AUDIT COMMITTEE CHARTER

Audit Committee Charter

This Audit Committee Charter (Charter) has been adopted by the Board of Directors (the Board) of Annaly Capital Management, Inc (the Company). The Audit Committee of the Board (the Committee) shall review and reassess this charter annually and recommend proposed changes for the Board's approval.

Role and Independence: Organization

The Committee assists the Board in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing, internal control, and financial reporting practices of the Company. It may also have such other duties as may from time to time be assigned to it by the Board. The membership of the Committee shall consist of at least three directors, who are each free of any relationship that, in the opinion of the Board, may interfere with such member’s individual exercise of independent judgment. Each Committee member shall also meet the independence and financial literacy requirements for serving on audit committees, and at least one member shall have accounting or related financial expertise, all as set forth in the applicable rules of the New York Stock Exchange and to the extent required by the rules of the Securities and Exchange Commission. No member may serve on the audit committees of more than two other public companies unless the Board determines that such simultaneous service would not impair the ability of such director to serve effectively on the Committee, and discloses this determination in the Company’s annual proxy statement. The Committee shall maintain free and open communication with independent registered public accounting firm and the Company management. In discharging its oversight role, the Committee is empowered to investigate any matter relating to the Company’s accounting, auditing, internal control, and financial reporting practices brought to its attention, with full access to all Company books, records, facilities, and personnel. The Committee shall also annually review its own performance. The Committee may retain outside counsel, independent registered public accounting firm, or other advisors.

One member of the Committee shall be appointed as chair. The chair shall be responsible for leadership of the Committee, including scheduling and presiding over meetings, preparing agendas, and making regular reports to the Board. The chair will also maintain regular liaison with the CEO, CFO, and the lead independent audit partner.The Committee shall meet at least four times a year, or more frequently as the Committee considers necessary. At least once each year the Committee shall have separate private meetings with the independent registered public accounting firm.

Responsibilities

Although the Committee may wish to consider other duties from times to time, the general recurring activities of the Committee in carrying out its oversight role are described below. The Committee shall be responsible for:

• The sole responsibility to select, retain and terminate the Company’s independent registered public accounting firm (subject to shareholder ratification for the hiring or retention) to audit the financial statements of the Company. The independent registered public accounting firm are ultimately accountable to the Board and the Committee, as representatives of the shareholders.
• Evaluating, together with the Board and management, the performance of the independent registered public accounting firm including reviewing and evaluating the qualifications, performance, and independence of the lead partner of the independent registered public accounting firm.
• Obtaining annually from the independent registered public accounting firm a formal written statement describing all relationships between the independent registered public accounting firm and the Company, consistent with the Independence Standards Board Standards Number 1. The Committee shall actively engage in a dialogue with the independent registered public accounting firm with respect to any relationships that may impact the objectivity and independence of the registered public accounting firm and shall take, or recommend that the Board take, appropriate actions to oversee and satisfy itself as to the registered public accounting firm’s independence.
• Establishing policies and procedures for the engagement of the independent registered public accounting firm to provide permissible non-audit services, which shall include pre-approval of permissible non-audit services to be provided by the independent registered public accounting firm. The Committee shall approve in advance all permissible non-audit services to be provided by the independent registered public accounting firm.
• Reviewing the audited financial statements and discussing them with management and the independent registered public accounting firm. Included in these discussions shall be the disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” to be included in the Form 10-K. These discussions shall include the matters required to be discussed under Statement of Auditing Standards No. 61 and consideration of the quality of the Company’s accounting principles as applied in its financial reporting, including a review of particularly sensitive accounting estimates, reserves and accruals, judgmental areas, audit adjustments (whether or not recorded), the clarity of the financial statements and other such inquiries as the Committee or the independent auditions shall deem appropriate. Based on such review, the Committee shall make its recommendation to the Board as to the inclusion of the Company’s audited financial statements in the Company’s Annual Report on Form 10-K.
• Meet separately with independent registered public accounting firm and the person responsible for the internal audit function.
• Issuing annually a report to be included in the Company’s proxy statement as required by the rules of the Securities and Exchange Commission.
• Overseeing the relationship with the independent registered public accounting firm, including discussing with the independent registered public accounting firm the nature and rigor of the audit process, receiving and reviewing audit reports, and providing the independent registered public accounting firm full access to the Committee (and the Board) to report on any and all appropriate matters.
• Discussing with a representative of management and the independent registered public accounting firm: (1) the interim financial information contained in the Company’s Quarterly Reports on Form 10-Q prior to their filing, (2) the earnings announcements prior to their release, and (3) the results of the review of such information by the independent registered public accounting firm. (These discussions may be held with the Committee as a whole or with the Committee chair in person or by telephone.)
• Overseeing internal audit activities, including discussing with management the internal audit function’s organization, objectivity, responsibilities, plans, results, budget and staffing.
• Discussing with management and the independent registered public accounting firm the quality and adequacy of the compliance with the Company’s internal controls.
• Discussing policies with respect to risk assessment and risk management, including discussing the steps management has taken to monitor and control risk exposure.
• Discussing with management and/or the Company’s general counsel any legal matters (including the status of pending litigation) that may have a material impact on the Company’s financial statements, and any material reports or inquiries from regulatory or governmental agencies.
• Establishing procedures for handling complaints regarding accounting, internal accounting controls, and auditing matters, including procedures for confidential, anonymous submission of concerns by employees regarding accounting and auditing matters.

The Committee’s job is one of oversight. Management is responsible for the preparation of the Company’s financial statements and the independent registered public accounting firm is responsible for auditing those financial statements. The Committee and the Board recognize that management and the independent registered public accounting firm have more resources and time, and more detailed knowledge and information regarding the Company’s accounting, auditing, internal control and financial reporting practices than the Committee does; accordingly the Committee’s oversight role does not provide any expert or special assurance as to the financial statements and other financial information provided by the Company to its shareholders and others.

April 8, 2005