Ellington Financial (EFC) S-4Registration of securities issued in business combination transactions

Certain terms that are defined in and frequently used throughout this proxy statement/prospectus may be helpful for you to have in mind at the outset. Unless otherwise specified or if the context so requires, the following terms have the meanings set forth below for purposes of this proxy statement/prospectus:

EFC, Merger Sub and Great Ajax have entered into the Merger Agreement pursuant to which, and subject to the terms and conditions of the Merger Agreement, Great Ajax will merge with and into Merger Sub, with Merger Sub continuing as the surviving company of the Merger and, following its contribution to the EFC Operating Partnership immediately following the Merger, as a wholly-owned subsidiary of the EFC Operating Partnership. A copy of the Merger Agreement is attached as Annex A to this proxy statement/prospectus. In order to complete the Merger, among other conditions described in the Merger Agreement and this proxy statement/prospectus, Great Ajax Stockholders must approve the Great Ajax Merger Proposal.

Changes in the market price of EFC Common Stock or Great Ajax Common Stock at or prior to the effective time of the Merger will not change the number of shares of EFC Common Stock that Great Ajax Stockholders will receive in the Merger because the Exchange Ratio is not based on the market price of EFC Common Stock or Great Ajax Common Stock.

The Merger is expected to be consummated by the end of 2023. Because the Merger is subject to a number of conditions, including the approval of the Great Ajax Merger Proposal by the requisite vote of the Great Ajax Stockholders, the exact timing of the Merger cannot be determined at this time and EFC and Great Ajax cannot guarantee that the Merger will be completed at all. The Merger Agreement may be terminated under certain circumstances if the Merger has not been consummated on or before 5:00 p.m. Eastern Time on January 31, 2024 (the “End Date”).

On May 29, 2023, EFC, Arlington, Arlington Merger Sub and, solely for the limited purposes set forth in the Arlington Merger Agreement, EFC Manager, entered into the Arlington Merger Agreement, pursuant to which, subject to the terms and conditions thereof, Arlington will be merged with and into Arlington Merger Sub, with Arlington Merger Sub continuing as the surviving corporation of the Arlington Merger. Immediately following the Arlington Merger, the surviving corporation of the Arlington Merger will be contributed to the EFC Operating Partnership, in exchange for EFC OP Units. As a result of the contribution, the surviving corporation of the Arlington Merger will become a wholly-owned subsidiary of the EFC Operating Partnership.

Immediately following the completion of the Merger, based on the number of issued and outstanding shares of EFC Common Stock and Great Ajax Common Stock (excluding Cancelled Shares) and outstanding Great Ajax Equity Awards as of June 30, 2023 and the Exchange Ratio of 0.5308 (which is subject to certain adjustments as provided in the Merger Agreement and not assuming the prior completion of the Arlington Merger):

The exact equity stake of EFC common stockholders and Great Ajax Stockholders in the Combined Company immediately following the effective time of the Merger will depend on the number of shares of EFC Common Stock (including shares of EFC Common Stock that may be issued to holders of Arlington Common Stock in connection with the pending Arlington Merger) and Great Ajax Common Stock issued and outstanding immediately prior to the effective time of the Merger.

Immediately following the Merger, each EFC common stockholder will continue to own the same number of shares of EFC Common Stock that such stockholder held immediately prior to the Merger. As a result, each EFC common stockholder will continue to own common stock in the Combined Company, which will be a larger company with more assets and equity. Because EFC will be issuing new shares of EFC Common Stock to Great Ajax Stockholders in the Merger, each outstanding share

Pursuant to the EFC Management Agreement, EFC pays EFC Manager a quarterly management fee, which includes a “base” component and “incentive” component. The “base” component of the management fee is paid quarterly in arrears in an amount equal to 1.50% per annum of the equity of the EFC Operating Partnership, as calculated pursuant to the EFC Management Agreement. As a result of the Merger and contribution of the surviving company of the Merger to the EFC Operating Partnership in exchange for EFC OP Units, the equity of the EFC Operating Partnership will effectively include the additional equity attributable to the acquisition of Great Ajax; thus, the amount of the management fees payable to EFC Manager will also increase, which gives EFC Manager (and therefore, EFC’s management), an incentive, not shared by EFC stockholders, to negotiate and effect the Merger, possibly on terms less favorable to EFC than would otherwise have been achieved.

The EFC Management Agreement was negotiated between related parties, and the terms, including fees and other amounts payable, may not be as favorable to EFC as if they had been negotiated with an unaffiliated third party.

You will be asked to consider and vote on the Great Ajax Merger Proposal and the Great Ajax Adjournment Proposal. Great Ajax will transact no other business at the Great Ajax Special Meeting or any postponement or adjournment thereof.

You can authorize a proxy to vote using the following the methods:

During the Great Ajax Special Meeting by visiting [•]; or

If you authorize a proxy to vote, the individuals named on the proxy card will vote your shares in the manner you indicate. You may specify whether your shares should be voted for or against each of the proposals. You may also specify that you would like to abstain from voting for or against a proposal. Unless you give other instructions on your proxy card, the persons named as proxy holders on the proxy card will vote your shares of Great Ajax Common Stock in accordance with the recommendations of the Great Ajax Board. Proxies authorized by telephone or via the Internet must be received by 11:59 p.m. Eastern Time, on [•], 2023.

If your shares of Great Ajax Common Stock are held in “street name” by a broker, bank or other nominee, please refer to the instructions provided by your broker, bank or other nominee to vote your shares of Great Ajax Common Stock.

Your attendance at the Great Ajax Special Meeting does not automatically revoke your previously submitted proxy.

If your shares of Great Ajax Common Stock are held in “street name” by a broker, bank or other nominee, please refer to the instructions provided by your broker, bank or other nominee to revoke your proxy or change your vote before the vote is taken at the Great Ajax Special Meeting.

If you are both an EFC stockholder and a Great Ajax stockholder on the Great Ajax Record Date, you are entitled to vote at the Great Ajax Special Meeting by virtue of your ownership of Great Ajax Common Stock on the Great Ajax Record Date. However, the approval of the EFC stockholders is not required for the Merger and as such, EFC will not hold a special meeting for that purpose. You will receive a proxy card for the Great Ajax Special Meeting only and must complete, sign and date the proxy card and return it in the appropriate preaddressed postage-paid envelope or, if available, by authorizing a proxy to vote your shares by one of the other methods specified in your proxy card or voting instruction card.

The Merger is expected to be consummated by the end of the fourth quarter of 2023, although EFC and Great Ajax cannot assure completion by any particular date, if at all. Because the Merger is subject to a number of conditions, including the approval of the Great Ajax Merger Proposal by the requisite vote of the Great Ajax Stockholders, the exact timing of the Merger cannot be determined at this time and EFC and Great Ajax cannot guarantee that the Merger will be completed at all.

The completion of the Merger is subject to the satisfaction or waiver of a number of conditions. In addition, under circumstances specified in the Merger Agreement, EFC or Great Ajax may terminate the Merger Agreement. In particular, completion of the Merger requires the approval of the Great Ajax Merger Proposal by the Great Ajax Stockholders. While it is currently anticipated that the Merger will be completed shortly after the Great Ajax Special Meeting to approve the Great Ajax Merger Proposal, there can be no assurance that the conditions to the Closing will be satisfied in a timely manner or at all, or that an effect, event, circumstance, occurrence, development or change will not transpire that could delay or prevent these conditions from being satisfied. Accordingly, EFC and Great Ajax cannot provide any assurances with respect to the timing of the Closing, whether the Merger will be completed or when the Great Ajax Stockholders would receive the consideration for the Merger, if at all.

The Merger may be consummated on terms different than those contemplated by the Merger Agreement, or the Merger may not be consummated at all. If the Merger is not completed, or is completed on different terms than as contemplated by the Merger Agreement, EFC and Great Ajax could be adversely affected and subject to a variety of risks associated with the failure to consummate the Merger, or to consummate the Merger as contemplated by the Merger Agreement, including the following:

Any delay in the consummation of the Merger or any uncertainty about the consummation of the Merger on terms other than those contemplated by the Merger Agreement, or the failure to complete the Merger, could materially adversely affect the business and financial results of EFC and Great Ajax, and/or the stock price of EFC and/or Great Ajax.

These provisions could discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of Great Ajax from considering or proposing a competing acquisition, even if the potential competing acquirer was prepared to pay consideration with a higher per share value than the value proposed to be received or realized in the Merger, or might result in a potential competing acquirer proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances under the Merger Agreement.

The market price of EFC Common Stock may decline as a result of the Merger if the Combined Company does not achieve the perceived benefits of the Merger or the effect of the Merger on the Combined Company’s financial results is not consistent with the expectations of financial or industry analysts.

In addition, upon consummation of the Merger, EFC stockholders and Great Ajax Stockholders will own interests in the Combined Company operating an expanded business with a different mix of assets, risks and liabilities. EFC’s current stockholders and Great Ajax’s current stockholders may not wish to continue to invest in the Combined Company, or for other reasons may wish to dispose of some or all of their shares of EFC Common Stock. If, following the effective time of the Merger, a large amount of EFC Common Stock is sold, the price of EFC Common Stock could decline.

Further, the Combined Company’s results of operations, as well as the market price of EFC Common Stock after the Merger may be affected by factors in addition to those currently affecting EFC’s or Great Ajax’s results of operations and the market prices of EFC Common Stock and Great Ajax Common Stock, including differences in assets and capitalization, and factors related to the pending Arlington Merger. Accordingly, EFC’s and Great Ajax’s historical market prices and financial results may not be indicative of these matters for the Combined Company after the Merger.

Directors and executive officers of EFC and Great Ajax may have interests in the Merger that are different from, or in addition to, the interests of EFC stockholders and Great Ajax Stockholders generally. Following the consummation of the Merger, all five of the current directors of the EFC Board are expected to continue as directors of the board of directors of the Combined Company and the executive officers of EFC are expected to continue as the executive officers of the Combined Company. The Combined Company will continue to be managed by EFC Manager under the terms of the EFC Management Agreement, pursuant to which EFC Manager receives a management fee, which includes a “base” component and “incentive” component, and reimbursement for certain expenses incurred by it and its affiliates in rendering management services to EFC. As a result of the Merger and contribution of the surviving company of the Merger to the EFC Operating Partnership in exchange for EFC OP Units, the equity of the EFC Operating Partnership will effectively include the additional equity attributable to the acquisition of Great Ajax. As a result, following the Merger, the amount of the management fees payable by EFC to EFC Manager will also increase, which gives EMG and EFC Manager (and therefore, EFC’s management), an incentive, not shared by EFC stockholders, to negotiate and effect the Merger, possibly on terms less favorable to EFC than would otherwise have been achieved. Each of EFC’s executive officers and one of its directors serves as an officer of EFC Manager and is an employee of EMG. In connection with the Merger, the Great Ajax Management Agreement will be terminated and the Great Ajax Manager will be paid a termination fee, which will be reduced by the percentage of Great Ajax’s ownership of the limited liability company interests

The completion of the Merger may trigger change in control or other provisions in certain agreements to which Great Ajax is a party. If EFC and Great Ajax are unable to negotiate waivers of those provisions, the counterparties may exercise their rights and remedies under the agreements, potentially terminating the agreements or seeking monetary damages. Even if EFC and Great Ajax are able to negotiate waivers, the counterparties may require a fee for such waivers or seek to renegotiate the agreements on terms less favorable to Great Ajax.

It is possible that EFC stockholders or Great Ajax Stockholders may file lawsuits challenging the Merger or the other transactions contemplated by the Merger Agreement, which may name EFC, Great Ajax, the EFC Board and/or the Great Ajax Board as defendants. In addition, EFC stockholders or Arlington shareholders may file lawsuits challenging the Arlington Merger or the other transactions contemplated by the Arlington Merger Agreement, which may name EFC, the EFC Board and/or other parties as defendants. The outcome of such lawsuits cannot be assured, including the amount of costs associated with defending these claims or any other liabilities that may be incurred in connection with the litigation of these claims. If plaintiffs are successful in obtaining an injunction prohibiting the applicable parties from completing the Merger or the Arlington Merger on the agreed-upon terms, such an injunction may delay the consummation of the Merger or the Arlington Merger, as applicable, in the expected timeframe, or may prevent the Merger or the Arlington Merger, as applicable, from being consummated altogether. Whether or not any plaintiff’s claim is successful, this type of litigation may result in significant costs and divert management’s attention and resources, which could adversely affect the operation of EFC’s business and/or Great Ajax’s business.

The Merger is intended to qualify as a reorganization within the meaning of Section 368(a) of the Code, and it is a condition to the completion of the Merger that Great Ajax and EFC each receive an opinion from its respective tax counsel to the effect that the Merger will constitute a reorganization within the meaning of Section 368(a) of the Code. Assuming that the Merger qualifies as a reorganization within the meaning of Section 368(a) of the Code, U.S. Great Ajax Stockholders will recognize gain (but not loss) in an amount equal to the lesser of (i) the amount by which the sum of the fair market value of the shares of EFC Common Stock and cash (other than cash received in lieu of a fractional share of EFC Common Stock) received by such holder in exchange for its Great Ajax Common Stock (such cash including such holder’s share of the Contingent Cash Purchase Price, if any) exceeds such holder’s adjusted basis in its shares of Great Ajax Common Stock and (ii) the amount of cash (other than the cash received in lieu of a fractional share of EFC Common Stock) received in exchange for its shares of Great Ajax Common Stock (such cash including

The Merger involves the combination of two companies that currently operate as independent public companies. To the extent that EFC management overestimated the value of, and/or projected net income to be generated by, Great Ajax’s or Alington’s assets, and/or underestimated Great Ajax’s or Arlington’s liabilities or was otherwise incorrect in its assumptions, the Combined Company may be unable to realize the anticipated benefits of either or both Mergers. The Combined Company expects to benefit from certain operating expense efficiencies relating to the elimination of duplicative costs associated with supporting a public company platform and operating the businesses of EFC and Great Ajax and the spread of fixed costs across a larger equity base. EFC anticipates similar operating efficiencies and cost savings in connection with the proposed Arlington Merger. The Combined Company will be required to devote significant management attention and resources to the integration of EFC’s, Great Ajax’s and, if the Arlington Merger is completed, Arlington’s businesses. The potential difficulties the Combined Company may encounter in combining the companies include, but are not limited to, the following:

For all these reasons, you should be aware that it is possible that the combination process could result in the distraction of the Combined Company’s management, the disruption of the Combined Company’s ongoing business or inconsistencies in its operations, services, standards, controls, policies and procedures, any of which could adversely affect the Combined Company’s ability to deliver investment returns to stockholders, to maintain relationships with its key stakeholders or to achieve the anticipated benefits of the Merger and the Arlington Merger, or could otherwise materially and adversely affect the Combined Company’s business and financial results.

Following the Merger, the Combined Company’s stockholders may not receive any dividends (or may not receive them at the same rate that EFC stockholders received dividends prior to the Merger) for various reasons, including the following:

The Combined Company’s common stockholders will have no contractual or other legal right to dividends that have not been authorized by its board of directors and declared by the Combined Company.

The Combined Company will have substantial indebtedness following completion of the Merger. In addition, in connection with executing its business strategies following the Merger, the Combined Company expects to evaluate the possibility of investing in additional target assets and making other strategic investments, and it may elect to finance these endeavors by incurring additional indebtedness. The amount of such indebtedness could have material adverse consequences for the Combined Company, including:

Moreover, the Combined Company may be required to raise substantial additional capital to execute its business strategy. The Combined Company’s ability to arrange additional financing will depend on, among other factors, its financial position and performance, as well as prevailing market conditions and other factors beyond its control. If the Combined Company is unable to obtain additional financing, its credit ratings could be adversely affected, which could raise its borrowing costs and limit its future access to capital and its ability to satisfy its obligations under its indebtedness.

EFC and Great Ajax have incurred substantial legal, accounting, financial advisory and other costs, and the management teams of EFC and Great Ajax have devoted considerable time and effort in connection with the Merger. EFC and Great Ajax may incur significant additional costs in connection with the completion of the Merger or in connection with any delay in completing the Merger or termination of the Merger Agreement, in addition to the other costs already incurred. If the Merger is not completed, EFC and Great Ajax will separately bear certain fees and expenses associated with the Merger without realizing the benefits of the Merger. If the Merger is completed, the fees and expenses may be significant and could have an adverse impact on the Combined Company’s results of operations.

Although EFC and Great Ajax have assumed that a certain level of transaction and integration expenses would be incurred, there are a number of factors beyond the control of either EFC or Great Ajax

In addition, EFC has incurred similar fees and transaction expenses in connection with the Arlington Merger and expects to incur additional costs related to such transaction that are difficult to estimate accurately at this time. If the Arlington Merger is not consummated, EFC (or, if the Merger is completed, the Combined Company) would bear certain transaction expenses associated with the Arlington Merger without realizing the anticipated benefits of the Arlington Merger. If the Arlington Merger is completed, the transaction expenses and the costs related to the integration of Arlington could be substantial, have an adverse impact on EFC’s (or, if the Merger is completed, the Combined Company’s) results of operations and exceed, particularly in the near term, the cost savings EFC expects to achieve in connection with the Arlington Merger.

The unaudited pro forma condensed combined financial information included elsewhere in this proxy statement/prospectus has been presented for informational purposes only and is not necessarily indicative of the financial position or results of operations that actually would have occurred had the Merger and the Arlington Merger been completed as of the date indicated, nor is it indicative of the future operating results or financial position of the Combined Company following the Merger and, if completed, the Arlington Merger. The unaudited pro forma condensed combined financial information does not reflect future events that may occur after the Merger and, if completed, the Arlington Merger. The unaudited pro forma condensed combined financial information presented elsewhere in this proxy statement/prospectus is based in part on certain assumptions regarding the Merger and the Arlington Merger that EFC believes are reasonable under the circumstances. However, such certain assumptions are based on values for mortgage assets in a market environment that is highly volatile and undue reliance should not be placed on such assumptions. EFC and Great Ajax cannot assure you that the assumptions will prove to be accurate over time.

Completion of the Arlington Merger is subject to, among other things, the approval of Arlington shareholders and other closing conditions set forth in the Arlington Merger Agreement. It is possible that Arlington shareholder approval may not be received in a timely manner or at all, or that one or more other closing conditions may not be satisfied or, if not satisfied, that such conditions may not be waived in accordance with the terms of the Arlington Merger Agreement. The Arlington Merger is a transaction separate and apart from the Merger and the completion of the Arlington Merger is not a condition to the completion of the Merger, and the completion of the Merger is not a condition to the completion of the Arlington Merger. Therefore, it is possible that the Merger will be consummated but the Arlington Merger will not be consummated. If EFC is unable to complete the Arlington Merger, EFC will not fully realize the anticipated benefits of the Arlington Merger.

EFC elected to be treated as a REIT for U.S. federal income tax purposes commencing with its taxable year ended December 31, 2019. While EFC believes that it has operated and intends to continue to operate in a manner that will enable it to meet the requirements for taxation as a REIT commencing with its taxable year ended January 1, 2019, EFC cannot assure you that it will remain qualified as a REIT.

If EFC fails to maintain its qualification as a REIT in any calendar year, and does not qualify for certain statutory relief provisions, it would be required to pay U.S. federal income tax (and any applicable state and local taxes) on its taxable income at regular corporate rates, and dividends paid to its stockholders would not be deductible by it in computing its taxable income (although such dividends received by certain non-corporate U.S. taxpayers generally would be subject to a preferential rate of taxation). Further, if EFC fails to maintain its qualification as a REIT, it might need to borrow money or sell assets in order to pay any resulting tax. EFC’s payment of income tax would decrease the amount of its income available for distribution to its stockholders. Furthermore, if EFC fails to maintain its qualification as a REIT, it no longer would be required under U.S. federal tax laws to distribute substantially all of its REIT taxable income to its stockholders. Unless EFC’s failure to maintain its qualification as a REIT was subject to relief under the U.S. federal tax laws, EFC could not re-elect to qualify as a REIT until the fifth calendar year following the year in which it failed to qualify.

To qualify as a REIT, EFC must continually satisfy various tests regarding the sources of its income, the nature and diversification of its assets, the amounts it distributes to its stockholders and the ownership of its shares. In order to meet these tests, EFC may be required to forego investments it might otherwise make. Thus, EFC may choose not to make certain types of investments that it made in prior years or pursue certain strategies that it pursued in prior years, which could include certain hedges that would otherwise reduce certain investment risks, or it could make such investments or pursue such strategies in a TRS. EFC’s domestic TRSs will be subject to regular U.S. federal, state and local corporate income tax, which may reduce the cash available to be distributed to EFC’s stockholders.

In addition, EFC must also ensure that each taxable year it satisfies the REIT 75% and 95% gross income tests, which require that, in general, 75% of its gross income comes from certain real estate-related sources and 95% of its gross income consists of gross income that qualifies for the 75% gross income test or certain other passive income sources. As a result of the requirement that EFC satisfies both the REIT 75% asset test and the REIT 75% and 95% gross income tests, it may be required to liquidate from its portfolio otherwise attractive investments or contribute such investments to a TRS, in which event they would become subject to regular corporate U.S. federal, state and local taxes assuming that the TRS is organized in the United States. These actions could have the effect of reducing EFC’s income and amounts available for distribution to its stockholders. Generally, if EFC fails to comply with these requirements at the end of any calendar year, it will lose its REIT qualification and may be subject to U.S. federal income tax and any applicable state and local taxes on all of its income.

Determination of EFC’s REIT taxable income involves the application of highly technical and complex Code provisions for which only limited judicial and administrative authorities exist. If the IRS disagrees with EFC’s determination, it could affect its satisfaction of the distribution requirement. Under certain circumstances, EFC may be able to correct a failure to meet the distribution requirement for a year by paying “deficiency dividends” to its stockholders in a later year. EFC may include such deficiency dividends in its deduction for dividends paid for the earlier year. Although EFC may be able to avoid income tax on amounts distributed as deficiency dividends, it will be required to pay interest and a penalty to the IRS based upon the amount of any deduction it takes for deficiency dividends.

Even if EFC qualifies for taxation as a REIT, it may be subject to certain U.S. federal, state and local taxes on its income and assets, including taxes on any undistributed income, tax on income from some activities conducted as a result of a foreclosure, and state or local income, property and transfer taxes. In addition, its domestic TRSs will be subject to regular corporate U.S. federal, state and local taxes. Any of these taxes would decrease cash available for distributions to stockholders.

EFC has entered into repurchase agreements under which it nominally sells certain of its MBS to a counterparty and simultaneously enters into an agreement to repurchase the sold assets. EFC believes that, for U.S. federal income tax purposes, these transactions will be treated as secured debt and it will be treated as the tax owner of the MBS that are the subject of any such repurchase agreement, notwithstanding that such agreements may transfer record ownership of such assets to the counterparty during the term of the agreement. It is possible, however, that the IRS could successfully assert that EFC does not own the MBS during the term of the repurchase agreement, in which case it could fail to maintain its qualification as a REIT.

EFC purchases and sells Agency RMBS through TBAs and recognizes income or gains from the disposition of those TBAs, through dollar roll transactions or otherwise, and may continue to do so in the future. While there is no direct authority with respect to the qualification of TBAs as real estate assets or U.S. government securities for purposes of the REIT 75% asset test or the qualification of income or gains from dispositions of TBAs as gains from the sale of real property or other qualifying income for purposes of the REIT 75% gross income test, EFC treats the GAAP value of its TBAs under which it contracts to purchase to-be-announced Agency RMBS (“long TBAs”) as qualifying assets for purposes of the REIT 75% asset test, and it treats income and gains from its long TBAs as qualifying income for purposes of the REIT 75% gross income test, based on an opinion of Hunton Andrews Kurth LLP substantially to the effect that (i) for purposes of the REIT asset tests, its ownership of a long TBA should be treated as ownership of real estate assets, and (ii) for purposes of the REIT 75% gross income test, any gain recognized by it in connection with the settlement of its long TBAs should be treated as gain from the sale or disposition of an interest in mortgages on real property. Opinions of counsel are not binding on the IRS, and no assurance can be given that the IRS will not successfully challenge the conclusions set forth in such opinions. In addition, it must be emphasized that the opinion of counsel is based on various assumptions relating to EFC’s TBAs and is conditioned upon fact-based representations and covenants made by EFC’s management regarding its TBAs. No assurance can be given that the IRS would not assert that such assets or income are not qualifying assets or income. If the IRS were to successfully challenge the opinion of counsel, EFC could be subject to a penalty tax or it could fail to remain qualified as a REIT if a sufficient portion of its assets consists of TBAs or a sufficient portion of its income consists of income or gains from the disposition of TBAs.

The REIT provisions of the Code substantially limit EFC’s ability to hedge. Under these provisions, any income that EFC generates from transactions intended to hedge its interest rate or foreign currency

The TRS rules limit the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. The rules also impose a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. EFC’s domestic TRSs will pay U.S. federal, state and local income tax on their taxable income (net of deductible interest expense) at regular corporate tax rates, and their after-tax net income will be available for distribution to EFC but is not required to be distributed to it. In certain circumstances, the ability to deduct interest expense by any TRS could be limited. In addition, losses in EFC’s domestic TRSs generally will not provide any tax benefit prior to liquidation, except that a net operating loss in the TRS may be carried forward against future TRS taxable income.

EFC generally structures its foreign TRSs with the intent that their income and operations will not be subject to U.S. federal, state and local income tax. For example, the Code and the Treasury Regulations promulgated thereunder specifically provide that a non-U.S. corporation is not engaged in a U.S. trade or business and therefore is not subject to U.S. federal income tax if it restricts its activities in the United States to trading in stock and securities (or any activity closely related thereto) for its own account irrespective of whether such trading (or such other activity) is conducted by such a non-U.S. corporation or its employees through a resident broker, commission agent, custodian or other agent. However, there is no assurance that EFC’s foreign TRSs will successfully operate so that they are not subject to U.S. federal, state and local income tax. If the IRS successfully challenged the tax treatment of EFC’s foreign TRSs, it would reduce the amount that those foreign TRSs would have available to distribute to EFC. E&P in EFC’s foreign TRSs, including gains from securities marked to market for tax purposes, are taxable to EFC, and are not qualifying income for the purposes of the REIT 75% gross income test, regardless of whether such earnings are distributed to EFC. In addition, losses in EFC’s foreign TRSs generally will not provide any tax benefit prior to liquidation.

EFC intends to monitor the value of and the income from its respective investments in its domestic and foreign TRSs for the purpose of ensuring compliance with TRS ownership limitations and the REIT 75% gross income test. In addition, EFC will review all of its transactions with its TRSs to ensure that they are entered into on arm’s-length terms to avoid incurring the 100% excise tax described above. There can be no assurance, however, that EFC will be able to comply with the 20% limitation, the REIT 75% gross income test or avoid application of the 100% excise tax discussed above.

In order for EFC to maintain its qualification as a REIT, no more than 50% in value of its outstanding shares may be owned, directly or indirectly, by five or fewer individuals during the last half of any calendar year. “Individuals” for this purpose include natural persons, private foundations, some employee benefit plans and trusts, and some charitable trusts. In order to help EFC qualify as a REIT, among other purposes, its certificate of incorporation provides that no person may own, or be deemed to own by virtue of the attribution provisions of the Code, more than 9.8%, in value or in number of shares, whichever is more restrictive, of the outstanding shares of any class or series of EFC’s capital stock.

The ownership limitation and other restrictions could have the effect of discouraging a takeover or other transaction in which holders of EFC Common Stock might receive a premium for their EFC Common Stock over the then-prevailing market price or which holders might believe to be otherwise in their best interests.

Qualified dividend income payable to U.S. investors that are individuals, trusts, and estates is subject to the reduced maximum tax rate applicable to long-term capital gains. Common and preferred dividends payable by REITs, however, generally are not eligible for the reduced rates on qualified dividend income. Rather, for taxable years beginning prior to January 1, 2026, non-corporate taxpayers may deduct up to 20% of certain pass-through business income, including “qualified REIT dividends” ​(generally, dividends received by a REIT stockholder that are not designated as capital gain dividends or qualified dividend income), subject to certain limitations. To qualify for this deduction, the shareholder receiving such dividend must hold the dividend-paying REIT shares for at least 46 days (taking into account certain special

Although EFC expects to avoid the prohibited transactions tax by conducting the sale of property that may be characterized as dealer property through a TRS, such TRS will be subject to U.S. federal, state and local corporate income tax and may incur a significant tax liability as a result of those sales conducted through the TRS. No assurance can be given that any property that EFC sells will not be treated as property held for sale to customers, or that EFC can satisfy certain safe-harbor provisions of the Code that would prevent such treatment. Moreover, no assurance can be given that the IRS will respect the transaction by which property that may be characterized as dealer property is contributed to the TRS. If any property sold is treated as property held for sale to customers or if the contribution of property is not respected, then EFC may be treated as having engaged in a prohibited transaction, and its net income therefrom would be subject to a 100% tax.

The EFC Operating Partnership, EFC’s subsidiary REIT and certain other subsidiaries of EFC have made elections under Section 475(f) of the Code to mark their securities to market. There are limited authorities under Section 475(f) of the Code as to what constitutes a trader for U.S. federal income tax purposes. Under other sections of the Code, the status of a trader in securities depends on all of the facts and circumstances, including the nature of the income derived from the taxpayer’s activities, the frequency, extent and regularity of the taxpayer’s securities transactions, and the taxpayer’s investment intent. There can be no assurance that the EFC Operating Partnership and these subsidiaries will continue to qualify as a trader in securities eligible to make the mark-to-market election. EFC has not received, nor is it seeking, an opinion from counsel or a ruling from the IRS regarding its or its subsidiaries’ qualification as a trader. If the qualification for, or EFC’s application of, the mark-to-market election were successfully challenged by the IRS, in whole or in part, it could, depending on the circumstances, result in retroactive (or prospective) changes in the amount or timing of gross income EFC recognizes. Furthermore, the law is unclear as to the treatment of mark-to-market gains and losses under the various REIT tax rules, including, among others, the prohibited transaction and qualified liability hedging rules. While there is limited analogous authority, EFC treats any mark-to-market gains as qualifying income for purposes of the 75% gross income test to the extent that the gain is recognized with respect to a qualifying real estate asset, based on an opinion of Hunton Andrews Kurth LLP substantially to the effect that any such gains recognized with respect to assets that would produce qualifying income for purposes of the 75% and/or 95% gross income test, as applicable, if they were actually sold should be treated as qualifying income to the same extent for purposes of the 75% and/or 95% gross income test, as applicable, and any such gains should not be subject to the prohibited transaction tax. If the IRS were to successfully treat EFC’s mark-to-market gains as subject to the prohibited transaction tax or to successfully challenge the treatment or timing of recognition of its mark-to-market gains or losses with respect to its qualified liability hedges, it could owe material U.S. federal income or penalty tax or, in some circumstances, even fail to maintain its qualification as a REIT. Finally, mark-to-market gains and losses could cause volatility in the amount of EFC’s taxable income. For instance, the mark-to-market election could generate losses in one taxable year that EFC is unable to use to offset taxable income, followed by mark-to-market gains in a subsequent taxable year that force it to make additional distributions to its stockholders. Hence, the mark-to-market gains and losses could cause EFC to distribute more dividends to its stockholders in a particular period than would otherwise be desirable from a business perspective.

Most of the distressed mortgage loans that EFC has acquired were acquired by it at a discount from their outstanding principal amount, because its pricing was generally based on the value of the underlying real estate that secures those mortgage loans. Treasury Regulations Section 1.856-5(c) (the “interest apportionment regulation”) provides that if a mortgage is secured by both real property and other property, a REIT is required to apportion its annual interest income to the real property security based on a fraction, the numerator of which is the value of the real property securing the loan, determined when the REIT commits

The interest apportionment regulation applies only if the debt in question is secured both by real property and personal property. EFC believes that most of the mortgage loans that it acquired at a discount under the circumstances contemplated by Revenue Procedure 2014-51 are secured only by real property (including mortgage loans secured by both real property and personal property where the value of the personal property does not exceed 15% of the aggregate value of the property securing the mortgage). Accordingly, EFC believes that the interest apportionment regulation generally does not apply to its loans.

Nevertheless, if the IRS were to assert successfully that such mortgage loans were secured by property other than real estate, that the interest apportionment regulation applied for purposes of EFC’s REIT testing, and that the position taken in Revenue Procedure 2014-51 should be applied to its portfolio, then depending upon the value of the real property securing its loans and their face amount, and the sources of its gross income generally, EFC might not be able to satisfy the REIT 75% gross income test, and possibly the asset tests applicable to REITs. If EFC did not meet these tests, it could potentially either lose its REIT status or be required to pay a tax penalty to the IRS. With respect to the REIT 75% asset test, Revenue Procedure 2014-51 provides a safe harbor under which the IRS will not challenge a REIT’s treatment of a loan as being a real estate asset in an amount equal to the lesser of (1) the greater of (a) the current value of the real property securing the loan or (b) the fair market value of the real property securing the loan determined as of the date the REIT committed to acquire the loan or (2) the fair market value of the loan on the date of the relevant quarterly REIT asset testing date. This safe harbor, if it applied to EFC, would help it comply with the REIT asset tests following the acquisition of distressed debt if the value of the real property securing the loan were to subsequently decline. If EFC did not meet one or more of the REIT asset tests, then it could potentially either lose its REIT status or be required to pay a tax penalty to the IRS.

This proxy statement/prospectus and the annexes to this proxy statement/prospectus contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Exchange Act.

This proxy statement/prospectus is being furnished in connection with the solicitation of proxies from Great Ajax Stockholders for exercise at the Great Ajax Special Meeting. This proxy statement/prospectus and accompanying form of proxy are first being mailed to Great Ajax Stockholders on or about [•], 2023.

The Great Ajax Special Meeting will be held solely by means of remote communication live over the Internet on [•], 2023 at [•] [a.m.], Eastern Time, for the following purposes:

Only business within the purposes described in the Notice of Special Meeting of Great Ajax Stockholders may be conducted at the Great Ajax Special Meeting. Any action may be taken on the items of business described above at the Great Ajax Special Meeting on the date specified above, or on any date or dates to which the Great Ajax Special Meeting may be postponed or adjourned.

Great Ajax has fixed the close of business on [•], 2023 as the record date for determining Great Ajax Stockholders entitled to the notice of, and to vote at, the Great Ajax Special Meeting. Great Ajax Stockholders at the close of business on the Great Ajax Record Date will be entitled to notice of the Great Ajax Special Meeting. As of the Great Ajax Record Date, there were [•] issued and outstanding shares of Great Ajax Common Stock. Each holder of record of Great Ajax Common Stock on the Great Ajax Record Date is entitled to one vote per share of Great Ajax Common Stock with respect to each proposal. Votes may be cast either electronically or by properly authorized proxy at the Great Ajax Special Meeting.

Before the Great Ajax Special Meeting by visiting [•]; or

During the Great Ajax Special Meeting by visiting [•]; or

If you authorize a proxy to vote your shares, the individuals named on the proxy card will vote your shares in the manner you indicate. You may specify whether your shares should be voted for or against each of the proposals. You may also specify you would like to abstain from voting for or against a proposal. Proxies authorized by telephone or via the Internet must be received by 11:59 p.m., Eastern Time, on [•], 2023.

All shares of Great Ajax Common Stock that are entitled to vote and are represented at the Great Ajax Special Meeting by properly authorized proxies received before or at the Great Ajax Special Meeting and not revoked will be voted at the Great Ajax Special Meeting in accordance with the instructions indicated on the proxies. If no instructions are given on a timely and properly executed proxy card, your shares of Great Ajax Common Stock will be voted:

Votes cast by proxy or electronically at the Great Ajax Special Meeting will be tabulated by one or more inspectors appointed by the Great Ajax Board for the Great Ajax Special Meeting. The chairman of the Great Ajax Special Meeting will determine whether or not a quorum is present.

Any proxy given by a stockholder of record pursuant to this solicitation may be revoked at any time before the vote is taken at the Great Ajax Special Meeting in any of the following ways:

Your attendance at the Great Ajax Special Meeting does not automatically revoke your previously submitted proxy.

If your shares of Great Ajax Common Stock are held in “street name” by a broker, bank or other nominee, please refer to the instructions provided by your broker, bank or other nominee to revoke your proxy or change your vote before the vote is taken at the Great Ajax Special Meeting.

Great Ajax will bear the costs of soliciting proxies. In addition to the solicitation of proxies by use of the mails, proxies may be solicited from Great Ajax Stockholders by directors, officers and employees of Great Ajax in person, by telephone, on the Internet, or using any other appropriate means of communications. No additional compensation, except for reimbursement of reasonable out-of-pocket expenses, will be paid to directors, officers and employees of Great Ajax in connection with this solicitation.

Additionally, Great Ajax has retained Georgeson to solicit, and for advice and assistance in connection with the solicitation of, proxies for the Great Ajax Special Meeting at a cost of $16,500, plus out-of-pocket expenses. No portion of the amount that Great Ajax has agreed to pay to Georgeson is contingent upon the Closing. Great Ajax has agreed to indemnify Georgeson against any loss, damage, expense, liability or claim relating to or arising out of Georgeson’s rendering of services with certain exceptions. Any questions or requests for assistance regarding this proxy statement/prospectus and related proxy materials may be directed to Georgeson by telephone at (877) 847-1383 (toll free) in North America or +1 (781) 575-2137 outside of North America.

On the date of the Great Ajax Special Meeting, you can virtually attend the Great Ajax Special Meeting by accessing the online virtual meeting platform at [•]. However, you are only entitled to vote and/or ask questions at the Great Ajax Special Meeting if you were a stockholder of record or a valid proxy holder of a stockholder of record as of the Great Ajax Record Date.

The Great Ajax Board unanimously recommends that the Great Ajax Stockholders vote “FOR” the Great Ajax Adjournment Proposal to adjourn the Great Ajax Special Meeting, if necessary or appropriate, including to solicit additional proxies if there are not sufficient votes to approve the Great Ajax Merger Proposal.

The EFC Board has set a strategic goal to achieve sensible growth in EFC’s capital and asset base in order to increase operating expense efficiencies, enhance EFC’s access to the capital markets and improve the liquidity of the EFC Common Stock. In furtherance of this strategic goal, EFC has regularly evaluated and executed on a range of capital raising alternatives, including public equity offerings and secured and unsecured borrowings. In addition, following EFC entering into the Arlington Merger Agreement to consummate the Arlington Merger in accordance with EFC’s strategic goals, EFC has remained interested in exploring corporate acquisitions, including acquisitions of other businesses or assets where the consideration to be issued by EFC in such transactions includes EFC Common Stock.

As a result of Great Ajax’s ongoing conversations with multiple parties, and through Piper Sandler’s introduction, on May 22, 2023, principals of Great Ajax met with principals of EFC. EFC already had a relationship with Great Ajax given that funds affiliated with EFC participated in a mortgage loan joint venture with Great Ajax and other financial investors. On Great Ajax’s behalf, Piper Sandler discussed with EFC a potential strategic opportunity involving Great Ajax. On May 19, 2023, Great Ajax and EFC executed a mutual non-disclosure agreement. The non-disclosure agreement did not include a standstill provision, other than a provision prohibiting each party from engaging in purchase or sale transactions in the securities of the other party and its publicly held affiliates until August 19, 2023.

On May 19, 2023, EFC requested an in-person meeting with Mr. Mendelsohn and other members of Great Ajax’s management team. Before agreeing to the meeting, Mr. Mendelsohn discussed the matter with Paul M. Friedman, a member of the Great Ajax Board.

On May 22, 2023, Mr. Mendelsohn met at EFC’s offices with Michael W. Vranos, Chief Executive Officer of EMG and Co-Chief Investment Officer of EFC; Laurence E. Penn, Chief Executive Officer, President and a member of the board of directors of EFC; and Mark Tecotzky, Co-Chief Investment Officer of EFC. Representatives of Piper Sandler were also present at the meeting. At the meeting, EFC proposed a transaction that would be priced based on a book value valuation with Great Ajax’s book value adjusted for any mark to market differences in fair value to book value and for the termination or acquisition costs of the Great Ajax Manager (the “EFC Proposed Transaction”). Based on their initial estimated calculations, EFC suggested that Great Ajax Stockholders would receive, relative to the then-current market price for Great Ajax Common Stock, a significant premium per share in EFC Common Stock as consideration in the transaction. EFC requested information from Great Ajax regarding, among other things, Great Ajax’s loan portfolio, employee allocations and health and retirement plans.

Following that meeting, during the remainder of the week of May 22, 2023, Mr. Mendelsohn had several discussions with Mr. Friedman and other independent members of the Great Ajax Board regarding the EFC Proposed Transaction and discussed the potential transaction with counsel.

On May 25, 2023, Mr. Mendelsohn discussed the proposed terms of the EFC Proposed Transaction with the Great Ajax Board and asked for their approval to continue engaging with EFC on behalf of Great Ajax and its stockholders. The Great Ajax Board members agreed that Mr. Mendelsohn should continue pursuing this opportunity.

Also on May 25, 2023, the EFC Board held a special telephonic meeting relating to the Arlington Merger at which representatives of EFC’s management, EFC’s legal counsel, Vinson & Elkins L.L.P. (“V&E”), and EFC’s financial advisor, Keefe, Bruyette & Woods (“KBW”), were present. Prior to the conclusion of that meeting, Mr. Penn informed the EFC Board of EFC management’s discussions with Great Ajax, including the process by which EFC was informed of this opportunity. EFC management and the EFC Board then discussed the strategic rationale for a proposed transaction, with EFC management providing an overview of Great Ajax’s business and capital structure to the EFC Board.

Following its May 25, 2023 meeting and in connection with the EFC Proposed Transaction, and because some of the Great Ajax Board members have conflicts of interests regarding the EFC Proposed Transaction, as described in greater detail in “The Merger — Interests of Great Ajax’s Directors and Executive Officers in the Merger,” the Great Ajax Board memorialized the establishment of the Great Ajax Special Committee, comprised of John C. Condas, Mr. Friedman, Mary Haggerty and J. Kirk Ogren, Jr., each an independent director of the Great Ajax Board. The Great Ajax Special Committee was already in existence to review and evaluate the strategic opportunities mentioned above, but in memorializing the establishment of the Great Ajax Special Committee, the Great Ajax Board specifically tasked the Great Ajax Special Committee with (i) reviewing and evaluating the negotiated terms and conditions of the EFC Proposed Transaction and determining its advisability (taking into account its negotiated terms and conditions); (ii) determining whether the EFC Proposed Transaction (taking into account its negotiated terms and conditions) is fair to, and in the best interest of, Great Ajax and Great Ajax Stockholders; and (iii) recommending to the Great Ajax Board what action, if any, should be taken by the Great Ajax Board with respect to the EFC Proposed Transaction, including, if applicable, the rejection of the EFC Proposed Transaction. The Great Ajax Board also authorized the Great Ajax Special Committee to retain financial and legal advisors in connection with discharging its duties, with the fees and expenses of such advisors to be paid by Great Ajax.

On May 26, 2023, Piper Sandler sent the Great Ajax Board a proposed engagement letter pursuant to which Great Ajax would retain Piper Sandler as financial advisor to Great Ajax and the Great Ajax Board in connection with the EFC Proposed Transaction.

That day, in connection with establishing a virtual due diligence data room, representatives of Piper Sandler provided a due diligence request list to Great Ajax and Mayer Brown LLP, Great Ajax’s legal advisor (“Mayer Brown”). Great Ajax, with the assistance of representatives of Piper Sandler and Mayer Brown, assembled the requested diligence materials over the next several days.

Later that day, Piper Sandler assisted Great Ajax in establishing Great Ajax’s virtual data room in order to respond to initial diligence requests made by EFC and Piper Sandler.

On May 30, 2023, representatives of KBW provided a due diligence request list to Great Ajax, Piper Sandler and Mayer Brown.

On May 30 and May 31, 2023, Piper Sandler requested additional due diligence materials for EFC and KBW from Great Ajax.

Later that day, representatives of Great Ajax and Piper Sandler met with representatives of EFC and KBW in New York City to discuss the proposed terms of the EFC Proposed Transaction. Among the matters discussed, Great Ajax’s management explained to EFC the importance of preserving Great Ajax’s ability to continue its usual business operations throughout the EFC Proposed Transaction. Great Ajax discussed, among other things, its mortgage loan portfolio, its outstanding debt securities, its repurchase facilities, and servicing related matters. Great Ajax conveyed its need for a limited exclusivity period.

Also on that day, representatives of Piper Sandler, Great Ajax and Mayer Brown held a telephonic meeting to discuss the potential process and timeline for the EFC Proposed Transaction.

On June 6, 2023, EFC engaged Hunton Andrews Kurth LLP (“Hunton”) to provide tax advice and to conduct due diligence on certain of Great Ajax’s assets.

On June 7, 2023, representatives of Mayer Brown spoke with Mr. Friedman, and discussed the potential process and timeline for the EFC Proposed Transaction.

Also on June 7, 2023, the EFC Board held a special telephonic meeting at which representatives of EFC’s management, KBW and V&E were present. Representatives of EFC’s management and KBW summarized the then-current discussions they were having with Great Ajax and their representatives. Representatives from KBW then followed with their own summary of Great Ajax’s capitalization and overview of the market generally. Next, EFC management presented an overview of the proposed transaction, including a review of Great Ajax’s current business and financial position. EFC management then presented the results of EFC’s initial review of Great Ajax and its portfolio, including issues related to Great Ajax’s then-current capitalization, areas of risk in the portfolio and any potential corresponding mitigants. EFC management and the EFC Board then provided an overview of next steps regarding the transaction.

Later that day, the Great Ajax Special Committee held a video meeting. All members were present and at the invitation of the Great Ajax Special Committee, also present was the Great Ajax Secretary. Mr. Friedman relayed to the members of Great Ajax Special Committee his conversation with Mayer Brown. Upon Mr. Friedman’s request, each of the members confirmed they did not have any personal or financial interest in EFC that would create a conflict of interest. Mr. Friedman provided an overview of the status of the EFC Proposed Transaction. The members discussed the potential advisors and agreed that Mr. Friedman should discuss the EFC Proposed Transaction with one of the financial advisors and solicit a revised proposal.

On June 8, 2023, after negotiations and exchanging drafts, and consultation, and approval by the Great Ajax Board, Great Ajax executed a letter agreement engaging Piper Sandler to act as its financial advisor in connection with the EFC Proposed Transaction.

Later that day, Great Ajax and Piper Sandler received a letter from representatives of EFC that contained, among other terms, a non-binding proposal to acquire Great Ajax in a stock transaction using an adjusted-book-for-adjusted-book exchange ratio (where their respective book values would be adjusted by accounting for, among other things, each party’s transaction expenses and, with respect to Great Ajax, the termination fee that would be payable to the Great Ajax Manager) pursuant to which EFC would issue shares to Great Ajax Stockholders with an adjusted mark-to-market book value per share equal to 95% of Great Ajax’s adjusted diluted mark-to-market book value per share (“MTM-BVPS”). Under the terms of the proposal and based on closing price of the EFC Common Stock and the Great Ajax Common Stock on the NYSE on June 7, 2023 and assuming no mark-to-market adjustments, a Great Ajax Stockholder would receive an approximate 75% premium, pro forma annual dividends of $1.36 per share of Great Ajax Common Stock, as compared to Great Ajax’s annualized dividends per share of Great Ajax Common Stock of $0.99, and approximately 21% ownership by Great Ajax Stockholders in the Combined Company (without giving effect to completion of the Arlington Merger). The letter also included a proposed

On June 14, EFC and Great Ajax held a telephonic meeting regarding valuation, with particular focus on servicing advances.

On June 15, 2023, representatives of V&E delivered an initial draft of a merger agreement (the “Draft Merger Agreement”) to representatives of Mayer Brown. The Merger Agreement draft included (i) merger consideration payable to Great Ajax Stockholders upon the closing of the merger in shares of EFC Common Stock, with such number of shares of EFC Common Stock to be determined based upon a floating exchange ratio to be determined a certain number of days before the Great Ajax Special Meeting; (ii) mutual covenants restricting Great Ajax and EFC from soliciting or negotiating acquisition offers from or with third parties, subject to customary exceptions; (iii) mutual covenants restricting each of the EFC Board and the Great Ajax Board from changing its recommendation to vote for the transaction, subject to customary exceptions; (iv) conditions precedent to the consummation of the transactions contemplated by the Draft Merger Agreement, including: (a) approval of each of the holders of the EFC Common Stock and the Great Ajax Stockholders; (b) Great Ajax’s redemption of the Great Ajax Preferred Stock and purchase of the Great Ajax Warrants; and (c) the termination of the Great Ajax Management Agreement; and (v) provisions providing for the payment of a termination fee under specified circumstances.

On June 19, 2023, at the request of Mayer Brown, representatives of Piper Sandler reached out to EFC and KBW to discuss certain necessary changes to the Draft Merger Agreement.

Also that day, KBW reached out to Piper Sandler, on behalf of Hunton Andrews Kurth LLP, EFC’s tax counsel, with additional due diligence requests. The requests were communicated to Great Ajax which, with the assistance of representatives of Piper Sandler and Mayer Brown, provided the requested materials to the Great Ajax virtual data room shortly thereafter.

That afternoon, representatives of Mayer Brown and Great Ajax management held a telephonic meeting to discuss the Draft Merger Agreement. Representatives of Mayer Brown updated Great Ajax management on the communications between Piper Sandler and EFC and KBW regarding the Draft Merger Agreement. The participants reviewed the Draft Merger Agreement and discussed the terms.

On June 20, 2023, representatives of Mayer Brown and Great Ajax management held a telephonic meeting to discuss the exchange ratio proposed in the Draft Merger Agreement and potential alternatives to the calculation of the exchange ratio included in the Draft Merger Agreement. The participants in the telephonic meeting discussed the various structure options and Great Ajax management decided to propose a fixed exchange ratio with limited adjustments that would not be based on or be affected by, or as a result of, a change in the trading price or mark-to-market book value of the Great Ajax Common Stock following the date that a merger agreement is executed.

On June 22, 2023, Mayer Brown and V&E held a video meeting to discuss open points in the Draft Merger Agreement, including the interim operating covenants, timing of the filing of the joint proxy statement, the timing and process of Great Ajax’s redemption of Great Ajax Preferred Stock and purchase of outstanding Great Ajax Warrants prior to closing, the non-contingency of the Merger on the consummation of the Arlington Merger, and inclusion of knowledge qualifiers for certain representations regarding Gregory and Gaea.

That day, the Great Ajax Board memorialized the establishment of the Great Ajax Special Committee with the intention of ratifying its actions until that date.

On June 23, 2023, representatives of V&E circulated a revised draft of the Merger Agreement, as well as an initial draft of the EFC Disclosure Letter.

Also that morning, representatives of KBW and Piper Sandler held a telephonic meeting to discuss pricing and other details, and KBW informed Piper Sandler that EFC intended to confirm the automatic extension of the Exclusivity Period, as agreed in the executed Exclusivity Agreement.

That afternoon, the Great Ajax Special Committee held a video meeting at which all members other than Ms. Haggerty were present. At the invitation of the Great Ajax Special Committee, also present was the Great Ajax Secretary. Mr. Friedman provided an update on the current status of the EFC Proposed Transaction and negotiations between EFC and Great Ajax.

Also that day, representatives of Great Ajax, Mayer Brown and Piper Sandler held a telephonic meeting in which Piper Sandler updated the participants on the ongoing meetings with EFC and KBW and the process as a whole.

Later that day, a representative of EFC reached out to Great Ajax and Piper Sandler and confirmed that each of EFC and Great Ajax agreed that the parties are continuing to negotiate in good faith to reach definitive documentation with respect to the proposed transaction, and therefore, the Exclusivity Period has been automatically extended for four additional days, through and including June 27, 2023. EFC and Great Ajax held a telephonic meeting on the same day to discuss valuation.

On June 24, 2023, representatives of Piper Sandler spoke with KBW to relay Great Ajax’s preference for a fixed exchange ratio. Representatives of Piper Sandler informed representatives of BTIG of this proposed change and related discussions.

On June 25, 2023, representatives of Mayer Brown and Great Ajax management held a video meeting to discuss the revised version of the Draft Merger Agreement distributed by V&E on June 23, 2023. Representatives of Mayer Brown reviewed the open points in the Draft Merger Agreement and the participants in the video meeting discussed such open points, including the following: exchange ratio/determination date, the extent of the disclosure required by the real property representation in the revised Draft Merger Agreement, and changes necessary to the interim operating covenants to allow Great Ajax to continue conducting its business in the ordinary course in the time between signing of the Merger Agreement and closing of the Merger.

That day, Mayer Brown returned a revised draft of the Merger Agreement to V&E, which included (i) proposing a fixed exchange ratio, in light of the extensive discussions between the parties regarding asset values and the desire to minimize uncertainty, (ii) conforming the liquidity maintenance requirement to Great Ajax’s existing requirement under the senior notes issued by the Great Ajax Operating Partnership,

On June 26, 2023, representatives of Piper Sandler held a telephonic meeting with representatives of EFC. EFC requested an additional extension of the Exclusivity Period, from June 27, 2023 to June 29, 2023, as EFC was continuing to work on EFC’s valuation of Great Ajax’s assets.

That day, a representative of Piper Sandler shared the details of the telephonic meeting with EFC with Mr. Mendelsohn and representatives of Mayer Brown and noted he believed EFC continued to work in good faith. Great Ajax agreed to an extension of the Exclusivity Period until June 29, 2023, at 12:00 p.m. Eastern Time.

Subsequently, EFC reached out to Great Ajax and Piper Sandler to confirm the extension of the Exclusivity Period until 12:00 p.m. Eastern Time on June 29, 2023. Piper Sandler was instructed to confirm the extension.

Also that day, after negotiating the terms and conditions of BTIG’s engagement letter, the Great Ajax Special Committee executed BTIG’s engagement letter.

That afternoon, the Great Ajax Special Committee held a video meeting, at which all of the members of the Great Ajax Special Committee were present. Also present at the telephonic meeting, at the invitation of the Great Ajax Special Committee, were Mr. Mendelsohn, Mr. Handley, a member of the Great Ajax Board, and the Great Ajax Secretary. Mr. Mendelsohn provided an update on the expected process and timeline through signing the Merger Agreement. Mr. Mendelsohn reviewed the status of negotiations on valuation, as well as the status of the negotiations on the Draft Merger Agreement. Mr. Mendelsohn explained key provisions of the Draft Merger Agreement and answered several questions. The members of the Great Ajax Special Committee discussed various provisions of the Draft Merger Agreement, including the conduct of Great Ajax pending the Merger, the conditions to closing and the termination provisions.

On June 27, 2023, the Great Ajax Special Committee held a video meeting, at which all of the members of the Great Ajax Special Committee were present. Also present at the invitation of the Great Ajax Special Committee, were Mr. Mendelsohn, Mr. Handley and the Great Ajax Secretary. Mr. Mendelsohn reviewed the expected timeline through the closing of the EFC Proposed Transaction. The members of the Great Ajax Special Committee discussed the timeline. Mr. Mendelsohn reviewed the status of the negotiations and the key terms of the Draft Merger Agreement. Mr. Mendelsohn reviewed the status of valuation discussions. The members of the Great Ajax Special Committee discussed and provided Mr. Mendelsohn with their preferences and insights. The members of the Great Ajax Special Committee also discussed exclusivity and closing conditions.

That evening, representatives of Great Ajax, Mayer Brown and Piper Sandler held a telephonic meeting in which the representatives of Piper Sandler updated the participants in the telephonic meeting on the process, including Piper Sandler’s ongoing meetings with EFC and KBW, discussions with BTIG regarding BTIG’s financial and market conditions analysis and the ongoing due diligence process. At that meeting, a representative of Mayer Brown discussed the process moving forward and outlined the potential approval and signing timeline.

On June 28, 2023, representatives of EFC, KBW, V&E, Great Ajax, Piper Sandler and Mayer Brown held a video meeting to discuss the remaining open points in the Draft Merger Agreement. During the meeting, the meeting participants discussed Great Ajax’s preference for a fixed exchange ratio, certain tax matters, qualifiers and other matters with respect to certain of the representations and warranties, and additional matters regarding interim operating covenants. The meeting participants negotiated a number of points in the Draft Merger Agreement, including with respect to terms that would allow Great Ajax to continue operating in the ordinary course of its business between signing of the Merger Agreement and closing of the Merger.

Following this meeting, a representative of Piper Sandler discussed with representatives of EFC and KBW Great Ajax’s preference for a fixed exchange ratio in the Merger Agreement. In response, EFC confirmed its agreement to a fixed exchange ratio structure.

Later that afternoon, the Great Ajax Board convened for a telephonic meeting. All of the members of the Great Ajax Board were in attendance. Also attending, at the invitation of the Great Ajax Board, were Great Ajax’s Chief Financial Officer, the Great Ajax Secretary, as well as representatives of Mayer Brown, Piper Sandler and Venable, Great Ajax’s Maryland counsel. A representative of Venable provided an overview of the Great Ajax Board members’ fiduciary duties under Maryland law in connection with the EFC Proposed Transaction. A discussion ensued and the directors asked questions, which the representative of Venable answered. After confirming the directors did not have further questions, the Venable representatives left the meeting. Piper Sandler’s representatives joined the meeting and provided an update on the status of the EFC Proposed Transaction. Then, a representative of Mayer Brown provided a review of the material terms of the Draft Merger Agreement, which was followed by a discussion during which the directors asked questions of the representative of Mayer Brown, which such representative answered. Finally, members of the Great Ajax Board discussed process and timing of the next steps.

That day, representatives of Mayer Brown and Deloitte held a video meeting to discuss the potential application of Rule 280G in the context of the transaction. The meeting and the preliminary analysis performed determined that no excess parachute payments would be anticipated.

On the morning of June 29, 2023, representatives of EFC, KBW and Piper Sandler held a telephonic meeting regarding valuation issues. During this meeting, the participants in the meeting reviewed fair value estimates for a number of mortgage loan assets held by Great Ajax, as well as the terms of certain outstanding Great Ajax securities.

Also that morning, representatives of EFC discussed with Piper Sandler an extension of the Exclusivity Period until June 30, 2023. With the approval of Great Ajax, Piper Sandler confirmed the extension. Representatives of Great Ajax management discussed these developments with Mr. Friedman. the Great Ajax Special Committee subsequently approved the extension.

Representatives of Piper Sandler reviewed EFC’s proposals regarding valuation and the exchange ratio and discussed valuation methodologies of Piper Sandler’s fairness assessment. Representatives of Mayer Brown reviewed the recent changes made in the Draft Merger Agreement. A discussion ensued. The directors discussed whether they were prepared to move forward with the EFC Proposed Transaction given the proposed exchange ratio. The Great Ajax Board concluded that the proposed exchange ratio was preferable to the alternatives but instructed Mr. Mendelsohn and Piper Sandler to continue negotiating to find paths to increase the proposed valuation.

Later that evening, Piper Sandler acted on the Great Ajax Board’s instruction and continued negotiating with EFC and KBW to increase the proposed valuation. Ultimately, the valuation remained the same, but EFC agreed to pay Great Ajax Stockholders certain contingent cash consideration that would be based on the outcome of certain transactions that were anticipated to be completed by Great Ajax prior to the Closing.

That night, representatives of Mayer Brown circulated to V&E a revised draft of the Draft Merger Agreement, including a contingent cash consideration provision, and a revised version of the Great Ajax Disclosure Letter responding to comments received from V&E.

On the morning of June 30, 2023, a representative of V&E reached out to Mayer Brown to note two points that would be reflected in forthcoming changes in the Draft Merger Agreement: (i) EFC’s request to ensure that Great Ajax’s liquidity maintenance covenant will be required to be maintained on a daily basis and (ii) in light of the proposed exchange ratio, consummation of the transaction would not require a vote of EFC shareholders.

Great Ajax agreed to the proposed changes to the Draft Merger Agreement, provided that the liquidity maintenance covenant was made subject to a five-day cure period.

Later that morning, the Great Ajax Special Committee held a video meeting, attended by all of the members of the Great Ajax Special Committee. Also in attendance, at the invitation of the Great Ajax Special Committee, were representatives of BTIG, Sheppard Mullin and the Great Ajax Secretary. Representatives of BTIG presented materials prepared by BTIG that were previously circulated to the Great Ajax Special Committee. BTIG’s presentation included an overview of the key terms of the EFC Proposed Transaction, including the merger consideration, a sensitivity analysis of the merger consideration based on various EFC stock prices, an analysis of premiums paid in selected acquisitions transactions, a review of Great Ajax and EFC historical stock prices, trading trends and relative valuation levels and BTIG’s financial analysis of each of Great Ajax and EFC. Following this presentation, at the request of the Great Ajax Special Committee, BTIG delivered to the Great Ajax Special Committee its oral opinion, subsequently confirmed by delivery of a written opinion dated as of June 30, 2023, to the effect that, based on and subject to the assumptions made, procedures followed, factors considered, limitations of the review undertaken and qualifications contained in such opinion, as of the date of such opinion the Merger Consideration to be received by the Great Ajax Stockholders pursuant to the Merger Agreement was fair, from a financial point of view, to the Great Ajax Stockholders (other than holders of Cancelled Shares). BTIG then answered questions from the members of the Great Ajax Special Committee.

Also on June 30, 2023, Great Ajax and EFC held a telephonic meeting regarding valuation.

Mr. Friedman confirmed the members of the Great Ajax Special Committee had no further questions for the BTIG representatives and the BTIG representatives then left the meeting. Following the departure of

the BTIG representatives, the members of the Great Ajax Special Committee discussed the fairness of the Merger Agreement, and the relevant conflicts of interest within the Great Ajax Board. After careful deliberations, the Great Ajax Special Committee resolved (i) that the Merger Agreement and the Merger are advisable and in the best interests of Great Ajax and the Great Ajax Stockholders (other than the related parties and the holders of the Cancelled Shares), (ii) to recommend to the Great Ajax Board that the Merger be approved by the Great Ajax Board and submitted to the Great Ajax Stockholders for their approval and that the Great Ajax Board recommend that the Great Ajax Stockholders approve the same, and (iii) to recommend to the Great Ajax Board that the Great Ajax Board approve and authorize Great Ajax to enter into, execute and deliver the Merger Agreement.

Later that afternoon, the Great Ajax Board held a video meeting, with all but one of the members of the Great Ajax Board in attendance. At the invitation of the Great Ajax Board, Great Ajax’s Chief Financial Officer, the Great Ajax Secretary, as well as representatives of Mayer Brown, Piper Sandler and BTIG were in attendance. Also in attendance, at the invitation of the Great Ajax Board, was a representative from Flexpoint Ford, as an observer on behalf of the member of the Great Ajax Board who could not attend the meeting.

Representatives of Mayer Brown reviewed the recent changes to the Draft Merger Agreement and the status of the negotiations between the parties. Representatives of BTIG summarized BTIG’s presentation to the Great Ajax Special Committee and presented to the Great Ajax Board a summary of BTIG’s fairness opinion to the Great Ajax Special Committee. Mr. Friedman then reported the Great Ajax Special Committee’s conclusion that the Merger Agreement and the Merger are advisable and in the best interests of Great Ajax and the Great Ajax Stockholders (other than the related parties and the holders of the Cancelled Shares) and its recommendation that the Great Ajax Board approve and authorize Great Ajax to enter into, execute and deliver the Merger Agreement, approve the Merger and direct that the Merger be submitted to the Great Ajax Stockholders for their approval and that the Great Ajax Board recommend that the Great Ajax Stockholders approve the same.

Representatives of Piper Sandler delivered a presentation to the Great Ajax Board. The presentation included an overview of the EFC Proposed Transaction, the calculations and analysis that led to the determination of the exchange ratio and the Merger Consideration, overview of Great Ajax and EFC’s historical financial profile and stock price performance, comparable group analysis, analyst estimates and projections. Then, Piper Sandler provided an oral summary of Piper Sandler’s fairness opinion, stating that as of June 30, 2023 and based upon and subject to the various assumptions, qualifications, limitations and other matters set forth therein, the Merger Consideration to be received by the Great Ajax Stockholders pursuant to the Merger Agreement is fair from a financial point of view to the Great Ajax Stockholders (other than holders of Cancelled Shares).

The Great Ajax Board deliberated and discussed the EFC Proposed Transaction. All the present members of the Great Ajax Board then resolved that (i) the terms and conditions of the Merger Agreement and the Merger and any and all actions heretofore taken or hereafter to be taken by the Great Ajax Special Committee or any officer of Great Ajax in connection with the consummation of the Merger Agreement and the Merger are approved and ratified, (ii) the Merger Agreement and the Merger are advisable and in the best interests of Great Ajax and the Great Ajax Stockholders, (iii) the Merger be submitted for consideration at a special meeting of the Great Ajax Stockholders for approval by Great Ajax Stockholders entitled to vote thereon and that (iv) it is recommended that Great Ajax Stockholders vote in favor of the Merger.

After the conclusion of the meeting, BTIG and Piper Sandler provided their written fairness opinions to the Great Ajax Special Committee and Great Ajax respectively confirming their oral opinions rendered earlier in the day.

The member of the Great Ajax Board that was not able to attend the June 30 Great Ajax Board meeting was subsequently brought up to speed by the Flexpoint Ford observer, Mr. Mendelsohn and representatives of Mayer Brown, reviewed the Merger Agreement and the presentation from Piper Sandler, and was able to ask questions and receive answers from Mr. Mendelsohn and Mayer Brown to his satisfaction.

The full Great Ajax Board executed a unanimous written consent to the effect described above which included additional resolutions related to the proposed transaction, and which were discussed and approved by the Great Ajax Board at the meeting.

The Great Ajax Special Committee and the Great Ajax Board also considered a variety of risks and other potentially negative factors in considering the Merger Agreement and the transactions, including the Merger, contemplated by the Merger Agreement, including, but not limited to, the following material factors:

The foregoing discussion of the factors considered by the Great Ajax Special Committee and the Great Ajax Board is not intended to be exhaustive and is not provided in any specific order or ranking, but rather includes material factors considered by the Great Ajax Special Committee and the Great Ajax Board. In view of the wide variety of factors considered in connection with their respective evaluation of the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement, and the complexity of these matters, the Great Ajax Special Committee and the Great Ajax Board did not consider it practical to, and did not attempt to, quantify, rank or otherwise assign any relative or specific weights or values to the different factors considered and individuals may have given different weights to different factors. The Great Ajax Special Committee and the Great Ajax Board conducted an overall review of the factors considered and determined that, in the aggregate, the potential benefits considered outweighed the potential risks or possible negative consequences of approving the Merger Agreement and the transactions, including the Merger, contemplated by the Merger Agreement.

At its meeting on June 29, 2023, after careful consideration, the EFC Board unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger and the EFC Stock Issuance, are in the best interests of EFC, and (ii) approved the Merger Agreement and the transactions contemplated thereby, including the Merger and the EFC Stock Issuance.

In evaluating the Merger Agreement and the EFC Stock Issuance, the EFC Board consulted with senior management and outside legal and financial advisors and carefully considered numerous factors that the EFC Board viewed as supporting its decision, including, but not limited to, the following material factors:

The EFC Board considered that the Merger is expected to provide a number of significant benefits to EFC and its stockholders, including the following:

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the Merger would enable EFC to effectively raise a relatively large amount of common equity capital at a premium to what EFC would be expected to achieve in the public markets;

The foregoing discussion of the factors considered by the EFC Board is not intended to be exhaustive and is not provided in any specific order or ranking, but rather includes material factors considered by the EFC Board. In view of the wide variety of factors considered in connection with its evaluation of the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement, and the complexity of these matters, the EFC Board did not consider it practicable to, and did not attempt to, quantify, rank or otherwise assign any relative or specific weights or values to the factors considered, and individual directors may have held varied views of the relative importance of the factors considered and given different weights or values to different factors. The EFC Board viewed its position and recommendation as being based on an overall review of the totality of the information available to it and determined that, in the aggregate, the potential benefits considered outweighed the potential risks or possible negative consequences of approving the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement.

The full text of Piper Sandler’s written opinion, dated June 30, 2023, to the Great Ajax Board, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Piper Sandler in connection with such opinion, is attached to this proxy statement/prospectus as Annex B. The description of Piper Sandler’s opinion set forth in this proxy statement/prospectus is qualified in its entirety by reference to the full text of Piper Sandler’s opinion. Piper Sandler’s opinion was provided to the Great Ajax Board (in its capacity as such) for its information in connection with its evaluation of the Merger Consideration from a financial point of view and did not address any other

In arriving at its opinion, Piper Sandler reviewed a draft, dated June 29, 2023, of the Merger Agreement and certain publicly available business and financial information relating to Great Ajax and EFC. Piper Sandler also reviewed certain other information relating to Great Ajax and EFC, including (i) the Great Ajax Projections relating to Great Ajax for the fiscal years ending December 31, 2023 through December 31, 2025 prepared and provided to Piper Sandler by the senior management of Great Ajax and (ii) publicly available mean and median analyst estimates relating to EFC for the fiscal years ending December 31, 2023 through December 31, 2025 (which are referred to in this section as the “EFC Estimates”). Piper Sandler also discussed with certain members of the senior management of Great Ajax and its representatives the business, financial condition, results of operations and prospects of Great Ajax and held similar discussions with certain members of the senior management of EFC and its representatives regarding the business, financial condition, results of operations and prospects of EFC. Piper Sandler also considered certain financial and stock market data of Great Ajax and EFC, and Piper Sandler compared that data with similar data for other companies with publicly traded equity securities in businesses Piper Sandler deemed similar to those of Great Ajax and EFC, respectively, and Piper Sandler considered, to the extent publicly available, the financial terms of certain other business combinations and other transactions which had been effected. Piper Sandler also considered such other information, financial studies, analyses and investigations and financial, economic and market criteria which it deemed relevant.

In connection with its review, Piper Sandler did not independently verify any of the foregoing information and, with Great Ajax’s consent, Piper Sandler assumed and relied upon such information being complete and accurate in all respects material to Piper Sandler’s analyses and opinion. With respect to the foregoing information, the respective senior managements of Great Ajax and EFC confirmed to Piper Sandler that such information reflected (or, in the case of the publicly available EFC Estimates referred to above, were consistent with) the best currently available projections, estimates and judgements of those respective senior managements as to the future financial performance of Great Ajax and EFC, respectively. At Great Ajax’s direction, Piper Sandler assumed that the Great Ajax Projections and the EFC Estimates were a reasonable basis to evaluate Great Ajax, EFC and the proposed Merger and, at Great Ajax’s direction, Piper Sandler relied upon the Great Ajax Projections and the EFC Estimates for purposes of its analyses and opinion.

As set forth in the Merger Agreement, to the extent Great Ajax effectuates the repurchase of certain securities on the terms set forth in the Great Ajax Disclosure Letter prior to the closing of the Merger, EFC will deliver the Contingent Cash Purchase Price to the Great Ajax Stockholders as part of the Merger Consideration. At Great Ajax’s direction and with Great Ajax’s consent, Piper Sandler assumed for purposes of its analyses that the Contingent Cash Purchase Price would be zero. In addition, for purposes of its analyses and opinion, Piper Sandler was advised and Piper Sandler assumed that the proposed Merger would qualify as a “reorganization” within the meaning of Section 368(a) of the Code. Piper Sandler also assumed, with Great Ajax’s consent, that, in the course of obtaining any regulatory or third-party consents, approvals or agreements in connection with the proposed Merger, no modification, delay, limitation, restriction or condition would be imposed that would have an adverse effect on Great Ajax, EFC or the contemplated benefits of the proposed Merger and that the proposed Merger would be consummated in compliance with all applicable laws and regulations and in accordance with the terms of the Merger Agreement without waiver, modification or amendment of any term, condition or agreement thereof that is material to Piper Sandler’s analyses or opinion. In addition, Piper Sandler was not requested to make, and did not make, an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Great Ajax or EFC, nor was Piper Sandler furnished with any such evaluations or appraisals. With Great Ajax’s consent, Piper Sandler further assumed that the final form of the Merger Agreement, when executed by the parties thereto, would conform to the draft reviewed by Piper Sandler in all respects material to its analyses and opinion.

Piper Sandler’s opinion addressed only the fairness, from a financial point of view, to the Great Ajax Stockholders, other than the holders of Cancelled Shares, of the Merger Consideration to be received by

Piper Sandler’s opinion was necessarily based on information made available to Piper Sandler as of the date of Piper Sandler’s opinion and upon financial, economic, market and other conditions as they existed and could be evaluated on that date. It should be understood that Piper Sandler has not undertaken, and is under no obligation, to update, revise, reaffirm or withdraw its opinion or otherwise comment on or consider events occurring or coming to its attention after the date of its opinion. Piper Sandler did not express any opinion as to what the value of shares of EFC Common Stock actually would be when issued to the Great Ajax Stockholders pursuant to the Merger Agreement or the prices or ranges of prices at which shares of Great Ajax Common Stock or EFC Common Stock might be purchased or sold at any time. Piper Sandler assumed that the shares of EFC Common Stock to be issued in the proposed Merger would be approved for listing on the NYSE prior to the consummation of the proposed Merger. Piper Sandler’s opinion did not address the relative merits of the proposed Merger as compared to alternative transactions or strategies that might be available to Great Ajax, nor did it address the underlying business decision of the Great Ajax Board or Great Ajax to proceed with or effect the proposed Merger.

Piper Sandler performed separate dividend discount analyses for each of Great Ajax and EFC.

The Great Ajax Special Committee retained BTIG to act as its financial advisor in connection with a potential transaction such as the Merger. In selecting BTIG, the Great Ajax Special Committee considered, among other things, (i)  the consensus of the Great Ajax Special Committee that BTIG would be the best suited based on the expertise and experience of the team proposed by BTIG and (ii) that BTIG is a reputable investment banking firm with experience advising companies in the financial services sector and providing strategic advisory services in general. BTIG, as part of its investment banking business, is continuously engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for corporate and other purposes.

In arriving at the BTIG Opinion, BTIG, with respect to Great Ajax:

BTIG also, with respect to EFC:

BTIG also:

In rendering the BTIG Opinion, BTIG assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available, supplied or otherwise made available to or discussed with BTIG by Great Ajax, and BTIG relied upon the assurances of the management of Great Ajax that they were not aware of any facts or circumstances that would make such information provided by Great Ajax inaccurate or misleading in any material respect. With respect to the Great Ajax Projections, BTIG was advised by the management of Great Ajax, and assumed, that the Great Ajax Projections were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of Great Ajax of the future financial performance of Great Ajax. BTIG assumed no responsibility for and BTIG expressed no view as to any such projections or estimates or the assumptions on which they are based. In addition, BTIG assumed, as advised by Great Ajax, the accuracy of the representations and warranties contained in the Merger Agreement and all agreements related thereto and that the Merger will be consummated in accordance with the terms set forth in the Merger Agreement, without any waiver, amendment or delay of any of the terms or conditions thereof, including, among other things, that the Merger will be treated as a tax-free reorganization, pursuant to the Code. BTIG also assumed, as advised by Great Ajax, that in connection with the receipt of all the necessary governmental, regulatory or other approvals and consents required for the proposed Merger, no delays, limitations, conditions or restrictions will be imposed that would have an adverse effect on Great Ajax, EFC or the contemplated benefits expected to be derived in the proposed Merger. With the Great Ajax Special Committee’s consent, BTIG assumed that any adjustments to the Merger Consideration pursuant to Section 3.1(c) of the Merger Agreement or otherwise would not be material to BTIG’s analyses or its opinion and that the Contingent Cash Purchase Price will be zero dollars. BTIG also assumed, as advised by Great Ajax, that (a) the final executed Merger Agreement will not differ in any material respect from the Draft Merger Agreement reviewed by BTIG, and (b) the final Merger Agreement would reflect the Exchange Ratio of 0.5308.

BTIG further relied upon, without independent verification, the assessment of Great Ajax and its legal, tax, regulatory and accounting advisors with respect to legal, tax, regulatory and accounting matters. BTIG expressed no view or opinion as to any terms or other aspects of the Merger (other than the Merger Consideration to the extent expressly specified in the BTIG Opinion), including, without limitation, the form or structure of the Merger or any adjustments to the Merger Consideration set forth in Section 3.1(c) of the Merger Agreement or otherwise. BTIG was not requested to, and it did not, participate in the negotiation of the terms of the Merger, nor was BTIG requested to, and it did not, provide any advice or services in connection with the Merger other than the delivery of the BTIG Opinion, and BTIG expressed no view or opinion as to any such matters. The BTIG Opinion is limited to the fairness, from a financial point of view, to the Great Ajax Stockholders (other than holders of Cancelled Shares) as of the date of the BTIG Opinion of the Merger Consideration to be received by the Great Ajax Stockholders pursuant to the Merger Agreement, and no view or opinion is expressed with respect to any consideration or other amounts to be received in connection with the Merger by the holders of any other class of securities or by any creditors or other constituencies of any party. In addition, BTIG expressed no view or opinion with respect to the fairness (financial or otherwise) of the amount, nature or any other aspect of any termination fee and/or reimbursement of certain expenses that may be paid by Great Ajax to Great Ajax Manager prior to the Closing, as described under “The Merger Agreement  —  Amendment to Management Agreement,” or any compensation to any of the officers, directors or employees of any party to the Merger, or any class of such persons, whether relative to the Merger Consideration or otherwise. BTIG did not make any independent valuation or appraisal of the assets or liabilities (including any contingent, derivative or other off-balance-sheet assets and liabilities) of Great Ajax or EFC, nor was it furnished with any such valuations or appraisals,

The BTIG Opinion does not address the relative merits of the Merger in comparison to other strategies or transactions that might have been available to Great Ajax or in which Great Ajax might have engaged or as to the underlying business decision of Great Ajax to proceed with or effect the Merger. In addition, the BTIG Opinion does not in any manner address the prices or volumes at which the Great Ajax Common Stock or the EFC Common Stock will trade at any time, including following the announcement or consummation of the Merger.

In conducting its analysis of Great Ajax, BTIG used three primary methodologies: selected public comparable company analysis; selected precedent transactions analysis; and dividend discount analysis. No individual methodology was given a specific weight, nor can any methodology be viewed individually. Additionally, no company or transaction used in any analysis as a comparison is identical to Great Ajax or the Merger, and they all differ in material ways. Accordingly, an analysis of the results described below is not mathematical; rather, it involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the public trading value of the selected companies or transactions to which they are being compared. BTIG used these analyses to determine the impact of various operating metrics on the implied per share common equity value of Great Ajax. Each of these analyses yielded a range of implied per share common equity values, and therefore, such implied per share equity value ranges developed from these analyses were viewed by BTIG collectively and not individually. In delivering the BTIG Opinion to the Great Ajax Special Committee, BTIG utilized the Great Ajax Projections and estimates regarding Great Ajax prepared by Great Ajax and supplied to BTIG by Great Ajax.

The selected transactions used in BTIG’s financial analysis consisted of transactions that were announced after the Federal Reserve’s increase in interest rates on March 17, 2022.

BTIG chose the selected transactions based upon its experience and knowledge of companies in the mortgage REIT industry. Although none of the selected transactions are directly comparable to the Merger, nor are any of the target companies directly comparable to Great Ajax, BTIG selected transactions involving target companies with similar characteristics to the characteristics identified above in the selected public comparable company analysis.