinelasticity,facilitateshedging

andlowersrisk

InvestmentTeam

Deep,broad

experience

and

disciplined

investment

approach

Fortyeightyearsofcombinedexperienceincludesmortgagesandassetbacked

securitiesandAgencymortgageREITmanagement

Establishedrelationshipsandinfrastructure

StructureCreates

AttractiveReturn

Profile

ESTspublicstockholdersexpectedtocreateARMOURat1.04xinitial Book

Value vs.1.12x

median

Book

Value and

1.32x

Historical

Book

Value for

Agency

publicpeers

Hightargetedreturnonequitywithmoderateleverage

Conservative

Approach

InvestinginAgencyonlyassetswithU.S.Agencyguarantee

Extensiveuseofswaps

Lowequity

duration

ConservationofunleveredequityincashNotes:

(1) Financialdataasof3/31/09andmarketdataasof8/26/09

(2) Financialdataasof6/30/09andmarketdataasof8/26/09.Bookvaluecalculatedascommonequitypershareandhistoricalbookvaluecalculatedas

commonequitylessaccumulatedothercomprehensiveincomeper share


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18

AppendixA

ManagementandBoardBiographies


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21

BoardMemberBiographies

ThomasK.Guba (IndependentDirector)Mr.Guba hasbeentheseniorexecutiveorheadtraderofvariousWallStreet

mortgageandgovernmentdepartmentsinhisthirtyfouryearsinthesecuritiesbusiness.From2002through2008,Mr.Guba was

PresidentandPrincipaloftheWinterGroup,afullyintegratedmortgageplatformandmoneymanagementfirm.Priorto2002,he

wasManagingDirectorofStructuredProductSalesatCreditSuisseFirstBoston(2000through2002),ManagingDirectorand

DepartmentManagerofMortgagesandU.S.TreasuriesatDonaldson LufkinJenrette,whichwassubsequentlypurchasedbyCredit

SuisseFirst

Boston

(1994

through

2000),

Executive

Vice

President

and

Head

of

Global

Fixed

Income

at

Smith

Barney

(1993

through

1994),ManagingDirectoroftheMortgageandU.S.TreasuriesDepartmentatMabon Securities(1990through1993),SeniorVice

PresidentandMortgageDepartmentManageratDrexelBurnhamLambert(1984through1990),SeniorVicePresidentandHead

MortgageTraderatPaineWebber(1977through1984)andatrader ofmortgagedbackedsecuritiesatBache&Co.(1975through

1977). Mr.Guba wasalsoaSecondLieutenant,MilitaryPoliceCorps,intheUnitedStatesArmy(1972through1974). Mr.Guba

receivedhisBAinpoliticalsciencefromCornellUniversityin1972andhisMBAinfinancefromNewYorkUniversityin1979.

JackJack P.Hollihan III(IndependentDirector) Mr.Hollihan hasover25yearsofinvestmentbankingandinvestment

experience.Mr.Hollihan wasformerlythe HeadofEuropeanInvestmentBankingforBancofAmericaSecurities(BAS),where

hewasamemberoftheBASEuropeanCapitalCommitteeandBoard, andwherehehadresponsibilityforaloanbookof$8

Billion.Priortothat,Mr.Hollihan wasHeadofGlobalProjectandAssetBasedFinanceandLeasingatMorganStanleyandwasa

memberoftheMorganStanleyInternationalInvestmentBankingOperatingCommittee.Inthatcapacity,hemanaged$45billion

inassetbasedandstructuredfinancingsandleasingarrangements.HeisaformertrusteeofAmericanFinancialRealtyTrust

(NYSE:AFR)

and

currently

the

lead

independent

director

of

City

Financial

Investment

Company

Limited

(London)

and

Executive

ChairmanofLitchfieldCapitalHoldings(Connecticut).Mr.Hollihan receivedB.S.(Wharton)andB.A.degreesfromtheUniversityof

Pennsylvania,andaJ.D.fromtheUniversityofVirginiaSchoolofLaw.


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23

AppendixB

SupplementalMaterials


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24

InvestorDecisions

Bothcommon

shareholders

and

warrant

holders

must

vote

to

ensure completion

of

acquisition

CommonShareholder

Acquisition

Approved

Acquisition

Rejected

VoteYes

VoteNo

ESTshareconvertedtoARMOURREITshare

ESTshareholderreceivescash($9.98)

Ifunabletocompleteatransactionby11/7/09,

trustliquidatedtocommonshareholders

Decision

WarrantHolder

VoteYes to

AmendTerms

ofWarrant

VoteNo

CommonSharesApprove

Acquisition

Amendedwarrantsremainoutstanding

Warrantsworthlessunlesstransactioncompleted

by11/7/09

Acquisitionisrejected

Decision

Common

SharesReject

Acquisition


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25

BookValueperShareAnalysis

Thefollowing

analysis

illustrates

the

pro

forma

book

value

per

share,

assuming

no

investor

redemptionsandmaximuminvestorredemptions

Notes: Financialdataasof3/31/09,marketdataasof8/26/09

(1) IncludesdividendpaymenttomaintainREITeligibilityand otherpurchaseaccountingadjustments.Seemergerproxyforfulldetail

Assumptions

DeferredUnderwriterFees 3.00%

Trust/Share $9.98

CurrentSharePrice(8/26/09) $9.86

NoRedemption

Max

Redemption

EquityAnalysis($)

CashinTrust(3/31/09) 249,434,399 249,434,399

Fees&Expenses:

AdvisorandDeferredUnderwriterFees 8,002,584 3,708,447

Legal&Accounting 1,175,000 1,175,000

OtherTransactionExpenses 727,300 727,300

TotalFees&Expenses 9,904,884 5,610,747

Less:Cash

Used

for

Redemption 143,137,912

Less:OtherAdjustments1

2,252,816 509,245

ProFormaEquity 237,276,699 100,176,496

ShareCount

SharesOutstanding 25,000,000 25,000,000

SharesRepurchased 14,346,248

BoardShares 100,000 100,000

ProForma

Shares 25,100,000 10,753,752

ProFormaBVPS($) 9.45 9.32

Price/BVPS(x) 1.04 1.06


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Revised EST Armour

Documents

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