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Item 1. Business

2025-06-23 compared with 2025-03-31 · 456 added, 264 removed, 86 unchanged (89% of the section changed)

Except where the context suggests otherwise references in this Annual Report on Form 10-K to "we," "us," and "our" refer to Ellington Credit Company (formerly Ellington Residential Mortgage REIT) and its consolidated subsidiaries, including Ellington Residential Mortgage LP, our operating partnership subsidiary, which we refer to as our "Operating Partnership." We hold all of our assets and conduct all of our operations through our Operating Partnership.

"Manager" refers to Ellington Credit Company Management LLC, our external manager, and "Ellington" refers to Ellington Management Group, L.L.C.

and its affiliated investment advisory firms, including our Manager.

In certain instances, references to our Manager and services to be provided to us by our Manager may also include services provided by Ellington and its other affiliates from time to time.

Except where the context suggests otherwise references in this Transition Report on Form 10-K to the "Fund," "we," "us," and "our" refer to Ellington Credit Company (formerly Ellington Residential Mortgage REIT) and its consolidated subsidiaries, including Ellington Residential Mortgage LP, our operating partnership subsidiary, which we refer to as our "Operating Partnership." We hold all of our assets and conduct all of our operations through our Operating Partnership.

"Adviser" refers to Ellington Credit Company Management LLC, our external manager, and "Ellington" refers to Ellington Management Group, L.L.C.

and its affiliated investment advisory firms, including the Adviser.

In certain instances, references to the Adviser and services to be provided to us by the Adviser may also include services provided by Ellington and its other affiliates from time to time.

References to "Blackstone" mean The Blackstone Group Inc.

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Special Note Regarding Forward-Looking Statements

When used in this Annual Report on Form 10-K, in future filings with the Securities and Exchange Commission, or the "SEC," or in press releases or other written or oral communications, statements which are not historical in nature, including those containing words such as "believe," "expect," "anticipate," "estimate," "project," "plan," "continue," "intend," "should," "would," "could," "goal," "objective," "will," "may," "seek," or similar expressions or their negative forms or references to strategy, plans or intentions, are intended to identify "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, or the "Securities Act," and Section 21E of the Securities Exchange Act of 1934, as amended, or the "Exchange Act," and, as such, may involve known and unknown risks, uncertainties and assumptions.

When used in this Transition Report on Form 10-K, in future filings with the Securities and Exchange Commission, or the "SEC," or in press releases or other written or oral communications, statements which are not historical in nature, including those containing words such as "believe," "expect," "anticipate," "estimate," "project," "plan," "continue," "intend," "should," "would," "could," "goal," "objective," "will," "may," "seek," or similar expressions or their negative forms or references to strategy, plans or intentions, are intended to identify "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, or the "Securities Act," and Section 21E of the Securities Exchange Act of 1934, as amended, or the "Exchange Act," and, as such, may involve known and unknown risks, uncertainties and assumptions.

Forward-looking statements are based on our beliefs, assumptions and expectations of our future operations, business strategies, performance, financial condition, liquidity and prospects, taking into account information currently available to us.

These beliefs, assumptions, and expectations are subject to numerous risks and uncertainties and can change as a result of many possible events or factors, not all of which are known to us.

If a change occurs, our business, financial condition, liquidity, results of operations and strategies may vary materially from those expressed or implied in our forward-looking statements or from our beliefs, expectations, estimates and projections and, consequently, you should not rely on these forward-looking statements as predictions of future events.

If a change occurs, our business, financial condition, liquidity, results of operations and strategies may vary materially from those expressed or implied in our forward-looking statements.

The following factors are examples of those that could cause actual results to vary from those stated or implied by our forward-looking statements:

changes in interest rates and the market value of our securities or our investments;

our use of and dependence on leverage;

future changes with respect to the Federal National Mortgage Association, or "Fannie Mae," and Federal Home Loan Mortgage Corporation, or "Freddie Mac," and related events, including the lack of certainty as to the future roles of these entities and the U.S.

Government in the mortgage market and changes to legislation and regulations affecting these entities;

market volatility;

our ability to pivot our investment strategy to focus on CLOs;

a deterioration in the CLO market;

our ability to utilize our U.S.

federal and state net operating losses, or "NOLs";

our ability to convert to a closed-end fund/regulated investment company;

our ability to exit investments in a timely and cost-effective manner;

changes in our investment objectives and strategy;

changes in the prepayment rates on the mortgage loans underlying the securities we own;

changes in rates of default and/or recovery rates;

our ability to borrow to finance our assets and the available terms for such borrowings;

changes in government regulations affecting our business;

our ability to maintain our exclusion from registration under the Investment Company Act of 1940, as amended, or the "1940 Act," and following our conversion to a closed-end fund/regulated investment company, our ability to qualify as an investment company under the 1940 Act;

risks associated with investing in real estate assets, including changes in business conditions;

and other changes in markets conditions and trends, such as changes to fiscal or monetary policy, heightened inflation, slower growth or recession, and currency fluctuations.

These and other risks, uncertainties and factors, including the risk factors described under Item 1A of this Annual Report on Form 10-K, could cause our actual results to differ materially from those projected or implied in any forward-looking statements we make.

All forward-looking statements speak only as of the date on which they are made.

New risks and uncertainties arise over time, and it is not possible to predict those events or how they may affect us.

Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Ellington Credit Company (formerly Ellington Residential Mortgage REIT) is a Maryland company that was formed in August 2012 through a strategic venture among affiliates of Ellington, an investment management firm and registered investment adviser with a 30-year investment history, and the Blackstone Funds.

We historically specialized in acquiring, investing in, and managing residential mortgage- and real estate-related assets, and elected to be taxed as a real estate investment trust, or "REIT," under the Internal Revenue Code of 1986, as amended (the "Code").

On March 29, 2024, our Board of Trustees approved a strategic transformation, the "CLO Strategic Transformation," of our investment strategy to focus on corporate collateralized loan obligations, or "CLOs." In connection with the CLO Strategic

Transformation, we revoked our election to be taxed as a REIT for tax year 2024, rebranded as Ellington Credit Company, and began operating as a taxable C-Corp.

As a taxable C-Corp, we conduct our operations so that neither we nor any of our subsidiaries are required to register as an investment company under the 1940 Act.

This includes holding a core portfolio of liquid Agency MBS pools in order to maintain our exemption from the 1940 Act.

During this time, we also plan to take advantage of our significant existing net operating loss carryforwards to offset the majority of our U.S.

changes in interest rates and the market value of our investments, market volatility, changes in the default rates on corporate loans, our ability to borrow to finance our assets, changes in government regulations affecting our business, a deterioration in the market for collateralized loan obligations, our ability to adapt to the new regulatory regime associated with our conversion to a closed-end fund/RIC, potential business disruption related to our conversion to a closed-end fund/RIC, ability to achieve the anticipated benefits of our conversion to a closed-end fund/RIC, the acceptance by the IRS of the proposed change to our tax year, and other changes in market conditions and economic trends, such as changes to fiscal or monetary policy, heightened inflation, increased tariffs, slower growth or recession, and currency fluctuations.

Furthermore, as stated above, forward-looking statements are subject to numerous risks and uncertainties, including, among other things, those described under the heading “Risk Factors” in our Registration Statement on Form N-2, which can be accessed through the link to our SEC filings under "For Investors" on our website (at www.ellingtoncredit.com) or at the SEC's website (www.sec.gov).

Other risks, uncertainties, and factors that could cause actual results to differ materially from those projected or implied may be described from time to time in reports we file with the SEC, and is not possible for us to predict or identify them all.

We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

This Transition Report on Form 10-K and the information contained herein do not constitute an offer of any securities or solicitation of an offer to purchase securities.

Explanatory Note

We are filing this Transition Report on Form 10-K for the period from January 1, 2025 to March 31, 2025 (the “Transition Period”) in conjunction with a change in our fiscal year end.

Effective April 1, 2025, we transitioned from a fiscal year ending December 31 to a fiscal year ending March 31, aligning with changes to our corporate structure and our registration as an investment company under the Investment Company Act of 1940, as amended (the "1940 Act").

These changes mark the culmination of the CLO Strategic Transformation (defined below).

This Transition Report on Form 10-K is our final periodic report filing under the Exchange Act.

Beginning with our fiscal year starting April 1, 2025, we will no longer file reports under the Exchange Act.

Instead, we will file periodic and other reports with the SEC as required of registered investment companies, including Form N-CSR, Form N-PORT, and Form N-CEN.

The Fund’s registration statement on Form N-2 contains important information relating to the Fund’s investment objectives and principal strategies, as well as a description of the Fund’s investment process and the primary risks associated with an investment in the Fund’s securities, which an investor should know before investing in the Fund’s securities.

Ellington Credit Company (formerly Ellington Residential Mortgage REIT) was formed in August 2012 as a Maryland company through a strategic venture among affiliates of Ellington, an investment management firm and registered investment adviser with a 30-year investment history, and the Blackstone Funds.

We historically specialized in acquiring, investing in, and managing residential mortgage- and real estate-related assets, and elected to be taxed as a real estate investment trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code").

On March 29, 2024, our Board of Trustees (the “Board”) approved a strategic transformation (the “CLO Strategic Transformation”) of our investment strategy to focus on corporate collateralized loan obligations ("CLOs").

In connection with the CLO Strategic Transformation, we revoked our REIT election beginning with tax year 2024, rebranded as Ellington Credit Company (from Ellington Residential Mortgage REIT), and operated as a taxable C-Corporation during the interim period from January 1, 2024 through March 31, 2025.

During this interim period, in addition to accumulating a CLO portfolio, we continued to hold a core portfolio of liquid Agency RMBS pools so that neither we nor any of our subsidiaries were required to register as an investment company under the 1940 Act.

We also took advantage of our significant existing net operating loss carryforwards during this period to offset the majority of our U.S.

federal taxable income.

On April 1, 2025, we intend to convert to a Delaware closed-end fund registered under the 1940 Act that will elect to be treated as a regulated investment company (a "RIC") under the Code (such actions, collectively, the "Conversion").

We obtained shareholder approval of certain matters related to the Conversion at a special meeting of shareholders held on January 17, 2025 (the "Special Meeting").

In conjunction with the Conversion, we intend to liquidate the vast majority of our remaining mortgage- and real estate-related assets and, upon the effectiveness of the Conversion, we intend to operate so as to qualify to be taxed as a RIC under subchapter M of the Code.

After the Conversion, we would generally not be subject to corporate tax.

Our primary objective is to generate attractive current yields and risk-adjusted total returns for our shareholders by making investments that we believe compensate us appropriately for the associated risks.

Following the CLO Strategic Transformation, we now seek to attain this objective by constructing and actively managing a portfolio of corporate CLOs, primarily mezzanine debt and equity tranches, which are typically collateralized by portfolios consisting primarily of below-investment-grade senior secured loans with a large number of discrete underlying borrowers across various industry sectors.

CLOs are a form of asset-backed security collateralized by syndicated corporate loans which receive interest and principal cash flows from these underlying loans.

Senior debt tranches are paid first, then mezzanine debt tranches, and finally, equity.

Additionally, we may also invest in CLO loan accumulation facilities, which are entities that acquire corporate loans and other similar corporate credit-related assets in anticipation of ultimately collateralizing a CLO transaction, as well as other related assets.

Our Manager and Ellington

We are externally managed and advised by our Manager, an affiliate of Ellington, pursuant to a management agreement.

Our Manager was formed solely to serve as our manager and does not have any other clients.

In addition, our Manager does not have any employees of its own and instead relies on the employees of Ellington to perform its obligations to us.

The members of our management team are Michael Vranos, founder and Chief Executive Officer of Ellington, who serves as our Co-Chief Investment Officer and as a member of our Board of Trustees;

Laurence Penn, Vice Chairman and Chief Operating Officer of Ellington, who serves as our President and Chief Executive Officer and as a member of our Board of Trustees;

Mark Tecotzky, Vice Chairman—Co-Head of Credit Strategies of Ellington, who serves as our Co-Chief Investment Officer;

Christopher Smernoff, who serves as our Chief Financial Officer;

On August 13, 2024, the Board approved the Advisory Agreement (the “Advisory Agreement”) with Ellington Credit Company Management LLC (the “Adviser”) that would take effect upon the Conversion (as defined below), subject to the further approval by our shareholders.

Such approval was subsequently obtained at a special meeting of our shareholders held on January 17, 2025 (the “Special Meeting”).

At the Special Meeting, our shareholders also approved other related matters that would allow us to convert to a registered closed-end investment company under the 1940 Act and thereby complete the CLO Strategic Transformation.

Effective as of April 1, 2025 (the "Conversion Date"), the Advisory Agreement between us and the Adviser was executed, and we became a Delaware statutory trust that is a non-diversified, closed-end management investment company registered as an investment company under the 1940 Act (such actions, together, the “Conversion”).

In connection with the Conversion, we changed our fiscal year end to March 31, such that our fiscal year now begins on April 1 of each year.

Shortly after the Conversion Date, we liquidated our remaining mortgage-related assets and began acquiring additional CLOs.

We intend to elect to be treated, and intend to qualify annually, as a regulated investment company (a “RIC”) under Subchapter M of the Code.

To be eligible to be treated as a RIC beginning on the Conversion Date, we have requested approval from the Internal Revenue Service ("IRS") to change our tax year to end on the day prior to the Conversion Date (i.e., March 31).

As a RIC, we generally will not have to pay corporate-level federal income tax on any net ordinary income or capital gain that we distribute to our stockholders as dividends if we meet certain source-of-income, distribution, and asset diversification requirements.

Our primary investment objectives are to generate attractive current yields and risk-adjusted total returns for our shareholders.

Following the Conversion, we seek to achieve our investment objectives by investing primarily in mezzanine debt and equity tranches of corporate CLOs, which are securitizations that are collateralized by portfolios of corporate credit assets.

These assets are primarily non-investment grade, first lien, senior secured corporate bank loans, although many CLOs may allocate a portion of their portfolios (typically below 10%) to other corporate credit assets, such as second lien or unsecured loans and/or secured or unsecured corporate bonds.

Each CLO is structured as multiple tranches which offer investors varying degrees of credit risk, maturity and yield characteristics.

CLO tranches are typically categorized as either senior debt, mezzanine debt, or subordinated/equity according to their relative seniority, payment priority and degree of risk.

If the collateral underlying a given CLO defaults or otherwise underperforms, scheduled payments to senior tranches of such CLO securitization take precedence over those of more junior tranches, such as mezzanine debt and equity tranches, which are the focus of our investment strategy.

The CLO securities in which we typically invest are unrated or rated below investment grade and are hence considered speculative with respect to timely payment of interest and repayment of principal.

We may also invest in other related securities and instruments that the Adviser believes are consistent with our investment objectives, including senior debt tranches of CLOs, loan accumulation facilities (“LAFs” or “warehouses”) and securities issued by other securitization vehicles, such as collateralized bond obligations (“CBOs”).

LAFs are entities that acquire corporate loans and other similar corporate credit-related assets in anticipation of ultimately collateralizing a CLO transaction.

The Adviser and Ellington

Effective as of the Conversion Date, we are externally managed and advised by the Adviser, who is an affiliate of Ellington, pursuant to the Advisory Agreement.

The Adviser does not have any other clients and does not have any employees of its own, rather, the Adviser relies on the employees of Ellington to perform its obligations to us.

The members of our management team are Michael Vranos, founder and Chief Executive Officer of Ellington, who serves as one of our Portfolio Managers and as a member of our Board;

Laurence Penn, Vice Chairman and Chief Operating Officer of Ellington, who serves as our President and Chief Executive Officer and as a member of our Board;

Gregory Borenstein, a Managing Director of Ellington, who serves as one of our Portfolio Managers;

and Mark Tecotzky, our Executive Vice President, who also serves as Vice Chairman of Ellington.

Vranos, Penn, Borenstein and Tecotzky are assisted by Christopher Smernoff, who serves as our Chief Financial Officer;

JR Herlihy, a Managing Director of Ellington, who serves as our Chief Operating Officer;

Daniel Margolis, General Counsel of Ellington, who serves as our General Counsel;

Vincent Ambrico, who serves as our Controller;

and Alaael-Deen Shilleh, Associate General Counsel of Ellington, who serves as our Associate General Counsel and Secretary.

Each of these individuals is an officer of our Manager.

Our Manager is responsible for administering our business activities and day-to-day operations and, pursuant to a services agreement between our Manager and Ellington, relies on the resources of Ellington to support our operations.

Alaael-Deen Shilleh, Associate General Counsel of Ellington, who serves as our Associate General Counsel and Secretary;

and Vincent Ambrico, who serves as our Controller.

Each of these individuals is an officer of the Adviser.

The Adviser is responsible for administering our business activities and day-to-day operations and, pursuant to a services agreement between the Adviser and Ellington, relies on the resources of Ellington to support our operations.

Ellington has well-established portfolio management resources for each of our targeted asset classes and an established infrastructure supporting those resources.

Through our relationship with our Manager, we benefit from Ellington's highly analytical investment processes, broad-based deal flow, extensive relationships in the financial community, financial and capital structuring skills, investment surveillance capabilities, and operational expertise.

Ellington's analytic approach to the RMBS investment process involves collection of substantial amounts of data regarding historical performance of RMBS collateral and RMBS market transactions.

Ellington’s approach to the CLO investment process is similar, with the analysis of CLO investments driven by models underpinned by substantial amounts of historical data on corporate loan and CLO performance including default, loss, recovery, and prepayment rates, as well as historical price action.

Ellington analyzes this data to identify possible relationships and trends and develops financial models used to support our investment and risk management process.

In addition, throughout Ellington's 30-year history of investing in RMBS and related derivatives and 12-year history of investing in corporate CLOs, it has developed strong relationships with a wide range of dealers and other market participants that provide Ellington access to a broad range of trading opportunities and market information.

In addition, through Ellington's 12-year investment history in the CLO market, and in structured products more broadly, it has developed strong relationships with a wide range of dealers and other market participants that provide Ellington access to a broad range of trading opportunities and market information.

As a result, Ellington provides us with access to a wide variety of asset acquisition and disposition opportunities and information that assist us in making asset management decisions across our targeted asset classes, which we believe provides us with a significant competitive advantage.

We also benefit from Ellington's finance, accounting, operational, legal, compliance, and administrative functions.

As of December 31, 2024, Ellington had over 160 employees and had assets under management of approximately $13.7 billion, of which (i) approximately $7.4 billion consisted of our company, as well as Ellington Financial Inc., a Delaware corporation that elected to be taxed as a REIT listed on the New York Stock Exchange, or the "NYSE," under the ticker "EFC,"

and various hedge funds and other alternative investment vehicles that employ financial leverage, and (ii) approximately $6.2 billion consisted of accounts that do not employ financial leverage.

We intend to capitalize on current market opportunities by utilizing an opportunistic strategy that we believe will enable us to generate attractive current yields and risk-adjusted total returns for our shareholders.

In particular, our strategy consists of:

• utilizing an investment model that focuses on security selection and allocates capital to assets that balance a range of corporate- and mortgage-related risks;

• acquiring and managing a portfolio of corporate CLOs, with an emphasis on CLO mezzanine debt and equity tranches, and related investments;

• actively managing an investment portfolio of Agency RMBS in order to maintain our exclusion from registration under the 1940 Act, prior to the Conversion becoming effective;

• opportunistically mitigating our interest rate, prepayment, and, to a lesser extent, credit risks, by using a variety of hedging instruments.

Our strategy is adaptable to changing market environments, subject to compliance with the tests that will enable us to maintain our exclusion from registration as an investment company under the 1940 Act until the Conversion is complete.

As a result, although we intend to focus on the acquisition and management primarily of CLOs, along with Agency MBS prior to our Conversion, our acquisition and management decisions will depend on prevailing market conditions and our targeted asset classes may vary over time in response to market conditions.

Our Manager is authorized to follow very broad investment guidelines and, as a result, we cannot predict our portfolio composition.

We may change our strategy and policies without a vote of our shareholders.

Moreover, although our independent trustees may periodically review our investment guidelines and our portfolio, they generally do not review our proposed asset acquisitions or asset management decisions.

Our investment philosophy primarily revolves around the pursuit of value across various types of CLO debt, CLO equity, MBS, and related assets.

As of March 31, 2025, Ellington had over 160 employees and had assets under management of approximately $14.9 billion, of which (i) approximately $7.6 billion consisted of our company, as well as Ellington Financial Inc., a Delaware corporation that elected to be taxed as a REIT listed on the New York Stock Exchange ("NYSE") under the ticker "EFC," and various hedge funds and other alternative investment vehicles that employ financial leverage;

and (ii) approximately $7.4 billion consisted of accounts that do not employ financial leverage.

Our primary investment objectives are to generate attractive current yields and risk-adjusted total returns for our shareholders.

We seek to achieve these objectives by acquiring and managing a portfolio of corporate CLOs, with an emphasis on CLO mezzanine debt and equity tranches, and related investments, and opportunistically mitigating our credit risk, foreign currency risk, and interest rate risk, by using a variety of hedging instruments.

Our acquisition and management decisions will depend on prevailing market conditions and our targeted asset classes may vary over time in response to market conditions.

The Adviser is authorized to follow very broad investment guidelines and, as a result, we cannot predict our portfolio composition.

Subject to the limitations of the 1940 Act, we may change our strategy and policies without a vote of our shareholders.

Moreover, although our independent trustees may periodically review our investment guidelines and our portfolio, they generally do not review individual acquisitions, dispositions, or many other management decisions.

Our investment philosophy primarily revolves around the pursuit of value across various types of CLO debt, CLO equity, and related assets, in both the U.S.

Within these sectors, we seek to make investments across a wide range of subsectors without any restriction as to ratings, structure, or position in the capital structure.

Over time and through market cycles, opportunities will present themselves in varying subsectors and in varying forms.

By rotating between and allocating among various strategies and adjusting the extent to which we hedge interest rate, prepayment, and credit risks, we believe that we will be able to capitalize on the disparities between these subsectors as well as on overall trends in the marketplace, and therefore provide better and more consistent returns.

By rotating between and allocating among various subsectors and adjusting the extent to which we hedge credit, foreign currency, and interest rate risk, we believe that we will be able to capitalize on the disparities between these subsectors as well as on overall trends in the marketplace, and therefore provide better and more consistent returns.

Disparities between targeted sectors vary from time to time and are driven by a combination of factors.

For example, as various CLO debt, CLO equity, and MBS sectors fall in and out of favor, the relative yields that the market demands for those sectors may vary.

For example, as various parts of the CLO capital structure fall in and out of favor, the relative yields that the market demands for those parts of the capital structure may vary.

In addition, our performance projections for certain sectors may differ from those of other market participants and such disparities will naturally cause us, from time to time, to gravitate towards certain sectors and away from others.

Disparities between CLO debt, CLO equity, and MBS sectors and individual securities within such sectors may also be driven by differences in collateral performance, in servicer or collateral manager behavior and in the structure of particular investments (for example, in the timing of cash flows), and we may believe that other market participants are overestimating or underestimating the value of these differences.

Furthermore, we believe that risk management, including opportunistic portfolio hedging and prudent financing and liquidity management, is essential for consistent generation of attractive current yields and risk-adjusted total returns.

Ellington's continued emphasis on and development of proprietary credit, MBS, interest rate, and prepayment models, as well as other proprietary research and analytics, underscores the importance it places on a disciplined and analytical approach to fixed income investing, especially in CLOs and MBS.

Our Manager uses Ellington's proprietary models to identify attractive assets, value these assets, monitor and forecast the performance of these assets, and opportunistically hedge our interest rate risk and yield spread risk, hedge our prepayment risk, and hedge our credit risk.

We leverage these skills and resources for purposes of attaining our objectives.

We believe that our Manager is uniquely qualified to implement our strategy.

Our strategy is consistent with Ellington's investment approach, which is based on its distinctive strengths in sourcing, analyzing, trading, and hedging for complex CLO, MBS and other mortgage- and non-mortgage-related products.

Disparities between CLO debt and CLO equity sectors and individual securities within such sectors may also be driven by differences in collateral performance, in servicer or collateral manager behavior and in the structure of particular investments (for example, in the timing of cash flows), and we may believe that other market participants are overestimating or underestimating the value of these differences.

Furthermore, we believe that risk

management, including opportunistic portfolio hedging and prudent financing and liquidity management, is essential for consistent generation of attractive current yields and risk-adjusted total returns.

The Adviser uses models (both Ellington's proprietary models and third-party models) to identify attractive assets, value these assets, monitor and forecast the performance of these assets, and opportunistically hedge our credit, credit spread, and interest rate risk, as applicable.

We believe that the Adviser is uniquely qualified to implement our strategy.

Our strategy is consistent with Ellington's investment approach, which is based on its distinctive strengths in sourcing, analyzing, trading, and hedging for structured products.

Furthermore, we believe that Ellington's extensive experience in buying, selling, analyzing, and structuring fixed income securities, coupled with its broad access to market information and trading flows, provides us with a steady flow of opportunities to acquire assets with favorable trade executions.

Our Targeted Assets

Asset Class Principal Assets

CLOs and Related Investments .

Collateralized loan obligation debt and equity tranches, or "CLOs."

CLO warehouse facilities, otherwise known as loan accumulation facilities ("LAFs");

Corporate debt and equity.

Agency RMBS .

Agency RMBS collateralized by fixed rate mortgage loans, adjustable rate mortgage loans, or "ARMs," or hybrid mortgage loans, reverse mortgages, or derivatives thereof, including:

whole and partial pool mortgage pass-through certificates;

Agency collateralized mortgage obligations, or "CMOs," including interest only securities, or "IOs," principal only securities, or "POs," inverse interest only securities, or "IIOs," and inverse floaters;

To-Be-Announced mortgage pass-through certificates, or "TBAs."

CLOs and Related Investments

Our targeted assets include collateralized loan obligation debt and equity tranches ("CLOs"), CLO warehouse facilities ("LAFs" or "warehouses"), and related corporate debt and equity assets.

A CLO is a form of structured finance security that is generally backed by a pool of corporate loans or similar corporate credit-related assets that serve as collateral.

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If the relevant collateral defaults or otherwise underperforms, payments to the more senior tranches of such securitizations take precedence over those of more junior tranches, such as mezzanine debt and equity tranches, which are the focus of our CLO investment strategy.

LAFs are generally short- to medium- term financing facilities provided by the investment bank that will ultimately serve as the arranger on a CLO transaction.

LAFs, or warehouses, are generally short- to medium- term financing facilities provided by the investment bank that will ultimately serve as the arranger on a CLO transaction.

Utilizing equity capital provided by the LAF investors and debt financing provided by the investment bank, LAFs acquire corporate loans and other similar corporate credit-related assets in anticipation of ultimately collateralizing a CLO transaction.

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Examples of corporate equity assets include common equity, preferred equity, and warrants (which are derivatives that typically give holders the right, but not the obligation, to buy a company’s common equity at a predetermined price before a specified expiration date).

Residential Mortgage Pass-Through Certificates— Residential mortgage pass-through certificates represent interests in "pools" of mortgage loans secured by residential real property where payments of both interest and principal, plus prepayments, on the underlying residential mortgage loans are made monthly to holders of the certificates, in effect "passing through" monthly payments made by the individual borrowers on the mortgage loans that underlie the securities, net of fees paid to the issuer/guarantor and servicers of the securities.

Collateralized Mortgage Obligations— CMOs are structured instruments representing interests in specified mortgage loan collateral.

CMO securitizations consist of multiple classes, or "tranches," of securities, with each tranche having specified characteristics based on the rules described in the securitization documents governing the division of the monthly principal and interest distributions, including prepayments, from the underlying mortgage collateral among the various tranches.

IOs are CMOs that only receive interest payments while POs receive only principal payments.

TBAs— In addition to investing in specific pools of Agency RMBS, we utilize forward-settling purchases and sales of Agency RMBS where the underlying pools of mortgage loans are TBAs.

Pursuant to these TBA transactions, we agree to purchase or sell, for future delivery, Agency RMBS with certain principal and interest terms and certain types of underlying collateral, but the particular Agency RMBS to be delivered is not identified until shortly before the TBA settlement date.

TBAs are generally liquid and have quoted market prices and represent the most actively traded class of RMBS.

TBA trading is based on the assumption that mortgage pools that are eligible to be delivered at TBA settlement are fungible and thus the specific mortgage pools to be delivered do not need to be explicitly identified at the time a trade is initiated.

We engage in TBA transactions for purposes of managing interest rate risk associated with our liabilities under repurchase agreements, which we sometimes refer to herein as "repos." We also opportunistically engage in TBA transactions because we find them attractive in their own right, from a relative value perspective or otherwise.

For accounting purposes, in accordance with generally accepted accounting principles in the United States of America, or "U.S.

GAAP," we classify TBA transactions as derivatives.

Investment Process

Our investment process benefits from the resources and professionals of our Manager and Ellington.

The process is managed by an investment and risk management committee, which includes, among others, the following three officers of our Manager:

Penn, and Mr.

These officers of our Manager also serve as our Co-Chief Investment Officer, President and Chief Executive Officer, and Co-Chief Investment Officer, respectively.

The investment and risk management committee operates under investment guidelines and meets periodically to develop a set of preferences for the composition of our portfolio.

The primary focus of the investment and risk management committee is to review and approve our investment policies and our portfolio composition and related compliance with our investment policies and guidelines.

Under the management agreement between us and our Manager, our Manager has the authority to enter into transactions consistent with our investment guidelines, subject to the oversight of our Board of Trustees.

Ellington has a focused investment team for each of our targeted asset classes.

Each team evaluates acquisition opportunities consistent with our investment guidelines.

Our asset acquisition process includes sourcing and screening of asset acquisition opportunities, credit analysis, due diligence, structuring, financing, and hedging, each as appropriate, to seek attractive current yields and total returns commensurate with our risk tolerance.

We also screen and monitor potential asset acquisitions to determine their impact on maintaining our exclusion from registration as an investment company under the 1940 Act until the Conversion occurs.

Our investment process benefits from the resources and professionals of the Adviser and Ellington.

The process is managed by our Portfolio Managers, Michael Vranos and Gregory Borenstein.

Our CLO investment process typically includes several components, such as (i) sourcing and trading, (ii) due diligence (which may include an assessment of collateral, documentation, CLO collateral manager, and/or structure), (iii) stress sensitivity and technical model analyses, and (iv) investment monitoring.

Sourcing and Trading

Ellington and its investment team have longstanding and deep experience investing and trading in the CLO market and in structured products more broadly, providing it with access to a wide range of market opportunities.

The Fund’s investment team identifies investment and trading opportunities through a network of dealer, investor, and manager relationships that it has developed over time.

Ellington intends to evaluate investment and trading opportunities across a range of CLO vehicles, managers, and vintages.

At the current time, the Fund only intends to invest in CLOs (or LAFs) that are managed by third parties;

i.e., it does not expect to invest in CLOs (or LAFs) that are managed by the Adviser or its affiliates.

However, the Fund’s intentions in this regard may change at any time, without notice to shareholders.

Nevertheless, when negotiating an investment in a CLO (or LAF) that is in the process of being formed, even if such CLO (or LAF ) will be managed by third parties, the Fund’s investment team may be able to negotiate certain structural terms of the CLO (or LAF) as a condition of its investment.

In addition, in situations where the Fund’s participation in a LAF culminates in

the issuance of a new CLO, the Fund will typically be offered the ability to purchase some of the newly issued CLO tranches, and in some of these cases the Fund’s investment team may be able to negotiate some of the terms of the CLO, including certain structural terms.

Due Diligence

The following are examples of the components of the investment team’s due diligence process on a CLO transaction.

The investment team has broad authority as to which of these components are performed with respect to any given investment or proposed investment.

• Review of the CLO’s underlying loan portfolio

◦ Review of portfolio-level metrics and characteristics, such as:

▪ Market prices and coupon spreads

▪ Credit ratings and weighted average lives

▪ Liquidity (as measured by asset bid depth and facility size)

▪ CLO-level exposures to specific industries and to lower-priced or lower-rated assets

◦ Identification of specific underlying assets for further review, including:

▪ In-depth analysis by Ellington’s internal credit analysts

▪ Consultation with third-party Collateral Managers

▪ Application of valuation adjustments based on internal and external insights

• Review of CLO deal documentation, including:

◦ Priorities of payment (“waterfalls”)

◦ Reinvestment flexibility

◦ Cash flow tests and triggers

◦ Asset concentration limits

◦ Deal redemption language (e.g., call, refinance, and reset provisions)

◦ Favorability of specific terms under varying market conditions

◦ Structural features, such as:

▪ Overcollateralization (OC) test cushion

▪ Interest diversion test cushion

▪ Equity net asset value (NAV)

▪ Deal excess spread / net interest margin

▪ Leverage levels

◦ Other key provisions

• Assessment of historical CLO performance, including:

◦ Collateral quality tests

◦ Coverage ratio compliance

• Analyze results of model analyses and stress sensitivities

• Evaluation of CLO Collateral Manager, including:

◦ Overall performance and market reputation

◦ Secondary market liquidity of the CLO’s tranches

◦ Historical equity distributions and internal rates of return (IRRs)

◦ Quality of underlying portfolios

◦ Effectiveness in building or maintaining portfolio par over time

• Comparison of the investment’s value proposition relative to other available opportunities

• Engagement and ongoing assessment, including:

◦ Conducting update calls and meetings with CLO Collateral Managers

◦ Reviewing CLO Collateral Managers’ trading strategies, market outlooks, and positioning

◦ Integrating historical performance data and qualitative insights into the overall investment evaluation

Stress Sensitivity and Technical Model Analyses

In addition to reviewing a given CLO’s collateral, documentation, CLO Collateral Manager, and structure, the investment team may conduct sensitivity analyses to evaluate how a CLO tranche could perform under different credit stress scenarios.

These analyses may consider several factors, including loan prices, spreads, maturities, default rates, prepayment rates, and recovery rates to estimate potential cashflows and performance across different market conditions.

Scenarios may include historical macroeconomic shocks as well as hypothetical market environments.

Individual assets within a CLO may be analyzed and various factors may be considered across each scenario, including how deal tests, cashflows, and triggers are projected to

evolve over time, as well as projected credit spreads, yields, tranche weighted average lives (WALs) and credit spread durations.

This analysis typically includes the assessment of the potential return profiles across different scenarios.

In addition to cashflow analyses, the investment team may utilize technical models to assess a CLO tranche relative to other corporate credit investments, including other CLO tranches.

This relative value analysis may take into account various factors, including fundamental credit considerations and mark-to-market risk information.

Investment Monitoring

To help inform decisions on whether to continue holding investments, the investment team employs a monitoring process whereby portfolio-level reports are generated regularly by the investment team and the Risk Oversight Group related to the Fund’s investments.

These reports incorporate a combination of third-party data and analytical tools to assess various factors related to the Fund’s CLO holdings.

Given that CLOs are typically actively managed vehicles prior to the end of their reinvestment periods, the CLO investment team may attempt to engage in discussions with CLO Collateral Managers to monitor developments in the deal portfolios.

If available, the investment team may also review monthly and quarterly reports from CLO trustees, which contain information on CLO portfolio compositions and structural changes.

The Fund may choose to exit investments for a variety of reasons, which could include changes in market value of the CLO, changes in market conditions, changes in collateral quality or coverage tests, collateral manager performance, changes in the Fund’s view of the market, the Fund’s liquidity needs, to maintain compliance with 1940 Act or RIC-related tests, trading opportunities, or to rotate into what it perceives to be more attractive investment opportunities.

Valuation of Assets

Our Manager's valuation committee directs our valuation process, which is also subject to the oversight of our independent trustees.

See Note 2 of the notes to consolidated financial statements included in Item 8 of this Annual Report on Form 10-K for a discussion of our valuation process.

For all periods prior to the Conversion Date, including during the Transition Period, the Adviser's valuation committee directed our valuation process, which was also subject to the oversight of our independent trustees.

See Note 2 of the notes to consolidated financial statements included in Item 8 of this Transition Report on Form 10-K for a discussion of our valuation process during the Transition Period.

Following the Conversion, we have chosen the Adviser to be our valuation designee pursuant to Rule 2a-5 under the 1940 Act.

The value of our investments are determined by the Adviser in good faith, subject to the Board’s oversight and in accordance with the 1940 Act and our valuation policies, based on relevant information compiled by the Adviser and third-party pricing services (when available), as follows:

• For investments that are readily valued, such as exchange-traded securities, valuations are generally based on market prices provided by recognized pricing sources.

• For investments that do not have readily available market quotations, including CLOs and other structured products, the Adviser may value these investments using third-party pricing services, if available.

The Adviser’s Valuation Committee oversees the valuation process and reviews third-party prices when received.

In cases where third-party pricing is unavailable, deemed unreliable, or otherwise not received, the Adviser may determine a value for these investments using third-party data, market data, and/or input from the portfolio management team.

Risk Management

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We benefit from Ellington's comprehensive risk management infrastructure and ongoing assessment of both portfolio and operational risks.

In addition, we utilize derivatives and other hedging instruments to opportunistically manage our credit, interest rate and yield spread risk.

In addition, we utilize derivatives and other hedging instruments to opportunistically manage our credit, foreign currency, interest rate, and credit spread risk.

Credit Risk Hedging

We opportunistically enter into short credit positions using derivative instruments to protect against adverse credit events and/or spread widening risk with respect to our CLOs, or other assets, subject to maintaining our exemption from the 1940 Act prior to the Conversion.

We opportunistically enter into short credit positions using derivative instruments to protect against adverse credit events and/or credit spread widening risk with respect to our CLOs, or other assets.

The derivative instruments that we use for credit hedging purposes may include contracts referencing the secured or unsecured debt or equity of certain corporations, as well as contracts referencing indices comprised of corporate debt and equity.

We may also utilize tranches or option contracts on corporate credit or equity indices, as well as contracts referencing various MBS indices and other derivative instruments.

The composition and relative mix of our hedging instruments may vary from period to period given the amount of our liabilities outstanding or anticipated to be entered into, the overall market environment and our view as to which instruments best enable us to execute our hedging goals.

We may also utilize tranches or option contracts on corporate credit or equity indices and various other derivative instruments.

The composition and relative mix of our hedging instruments may vary from period to period given the overall market environment and our view as to which instruments best enable us to execute our credit hedging goals.

Foreign Currency Hedging

To the extent we hold instruments denominated in currencies other than U.S.

dollars, we may enter into transactions to offset the potential adverse effects of changes in currency exchange rates.

In particular, we may use currency forward contracts and other currency-related derivatives to mitigate this risk.

Interest Rate Hedging

We opportunistically manage our interest rate risk by using various hedging strategies to mitigate such risks, subject to maintaining our exemption from the 1940 Act prior to the Conversion.

The majority of our interest rate risk is associated with our Agency RMBS;

We opportunistically manage our interest rate risk by using various hedging strategies to mitigate such risks.

The majority of our interest rate risk was historically associated with our Agency RMBS;

CLOs are primarily backed by floating-rate loans and, as such, tend to have limited interest rate risk.

The interest rate hedging instruments that we use and may use in the future include, without limitation:

The interest rate hedging instruments that we have used, and could selectively use in the future, include:

• interest rate swaps (including floating-to-fixed, fixed-to-floating, or more complex swaps such as floating-to-inverse floating, callable or non-callable);

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In an interest rate swap, the notional principal is generally not exchanged.

We also utilize TBAs for interest rate hedging purposes.

We have also utilized TBAs for interest rate hedging purposes.

Pursuant to a TBA transaction, we agree to purchase or sell, for future delivery, Agency RMBS with certain principal and interest terms and certain types of underlying collateral, but the particular Agency RMBS to be delivered is not identified until shortly before the TBA settlement date.

Our Financing Strategies and Use of Leverage

We finance our assets with what we believe to be a prudent amount of leverage, which will vary from time to time based upon the particular characteristics of our portfolio, availability of financing and market conditions.

As of December 31, 2024, all of our debt financings consisted of repos.

In a repo, we sell an asset to a counterparty at a discounted value, or the "Loan Amount," and simultaneously agree to repurchase the same asset from such counterparty at a future date at a price equal to the Loan Amount plus an interest factor.

As of March 31, 2025, all of our debt financings consisted of repurchase agreements or "repos." In a repo, we sell an asset to a counterparty at a discounted value, or the "Loan Amount," and simultaneously agree to repurchase the same asset from such counterparty at a future date at a price equal to the Loan Amount plus an interest factor.

Despite being legally structured as sales and subsequent repurchases, repos are accounted for as collateralized borrowings.

During the term of a repo, we generally receive the income and other payments distributed with respect to the underlying assets, and pay interest to the counterparty.

While the proceeds of our repos are often used to purchase the asset subject to the transaction, our financing arrangements do not restrict our ability to use proceeds from these arrangements to support our other liquidity needs.

While the proceeds of our repos may be used to purchase the asset subject to the transaction, our financing arrangements do not restrict our ability to use proceeds from these arrangements to support our other liquidity needs.

Our repo arrangements are typically documented under the standard form master repurchase agreement of the Securities Industry and Financial Markets Association, with the ability for both parties to request margin (i.e., to demand that the other party post additional collateral or repay a portion of the funds advanced) should the value of the underlying assets and posted collateral change.

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Our repo financing counterparties generally have the right, to varying degrees, to determine the value of the underlying collateral for margining purposes, subject to the terms and conditions of our agreement with the counterparty, including in certain cases our right to dispute the counterparty's valuation determination.

As of December 31, 2024, we had approximately $563.0 million outstanding under repos with 14 counterparties, and given that we had approximately $193.7 million of shareholders' equity as of December 31, 2024, our debt-to-equity ratio was 2.9 to 1.

As of March 31, 2025, we had approximately $517.5 million outstanding under repos with 13 counterparties, and given that we had approximately $228.5 million of shareholders' equity as of March 31, 2025, our debt-to-equity ratio was 2.3 to 1.

Our debt-to-equity ratio does not account for liabilities other than debt financings.

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Our use of leverage, especially in order to increase the amount of assets supported by our capital base, may have the effect of increasing losses when these assets underperform.

Our investment policies require no minimum or maximum leverage, and our Manager's investment and risk management committee has the discretion, without the need for further approval by our Board of Trustees, to change both our overall leverage and the leverage used for individual asset classes.

Prior to the onset of the CLO Strategic Transformation, the majority of our assets consisted of Agency RMBS, which were typically financed using repos.

Given the very high credit quality of Agency RMBS, these repo financings carried require “haircuts” of only around 5%, which could have hypothetically allowed for debt-to-equity ratios well in excess of 10:1.

However, given the risk management protocols of the Adviser, our debt-to-equity ratios during this time frame were typically between 5:1 and 10:1.

The repo financing markets for CLO mezzanine debt and equity investments carry required haircuts that are much greater than 5%, given the comparatively lower credit quality of those assets relative to Agency RMBS.

Repo financings for CLO mezzanine debt investments typically carry haircuts in the 20% to 40% range, and repo financing of CLO equity investments typically carry haircuts in the 45% to 65% range.

Therefore, now that we have shifted our focus to CLO mezzanine debt and equity investments, we can no longer use repo debt financing to leverage to the same degree that we once did.

Following the Conversion, in addition to these tighter limits on our debt leverage imposed by the repo financing markets, we are also subject to various limitations on leverage imposed by the 1940 Act, especially leverage obtained through the issuance of "senior securities." Therefore, we expect to have a much lower debt-to-equity ratio following the Conversion than we did prior to the Conversion.

However, subject to maintaining our compliance with the 1940 Act, our investment policies require no minimum or maximum leverage, and the Adviser has the discretion, without the need for further approval by our Board, to change both our overall leverage and the leverage used for individual asset classes.

Because our strategy is flexible, dynamic, and opportunistic, our overall leverage will vary over time.

As a result, we do not have a targeted debt-to-equity ratio.

Following the Conversion, we will be required to operate our business, including the way we finance our assets, to be in compliance with the rules and regulations of the 1940 Act.

Management Agreement

Upon our inception in September 2012, we entered into a management agreement with our Manager pursuant to which our Manager provides for the day-to-day management of our operations.

The management agreement, as amended, requires our Manager to manage our business affairs in conformity with policies and investment guidelines that are approved and monitored by our Board of Trustees.

In connection with the CLO Strategic Transformation, on June 25, 2024, our Board of Trustees unanimously approved the Sixth Amended and Restated Management Agreement (the "Management Agreement") where, in addition to carrying over the removal of certain provisions related to the maintenance of our REIT status (which had been made in a prior amendment to the management agreement), our Board of Trustees determined to more closely align the management fee arrangement between us and our Manager with the advisory fee structures of CLO-focused registered closed-end funds in light of the pending Conversion.

The Management Agreement became effective on July 1, 2024, and replaced the previous management agreement.

Under the Management Agreement, our Manager remains subject to the direction and oversight of our Board of Trustees.

Our Manager also remains responsible for, among other things:

• the selection, purchase, and sale of our portfolio investments;

• our financing and risk management activities;

• providing us with advisory services;

• providing us with a management team, inclusive of a dedicated or partially dedicated Chief Financial Officer and appropriate support personnel as necessary.

Our Manager is also responsible for our day-to-day operations and performs (or causes to be performed) such services and activities relating to the management, operation, and administration of our assets and liabilities, and business as may be appropriate.

We believe that the base management fees and performance fees that we pay to our Manager, which are outlined below, are aligned with the advisory fee structures of CLO-focused registered closed-end funds.

At the Special Meeting, shareholders approved certain proposals related to the Conversion, including a new investment advisory agreement between us and our Manager (the "Investment Advisory Agreement") that would become effective upon the completion of the Conversion.

Under the terms of the Investment Advisory Agreement, the Manager will receive a base management fee and a performance fee that are structurally identical to the fees specified by the current Management Agreement.

Base Management Fees, Performance Fees, and Reimbursement of Expenses

Furthermore, our focus on CLO equity and certain other credit investments expose us to substantial indirect leverage (i.e., the debt financing employed by the CLO vehicles in which we invest).

Our use of direct and indirect leverage, especially in order to increase the amount of assets supported directly or indirectly by our capital base, may have the effect of increasing losses when these assets underperform.

See also "Risk Factors—Risks Related to the Fund's Financing, Hedging, and Derivatives Activities—The Fund uses financial leverage in executing its business strategy, which may adversely affect the return on its assets and may reduce cash available for distribution to its shareholders, as well as increase losses when economic conditions are unfavorable" and "Operating and Regulatory Structure—1940 Act—Leverage."

Advisory Agreement

In connection with the Conversion, on April 1, 2025, we entered into the Advisory Agreement with the Adviser pursuant to which the Adviser provides for the day-to-day management of our operations.

The Advisory Agreement requires the Adviser to manage our business affairs in conformity with 1940 Act and the policies and investment guidelines that are approved and monitored by our Board.

Under the Advisory Agreement, the Adviser remains subject to the direction and oversight of the Board.

The Adviser also, among other things:

• determines the composition of our portfolio, the nature and timing of the changes therein, and the manner of implementing such changes;

• identifies, evaluates, and negotiates the structure of the investments made by us;

• closes, monitors, and services our investments;

• determines the securities and other assets that we will purchase, retain, or sell;

• provides us with such other investment advisory, research and related services as we may, from time to time, reasonably require for the investment of our funds.

Management Fees, Performance Fees, and Reimbursement of Expenses

Pursuant to the Advisory Agreement, we have agreed to pay the Adviser fees for investment advisory and management services, which consist of two components—a base management fee and a performance fee.

Base Management Fees

Under the Management Agreement, we pay our Manager a quarterly fee equal to 1.50% per annum of our Net Asset Value, which is equal to our total assets minus our total liabilities (the "Base Management Fee"), calculated and payable quarterly in arrears.

The “Base Management Fee” we pay to the Adviser with respect to each fiscal quarter is equal to the product of 0.375% (i.e., 1.50% per annum) and our “Net Asset Value,” which is equal to our total assets minus our total liabilities, as of the end of such fiscal quarter.

The Base Management Fee is prorated for partial periods based on the number of days in such partial period compared to a 90-day quarter and is calculated and payable quarterly in arrears.

Performance Fees

In addition to the Base Management Fee, pursuant to the Management Agreement, we will pay our Manager a performance fee (the "Performance Fee"), calculated and payable quarterly in arrears based upon our Pre-Performance Fee Net Investment Income, with respect to each fiscal quarter.

We pay to the Adviser a “Performance Fee,” calculated and payable quarterly in arrears based upon our “Pre-Performance Fee Net Investment Income” with respect to each fiscal quarter, and is subject to a hurdle rate, expressed as a rate of return on our common equity, equal to 2.00% per quarter (i.e., 8.00% per annum), and is subject to a “catch-up” feature.

quarter by the Hurdle Rate (the "Hurdle Amount") for such quarter, then no Performance Fee is payable to our Adviser with respect to such quarter;

• If our Pre-Performance Fee Net Investment Income for a fiscal quarter exceeds the Hurdle Amount for such quarter but is less than or equal to 121.21% of the Hurdle Amount, then 100% of the portion of our Pre-Performance Fee Net Investment Income that exceeds the Hurdle Amount (the “Catch-Up”) is payable to our Adviser as the Performance Fee with respect to such quarter.

Therefore, once our Pre-Performance Fee Net Investment Income for such quarter exactly reaches 121.21% of the Hurdle Amount, our Adviser will have accrued a Performance Fee with respect to such quarter that is exactly equal to 17.5% of the Pre-Performance Fee Net Investment Income (because 21.21% of the Hurdle Amount (which is the Pre-Performance Fee Net Investment Income captured by our Adviser during the Catch-Up phase) is equal to 17.5% of 121.21% of the Hurdle Amount (which is the entire Pre-Performance Fee Net Investment Income at the end of the Catch-Up phase));

• If our Pre-Performance Fee Net Investment Income for a fiscal quarter exceeds 121.21% of the Hurdle Amount for such quarter, then 17.5% of the our Pre-Performance Fee Net Investment Income is payable to our Adviser as the Performance Fee with respect to such quarter.

With respect to the Performance Fee, there will be no accumulation of the Hurdle Amount from quarter to quarter, no claw back of amounts previously paid if the Pre-Performance Fee Net Investment Income in any subsequent quarter is below the Hurdle Amount for such subsequent quarter, and no delay or adjustment of payment if the Pre-Performance Fee Net Investment Income in any prior quarter was below the Hurdle Amount for such prior quarter.

For these purposes, the following definitions are applicable:

“Hurdle Amount” for any fiscal quarter means the result obtained by multiplying the Net Asset Value of Common Equity at the end of the immediately preceding fiscal quarter by the Hurdle Rate.

The Hurdle Amount will be appropriately adjusted for any common share issuances or repurchases during the fiscal quarter.

“Hurdle Rate” means 2.00% per quarter, or 8.00% per annum.

The Hurdle Rate will be appropriately prorated for partial quarterly periods based on the number of days in such partial period compared to a 90-day quarter.

“Net Asset Value” means the figure that is equal to our total assets minus our total liabilities.

“Net Asset Value of Common Equity” means the portion of Net Asset Value attributable to common equity.

“Pre-Performance Fee Net Investment Income” for any fiscal quarter means interest income (including accretions of discounts, amortization of premiums, and payment-in-kind income), dividend income, and any other income (including any fee income) earned or accrued by us during such fiscal quarter, minus our operating expenses for such quarter (which, for this purpose, will not include any litigation-related expenses, any extraordinary expenses, or Performance Fee).

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In the case of an interest rate swap, Pre-Performance Fee Net Investment Income includes the net payments and net accruals of periodic payments.

The Performance Fee is subject to a hurdle rate of 2.00% per quarter, or 8.00% per annum (the "Hurdle Rate"), and is subject to a "catch-up" feature.

Specifically:

• If our Pre-Performance Fee Net Investment Income for a fiscal quarter does not exceed the result obtained by multiplying our Net Asset Value attributable to our common equity at the end of the immediately preceding fiscal quarter by the Hurdle Rate (the "Hurdle Amount") for such quarter, then no Performance Fee is payable to our Manager with respect to such quarter;

• If our Pre-Performance Fee Net Investment Income for a fiscal quarter exceeds the Hurdle Amount for such quarter but is less than or equal to 121.21% of the Hurdle Amount, then 100% of the portion of our Pre-Performance Fee Net Investment Income that exceeds the Hurdle Amount (the “Catch-Up”) is payable to our Manager as the Performance Fee with respect to such quarter.

Therefore, once our Pre-Performance Fee Net Investment Income for such quarter exactly reaches 121.21% of the Hurdle Amount, our Manager will have accrued a Performance Fee with respect to such quarter that is exactly equal to 17.5% of the Pre-Performance Fee Net Investment Income (because 21.21% of the Hurdle Amount (which is the Pre-Performance Fee Net Investment Income captured by our Manager during the Catch-Up phase) is equal to 17.5% of 121.21% of the Hurdle Amount (which is the entire Pre-Performance Fee Net Investment Income at the end of the Catch-Up phase));

• If our Pre-Performance Fee Net Investment Income for a fiscal quarter exceeds 121.21% of the Hurdle Amount for such quarter, then 17.5% of the our Pre-Performance Fee Net Investment Income is payable to our Manager as the Performance Fee with respect to such quarter.

Our Manager has agreed to waive all of the Performance Fees payable under the Management Agreement for all periods through March 31, 2025.

The “catch-up” provision is intended to provide the Adviser with a performance fee of 17.5% on all of our Pre-Performance Fee Net Investment Income when our Pre-Performance Fee Net Investment Income reaches 2.424% of Net Asset Value of Common Equity in a calendar quarter.

The Adviser is obligated to pay expenses associated with providing the investment services stated in the Advisory Agreement, including compensation of and office space for its officers and employees connected with investment and economic research, trading and investment management of us.

The Performance Fee is based on our Pre-Performance Fee Net Investment Income, without considering any realized or unrealized gains or losses on our investments.

As a result, (i) for quarters in which a Performance Fee is payable, such Performance Fee will exceed 17.5% of our GAAP net income if we generated net realized and unrealized losses on our investments during such quarter, (ii) the Adviser could earn a Performance Fee for fiscal quarters during which we generate a GAAP net loss, and (iii) given the Performance Fee, the Adviser might be incentivized to manage our portfolio using higher risk assets, using assets with deferred interest features, or using more financial leverage through indebtedness (subject to the

applicable 1940 Act restrictions), to generate more income, both of which could result in higher investment losses, especially during economic downturns.

The Performance Fee is calculated quarterly, treating each quarter in isolation.

As a result, the Hurdle Amount does not accumulate from quarter to quarter, and decreases in our Net Asset Value of Common Equity, such as those due to unrealized losses, will reduce the Hurdle Amount, potentially making it easier for the Adviser to earn a Performance Fee.

We will not have the ability to claw back, delay, or adjust the payment of any Performance Fee based on financial results in prior or subsequent quarters.

In addition, over a series of quarters, if our Pre-Performance Fee Net Investment Income is positive in some quarters but negative in others, it is likely, when viewing the series of quarters as a whole, for the aggregate Performance Fee payable to the Adviser to exceed 17.5% of our aggregate Pre-Performance Fee Net Investment Income.

There is also a conflict of interest related to management's involvement in many accounting determinations (including but not limited to valuations and calculations of interest income) that can affect the Performance Fee.

Reimbursement of Expenses

We do not maintain an office or employ personnel.

We rely on the facilities and resources of our Manager to conduct our operations.

We pay all of our direct operating expenses, except those specifically required to be borne by our Manager under the Management Agreement.

Our Manager is responsible for all costs incident to the performance of its duties under the Management Agreement, including compensation of Ellington's employees and other related expenses, other than our allocable portion of the costs incurred by our Manager for certain dedicated or partially dedicated employees, including a Chief Financial Officer, one or more controllers, an in-house legal counsel, an investor relations professional, and certain other personnel performing duties for us, based on the portion of their working time and efforts spent on our matters and subject to approval of the reimbursed amounts by the Compensation Committee of our Board of Trustees.

In addition, other than as expressly described in the Management Agreement, we are not required to pay any portion of rent, telephone, utilities, office furniture, equipment, machinery, and other office, internal and overhead expenses of our Manager and its affiliates.

All investment professionals of the Adviser and its affiliates, along with their respective staff, when engaged in providing advisory or management services under the Advisory Agreement, are compensated by the Adviser, which also bears their routine overhead expenses.

We, however, are responsible for a comprehensive set of expenses related to our operations and administration.

These include costs associated with organizing, restructuring, or liquidating us, as well as expenses for calculating Net Asset Value—including those charged by independent valuation firms.

We bear the direct costs of legal, accounting, and auditing services, including legal counsel to the independent trustees, and pay for routine administrative needs such as printing, mailing, and office support.

We are also responsible for all applicable taxes and regulatory fees, including those tied to federal and state filings, membership dues in industry organizations, and compliance-related expenses.

We pay fees related to custody, transfer agency, sub-accounting services, portfolio pricing, and marketing and distribution activities.

We covers shareholder-related communications and meetings, trustee compensation, insurance policies, and travel costs incurred in connection with our business.

In addition, we bear the cost of technology and software tools used in operations, debt servicing, brokerage commissions, co-investment allocations, and other transaction-related charges.

Extraordinary expenses, such as litigation or indemnification costs, and the compensation of compliance personnel allocated to us are also paid directly by us.

Further, we reimburse the Adviser or its affiliates for any of these expenses paid on our behalf, subject to documentation and review.

Lastly, we bear our allocable portion of overhead and personnel expenses incurred by the Administrator in performing its duties under the Administration Agreement, including expenses related to the Chief Financial Officer, Chief Operating Officer, and related support staff.

Term and Termination

The Management Agreement has an initial term expiring on June 25, 2025, unless terminated earlier in accordance with its terms and, thereafter, will continue to renew automatically each year for an additional one-year period, unless we or our Manager exercise our respective termination rights.

Either we or our Manager may elect not to renew the Management Agreement upon expiration of any renewal term by providing written notice of non-renewal at least 180 days, but not more than 270 days, before expiration.

In the event we elect not to renew the term, we will be required to pay our Manager a termination fee equal to 5% of our Net Asset Value, as defined in the Management Agreement, as of the end of the month preceding the date of the notice of termination or non-renewal of the Management Agreement.

No termination fee will be due to the Manager if the Manager decides not to renew the Management Agreement.

Further, no termination fee shall be payable pursuant to the Management Agreement once the Investment Advisory Agreement becomes effective.

In addition, the termination provisions of the Investment Advisory Agreement do not require us to pay our Manager a termination fee in the event that we terminate the Investment Advisory Agreement.

We have the right to terminate the Management Agreement for cause, as defined in the Management Agreement, at any time during the term upon 30 days' prior written notice, without payment of any termination fee.

Our Board of Trustees reviews our Manager's performance annually and, as a result of such review, upon the affirmative vote of at least two-thirds of the members of our Board of Trustees or of the holders of a majority of our outstanding common shares, we may terminate the Management Agreement based either upon unsatisfactory performance by our Manager that is materially detrimental to us or upon a determination by our independent trustees that the management fees payable to our Manager are not fair, subject to the right of our Manager to prevent such a fee-based termination by agreeing to a reduction of the management fees payable to our Manager.

Upon any termination of the Management Agreement based on unsatisfactory performance or unfair management fees, we are required to pay our Manager the termination fee described above.

Our Manager may terminate the Management Agreement upon 60 days written notice if we default in the performance of any material term of the Management Agreement and the default continues for a period of 30 days after written notice to us, whereupon we would be required to pay our Manager the termination fee described above.

Our Manager may generally only assign the Management Agreement with the written approval of a majority of our independent trustees.

However, our Manager may assign to one or more of its affiliates the performance of any of its responsibilities under the Management Agreement without the approval of our independent trustees so long as our Manager remains liable for any such affiliate's performance and such assignment does not require our approval under the Investment Advisers Act of 1940, as amended, or the "Advisers Act."

The initial term of the Advisory Agreement is two years from its execution.

Unless earlier terminated in accordance with its terms, the Advisory Agreement will remain in effect year-to-year if approved annually by the Board or by the affirmative vote of the holders of a majority of our outstanding voting securities, including, in either case, approval by a majority of our trustees who are not parties to such agreement or who are independent trustees.

The Advisory Agreement may be terminated without penalty by either party with appropriate notice.

The Adviser may terminate the Advisory Agreement at any time by providing us with sixty (60) days’ written notice, which we may choose to waive.

Similarly, we may terminate the Advisory Agreement without penalty by giving the Adviser sixty (60) days’ written notice, which the Adviser may waive.

Additionally, we may terminate the Advisory Agreement in the event of a material breach by the Adviser.

In such circumstances, we must first provide written notice identifying the breach, and if the breach is capable of being cured, the Adviser must be given thirty (30) days to remedy it to our reasonable satisfaction.

If the Adviser fails to cure the breach within that period, we may proceed with termination.

Any termination of the Advisory Agreement by us—whether voluntary or for cause—must be directed or approved either by a majority vote of all trustees then in office or by the holders of a “majority” of our outstanding voting securities, as defined under the 1940 Act.

The Advisory Agreement will automatically terminate in the event of its assignment.

Administration Agreement

In connection with the Conversion, we also entered into an administration agreement, dated as of April 1, 2025, with Ellington Credit Company Administration LLC, a Delaware limited liability company (the “Administrator”) (such agreement, the “Administration Agreement”).

Pursuant to the Administration Agreement, the Administrator, among other things, furnishes us with office facilities, equipment and clerical, bookkeeping and record keeping services at such facilities and also performs, or oversees the performance of, its required administrative services, which include, among other things, being responsible for the financial records which we are required to maintain and preparing reports to our shareholders.

Payments under the Administration Agreement are equal to an amount based upon our allocable portion of the Administrator’s costs and expenses incurred in performing its obligations and providing personnel (including wages, salaries, bonuses and related payroll expenses) under the Administration Agreement, including rent, office supplies, the fees and expenses associated with performing compliance functions, and our allocable portion of the costs of compensation and related expenses of our Chief Financial

Officer, Chief Operating Officer, and their respective support staff.

To the extent the Administrator outsources any of its functions, we pay the fees on a direct basis, without profit to the Administrator.

The Administration Agreement may be terminated by us without penalty upon not less than 60 days’ written notice to the Administrator and by the Administrator upon not less than 90 days’ written notice to us.

The Administration Agreement will remain in effect if approved by the Board, including by a majority of the independent trustees.

Vranos, one of our Portfolio Managers and one of our trustees, Mr.

Penn, our Chief Executive Officer, President, and one of our trustees, Mark Tecotzky, an Executive Vice President, Christopher Smernoff, our Chief Financial Officer, JR Herlihy, our Chief Operating Officer, and Daniel Margolis, our General Counsel, each also serves as an officer of the Administrator.

Term and Termination

The initial term of the Administration Agreement is two years from its execution.

The Board will consider the approval of the Administration Agreement on an annual basis, and the Administration Agreement may be amended by the Board and the Administrator, without shareholder approval.

When considering the approval of the Administration Agreement, the Board considers, among other factors, (i) the reasonableness of the compensation paid by us to the Administrator and any third-party service providers in light of the services provided, the quality of such services, any cost savings to us as a result of the arrangements and any conflicts of interest, (ii) the methodology employed by the Administrator in determining how certain expenses are allocated to us, (iii) the breadth, depth and quality of such administrative services provided, (iv) certain comparative information on expenses borne by other companies for somewhat similar services known to be available and (v) the possibility of obtaining such services from a third-party.

The Administration Agreement may be terminated at any time, without the payment of any penalty, by us upon not less than 60 days’ written notice or by the Administrator upon not less than 90 days’ written notice.

Conflicts of Interest;

Equitable Allocation of Opportunities;

Ellington manages various other clients that have strategies that are similar to, or overlap with, our strategy, including Ellington Financial Inc.

As of December 31, 2024, these other funds, accounts, and vehicles, represented approximately $12.7 billion of assets under management (excluding our assets but including $6.2 billion of accounts that do not employ financial

Ellington makes available to our Manager all opportunities to acquire assets that it determines, in its reasonable and good faith judgment, based on our objectives, policies and strategies, and other relevant factors, are appropriate for us in accordance with Ellington's written investment allocation policy, subject to the exception that we might not participate in each such opportunity, but will equitably participate with Ellington's other accounts in all such opportunities on an overall basis.

Ellington's investment and risk management committee and its compliance committee (headed by its Chief Compliance Officer) are responsible for monitoring the administration of, and facilitating compliance with, Ellington's investment allocation procedures and policies.

Because CLOs, Agency pass-through certificates, Agency and non-Agency CMOs, and certain other asset classes in which we invest are typically available only in specified quantities and are also targeted assets for certain other Ellington accounts, Ellington often is not able to buy as much of any given asset or group of assets as would be required to satisfy the needs of all of Ellington's accounts.

In these cases, Ellington's investment allocation procedures and policies typically allocate such assets to multiple accounts in proportion to their needs and available capital.

Ellington may at times allocate opportunities on a preferential basis to accounts that are in a "start-up" or "ramp-up" phase, including us.

The policies permit departure from such proportional allocation under certain other circumstances, including, for example, when such allocation would result in an inefficiently small amount of the security or assets being purchased for an account.

In that case, the policies allow for a protocol of allocating assets so that, on an overall basis, each account is treated equitably.

In addition, as part of these policies, we may be excluded from specified allocations of assets for tax, regulatory, risk management, or similar reasons.

Other policies of Ellington that our Manager applies to the management of our company include controls for:

• Cross Transactions— defined as transactions between us or one of our subsidiaries, on the one hand, and an account (other than us or one of our subsidiaries) managed by Ellington or our Manager, on the other hand.

It is Ellington's policy to engage in a cross transaction only when the transaction is in the best interests of, and is consistent with the objectives and policies of, both accounts involved in the transaction.

Pursuant to the terms of the Management Agreement, Ellington or our Manager may enter into cross transactions where it acts both on our behalf and on behalf of the other party to the transaction;

provided, however, that our Manager will not enter into any cross transactions on our behalf unless the cross transaction involves a "level one" asset for U.S.

GAAP accounting purposes which is being crossed at market prices, or the cross transaction has received approval of a majority of our independent trustees.

Although we believe such restrictions on our Manager's ability to engage in cross transactions on our behalf mitigate many risks, cross transactions, even at market prices, may potentially create a conflict of interest between our Manager's and our officers' duties to and interests in us and their duties to and interests in the other party.

Subject to our Board of Trustees authorizing such action and upon written notice to our Manager, we may at any time revoke our consent to our Manager's executing cross transactions.

Additionally, unless approved in advance by a majority of our independent trustees or pursuant to and in accordance with a policy that has been approved by a majority of our independent trustees, all cross transactions must be effected at the then-prevailing market prices.

Pursuant to our Manager's current policies and procedures, assets for which there are no readily observable market prices may be purchased or sold in cross transactions (i) at prices based upon third-party bids received through auction, (ii) at the average of the highest bid and lowest offer quoted by third-party dealers, or (iii) according to another pricing methodology approved by our Manager's Chief Compliance Officer.

• Principal Transactions— defined as transactions between Ellington or our Manager (or any related party of Ellington or our Manager, which includes employees of Ellington and our Manager and their families), on the one hand, and us or one of our subsidiaries, on the other hand.

Certain cross transactions may also be considered principal transactions whenever our Manager or Ellington (or any related party of Ellington or our Manager, which includes employees of Ellington and our Manager and their families) have a substantial ownership interest in one of the transacting parties.

Our Manager is only authorized to execute principal transactions with the prior approval of a majority of our independent trustees and in accordance with applicable law.

Such prior approval includes approval of the pricing methodology to be used, including with respect to assets for which there are no readily observable market prices.

• Investment in Other Ellington Accounts— pursuant to the Management Agreement, if we invest in any other investment fund or other investment for which Ellington or one of its affiliates receives management, origination, or structuring fees, then, unless agreed otherwise by a majority of our independent trustees, the management fees payable by us to our Manager will be reduced by (or our Manager will otherwise rebate to us) an amount equal to the applicable portion (as described in the Management Agreement) of any such management, origination, or structuring fees.

We have not made any such investments to date.

• Split Price Executions— pursuant to the Management Agreement, our Manager is authorized to combine purchase or sale orders on our behalf together with orders for other accounts managed by Ellington, our Manager or their affiliates and allocate the securities or other assets so purchased or sold, on an average price basis or other fair and consistent basis, among such accounts.

Our Manager is authorized to follow very broad investment guidelines.

Our independent trustees will periodically review our investment guidelines and our portfolio.

However, our independent trustees generally will not review our proposed asset acquisitions, dispositions, or other management decisions.

In addition, in conducting periodic reviews, our independent trustees will rely primarily on information provided to them by our Manager.

Furthermore, our Manager may arrange for us to use complex strategies or to enter into complex transactions that may be difficult or impossible to unwind by the time they are reviewed by our independent trustees.

Our Manager has great latitude within our broad investment guidelines to determine the types of assets it may decide are proper for purchase by us.

The Management Agreement with our Manager does not restrict the ability of its officers and employees from engaging in other business ventures of any nature, whether or not such ventures are competitive with our business.

We may acquire assets from entities affiliated with our Manager, even where the assets were originated by such entities.

Affiliates of our Manager may also provide services to entities in which we have invested.

Our executive officers and the officers and employees of our Manager are also officers and employees of Ellington, and we compete with other Ellington accounts for access to these individuals.

Co-Investments and Related Party Transactions

Conflicts of Interest;

Equitable Allocation of Opportunities

Ellington manages various other clients that invest in the CLO market and employ other corporate credit-related strategies.

As of March 31, 2025, these other funds, accounts, and vehicles, represented approximately $5.6 billion of assets under management (excluding our assets but including $1.7 billion of accounts that do not employ financial leverage).

Our executive officers, Portfolio Managers and certain trustees, and the Adviser, the Administrator and their affiliates officers and employees, have several conflicts of interest as a result of affiliations they have and other activities in which they engage.

The Adviser and the Administrator are indirectly owned by Ellington Management Group, L.L.C., ("EMG"), a registered investment adviser that provides advisory services to several clients unrelated to us.

Our executive officers, Portfolio Managers and certain trustees, and members of the Adviser’s and the Administrator’s respective management teams, are also employees, officers and/or principals of EMG.

Under the Services Agreement, EMG provides such services, including personnel, support and resources, to the Adviser and the Administrator as the Adviser and the Administrator, respectively, may determine to be reasonably necessary to perform their respective obligations under the Advisory Agreement and the Administration Agreement.

The fact that the same individuals affiliated with us are also affiliated with the Adviser, the Administrator, and EMG may result in conflicts of interest that may not be foreseen or resolved in a manner that is always or exclusively in our best interest.

Our executive officers and trustees, as well as other current and potential future affiliated persons, officers and employees of the Adviser, the Administrator, EMG and certain of their affiliates, may serve as officers, directors or principals of, or manage the accounts for, other entities with investment strategies that substantially or partially overlap with the strategy that we pursue.

Accordingly, they may have obligations to investors in those entities, the fulfillment of which obligations may not be in the best interests of us or our shareholders.

The Adviser has entered into, and may in the future enter into, additional business arrangements with certain of its shareholders, including granting beneficial ownership in limited liability company interests in the Adviser.

In such cases, such shareholders may have an incentive to vote shares held by them in a manner that takes such arrangements into account.

As a result of these relationships and separate business activities, the Adviser has conflicts of interest in allocating management time, services and functions among us, other advisory clients and other business activities.

The Adviser is responsible for the investment decisions made on our behalf.

There are no restrictions on the ability of the Adviser and certain of its affiliates to manage accounts for multiple clients, including accounts for affiliates of the Adviser or their directors, officers or employees, following the same, similar, or different investment objectives, philosophies, and strategies as those used by the Adviser for its account.

In those situations, the Adviser and its affiliates may have conflicts of interest in allocating investment opportunities between us and any other account managed by such person.

Such conflicts of interest would be expected to be heightened where the Adviser manages an account for an affiliate or its directors, officers, or employees.

In addition, certain of these accounts may provide for higher management fees or have higher performance fees than us, and/or may allow for higher expense reimbursements, all of which may contribute to a conflict of interest and create an

incentive for the Adviser to favor such other accounts.

Further, accounts managed by the Adviser or certain of its affiliates may hold certain investments in CLOs, such as mezzanine debt and equity tranches, which conflict with the positions held by other accounts in such CLOs, such as those held by us.

In these cases, when exercising the rights of each account with respect to such investments, the Adviser and/or its affiliate will have a conflict of interest, as actions on behalf of one account may have an adverse effect on another account managed by the Adviser or such affiliate, including us.

Our executive officers and trustees, as well as other current and potential future affiliated persons, officers, and employees of the Adviser and certain of its affiliates, may serve as officers, directors, or principals of, or manage the accounts for, other entities with investment strategies that substantially or partially overlap with the strategy that we intend to pursue.

Accordingly, they may have obligations to investors in those entities, the fulfillment of which obligations may not be in the best interests of us or our shareholders.

Further, the professional staff of the Adviser and Administrator will devote as much time to us as such professionals deem appropriate to perform their duties in accordance with the Advisory Agreement and Administration Agreement, respectively.

However, such persons may be committed to providing investment advisory and other services for other clients and engage in other business ventures in which we have no interests.

In addition, payments under the Administration Agreement are equal to an amount based upon our allocable portion of certain of the Administrator’s expenses.

As a result of these separate business activities, the Adviser and Administrator may have conflicts of interest in allocating management and administrative time, services, and functions among us and its affiliates and other business ventures or clients.

As a fiduciary, Ellington has a duty to act in the best interests of its clients and to allocate investment opportunities in a fair and equitable manner over time.

Ellington has adopted policies and procedures designed to govern the allocation of investment opportunities among multiple client accounts in a manner that it believes is consistent with its fiduciary duties, taking into account various factors.

These factors may include, but are not limited to, regulatory, tax, or legal considerations applicable to an account, the investment guidelines and restrictions of a particular client, the risk and return profile of the investment, available capital, liquidity needs, and other relevant circumstances.

Investment opportunities may be allocated using various methodologies, including rotational, percentage-based, or other allocation approaches, provided that such methodologies are consistent with Ellington’s internal conflict of interest and allocation policies and the requirements of applicable law, including the Advisers Act, the 1940 Act and other applicable laws, rules, and regulations.

Automated allocation tools may be utilized as part of its portfolio management system to assist in trade allocations, and may be subject to review and oversight by Ellington’s risk management and compliance teams.

In certain cases, priority may be given to accounts in a ramp-up or start-up phase, including us, as such accounts seek to establish their investment portfolios.

While this prioritization is permitted within Ellington’s policies, the policies allow for a protocol of allocating assets so that, on an overall basis, each account is treated equitably.

As part of these policies, we may be excluded from specified allocations of assets for tax, regulatory, risk management, or similar reasons.

In addition, an account managed by the Adviser, such as the Fund, is expected to be considered for the allocation of investment opportunities alongside other accounts managed by Ellington.

However, there is no assurance that a particular opportunity will be allocated to any particular account in a certain manner or that any such account, including the Fund, will be able to participate in all investment opportunities that are suitable for it.

In the course of their advisory and other activities, the Adviser and Ellington may acquire confidential or material non-public information or become subject to trading restrictions in certain securities.

As a result, the Adviser may be unable to disclose or act upon such information, even if it could be useful to investment decisions.

These restrictions may prevent the Adviser from initiating a transaction for us that it otherwise might have initiated, which could result in us being unable to acquire or exit certain investment positions.

The Interested Trustees (as defined herein) are associated with the Adviser and have an interest in the Adviser’s economic success.

The participation of the Adviser’s investment professionals in the valuation process, and the interest of the Interested Trustees in the Adviser and Ellington, could result in a conflict of interest because, for example, the management fees paid to the Adviser are based on our Net Asset Value.

Further, in the ordinary course of its business, Ellington may face other conflicts of interest in managing multiple client accounts.

These conflicts may arise due to differing investment advice, competing interests in the same issuer or securitization, joint participation in transactions, investment in other client accounts, service provider relationships, and the receipt of administrative, servicing, or other fees.

For example, client accounts may be provided with differing investment recommendations, take opposing positions in the same security, or invest in different levels of an issuer’s capital structure, which may create competing economic interests.

In certain cases, Ellington or its affiliates may manage securitizations or

structured vehicles in which client accounts invest, act as a servicer or administrator for client transactions, or determine whether services should be provided by third-party vendors or in-house resources.

These situations may present conflicts where Ellington has incentives to maximize fees, allocate investments among accounts, or select service providers based on existing relationships.

Additionally, conflicts may arise when client accounts provide guarantees, indemnities, or financing through joint vehicles, or when Ellington determines whether to invest in affiliated entities.

Both EMG and the Adviser have adopted policies and procedures to identify, manage, and mitigate potential conflicts of interest in a manner consistent with its fiduciary duties.

However, there is no guarantee that all conflicts can be eliminated or that actions taken on behalf of another client account will not have an adverse effect on us.

Our executive officers and the officers and employees of our Adviser are also officers and employees of Ellington, and we compete with other Ellington accounts for access to these individuals.

We have not adopted a policy that expressly prohibits our trustees, officers, security holders, or affiliates from having a direct or indirect pecuniary interest in any asset to be acquired or disposed of by us or any of our subsidiaries or in any transaction to which we or any of our subsidiaries is a party or has an interest, nor do we have a policy that expressly prohibits any such persons from engaging for their own account in business activities of the types conducted by us.

However, our code of business conduct and ethics contains a conflicts of interest policy that prohibits our trustees, officers, and employees, as well as employees of our Manager who provide services to us, from engaging in any transaction that involves an actual or apparent conflict of interest with us, absent approval by the Board of Trustees or except as expressly set forth above or as provided in the Management Agreement between us and our Manager.

In addition, nothing in the Management Agreement binds or restricts our Manager or any of its affiliates, officers, or employees from buying, selling, or trading any securities or commodities for their own accounts or for the accounts of others for whom our Manager or any of its affiliates, officers, or employees may be acting.

In acquiring our assets, we compete with closed-end funds, mortgage REITs, specialty finance companies, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, financial institutions, governmental bodies, and other entities.

However, our code of business conduct and ethics contains a conflicts of interest policy that prohibits our trustees, officers, and employees, as well as employees of our Adviser who provide services to us, from engaging in any transaction that involves an actual or apparent conflict of interest with us, absent approval by the Board or except as expressly set forth above or as provided in the Management Agreement between us and our Adviser.

In addition, nothing in the Management Agreement binds or restricts our Adviser or any of its affiliates, officers, or employees from buying, selling, or trading any securities or commodities for their own accounts or for the accounts of others for whom our Adviser or any of its affiliates, officers, or employees may be acting.

Related Party Transactions and Co-Investments

In the ordinary course of business, and to the extent permitted by the 1940 Act and other applicable law, we may enter into transactions with persons who are affiliated with us by reason of being under common control of the Adviser, the Administrator or their affiliates, including EMG.

In order to ensure that it complies with applicable regulations, we have implemented certain policies and procedures requiring our executive officers to screen transactions for possible affiliations between us, the Administrator, the Adviser and its affiliates and their respective employees, officers, and directors.

We will not enter into such transactions unless it is satisfied that doing so is consistent with the 1940 Act, applicable SEC exemptive rules, interpretations or guidance or the terms of any exemptive relief granted to us (as discussed below).

Due to our affiliations, we may be required to forgo certain investment opportunities, including but not limited to investing in CLOs managed by certain affiliates of the Adviser.

Our Nominating and Corporate Governance Committee (the “Governance Committee”) is responsible for reviewing and approving in advance any related party transactions, except for certain transactions pre-approved under guidelines or rules established by the Governance Committee or the Board.

The Governance Committee may prohibit any transaction if it determines that it is inconsistent with our interests or the interests of our shareholders.

In certain instances, we may co-invest concurrently with other accounts managed by the Adviser, Ellington or certain of the Adviser’s affiliates, subject to compliance with applicable regulations, regulatory guidance, and the Adviser’s allocation procedures.

On May 8, 2025, we and the Adviser, among others, submitted an application for exemptive relief to the SEC to permit us and certain of our affiliates to participate in certain negotiated co-investments alongside other accounts managed by the Adviser, or certain of its affiliates, subject to certain conditions.

There can be no assurance when, or if, such relief may be obtained.

A copy of our application for exemptive relief, including all of the conditions and the related order, is available on the SEC’s website at www.sec.gov.

In acquiring our assets, we compete with closed-end funds, BDCs, hedge funds, specialty finance companies, banks, insurance companies, mutual funds, institutional investors, investment banking firms, financial institutions, governmental bodies, and other entities.

Many of our competitors are significantly larger than us, have greater access to capital and other resources, and may have other advantages over us.

Some competitors may have a lower cost of funds and access to funding sources that may not be available to us, such as funding from the government.

Additionally, many of our competitors are not required to maintain an exclusion from the 1940 Act.

Our competitors may include other investment vehicles managed by Ellington or its affiliates, including Ellington Financial Inc.

In addition to existing competitors, other companies may be organized for similar purposes in the future, including companies focused on purchasing mortgage assets.

Additionally, many of our competitors are not required to comply with the 1940 Act.

Our competitors also include other investment vehicles managed by Ellington or its affiliates.

In addition to existing competitors, other companies may be organized for similar purposes in the future, including companies focused on purchasing CLOs and CLO-related assets.

A proliferation of such companies may increase the competition for equity capital and thereby adversely affect the market price of our common shares.

An increase in the competition for sources of funding could adversely affect the availability and cost of financing, and thereby adversely affect the market price of our common shares.

An increase in the competition for sources of funding could adversely affect the availability and cost of financing, and thereby adversely affect the

market price of our common shares.

In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of assets, or pay higher prices, than we can.

In the face of this competition, we believe that our access to our Manager's and Ellington's professionals and their industry expertise may provide us with a competitive advantage, including helping us to identify appropriate assets for acquisition and the appropriate prices to pay for such assets, and thereby to compete more effectively for attractive asset acquisition opportunities.

In the face of this competition, we believe that our access to our Adviser's and Ellington's professionals and their industry expertise may provide us with a competitive advantage, including helping us to identify appropriate assets for acquisition and the appropriate prices to pay for such assets, and thereby to compete more effectively for attractive asset acquisition opportunities.

However, we may not be able to achieve our business goals or expectations as a result of the competitive risks that we face.

Operating and Regulatory Structure

Tax Requirements

We revoked our election to be treated as REIT, effective as of January 1, 2024.

Beginning January 1, 2024, we are subject to tax as a C-corporation at regular corporate rates on our taxable income.

We plan to use our existing net operating loss carryforwards to offset the majority of our U.S.

federal taxable income for all periods until the completion of the Conversion.

The revocation of our REIT election was not a taxable event for our shareholders.

1940 Act Exclusion

Both we and our Operating Partnership are organized as holding companies and conduct our businesses primarily through wholly-owned subsidiaries of our Operating Partnership in a manner such that neither we nor our subsidiaries are subject to registration under the 1940 Act.

Under Section 3(a)(1) of the 1940 Act, a company is deemed to be an "investment company" if:

• it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities (Section 3(a)(1)(A));

• it is engaged or proposes to engage in the business of investing, reinvesting, owning, holding, or trading in securities and does own or proposes to acquire "investment securities" having a value exceeding 40% of the value of its total assets (excluding U.S.

government securities and cash) on an unconsolidated basis, or "the 40% Test" (Section 3(a)(1)(C)).

"Investment securities" excludes U.S.

government securities and securities of majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company for private funds under Section 3(c)(1) or Section 3(c)(7) of the 1940 Act.

We believe that we and our Operating Partnership will not be considered investment companies under Section 3(a)(1)(A) of the 1940 Act because we and our Operating Partnership do not engage primarily or hold ourselves out as being engaged primarily in the business of investing, reinvesting, or trading in securities.

Rather, through wholly-owned or majority-owned subsidiaries, we and our Operating Partnership are primarily engaged in the non-investment company businesses of these subsidiaries.

In addition, we conduct our operations so that both we and our Operating Partnership satisfy the 40% Test.

Our Operating Partnership's direct and indirect subsidiaries, through which we operate our business, rely upon certain exclusions from the definition of investment company under the 1940 Act including, in the case of our Operating Partnership's wholly-owned subsidiary, EARN Mortgage LLC, Section 3(c)(5)(C) of the 1940 Act.

Section 3(c)(5)(C), as interpreted by the staff of the SEC, requires an entity to invest at least 55% of its assets in "mortgages and other liens on and interests in real estate," which we refer to as "qualifying real estate interests," and at least 80% of its assets in qualifying real estate interests plus "real estate-related assets." In satisfying the 55% requirement, the entity may treat agency securities issued with respect to an underlying pool of mortgage loans in which it holds all of the certificates issued by the pool as qualifying real estate interests.

The CMOs will be treated as qualifying real estate interests for purposes of the 55% requirement.

We also have formed certain other wholly-owned or majority-owned subsidiaries that invest in CMOs and, subject to our investment guidelines, other real estate-related assets.

These subsidiaries will rely upon the exclusion from the definition of investment company under the 1940 Act pursuant to Section 3(c)(1) or 3(c)(7) of the 1940 Act.

Investments in subsidiaries that rely on the exclusions from the definition of investment company under 3(c)(1) or 3(c)(7) of the 1940 Act are considered investment securities for the purposes of the 40% Test.

Therefore, our Operating Partnership's investments in its 3(c)(7) subsidiaries and its other investment securities cannot exceed 40% of the value of our Operating Partnership's total assets (excluding U.S.

government securities and cash) on an unconsolidated basis.

We monitor our compliance with the 40% Test and the holdings of our subsidiaries to ensure that each of our subsidiaries is in compliance with an applicable exemption or exclusion from registration as an investment company under the 1940 Act.

On August 31, 2011, the SEC published a concept release entitled "Companies Engaged in the Business of Acquiring Mortgages and Mortgage Related Instruments" (1940 Act Rel.

This release notes that the SEC is reviewing the 3(c)(5)(C) exclusion relied upon by companies similar to us that invest in mortgage loans and mortgage-backed securities.

There can be no assurance that the laws and regulations governing the 1940 Act status of companies similar to ours, or the guidance from the Division of Investment Management of the SEC regarding the treatment of assets as qualifying real estate assets or real estate-related assets, will not change in a manner that adversely affects our operations as a result of this review.

To the extent that the SEC staff provides more specific guidance regarding any of the matters bearing upon our exclusion from the need to register under the 1940 Act, we may be required to adjust our strategy accordingly.

Any additional guidance from the SEC staff could provide additional flexibility to us, or it could further inhibit our ability to pursue the strategies that we have chosen.

Furthermore, although we monitor the assets of EARN Mortgage LLC regularly, there can be no assurance that EARN Mortgage LLC will be able to maintain this exclusion from registration.

In that case, our investment in EARN Mortgage LLC would be classified as an investment security, and we might not be able to maintain our overall exclusion from registering as an investment company under the 1940 Act.

The loss of our exclusion from registration pursuant to the 1940 Act prior to completion of the Conversion could require us to restructure our operations, sell certain of our assets to pay down leverage, or abstain from the purchase of certain assets, which could have an adverse effect on our financial condition and results of operations.

See "Risk Factors—Risks Related to Our Organization and Structure—Maintenance of our exclusion from registration as an investment company under the 1940 Act imposes significant limitations on our operations." If we were required to register as an investment company under the 1940 Act, we would be subject to the restrictions imposed by the 1940 Act, which would require us to make material changes to our strategy.

On April 1, 2025, we intend to complete the Conversion and thereby convert to a Delaware closed-end fund registered under the 1940 Act.

We intend to elect to be taxed as a RIC under Subchapter M of the Code.

To qualify as a RIC, we must, among other things, (a) derive in each taxable year at least 90% of our gross income from dividends, interest (including tax-exempt interest), payments with respect to certain securities loans, gains from the sale or other disposition of stock, securities or foreign currencies, other income (including but not limited to gain from options, futures and forward contracts) derived with respect to our business of investing in stock, securities or currencies, or net income derived from an interest in a “qualified publicly traded partnership” (a “QPTP”);

and (b) diversify our holdings so that, at the end of each quarter of each taxable year (i) at least 50% of the market value of our total assets is represented by cash and cash items, U.S.

Government securities, the securities of other RICs and other securities, with other securities limited, in respect of any one issuer, to an amount not greater than 5% of the value of our total assets and not more than 10% of the outstanding voting securities of such issuer (subject to the exception described below), and (ii) not more than 25% of the market value of our total assets is invested in the securities (other than U.S.

Government securities and the securities of other RICs) (A) of any issuer, (B) of any two or more issuers that we control and that are determined to be engaged in the same business or similar or related trades or businesses, or (C) of one or more QPTPs.

The Code provides for certain exceptions to the foregoing diversification requirements.

We may generate certain income that might not qualify as good income for purposes of the 90% annual gross income requirement described above.

We intend to monitor our transactions to prevent our disqualification as a RIC.

If we fail to satisfy the 90% annual gross income requirement or the asset diversification requirements discussed above in any taxable year, we may be eligible for relief provisions if the failures are due to reasonable cause and not willful neglect and if a penalty tax is paid with respect to each failure to satisfy the applicable requirements.

Additionally, relief is provided for certain de minimis failures of the asset diversification requirements where we correct the failure within a specified period.

If the applicable relief provisions are not available or cannot be met, all of our income would be subject to corporate-level U.S.

federal income tax as described below.

We cannot provide assurance that we would qualify for any such relief should we fail the annual gross income or the asset diversification requirements discussed above.

As a RIC, in any taxable year with respect to which we timely distribute at least 90% of the sum of our (i) investment company taxable income (which includes, among other items, dividends, interest and the excess of any net short-term capital gain over net long-term capital loss and other taxable income (other than any net capital gain), reduced by deductible expenses) determined without regard to the deduction for dividends paid and (ii) net tax exempt interest income (which is the excess of our gross tax exempt interest income over certain disallowed deductions) (the “Annual Distribution Requirement”), we (but not our shareholders) generally will not be subject to U.S.

federal income tax on investment company taxable income and net capital gain (generally, net long-term capital gain in excess of short-term capital loss) that we distribute to our shareholders.

We intend to distribute annually all or substantially all of such income on a timely basis.

To the extent that we retain our net capital gain for investment or any investment company taxable income, we will be subject to U.S.

federal income tax on such retained amounts at the regular corporate income tax rates.

We may choose to retain our net capital gains for investment or any investment company taxable income, and pay the associated federal corporate income tax, including the federal excise tax described below.

Certain amounts not distributed during a calendar year are subject to a nondeductible 4% U.S.

federal excise tax payable by us.

To avoid this tax, we would need to distribute (or be deemed to have distributed) during each calendar year an amount equal to the sum of:

(1) at least 98% of our ordinary income (not taking into account any capital gains or losses) for the calendar year;

(2) at least 98% of net specified gains, including specified mark to market net gains, for a one-year period generally ending on October 31 of the calendar year (unless we elect to use our taxable year);

(3) at least 98.2% of the amount by which our capital gains exceed our capital losses (adjusted for certain ordinary losses) for a one-year period generally ending on October 31 of the calendar year (unless we elect to use our taxable year);

(4) certain undistributed amounts from previous years on which we paid no U.S.

federal income tax.

While we intend to distribute any income and capital gains in the manner necessary to minimize imposition of the 4% federal excise tax, sufficient amounts of our taxable income and capital gains may not be distributed to avoid entirely the imposition of the tax.

In that event, we will be liable for the tax only on the amount by which we do not meet the foregoing distribution requirement.

If, in any particular taxable year, we do not satisfy the Annual Distribution Requirement or otherwise were to fail to qualify as a RIC (for example, because we fail the 90% annual gross income requirement described above), and relief is not available as discussed above, all of our taxable income (including our net capital gains) will be subject to tax at regular corporate rates without any deduction for dividends paid to shareholders, and distributions generally will be taxable to the shareholders as ordinary dividends to the extent of our current and accumulated earnings and profits.

Our investments in CLO equity tranches are generally shares in “passive foreign investment company” (“PFIC”) investments or “controlled foreign corporation” ("CFC") investments.

We have elected to mark our securities to market at the end of each taxable year;

in this case, we will recognize as ordinary income our allocable share of any increase in the value of such shares, and as ordinary loss our allocable share of any decrease in such value.

Under the election, we may be required to recognize in a year income in excess of distributions from PFICs and CFCs during that year, and such income will nevertheless be subject to the Annual Distribution Requirement and will be taken into account for purposes of the 4% U.S.

federal excise tax.

A RIC cannot carry back or carry forward any net operating losses.

As a registered closed-end management investment company, we are subject to regulation under the 1940 Act.

Under the 1940 Act, unless authorized by vote of a majority of our outstanding voting securities, we may not:

• change our classification to an open-end management investment company;

• alter any of our fundamental policies, which are set forth below in “—Fundamental Investment Restrictions;” or

• change the nature of our business so as to cease to be an investment company.

A majority of the outstanding voting securities of a company is defined under the 1940 Act as the lesser of:

(a) 67% or more of such company’s voting securities present at a meeting if more than 50% of the outstanding voting securities of such company are present or represented by proxy or (b) more than 50% of the outstanding voting securities of such company.

As with other companies regulated by the 1940 Act, a registered closed-end management investment company must adhere to certain substantive regulatory requirements.

A majority of its trustees must be persons who are not “interested persons” of us, as that term is defined in the 1940 Act.

We are required to provide and maintain a bond issued by a reputable fidelity insurance company to protect the closed-end management investment company.

Furthermore, as a registered closed-end management investment company, we are prohibited from protecting any trustee or officer against any liability to us or our shareholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.

As described above, we may also be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates absent exemptive relief or other prior approval by the SEC.

We will generally not be able to issue and sell our common shares at a price below the then current net asset value per common share (exclusive of any distributing commission or discount).

We may, however, sell our common shares at a price below the then current net asset value per common share if our Board determines that such sale is in our best interests and the best interests of our shareholders, and the holders of a majority of our shares approves such sale.

In addition, we may generally issue new shares at a price below our net asset value per common share in rights offerings to existing shareholders, in payment of dividends and in certain other limited circumstances.

Fundamental Investment Restrictions

Our stated fundamental policies, which may only be changed by the affirmative vote of a majority of our outstanding voting securities (the shares), are listed below.

For the purposes of this Transition Report on Form 10-K, “majority of the outstanding voting securities” means the vote, at an annual or special meeting of shareholders, duly called, (a) of 67% or more of the shares present at such meeting, if the holders of more than 50% of the outstanding shares are present or represented by proxy;

or (b) of more than 50% of the outstanding shares, whichever is less.

(1) Borrow money, except as permitted by (i) the 1940 Act, or interpretations or modifications by the SEC, SEC staff or other authority with appropriate jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or

other authority with appropriate jurisdiction.

We may borrow for investment purposes, for temporary liquidity, or to finance repurchases of our shares.

(2) Issue senior securities, except as permitted by (i) the 1940 Act, or interpretations or modifications by the SEC, SEC staff or other authority with appropriate jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority with appropriate jurisdiction.

(3) Underwrite securities of other issuers, except insofar as we may be deemed an underwriter under the Securities Act of 1933, as amended (the “Securities Act”) in connection with the disposition of our portfolio securities.

We may invest in restricted securities (those that must be registered under the Securities Act before they may be offered or sold to the public) to the extent permitted by the 1940 Act.

(4) Invest more than 25% of the market value of our assets in the securities of companies, entities or issuers engaged in any one industry.

This limitation does not apply to investment in the securities of the U.S.

Government, its agencies or instrumentalities.

(5) Purchase or sell real estate or interests in real estate.

This limitation is not applicable to investments in securities that are secured by or represent interests in real estate (e.g., mortgage loans evidenced by notes or other writings defined to be a type of security).

Additionally, the preceding limitation on real estate or interests in real estate does not preclude us from investing in mortgage-related securities or investing in companies engaged in the real estate business or that have a significant portion of their assets in real estate (including real estate investment trusts), nor from disposing of real estate that may be acquired pursuant to a foreclosure (or equivalent procedure) upon a security interest.

(6) Purchase or sell commodities, commodity contracts, including commodity futures contracts, unless acquired as a result of ownership of securities or other investments, except that we may invest in securities or other instruments backed by or linked to commodities, and invest in companies that are engaged in a commodities business or have a significant portion of their assets in commodities, and may invest in commodity pools and other entities that purchase and sell commodities and commodity contracts.

(7) Make loans, except to the extent permitted by (i) the 1940 Act, or interpretations or modifications by the SEC, SEC staff or other authority with appropriate jurisdiction, or (ii) exemptive or other relief or permission from the SEC, SEC staff or other authority with appropriate jurisdiction.

For purposes of this investment restriction, the purchase of debt obligations (including acquisitions of loans, loan participations or other forms of debt instruments) shall not constitute loans by us.

Additionally, the preceding limitation on loans does not preclude us from modifying note terms.

We will treat with respect to participation interests both the financial intermediary and the borrower as “issuers” for purposes of fundamental investment restriction (5).

The fundamental investment limitations set forth above restrict our ability to engage in certain practices and purchase securities and other instruments other than as permitted by, or consistent with, applicable law, including the 1940 Act.

Relevant limitations of the 1940 Act as they presently exist are described below.

These limitations are based either on the 1940 Act itself, the rules or regulations thereunder or applicable orders of the SEC.

In addition, interpretations and guidance provided by the SEC staff may be taken into account to determine if a certain practice or the purchase of securities or other instruments is permitted by the 1940 Act, the rules or regulations thereunder or applicable orders of the SEC.

As a result, the foregoing fundamental investment policies may be interpreted differently over time as the statute, rules, regulations or orders (or, if applicable, interpretations) that relate to the meaning and effect of these policies change, and no vote of shareholders, as applicable, will be required or sought.

Non-Fundamental Investment Restrictions

We are also subject to the following non-fundamental restrictions and policies, which may be changed by the Board without the approval of the holders of a majority of our outstanding voting securities.

(1) Change or alter our investment objective or 80% policy;

(2) Purchase securities of other investment companies, except to the extent that such purchases are permitted by applicable law, including any exemptive orders issued by the SEC;

(3) Purchase any securities on margin except as may be necessary in connection with transactions described in our registration statement on Form N-2 and except that we may obtain such short-term credit as may be necessary for the clearance of purchases and sales of portfolio investments (the deposit or payment by us of initial or variation margin in connection with swaps, forward contracts and financial futures contracts and options thereon is not considered the purchase of a security on margin).

Compliance with any policy or limitation of ours that is expressed as a percentage of assets is determined at the time of purchase of portfolio securities.

The policy will not be violated if these limitations are exceeded because of changes in the market value or investment rating of our assets or if a borrower distributes equity securities incident to the purchase or ownership of a portfolio investment or in connection with a reorganization of a borrower.

We interpret our policies with respect to borrowing and lending to permit such activities as may be lawful for us, to the full extent permitted by the 1940 Act or by exemption from the provisions therefrom pursuant to an exemptive order of the SEC.

Subject to prevailing market conditions, we may add financial leverage if, immediately after such borrowing, we would have asset coverage (as defined in the 1940 Act) of 300% or more (for leverage obtained through debt or other “senior securities”) or 200% or more (for leverage obtained through preferred shares).

As one example, if we have $100 in “Net Asset Value” (as defined below), we may utilize leverage through obtaining debt or other “senior securities” subject to a 300% asset coverage requirement, which will typically result in a debt limit of $50 (e.g., $150 in total assets compared to $50 in debt or other “senior securities”).

As another example, if we have $100 in “Net Asset Value” (as defined below) and no debt, it may issue $100 in preferred shares subject to a 200% asset coverage requirement, which will typically result in a $100 limit on preferred shares (e.g., $200 in total assets compared to $100 in preferred shares).

“Net Asset Value” means our total assets minus our liabilities.

We also may add financial leverage through borrowings entered into under repos subject to the requirements discussed under “Derivatives Transactions” below.

We may use leverage opportunistically and may choose to increase or decrease our leverage, or use different types or combinations of leveraging instruments, at any time based on our assessment of market conditions and the investment environment.

Certain instruments that create leverage are considered to be senior securities under the 1940 Act.

In the event we fail to meet our applicable asset coverage ratio requirements, we may not be able to incur additional debt and/or issue preferred shares, and could be required by law or otherwise to sell a portion of our investments to repay some debt or redeem preferred shares (if any) when it is disadvantageous to do so, which could have a material adverse effect on our operations, and we may not be able to make certain distributions or pay dividends of an amount necessary to continue to qualify for treatment as a RIC for U.S.

federal income tax purposes.

We expect that we will, or may need to, raise additional capital in the future to fund our continued growth or otherwise, and we may do so by entering into a credit facility, issuing preferred shares or debt securities or through other leveraging instruments.

Subject to the limitations under the 1940 Act, we may incur additional leverage opportunistically and may choose to increase or decrease our leverage.

In addition, we may borrow for temporary, emergency or other purposes as permitted under the 1940 Act, which indebtedness would be in addition to the asset coverage requirements described above.

By leveraging our investment portfolio, we may create an opportunity for increased net income and capital appreciation.

However, the use of leverage also involves significant risks and expenses, which will be borne entirely by our shareholders, and our leverage strategy may not be successful.

For example, the more leverage is employed, the more likely a substantial negative change will occur in our net asset value per common share.

Accordingly, any event that adversely affects the value of an investment would be magnified to the extent leverage is utilized.

Derivatives Transactions

We engage in “Derivative Transactions,” as described below, primarily to hedge against interest rate, credit, currency and/or other risks, or for other risk management or investment purposes, including to accommodate additional investments.

However, we may also use Derivative Transactions for investment purposes to the extent consistent with our investment objectives if the Adviser deems it appropriate to do so.

We may purchase and sell a variety of derivative instruments, including exchange-listed and over-the-counter (“OTC”) options, futures, options on futures, swaps and similar instruments, various interest rate-related products, such as fixed-to-floating interest rate swaps, caps, floors or collars, and credit transactions and credit default swaps.

We also may purchase and sell derivative instruments that combine features of these instruments.

Collectively, we refer to these financial management techniques as “Derivative Transactions.” The use of Derivative Transactions, if any, will generally be deemed to create leverage for us and involves significant risks.

No assurance can be given that the strategy and use of derivatives will be successful, and our investment performance could diminish compared with what it would have been if Derivative Transactions were not used.

As required by Rule 18f-4 under the 1940 Act (the “Derivatives Rule”), funds that engage in derivatives transactions, other than “limited derivatives users” (as defined under the Derivatives Rule), generally must adopt and implement a written derivatives risk management program (the “Derivatives Risk Management Program”), that is reasonably designed to manage our derivatives risks, while taking into account our derivatives and other investments.

The Derivatives Rule mandates that the fund adopt and/or implement:

(i) value-at-risk limitations (“VaR”);

(ii) a written derivatives risk management program;

(iii) Board oversight responsibilities;

and (iv) reporting and recordkeeping requirements.

It is our intention to adopt and implement a

Derivatives Risk Management Program.

However, we may elect in the future, without notice to shareholders, to operate as a “limited derivatives user,” in which case it would no longer be required to maintain our Derivatives Risk Management Program.

The Derivatives Rule also provides special treatment for repos, similar financing transactions and unfunded commitment agreements.

Specifically, a fund may elect whether to treat repos and similar financing transactions as “derivatives transactions” subject to the requirements of the Derivatives Rule or as senior securities equivalent to bank borrowings for purposes of Section 18 of the 1940 Act.

Repos are not subject to the Derivatives Rule but are still subject to other provisions of the 1940 Act.

In addition, when-issued or forward settling securities transactions that physically settle within 35 days are deemed not to involve a “senior security” for the purposes of the asset coverage tests described above.

We have currently elected to treat repos and similar financing transactions as “derivatives transactions,” subject to the requirements of the 1940 Act under the Derivatives Rule, but alternatively may elect to treat such transactions as borrowings subject to the asset coverage requirements discussed above.

Further, we are permitted under the Derivatives Rule to enter into an unfunded commitment agreement, and such unfunded commitment agreement will not be subject to the asset coverage requirements under the 1940 Act, if we reasonably believe, at the time we enter into such agreement, that we will have sufficient cash and cash equivalents to meet our obligations with respect to all such agreements as they come due.

However, we may elect in the future, without notice to shareholders, to no longer treat these types of liabilities as derivative transactions.

Investment Advisers Act of 1940

Both Ellington and our Manager are registered as investment advisers under the Advisers Act and are subject to the regulatory oversight of the Division of Investment Management of the SEC.

Both Ellington and the Adviser are registered as investment advisers under the Advisers Act and are subject to the regulatory oversight of the Division of Investment Management of the SEC.

Human Capital Resources

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All of our executive officers, and our partially dedicated personnel, which include our Chief Financial Officer, Chief Operating Officer, controller, accounting staff, in-house legal counsel, and internal audit staff, are employees of Ellington or one or more of its affiliates.

See "—Management Agreement" above.

See "—Advisory Agreement" above.

Additional Information

A copy of this Annual Report on Form 10-K, as well as our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available, free of charge, on our internet website at www.ellingtoncredit.com .

A copy of this Transition Report on Form 10-K, as well as our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Registration Statement on Form N-2, and any amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available, free of charge, on our internet website at www.ellingtoncredit.com .

All of these reports are made available on our internet website as soon as reasonably practicable after they are electronically filed with or furnished to the SEC.

Our Corporate Governance Guidelines and Code of Business Conduct and Ethics and the charters of the Audit, Compensation and Nominating and Corporate Governance Committees of our Board of Trustees are also available at www.ellingtoncredit.com and are available in print to any shareholder upon request in writing to Ellington Credit Company, c/o Investor Relations, 53 Forest Avenue, Old Greenwich, CT 06870.

Our Code of Ethics and our Code of Ethics for Principal Executive and Senior Financial Officers and the charters of the Compensation, and Governance Committees of our Board are also available at www.ellingtoncredit.com and are available in print to any shareholder upon request in writing to Ellington Credit Company, c/o Investor Relations, 53 Forest Avenue, Old Greenwich, CT 06870.

The information on our website is not, and shall not be deemed to be, a part of this report or incorporated into any other filing we make with the SEC.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business