EJF Investments Ltd

Annual Report and Audited Financial Statements 2022

Contents

1

2022 Performance Highlights

2–4

Corporate Summary

5

General Information

6–8

Chair’s Statement

9–13

Manager’s Report

14–17

Statement of Principal Risks

18

The Board

19-20

The Manager

21-28

Corporate Governance Report

29–31

Directors’ Report

32–33

Directors’ Remuneration Report

34–38

Audit and Risk Committee Report

39

Statement of Directors’ Responsibilities

40–47

Independent Auditor’s Reports to the Members

of EJF Investments Limited

Audited Financial Statements

48

Statement of Comprehensive Income

49

Statement of Financial Position

50

Statement of Changes in Equity

51

Statement of Cash Flows

52–81

Notes to the Audited Financial Statements

82–85

Glossary of Terms

86–87

Alternative Performance Measures

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

1

Performance

Total Return

1

2022: 13.85%

2021

1

:

11.02%

Total Return since inception

1

93.38%

Market View

Ordinary Share Price

2022: 132p

2021: 129p

2022 ZDP Share Price

2

2022: n/a

2021: 127p

2025 ZDP Share Price

3

2022: 118.5p

2021: 116.5p

Market Capitalisation

2022: £80.7m

2021: £78.9m

Asset Performance

Net Asset Value

2022: £112.5m

2021: £104.8m

NAV per ordinary share

1

2022: 184p

2021

1

: 171p

Share price discount to NAV per ordinary share

1

2022: (28.3)%

2021

1

: (24.6)%

Delivered on Dividends

Dividends paid

2022: 10.7p

2021: 10.7p

Annualised Dividend Yield

1

2022: 8.1%

2021

1

: 8.3%

Portfolio Investments

Securitisation & Related Investments

£104.7m

Specialty Finance

£16.5m

Other

£0.6m

2

EJF Investments Limited

Annual

Report and Audited Financial Statements 2022

Corporate Summary

Overview

The Company is a closed-ended investment company

incorporated with limited liability in the Bailiwick of Jersey on

20 October 2016 under the provisions of the Companies Law

with registered number 122353, and is regulated as a collective

investment fund under the Collective Investment Funds (Jersey)

Law 1988. The Company’s registered office and principal place

of business is IFC1, The Esplanade, St. Helier, Jersey, JE1 4BP,

Channel Islands. The principal legislation under which the

Company operates is the Companies Law. The Company’s capital

comprises Ordinary Shares and 2025 ZDP Shares admitted to

trading on the SFS. The 2022 ZDP shares were redeemed on

30 November 2022.

The Company does not have a fixed life. Under the Articles, on

or about each fifth anniversary of the Ordinary Shares being

admitted to trading on the LSE on 7 April 2017, a Continuation

Vote will be held. The first Continuance Resolution was passed

at the EGM on 5 May 2022. The next Continuation Vote will take

place, on or about five years from the most recent vote.

Investment Objective

The Company seeks to generate risk adjusted returns for

its shareholders by investing, through its Subsidiary, in

opportunities created by regulatory and structural changes

impacting the financial services sector. These opportunities are

anticipated to include structured debt and equity, loans, bonds,

preference shares, convertible notes, FinTech debt securities

and private equity, in both cash and synthetic formats issued

by entities domiciled in the US, UK and Europe. Investments

consist primarily of Securitisation and Related Investments and

Specialty Finance Investments. The Company seeks to make

quarterly dividend payments in addition to targeting Net Asset

Value growth.

Purpose

The Company is an essential part of EJF’s overall strategy and

acts as a public vehicle to provide exposure to investments in

the equity tranches of EJF sponsored securitisations, subject

to Directors’ approval. The Manager believes that through

investments in niche asset classes, with a target of making

quarterly dividend payments and growing the Net Asset

Value, the Company offers attractive risk adjusted returns for

its Ordinary Shareholders.

The Company targeted a Total Return of 8% to 10% per annum

for the year ended 31 December 2022 (31 December 2021:

8% to 10%), and paid the Target Dividend for the year of 10.7

pence per Ordinary Share (31 December 2021: 10.7 pence per

Ordinary Share). The Target Dividend for the financial year to

31 December 2023 remains at 10.7 pence per Ordinary Share.

Strategy

The Company aims to achieve its Investment Objective by

pursuing a policy of investing in a diversified portfolio of

investments that are derived from the changing financial

services landscape, primarily through Risk Retention and

Related Investments and Specialty Finance Investments.

Values

To promote the long-term success of the Company through

responsible investing, focussing on the values of the Company

in a world with constantly evolving social and economic

demographics. We believe that a strong corporate governance

structure is crucial to the pursuit of this goal along with trusted

relationships with our advisors.

The Company’s detailed Investment Policy can be found

on pages 78 to 81 of its Prospectus, which is available on the

Company’s website, www.ejfi.com.

Structure

The Company has one subsidiary, EJFIH (incorporated

on 9 June 2017), of which the Company owns 100% of the

stated capital.

The holding of assets via EJFIH allows the Company to manage

the upstreaming of portfolio income with greater flexibility and

cash flow management and conduct its affairs in accordance

with the criteria for the non-UK investment trust exemption to

the UK Unregulated Collective Investment Schemes and Close

Substitutes Instrument 2013.

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

3

Corporate Summary

Manager

The Company is externally managed by the Manager. EJF holds 100% of the voting rights in the Manager. EJF is an investment adviser

principally located in the US and registered as such with the SEC and as a CPO and CTA with the CFTC.

To meet the requirements of Rule 206(4)-2 under the Investment Advisors Act 1940 (the “Custody Rule”), the Audited Financial

Statements of the Company have also been audited in accordance with US GAAS.

The Company has appointed the Manager to act as the AIFM for the purposes of the AIFM Directive.

Listing Information

As at 31 December 2022.

Ordinary Shares

2025 ZDP Shares

ISIN

JE00BF0D1M25 JE00BK1WV903

SEDOL

BF0D1M2

BK1WV90

TICKER

EJFI

EJF0

Total issued shares at year end

76,953,707

16,996,857

Total issued shares held in treasury at year end

15,808,509

–

Total issued shares with voting rights at year end

61,145,198

–

As at 31 December 2021.

Ordinary Shares

2022 ZDP Shares

2025 ZDP Shares

ISIN

JE00BF0D1M25

JE00BDG12N48 JE00BK1WV903

SEDOL

BF0D1M2

BDG12N4

BK1WV90

TICKER

EJFI

EJFZ

EJF0

Total issued shares at year end

76,953,707

15,000,000

6,000,000

Total issued shares held in treasury at year end

15,808,509

–

–

Total issued shares with voting rights at year end

61,145,198

–

–

4

EJF Investments Limited

Annual

Report and Audited Financial Statements 2022

Corporate Summary

Significant Events during the Year

Appointment of Corporate Broker

On 10 January 2022, Liberum Capital Limited was appointed to

act as the Company’s broker and financial advisors.

Rollover Offer and launch of ZDP Placing Programme

and Publication of the Prospectus

On 4 April 2022, the Board published the Prospectus approved

by the FCA in relation to the Rollover Offer as well as a Placing

Programme of up to 70 million new Ordinary Shares and/or new

C Shares and up to 25 million new 2025 ZDP Shares.

Extraordinary General Meeting

On 5 April 2022, the Board announced it had published

a shareholder circular containing a notice convening an EGM of

the Company on 5 May 2022, at which Ordinary Shareholders

were invited to vote on the following resolutions:

Ordinary Resolutions

1)

Resolution 1 – Continuation Vote.

2)

Resolution 2 – Rollover Offer.

3)

Resolution 3 – Early repayment of 2022 ZDP Shares.

Special Resolutions

4)

Resolution 4 – Placing Programme to allot and issue up to

70 million Ordinary Shares and/or C Shares.

5)

Resolution 5 – Allot and issue up to 25 million new

2025 ZDP Shares.

On 5 May 2022, the Board announced that all ordinary and

special resolutions put to Ordinary Shareholders at the EGM

were duly passed. Votes were cast for a total of 42,472,378

Ordinary Shares, representing 55.19% of the total number

of votes capable of being cast at the EGM.

Result of the Rollover Offer

On 5 May 2022, the result of the Rollover Offer was announced

with valid elections received to roll 10,021,292 2022 ZDP Shares

into 2025 ZDP Shares, representing approximately 66.8% of

the total number of 2022 ZDP Shares in issue. 10,996,857 2025

ZDP Shares were issued on the basis of each 2022 ZDP Share

converting into 1.09735 new 2025 ZDP Shares.

Change in Hedging Strategy

On 10 May 2022, the Company announced a change to its

hedging strategy. Following the weakening of Sterling against

the US Dollar, the Manager recommended increasing the level

of the Company’s foreign exchange hedge to lock-in a portion

of currency gains.

Effective from 10 May 2022, the Board approved an increase

in the level of the Company’s foreign exchange hedge so that

approximately 40% of the Company’s US Dollar assets were

hedged against currency movements, and also approved that

this level may be moved up or down to hedge between 60%

of US Dollar assets and the final capital entitlement of the ZDP

Shares only. As at the year end, approximately 55% of that

exposure was hedged.

Annual General Meeting

On 27 May 2022, the Board announced that a circular had

been issued convening an AGM to be held on 22 June 2022.

On 22 June 2022, the Board announced that all resolutions

tabled were duly passed.

Redemption of 2022 ZDP Shares

On 1 November 2022, the Company announced that redemption

proceeds would be paid to holders of the Company’s 2022 ZDP

Shares, each due for redemption on 30 November 2022, whose

names appeared on the register as at the close of business on

Friday 25 November 2022. Settlement of the redemption monies

occurred on 30 November 2022.

The Company also announced that applications were made to

the LSE for a halt in trading in the 2022 ZDP Shares on the LSE

with effect from 8:00am on Monday 28 November 2022 and for

the 2022 ZDP Shares to be cancelled from trading on the SFS

with effect from 8.00am on Thursday 1 December 2022.

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

5

General Information

The Board

Joanna Dentskevich (Chair)

Alan Dunphy

Nick Watkins

Neal J. Wilson

Registered Office

IFC1

The Esplanade

St. Helier

Jersey JE1 4BP

Channel Islands

Administrator and Company Secretary

BNP Paribas S.A., Jersey Branch

IFC1

The Esplanade

St. Helier

Jersey JE1 4BP

Channel Islands

Manager

EJF Investments Manager LLC

The Corporation Trust Company

Corporation Trust Center

1209 Orange Street

Wilmington, DE 19801-1120

US

Corporate Broker & Financial Adviser

Liberum Capital Limited

1

Ropemaker Place

Level 12

25 Ropemaker Street

London EC2Y 9LY

UK

Custodians

Citigroup Global Markets Inc.

390 Greenwich Street

New York City

NY 10013-2396

US

Citibank N.A.

399 Park Avenue

New York City

NY 10043

US

Registrar

Computershare Investor Services (Jersey) Limited

13 Castle Street

St. Helier

Jersey

JE1 1ES

Channel Islands

Independent Auditor

KPMG LLP

15 Canada Square

London E14 5GL

UK

Legal Adviser to the Group

(as to Jersey law)

Carey Olsen

47 Esplanade

St. Helier

Jersey

JE1 0BD

Channel Islands

Investor Screening/CDD Service

The ID Register

5th Floor Market Building

Fountain Street

St. Peter Port

Guernsey

GY1 1BX

Channel Islands

Websites

Company: www.ejfi.com

Manager: www.ejfimanager.com

1

Appointed on 10 January 2022 to replace Numis Securities Limited.

6

EJF Investments Limited

Annual

Report and Audited Financial Statements 2022

Introduction

On behalf of the Board, I am pleased to present the Annual

Report for the year ended 31 December 2022.

2022 will be remembered by many investors as being an

extremely challenging year, as inflation, interest rate increases,

geopolitics and concerns regarding lower economic growth

led to significant volatility across many asset classes. It is

therefore particularly pleasing that the Portfolio continued

to provide strong performance for investors, by generating

a Total Return of 13.85% for the year despite the backdrop. Once

again, the Company suffered no material write-downs in the

creditworthiness of its investments and paid its Target Dividend.

Performance and portfolio activity

The Total Return of 13.85% was predominantly driven by regular

interest accruals and payments in addition to some gains on the

Company’s Securitisation and Related Investments alongside

strong mark-to-market gains on the MSRs investment. There

continues to be no defaults in underlying collateral backing

the Company’s securitisation investments, which reflects the

diversified nature of the Company’s underlying targeted US

bank and insurance exposures.

The Company’s investment in MSRs continued to perform very

strongly in the first three quarters of the year. The valuation

of the underlying MSRs, which are a contractual stream of

senior cash flows from Fannie Mae and Freddie Mac acquired

mortgages, are heavily influenced by prepayments on the

associated mortgages. As a result of the upward trend in the

yields on the US Treasury 10 year for much of 2022, thereby

reducing the probability of prepayments, significant mark-to-

market gains were generated. The fall in US Treasury yields

towards the end of the year, before some of these falls were

reversed, led to a reduction in the value of MSRs, but it was

undoubtedly a positive year overall, and the Manager continues

to believe that the yields and return potential remain attractive

as we potentially enter an environment of less dramatic interest

rate change. It should also be noted that the Manager added

a small US Treasury hedge to the MSRs later in the year in

recognition of the changing interest rate environment.

Elsewhere, in line with the Company’s regulated financials and

specialty finance mandate, further investments were made to

put cash to work in contiguous investment areas. The Armadillo

Portfolio remained largely flat and final distributions were

received post the year end.

The Board approved an increase in the level of the Company’s

FX hedge, from approximately 40% of the Company’s US

Dollar assets being hedged against relevant FX movements,

to between up to 60% of the value of US Dollar denominated

assets and the final capital entitlement of the ZDP Shares only.

Following the fall of Sterling against the US Dollar, the Company

utilised this approved increase to protect against a reversal in the

value of the USD with a hedge of approximately 55% at the year

end. The Total Return net of FX effects was 5.44%.

Chair’s Statement

“…the Company suffered no material

write-downs in the creditworthiness of its

investments and paid its Target Dividend.”

“...the Portfolio continued to provide

strong performance for investors, by

generating a Total Return of 13.85%.”

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

7

Chair’s Statement

Corporate activity

In May 2022, the Company held an EGM in respect of the

Rollover Offer to convert the existing 2022 ZDP shares into

new 2025 ZDP shares. All resolutions were duly passed, with

approximately 67% of the 2022 ZDP Shareholders electing

to roll their holdings, thereby taking advantage of a small

uptick in yield to 6% whilst also increasing the size of 2025

ZDP Shares in issue. The remaining 2022 ZDP Shares matured

on 30 November 2022 and the Company duly settled the

redemption amount due.

In the same EGM, Ordinary Shareholders also approved the

Continuation Resolution, approving continuation of the

Company for another five years.

The Company continued to benefit from the Manager’s

absorption of 60% of the Company’s recurring operating

expenses during the year. I believe the Manager’s decision to

continue the reimbursement in 2023 at the same level as 2022

continues to demonstrate the Manager’s and EJF’s ongoing

commitment to, and alignment with, the Company.

In June 2022, the Company held an AGM where all resolutions

were duly passed.

On 20 February 2023, the Company announced its intention

to issue further 2025 ZDP Shares. Following completion of

a placing, 2,277,046 new 2025 ZDP Shares were issued at

a placing price of 119.78 pence per share, raising gross proceeds

of approximately £2.73 million. The new 2025 ZDP shares

were admitted to the SFS of the main market of the LSE on

1 March 2023. Following this the total number of 2025 ZDP

Shares in issue are 19,273,903.

Share price

Shareholders will be cognisant of the predominance of

discounts amongst investment companies as a result of the

macro-economic and geopolitical environment, which saw

many also experience negative returns. This environment was

an added headwind for the Company too, notwithstanding

its performance of 13.85% in the year, demonstrating the

uniqueness and uncorrelated nature of the Investment Policy

and its consistent performance of 11.84% p.a. since inception in

2017. The Ordinary Share Price finished the year 3p higher than

it started and 15p above its low in July.

During the year, the Board has had discussions with the

Manager regarding potential discount control mechanisms,

and having also taken into account the views expressed by its

shareholders, believes that a buy-back program at this time

would not be in the best interest of the Company, given the

volatility in the market and that it may reduce liquidity and

prevent the Company’s ability to take full advantage of the

Manager’s attractive investment pipeline. The Board is conscious

of the need to improve liquidity and is committed to doing so,

subject to any method employed to reduce the discount aligning

with the best interests of the Company. We have been working

with the Manager to produce a new quarterly report which

aims to provide current and prospective stakeholders regular

information to facilitate a greater understanding of the Company,

its strategy and the attractive nature of its underlying exposures.

In addition, we have been speaking with the Company’s

advisors and are actively considering further initiatives to better

market the Company.

Dividends

Cash dividends in respect of 2022 of 2.675p per Ordinary Share

were announced in April 2022, July 2022, October 2022 and

January 2023, and are a reflection of the continued positive

performance of the Portfolio.

The total dividend paid for 2022 equates to an annualised

dividend yield of 8.1% of the Share Price at 31 December 2022.

This is consistent with Target Dividend of 10.7 pence per share,

which also remains the target for the 2023 financial year.

“In May 2022, the Company held an EGM

in respect of the Rollover Offer to convert

the existing 2022 ZDP shares into new

2025 ZDP shares. All resolutions were duly

passed, with approximately 67% of the

2022 ZDP Shareholders electing to roll

their holdings.”

8

EJF Investments Limited

Annual

Report and Audited Financial Statements 2022

Chair’s Statement

Corporate governance

The Company continues to uphold the principles of good

corporate governance and by reporting against the AIC Code,

meets its obligations in relation to the UK Code, and in particular

for this year, Section 172(1). With respect to Section 172(1), the

diagram on page 27 identifies the Company’s key stakeholders,

their particular focus and how the Company engages with them.

Through this, the Company aims to ensure understanding of

each stakeholder’s issues and recognises the importance of

engagement with its stakeholders in building the long-term

success of the Company.

ESG

The Board believes in a strong corporate governance framework

to ensure responsible investing focused on the values of the

Company and that building trusted relationships with the

Company’s stakeholders is crucial for the long-term success

of the Company.

Whilst the Company is not a sustainable investment fund and

its Investment Policy has no direct impact on the environment

per se, when pursuing the Investment Objective and in the

selection of the service providers and advisers of the Company,

the Company aims to conduct itself responsibly, ethically

and fairly with the impact of all material factors, including

ESG, on its financial risk and return being considered in the

decisions it makes.

As detailed further on pages 25 to 26, the Directors and the

Manager continue to work closely to develop the Company’s

ESG Strategy & Policy recognising that the integration of ESG

principles at both a corporate and investment portfolio level

is their joint responsibility and is likely to contribute to the

long term success of the Company.

Principal Risks and Uncertainties

The Directors have carried out a robust review and assessment

of the emerging and Principal Risks and Uncertainties facing the

Company, a summary of which, including any changes from last

year can be found on pages 14 to 17.

Outlook

The Directors believe the Company is well positioned to

participate in further investment opportunities as and when

they arise and that the Company’s shares continue to represent

an attractive risk adjusted return for investors. We believe

that higher interest rates will continue to benefit many of the

Company’s underlying investments, and that credit profiles

remain robust and able to absorb any reduction in credit

quality, which will naturally occur given the asset quality and

economic cycle.

I also highlight that the Company and its underlying

investments have no direct exposure to Russia or to the

imposed sanctions. However, the Board remains cognisant of

the uncertainty regarding the pressure on energy prices, interest

rates rises and inflation that may arise, in addition to stock

market volatility and changes in investor sentiment.

As I write this, March has seen further significant turmoil in

financial markets and certain segments of US and European

banking sectors. Based on facts known at this time, I believe the

Company has manageable exposure to those banks, as detailed

in the Outlook section of the Manager’s Report.

The Board again expresses its thanks for the continued support

from its shareholders and, along with the Manager and the

Group’s advisers, looks forward to maintaining consistent

positive returns during the coming year.

General Meetings

The 2023 AGM is due to be held on 13 June 2023, at the

Company’s registered office in Jersey.

Joanna Dentskevich

Chair

Date: 30 March 2023

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

9

Geographic Diversification of Bank and Insurance Debt

1

Insurance Issuers

Bank Issuers

1

Based on the headquarters of the underlying collateral issuers of TFINS 2017-2, TFINS 2018-1, TFINS 2018-2, TFINS 2019-1, TFINS 2019-2, TFINS 2020-1 and

TFINS 2020-2; as of 31 December 2022.

We are pleased to present our review for the year ended 31 December 2022

and our outlook for 2023.

As mentioned in the Chair’s Statement, despite 2022 being an

extremely challenging year, the Company delivered a Total

Return of 13.85%, totalling 10.7 pence per Ordinary Share.

This equates to a Total Return since inception of 93.38% for

the Company and compares favourably to the Target Return

of 8-10% p.a.

Through its main investment strategy of acquiring bank and

insurance CDO equity positions as the risk retention partner to

EJF, the Company has exposure to a diversified portfolio of more

than 160 banks and 40 insurance companies located across the

US. We believe the Company’s investment strategy will continue

to benefit from a rising interest rate environment and that there

will be continued consolidation in the US banking and insurance

sectors, driven by the regulatory and economic environment.

Manager’s Report

10

EJF Investments Limited

Annual

Report and Audited Financial Statements 2022

Manager’s Report

US Bank Market Update

US banking sector fundamentals remained solid as evidenced

by the third quarter earnings season. Strong loan growth drove

a balance sheet migration towards higher-yielding earning

assets, while deposit costs remained well contained. These

effects contributed to the sector’s aggregate net interest margin

expansion of 0.32% to 3.00%. Cycle-to-date at that time, the

industry’s total cost of deposits increased to only 0.54% in the

from 0.11% in the first quarter of 2022 and the fourth quarter

of 2021, while the average effective Fed Funds rate increased

to 2.19% in the third quarter from just 0.08% in the fourth

quarter of 2021. Vitally, net charge-off ratios remained well

below average levels at just 0.25% annualised, and the non-

performing loan percentage declined to 0.83%. To compare this

to a “pre-pandemic” time period, the full-year 2019 net charge-off

ratio was 0.49% and the non-performing loan ratio ended the

year at 0.98%.

The extreme pace of Fed interest rate hikes began to cause

certain customers to seek higher yielding alternatives or demand

higher rates from their bank. Deposit reductions, including

declines in non-interest-bearing accounts, were evident in

third quarter earnings. As a result, the Manager anticipates that

net interest margins will reach peak quicker than might have

initially modeled as banks slow loan growth and are compelled

to raise deposit rates more quickly going forward.

Bank M&A slowed in 2022 due to a combination of recessionary

fears, higher interest rates and extended regulatory approval

timelines. Nevertheless, 167 deals were announced for the year,

with total deal value of USD22.6 billion. These metrics are down

from 2021’s full year of 207 announcements and USD76.9 billion.

While the Manager continues to believe that mergers and

acquisitions among small and medium-sized banking

institutions is a long-term secular trend, near-term headwinds

caused by interest rate movements remain, and may impact deal

making in the near-term.

US Insurance Market Update

The US insurance sector continued to demonstrate strength in

2022. On the life insurance side, the equity market rebounded

due to higher interest rates which provided solid support to life

insurance performance. Overall, we continue to have a positive

outlook for US life insurance. Moreover, we believe the M&A

dynamics are also very favourable for the life insurance sector,

not only for a fixed annuity but also for the variable annuity

and potentially long-term care blocks. The credit environment

continues to be relatively stable for a life insurance portfolio in

our opinion.

The reinsurance market continues to be as hard as for the last

decade following multiple years of high CAT events and limited

third-party capital. The hard reinsurance market introduces

further pressure on InsureTech players relying on reinsurance

funding for a “capital-light” model. We remain cautious about

the so-called InsureTech group in general. The Company has

limited exposure to reinsurance and no direct exposure to

pureplay InsureTech. The hardening reinsurance market may

also pressure the insurance brokers, especially the ones focusing

on the MGA/MGU universe.

On the personal & commercial side, we witnessed improved

dynamics and anticipate that a less dramatic inflation outlook

alongside further rate improvement will provide greater support

for the personal line sector in 2023 after a weak 2022. On the

commercial side, we remain constructive on property lines

but expect more moderate performance as inflation slows and

the reinsurance market remains hard. We remain cautious

for the casualty space in general and are waiting for more

rate improvement.

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

11

Manager’s Report

Portfolio Update and Investment activity

The Portfolio continues to perform in line with expectations from an income yield perspective. Furthermore, there were some mark-to-

markets gains on the Securitisation and Related Investments alongside strong gains on the MSRs investment for much of the year.

Portfolio comparison in £ million

£0.0

Risk Retention

& Related Securities

REIT TruPS

CDOs

CDO

Manager Interest

Armadillo

Portfolio

Mortgage

Servicing Rights

US Treasury

bonds

UK liquid

bonds

FinTech Debt

Investments

Cash

Other

£10.0

£20.0

£30.0

£40.0

£50.0

£60.0

£70.0

£90.0

£80.0

£100.0

£89.3

£95.2

£1.4

£1.4

£8.7

£8.1

£6.7

£11.2

£1.2

£1.2

£0.0

£1.5

£3.2

£0.0

£2.8 £2.6

£16.8

£11.0

£0.4 £0.6

Securitisations and Related Investments

Specialty Finance Investments

31 December 2021

31 December 2022

12

EJF Investments Limited

Annual

Report and Audited Financial Statements 2022

Manager’s Report

Risk Retention and Related Investments, in combination with the other Securitisation and Related Investments, represented

approximately 79% of the Group’s assets as of 31 December 2022. These investments are consistent with the Group’s strategy of

generating risk adjusted shareholder returns by investing in a diversified portfolio of long-term, cash-flow generating assets. A summary

of the CDO equity investments and underlying collateral diversification is below, along with forward projected returns analysis:

EJF Investments Ltd – Risk Retention Investments as of 31 December 2022

TFINS 2017-2

October 2017

TFINS 2018-1

May 2018

TFINS 2018-2

December 2018

TFINS 2019-1

March 2019

TFINS 2019-2

December 2019

TFINS 2020-1

September 2020

TFINS 2020-2

December 2020

EJFI — CDO Equity amount ($ million)

14.8

22.7

16.7

15.2

15.7

14.1

8.8

Estimated return profile

1

Yield to Call

2

(%)

12.63

10.14

10.69

9.55

13.82

15.42

17.43

Yield to Call

2

including CDO

management fee income (%)

12.80

10.74

11.29

10.07

14.47

15.94

18.45

Collateral overview

(on closing date)

TruPS, senior, subordinated and

surplus notes issued by US banks

and insurers.

Insurance companies

Banks

CDO structure

Original collateral principle balance ($ million)

353.0

537.8

351.0

313.9

338.4

282.9

177.2

Implied rating

Ba1

Baa3

Baa3

Baa3

Ba1

Ba2

Ba3

Leverage ratio

4.3x

6.7x

5.7x

4.6x

5.8x

4.5x

5x

Other key terms

Non call/Auction call

Passed/

Sept 2025

Passed/

Mar 2026

Passed/

Dec 2026

Passed/

Feb 2026

Jan 2023/

Nov 2027

Passed/

July 2028

Passed/

Oct 2028

Senior collateral management fee (bps)

10

20

20

20

20

30

30

As mentioned previously, the Company’s investment in MSRs continued to perform strongly for much of the year as a result of the

upward trend in the yields on the US Treasury 10 year for much of 2022. The Company also invested £1.5 million equivalent at year end

into US Treasury bonds to partially hedge the MSRs valuation in recognition of the changing interest rate environment.

The allocation to FinTech related debt remained relatively small while UK liquid bond investments were held temporarily to manage

liquidity prior to the repayment of 2022 ZDP shares. Consequently, they were divested in advance of the repayment. The Armadillo

portfolio remained largely flat and final distributions were received post the year end.

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

13

Manager’s Report

Risk Management

We believe the Portfolio contains a portfolio of diversified

borrowers. The Manager’s credit team conducts regular

surveillance on issuer financial and business profiles and the

broader portfolio and there were no defaults during the year

on the underlying securitisation collateral positions.

The Group’s base currency is denominated in Sterling although

most of the Group’s investments are denominated in USD. The

Company updated its hedging policy this year with a mandate

approved by the Board to hedge between the USD equivalent

of the outstanding amount of ZDP Shares and 60% of USD

exposure. As at 31 December 2022, the Company has hedged

approximately 55% of its USD exposure. Overall the total returns

for 2022 from FX movements was 8.0%.

Outlook

The Manager continues to believe that the Company remains

well positioned to benefit from the rising interest rate

environment, and that its Investment Policy provides ample

opportunity to allow it to continue to harvest and add attractive

risk-adjusted returns. While rising interest rates have been

strongly positive for bank earnings over the past 12 months,

the Manager believes that additional time is needed to make

a clear judgement on whether a traditional credit cycle will

occur. The Manager’s concern stems from the Fed tightening

financial conditions at a historic pace in 2022, but we note that

many banks have very strong capital levels and appear to be well

prepared for a harsher environment.

Additionally, EJF continues to support the Company through

its commitment to cover 60% of operating expenses until

at least 31 December 2023 or such time as the NAV exceeds

£300 million, if earlier.

Subsequent to year end, there has been significant turmoil

in certain segments of the US and European banking sectors

and associated broader market volatility and concerns. The

Company’s exposure to crystallised events at the time of

writing, was published on 15 March 2023 and further analysis

on exposure to three other regional banks on 29 March 2023.

The main points being:

•

The Company has no exposure to SVB Financial Group

(“SVB”) or Signature Bank (“Signature”), the two US Regional

Banks that regulators put into receivership earlier this month

(“US Regional Banks” being those US banks with assets

between USD50bn and USD250bn).

•

The Company has no exposure to debt issued by

European banks.

•

The Company holds cash balances with BNP Paribas and Citi.

•

Of the Risk Retention exposure within the collateral, which

represents approximately 70% of the gross asset value of the

Company as at 28 February 2023, there were 260 US banks

and 113 insurance companies, of which 162 US banks and

41 insurance companies were unique issuers.

•

The largest exposure to any single bank is approximately 3%

of the total outstanding underlying principal across all seven

Risk Retention deals in which the Company is invested.

•

As published on 15 March 2023, the Company’s combined

exposure to Silvergate Capital Corporation (“Silvergate”),

which went into voluntary liquidation on 8 March 2023,

is equivalent to less than 2.5% of the Company’s most

recently published NAV on a look through basis, prior to

any recoveries. The Manager currently believes there may

be a recoverable value noting that both Silvergate’s equity

and preferred equity are currently trading with a positive

economic value in the market, and that the Company’s

position is structurally senior to both of these.

•

With respect to EJFI’s remaining exposures, the Manager

has identified three US Regional Banks, within the collateral,

which may share some of the attributes of SVB and Signature:

(1) a relatively concentrated deposit base; (2) a greater than

average level of uninsured deposits; and (3) a greater than

average held to maturity and/or available for sale securities

portfolio that has unrealised losses as a result of the steep

rise in interest rates. In combination, the exposure of the

banks identified by the Manager of this nature is less than

9% of the Company’s most recently published NAV on a

look through basis. It is important to emphasise, however,

that notwithstanding this identification, these banks

remain operational.

14

EJF Investments Limited

Annual

Report and Audited Financial Statements 2022

Principal Risks, Uncertainties and Emerging Risks

The Principal Risks of the Company are those risks, or a combination thereof, identified by the Directors that they believe may

materially threaten the Company’s ability to meet its Investment Objective, solvency, liquidity or viability.

Risks faced by the Company include (but are not limited to) strategic risk, financial risk, investment risk, compliance risk and

operational risk, as summarised in the Prospectus on pages 9 to 49.

In determining the Principal Risks, a robust assessment of all risk factors that the Directors believe the Company is exposed to has

been performed. The Manager and the Directors continue to monitor the potential uncertainties around additional market volatility

arising from current macro-economic and geopolitical issues including the Russia-Ukraine conflict, inflationary pressure, cost of

living increase and increasing energy prices. The Manager believes that the Company’s underlying assets remain robust and able to

withstand further stress with all expected near-term cash inflows still having been received to date.

As at 31 December 2022, the Principal Risks and uncertainties that the Group faces, along with related mitigants and changes to the

Principal Risks from last year, and consideration of emerging risks, are set out below.

Principal Risks: Strategic

Changes in the geopolitical and macro economic environment

As reported in the 2022 Interim Report, the Principal Risk of ‘Changes in the macro-economic environment’ has been updated to

become ‘Changes in the geopolitical and macro-economic environment’ to reflect the ongoing war in Ukraine and the impact that

it is having on global economies.

Changes to global geopolitical and macro-economic conditions may adversely impact the Company’s investment performance, the

availability of investment opportunities, the Manager’s ability to source and securitise investments and prevent the Company from

meeting its Investment Objective.

Mitigants

The Manager evaluates and monitors the macro, economic,

geopolitical and market cycle risks it deems material to the

Investment Policy, both on an ongoing basis and ahead of

any new investment. The Manager can control the timing

of entry into investments and markets to ensure that the

Portfolio adheres to the Investment Policy and to manage

the aforementioned risks. The Board is kept informed on

a regular basis by the Manager and is also updated at quarterly

Board meetings.

Analysis and Change during the year

Notwithstanding that the Manager continues to see an attractive

pipeline of investments, the impact of inflation and the increases

in energy prices and interest rates as a result of geopolitical

tensions is beginning to have significant macro-economic

implications for the global economy and financial markets

including inflation at levels not seen for decades, the strong

likelihood of recession for some countries, continued supply

chain disruptions and weaker currencies and interest rate hikes.

The Directors believe there has been an increase in the residual

risk during the year.

Statement of Principal Risks

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

15

Statement of Principal Risks

Changes in law, tax and regulation reduces investment opportunities or undermines the Group’s legal, tax

or regulatory structure

The Directors have combined the Principal Risks in relation to ‘Changes in law, taxes and regulation reduce investment opportunities’

and ‘Changes in law, taxes and regulation undermine the Company’s or Subsidiary’s legal, tax or regulatory structure’ as the risks are

intrinsically linked.

The Group is subject to regulations enacted by national and local governments, changes to which may reduce the investment

opportunities available or undermine or invalidate the structure of tax, legal or regulatory rationale and make it difficult to pursue the

Investment Policy.

Mitigants

The Manager, along with the Company’s Financial Adviser,

Administrator and legal advisers, continually monitors

and evaluates the legal and regulatory horizon for any

new or changes to existing legislation and regulation that

could potentially invalidate the Investment Policy or the

Group’s structure.

The Board is kept abreast of any potential changes on a regular

basis through its committee and Board meetings and regular

communication with the Manager and advisers. In addition, the

Investment Policy allows the Company to pursue a wide variety

of investment opportunities.

Analysis and Change during the year

As at the date of the Annual Report, the Directors have not

been advised of any expected changes in law, tax or regulation

that would materially impact the Investment Policy or

Group structure.

Therefore, the Directors believe there has been no material

change in the residual risk during the year.

Availability of cash for investment opportunities and payment of liabilities

The Company requires regular ongoing funding and available cash to be in a position to take full advantage of investment

opportunities as and when they arise, along with meeting liabilities as and when they fall due. The risk of the Company having

insufficient cash to meet investment opportunities continues to be a Principal Risk due to several factors:

(i)

the potential for the volatility of Sterling to require unencumbered cash to be used to meet margin calls on the currency hedge;

(ii)

the Ordinary Share Price discount to NAV and difficulty in raising capital;

(iii) the complex nature of the underlying Portfolio continues to deter potential investors; and

(iv) the maturity of the 2025 ZDP Shares.

Mitigants

The Manager continually monitors the current and projected

cash flows required by the Company to meet its current and

future liabilities, including control over the timing of entry

into investments and expectations on when the Manager

may recommend calling and/or refinancing underlying

securitisations.

On a quarterly basis, the Manager produces for the

Board a working capital memorandum showing forecast

balances covering a period of at least 18 months which

is also supplemented every six months by appropriate

scenario analysis.

In addition, the Company continually seeks to improve the

discount of the share price to NAV and the liquidity of the

Ordinary Shares stock by working with the Corporate Broker

and meeting investors and conducting roadshows to raise

market awareness and explain the Company’s strategy and

investment thesis.

Analysis and Change during the year

In November 2022, the Company duly repaid all amounts due in

respect of 2022 ZDP shares that did not roll into 2025 ZDP shares.

Although no significant liabilities require repayment in the

near future, the Directors, believe that overall the residual risk

remains unchanged.

16

EJF Investments Limited

Annual

Report and Audited Financial Statements 2022

Statement of Principal Risks

Dependency on the Manager

To successfully pursue its Investment Objective, the Company is dependent on the Manager and the Manager’s ability to retain and

recruit staff. The loss of one of a small number of key individuals in key roles at the Manager could adversely impact the ability of the

Manager to meet the Investment Objective.

Mitigants

The Manager’s senior management team has a proven track

record, with strength and depth of relevant experience and

is recognised as an expert in its field. The Manager employs

experienced individuals and regularly reviews remuneration

levels against the employment market and the requirements

for skills and headcount. The Manager’s remuneration policies

are designed to strike an appropriate balance between short-

term and long-term rewards, alignment and retention. The

Manager is committed to retaining additional resources in key

operational areas.

Analysis and Change during the year

The Company continues to have no direct competitors with

the same investment thesis. The independent Directors carried

out their planned due diligence visit of the Manager in the US

during the year and held meetings with each key function to

gain comfort over their continued performance and operations.

The independent Directors reaffirm their positive view of the

Manager and believe that the senior management team, and the

business, is highly cohesive and aligned with the Company in

pursuing its Investment Objective.

The Directors believe there has been no material change in the

residual risk during the year.

Valuation

The nature of the Group’s investments make them inherently difficult to value compared to more liquid investments due to the

number of assumptions involved. Furthermore, a general market collapse and/or a seizing-up of credit markets may render it difficult

to price certain investments with any degree of accuracy, or at all.

Mitigants

There is a stated valuation policy, reviewed and updated

periodically for all underlying investments, which is applied

by the Manager and the Administrator when preparing the

NAV. In most cases, the Manager obtains quotes from multiple

independent brokers to mark the securities. The Manager has

also appointed a recognised independent valuation agent

to provide comfort over the valuations derived from models

developed by the Manager where appropriate.

The Manager has a valuation committee which meets monthly

to review the valuation of investments which feeds into the NAV

process. The NAV is prepared by the Administrator, and then

reviewed and approved by the Manager and the independent

Directors on a monthly basis.

Analysis and Change during the year

The Group’s core investment allocation continues to be focused

on Risk Retention assets which are inherently difficult to value

compared to more liquid investments.

The Directors believe there has been no material change in the

residual risk during the year.

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

17

Statement of Principal Risks

Principal Risks: Investments

Credit Risk

The value of the Group’s investments may be impacted by adverse credit events with recovery of initial investments being lengthy

and uncertain.

Mitigants

The Manager carefully assesses the credit risks of every

investment, including the underlying collateral held in the

securitisation vehicles. Assessments of credit risk are derived

from various credit analyses, market and macro conditions

and underwriting stress scenarios. The Manager conducts

regular credit surveillance on the portfolio of investments and

underlying collateral in the securitisation vehicles, which are

well diversified.

Analysis and Change during the year

The Group’s investment allocation continues to be focused

on Risk Retention assets, with credit analysis focusing on

underlying collateral in the securitisation vehicles. There have

been no significant changes to the credit risk of the underlying

collateral during the year and there continue to be no defaults on

any of the underlying securitisation collateral since inception.

The Directors believe there has been no material change in the

residual risk during the year.

Principal Risks: Operational

Dependency on service providers

The Company is dependent on the ability of all its service providers for the successful management and administration of the

Company’s affairs. This includes a reliance on the strength of their internal controls, their ability to retain and recruit sufficient

appropriately qualified and experienced staff as well as cyber security, data protection and business continuity planning.

Mitigants

The Company’s service providers are selected through a process

based on recommendation and their experience and ability

to meet the Company’s requirements. The Board is in regular

contact with the Administrator and Manager to ensure that

the policies and procedures implemented are appropriate and

effective and meet regularly to review the service level. The

Board has established a Management Engagement Committee

which reviews the performance of all key service providers on an

annual basis.

Analysis and Change during the year

All service providers continue to be reviewed to ensure that the

Company’s service requirements and objectives continue to

be fully met.

The Directors noted business continuity plans continued

to operate with no material impact on the Company, which

demonstrated a high level of robustness in the plans

being operated.

As a result, the Directors believe there has been no material

change in the residual risk during the year.

Emerging Risks

The Directors have not identified any emerging risks.

18

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

Skills & experience

Joanna Dentskevich has over 35 years of finance, risk and

investment banking experience gained in London and Asia.

She started her career in 1986 in the financial services group

of a London accountancy firm before moving into investment

risk at Bankers Trust. Prior to moving to Jersey in 2008, she

was director of risk at Deutsche Bank and Morgan Stanley and

chief risk offi

cer and a co-founder of a London based systematic

hedge fund. Joanna sits on the board of a number of regulated

investment companies and financial institutions.

Committees

Audit and Risk Committee

Management Engagement Committee

Other public appointments

GCP Asset Backed Income Fund Ltd

Executive appointments

None

Skills & experience

Alan Dunphy has over 25 years of experience in the offshore

financial industry moving to Jersey in 1998 to join the Assurance

and Business Advisory Division of PricewaterhouseCoopers.

Since 2014 Alan has worked for Altum Group as a director

on fund and corporate client structures before which he was

managing director of fund management group Bennelong

Asset Management for 8 years. Prior to this Alan was a director

of Capita Fiduciary Group and also worked at Abacus Financial

Services Group. Alan is a fellow of the Institute of Chartered

Accountant in Ireland.

Committees

Audit and Risk Committee (Chair)

Management Engagement Committee

Other public appointments

Altum Group

Executive appointments

LGL Group

Skills & experience

Nick Watkins started his career as a corporate tax lawyer with

Dechert LLP in London in 1997. He is currently a partner and

director of Altair Partners Limited, which provides independent

directors to funds and regulated entities. Prior to joining Altair

in 2014, he was global head of transaction management for

Deutsche Bank’s Alternative Fund Services division in Jersey

and prior to that was assistant managing director and senior

in-house legal counsel at Citco in the Cayman Islands. Nick is

a qualified solicitor in England and Wales.

Committees

Audit and Risk Committee

Management Engagement Committee (Chair)

Other public appointments

None

Executive appointments

Altair Partners Limited

Neal J. Wilson

Non-executive Director

Appointed in 2017

CEO and Co-Chief Investment Offi

cer

of the Manager and member of the

Investment Committee

Considered to be

non-independent

Skills & experience

Neal Wilson has over 30 years of capital market and asset

management experience and is co-CEO of EJF which he

cofounded in 2005. Neal is also the CEO of the Manager. Prior to

EJF, Neal was in charge of the Alternative Asset Investments and

Private Wealth Management divisions at FBR, a senior securities

attorney at Dechert LLP and Branch Chief of the Division of

Enforcement at the SEC in Washington, D.C. Neal is a non-active

member of the bars of Pennsylvania and Washington, DC.

Committees

None

Other public appointments

None

Executive appointments

CEO of EJF and the Manager

The Board

Joanna Dentskevich

Non-executive Chair

Appointed in 2017

Considered to be

independent

Alan Dunphy

Non-executive Director

Appointed in 2016

Considered to be

independent

Nick Watkins

Non-executive Director

Appointed in 2017

Considered to be

independent

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

19

EJF Capital LLC

The key employees of EJF involved with the Company, excluding Neal Wilson who has been included with the Board on page 18, are

listed below:

Skills & experience

Peter Stage joined EJF in 2013, and is a member of the Executive

Committee. Peter is responsible for identifying investment

opportunities in the European fixed income, equity and private

markets with a focus on the banking sector. Peter was previously

Head of Credit Research at F&C Asset Management (“F&C”)

where he also analysed the banking sector. Prior to joining F&C

in 2008, Peter was head of credit at Gordian Knot Limited, an

investment management company, which he joined in 1998 as

a bank analyst.

Peter holds a BA in Economics from the University

of Manchester.

Skills & experience

Omer Ijaz serves as a Senior Managing director, Portfolio

Management, at EJF. Omer joined EJF in 2011 and oversees the

structured product strategy. Omer specializes in the specialty

finance, insurance, and banking sectors, and currently leads

the credit analysis and trust preferred CDO structuring for the

insurance and bank TruPS team as well as the structuring for

bank subordinated debt CDOs.

Omer has spearheaded twelve EJF sponsored securitisations,

totalling approximately US$3.8 billion. Omer also manages

the investments of legacy TruPS CDOs and some corporate

debt. Omer came to EJF from Merrill Lynch, where he was

employed as a summer research analyst in the Global Private

Client Division. Prior to his time at Merrill Lynch, he worked for

Citibank N.A. and Muslim Commercial Bank. Omer earned a BA

in Business Economics from the College of Wooster.

Skills & experience

Jay Ghatalia joined EJF in 2023 and is responsible for operations

and finance functions. Prior to joining EJF, he spent 2 and a half

years at Intermediate Capital Group PLC (‘ICG’), managing

finance and operations for private funds in their Strategic Equity

and LP Secondaries strategies. Prior to ICG, he spent 9 years in

public accounting firms, PricewaterhouseCoopers and KPMG

managing assurance and advisory engagements for clients

across financial services and latterly focusing on both listed and

private alternate investment funds.

Jay is a Chartered Accountant (Institute of Chartered Accountants

of India) and holds a Bachelor of Commerce degree from

University of Mumbai.

The Manager

Peter Stage

Co-Chief Investment Offi

cer

of the Manager and member of

the Investment Committee

Jay Ghatalia

Finance Director

of the Manager

Omer Ijaz

Member of the

Investment Committee

20

EJF Investments Limited

Annual

Report and Audited Financial Statements 2022

The Manager

Skills & experience

Emanuel Friedman co-founded EJF, a global institutional

alternative asset management firm that has been at the forefront

of regulatory, event-driven investing in financials and real

estate. Over the course of his 40+ year career in capital markets

and asset management, Mr. Friedman has structured and built

numerous innovative investment strategies that have focused on

some of the most powerful trends in the financial sector driven

by regulatory change.

Prior to forming EJF, Emanuel was a founder and the former

co-chairman and co-CEO of FBR. At FBR, Emanuel assisted in

designing property and mortgage REIT vehicles. Throughout

the 1990s, Emanuel was active in building out FBR’s alternative

asset management platform. He was instrumental in the

creation of hedge, private equity and venture capital funds at

FBR, and maintains an extensive network of contacts within the

CDO, hedge fund and private equity fund communities.

He received his BA in Education from the University of North

Carolina at Chapel Hill and his JD from Georgetown University.

Skills & experience

Jason Ruggiero joined EJF at its founding in 2005 and is

a member of the executive committee. Jason serves as the

primary portfolio manager for EJF’s equity focused strategies as

well as the co-chief investment officer for EJF’s capital markets

products. Jason also serves as a member of EJF’s risk committee

and ESG committee. Jason currently serves on the board of

directors of Arlington Food Assistance Center and formerly

served on the board of directors of FB Corporation in St. Louis,

MO and TIG Bancorp in Denver, CO. He also formerly served as

a member of the JMU College of Education Executive Advisory

Council. Prior to joining EJF, Jason was an equity trader in FBR’s

Alternative Asset Investment Group, where he assisted Emanuel

Friedman in the day-to-day operations of FBR Ashton, L.P.,

a long/short hedge fund. In 2004, Jason assumed co-portfolio

manager responsibilities for FBR Ashton, L.P. Before joining FBR,

Jason was an auditor for Deloitte and Touche in Washington, DC,

where he focused on the financial services industry.

He holds a BBA in accounting from James Madison University

and an MBA in finance from the University of Maryland.

Emanuel J. Friedman

Member of the

Investment Committee

Jason Ruggiero

Member of the

Investment Committee

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

21

Corporate Governance Report

Corporate Governance Compliance

Statement

The Company’s shares are traded on the SFS. The Listing Rules,

applicable to companies which are listed on the premium listing

segment of the Official List of the FCA, therefore do not apply to

the Company. The Directors are committed to the application

and practice of high standards of corporate governance and so

the Company has voluntarily adopted certain provisions of the

Listing Rules as detailed on page 63 of the Prospectus.

The Directors recognise the value of the UK Code and have also

considered the principles and recommendations of the AIC Code.

The AIC Code addresses all the principles set out in the UK Code,

as well as setting out additional principles and recommendations

on issues that are of specific relevance to the Company as an

investment company. This statement outlines how the principles

of the UK Code, which can be found at www.frc.org.uk, and the

principles of the AIC Code were applied throughout the financial

year. The AIC Code provides a framework of best practice for

investment companies and can be found at www.theaic.co.uk.

The Directors consider that reporting in line with the principles

and recommendations of the AIC Code will provide better

information to shareholders. Consequently, throughout

the year from 1 January 2022 to 31 December 2022, the

Company complied with the provisions of the UK Code and

the recommendations of the AIC Code, with the exception of

the recommendations from the UK Code and the AIC Code

listed below.

•

The role of chief executive: The Board considers that the post

of chief executive is not relevant for the Company, being an

externally managed investment company.

•

The appointment of a senior independent director: Given

the size and composition of the Board, it is not felt necessary

to appoint a senior independent director. However, should

a situation arise where it is felt necessary to appoint a senior

independent director, the Chair of the Audit and Risk

Committee will perform the role.

•

Internal audit function: The Board has reviewed the need for

an internal audit function and due to the size of the Company

and the delegation of day-to-day operations to regulated

service providers, an internal audit function is not considered

necessary. The Directors will continue to monitor the systems

of internal controls in place in order to provide assurance that

they continue to operate as intended.

•

Executive directors’ remuneration: All of the Company’s

day-to-day management and administrative functions are

outsourced to third parties (subject to appropriate systems,

controls and oversight). As a result, the Company has no

executive directors, employees or internal operations and

is not required to comply with the principles of Executive

Directors’ remuneration.

•

Committees: Given the size of the Board, it is currently

considered that it would be unnecessarily burdensome to

establish separate nomination and remuneration committees,

therefore such committees have not been established and

these matters are reserved for the Board. Under Tenure

and Succession, it is the intention of the Board to establish

a committee, when required, to lead the process of orderly

Director succession.

•

The Chair of the Board is a member of the Audit and Risk

Committee. Given the size of the Company and that the

Chair is considered to be independent, the Board believe this

is appropriate.

Board Composition and Director

Independence

As at 31 December 2022, the Board comprised four non-

executive Directors, the biographies of which are disclosed

on page 18. The Company has no executive Directors or

any employees.

The Board assesses and reviews the independence of each

Director with respect to the 2019 AIC Code annually, having

regard to the potential relevance and materiality of any Directors’

interests and relationships.

The Directors do not consider Neal Wilson to be independent

given he is an officer of the Manager but believe his position

on the Board does not compromise the independence of

the Company from the Manager on the basis that half the

Board, excluding the Chair, comprise of independent non-

executive Directors.

Matters Reserved for the Board

The Board meets at least quarterly to review the overall business

of the Company and to consider matters specifically reserved

for its attention. At the quarterly meetings, the Directors monitor

the investment performance of the Company and review

its activities to ensure it adheres to the Investment Policy.

Additional ad-hoc reports are received as required and the

Directors have access at all times to the advice and services of

the Company Secretary. Once a year, the Board also considers

the remuneration of the Directors as a separate remuneration

committee has not been established. Representatives of the

Manager are invited to attend Board meetings on at least

a quarterly basis.

The Board monitors the level of the Ordinary Share

Price premium or discount to determine what action is

desirable (if any).

22

EJF Investments Limited

Annual

Report and Audited Financial Statements 2022

Corporate Governance Report

During the year, all Directors attended formal training sessions

provided by professional firms and other recognised providers

in order to remain up to date with all relevant corporate

governance, regulatory and market issues.

The Board and relevant personnel of the Manager acknowledge

and adhere to the MAR and the Board has adopted procedures

in relation to the management, identification and disclosure of

inside information and share dealing in accordance with MAR.

Tenure and Succession

The Board’s policy regarding tenure of service balances the need

to provide and maintain continuity, knowledge, experience and

independence, against the need to periodically refresh the Board

composition in order to maintain an appropriate mix of the

required skills, experience, age, length of service and diversity.

In accordance with the AIC Code, where a director has served

for more than nine years from the date of first appointment,

the Board will review and explain whether that director can

continue to be considered independent albeit that the Board

does not consider that lengthy service necessarily undermines

a director’s independence nor that each director, including the

chair, should serve for a finite fixed period.

There is no separate succession plan for the chair. Succession

of the chair will be considered in the same manner as other

directors at all times ensuring their independence is maintained.

The Articles include provisions for retirement of directors and

eligibility for re-appointment including that any directors not

independent of the Manager are required to retire at every

AGM. Notwithstanding that requirement, in line with the AIC

Code, the Board has determined that all Directors will retire and

seek re-election on an annual basis. Any director not re-elected

would resign.

To ensure an orderly succession of directors to the Board, and to

allow appropriate recommendation for each director’s re-election

to the Board and committees, the Directors will review the

composition of the Board and its committees on an annual basis

taking into account the Company’s Tenure & Succession Policy

and each director’s performance, effective contribution and

ability to meet the ongoing commitments of the Company and

the reasons why their continued appointment is considered to be

important to the long-term sustainable success of the Company.

All Directors were subject to re-election at the Company’s AGM,

held on 22 June 2022, and were duly re-elected.

Diversity

The Directors recognise the benefits and effectiveness that

diversity, including gender, age, professional experience and

cultural background, brings to the Board and its committees

and have a strong commitment to ensuring a correct balance of

knowledge, experience and independence. Board appointments

are based on merit as well as being an appropriate fit for

the Company.

The Board currently comprises one female and three male

Directors. As the Company has no employees there is no further

requirement to report in respect of diversity quotas.

The below tables set out the Board’s current composition. The

below text compares this against the targets prescribed by

Listing Rule 9.8.6R (9)(a).

Number of

board members

Percentage

of the board

Senior positions on the board

(CEO, CFO, SID and Chair)*

Men: 3

75%

Chair of the Audit and Risk Committee

– Alan Dunphy

Chair of the Management Engagement

Committee – Nick Watkins

Women: 1

25%

Chair – Joanna Dentskevich

Not specified/

prefer not to say

N/A

N/A

Number

of board

members

Percentage

of the board

Senior positions on

the board (CEO, CFO,

SID and Chair)*

White British or other

White (including

minority-white groups)

4

100%

Chair –

Joanna Dentskevich

Chair of the Audit and

Risk Committee –

Alan Dunphy

Chair of the

Management

Engagement

Committee –

Nick Watkins

Mixed/Multiple Ethnic

Groups

Nil

N/A

N/A

Asian/Asian British

Nil

N/A

N/A

Black/African/

Caribbean/Black British

Nil

N/A

N/A

Other ethnic group,

including Arab

Nil

N/A

N/A

Not specified/ prefer

not to say

Nil

N/A

N/A

* The Company does not have executive management.

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

23

Corporate Governance Report

It is noted that at present 25% of the individuals on the Board

are women, which is below the target of 40% prescribed by

Listing Rule 9.8.6R (9)(a). The role of Board Chair, being a senior

position, is held by a woman. The Board are mindful of the

requirement to have at least 40% female representation on its

Board, and alongside knowledge and expertise, this will form

a key consideration when the Board next recruits.

At present none of the Board members are from minority

ethnic backgrounds which is below the target of one, prescribed

by Listing Rule 9.8.6R (9)(a). The Board are mindful of this

and alongside knowledge and expertise, this will form a key

consideration when the Board next recruits.

The Board seeks to uphold the highest standards of

professionalism and corporate governance and embraces

diversity. It therefore expects the same from its service providers.

Over-boarding

As a member of the AIC, the Company reports against the

principles and provisions of the AIC Code, as endorsed by

the FRC and the Jersey Financial Services Commission,

and considers by doing so it provides better information to

shareholders on specific relevance to investment companies.

Principle H of the UK Code states that non-executive

directors should have sufficient time to discharge their

Board responsibilities.

As an investment company, the Directors consider the Company

to demand less time commitment than would be required of an

executive of an operating company and that it is appropriate not

to have a formulaic approach to assessing whether a Director is

able to effectively discharge their duties.

Prior to accepting the appointment as a director of the Company,

each Director must disclose existing significant commitments

and confirm they have sufficient time to attend to the business

of the Company. In addition, before accepting another significant

role a director should confirm to the Chair their ability to meet

the ongoing commitments of the Company. The Company

Secretary must also be informed in order that the appropriate

records can be updated and announcements made if required.

Prior to recommendation for re-election to the Board, each

Director’s continuing ability to meet the requirements of the role

will be assessed by the other Directors by considering, amongst

other things, their attendance at Board, committee and other

ad hoc meetings or events held during the year.

Director Meetings and Attendance

The table below shows the attendance at Board and committee

meetings held from 1 January 2022 to 31 December 2022.

Name

Quarterly

Board

Audit and Risk

Committee

Management

Engagement

Committee

Joanna Dentskevich

4/4

5/5

1/1

Alan Dunphy

4/4

5/5

1/1

Nick Watkins

4/4

5/5

1/1

Neal J. Wilson

4/4

N/A

N/A

N/A – attendance record not applicable, as the Director concerned is not

a member of the stated Committee.

There were five other ad-hoc Board meetings held during

the year relating to matters such as approval of interim and

annual reports, the placing programme, Continuation Vote, and

redemption of the 2022 ZDP shares.

Directors’ Performance Evaluation

The Board has established a formal system for the evaluation

of its effectiveness and performance and that of the individual

Directors, which is carried out on an annual basis. It considers

this to be appropriate having regard to the non-executive role of

the Directors and the significant outsourcing of services by the

Company to external providers. The evaluation considers the

balance of skills, experience, independence and knowledge of

the Board and also the Board’s oversight and monitoring of the

performance of the Manager and other key service providers.

Director Remuneration

Details of the Directors’ remuneration can be found on

pages 32 to 33.

Regular communication with major shareholders is undertaken

by the Company’s Corporate Broker and the Manager by way of

webinars and arranged video conferencing. Any concerns raised

by shareholders are reported to the Board. In addition, the Chair

and individual Directors are willing to meet with shareholders

to discuss performance of the Company and are available to

answer any questions that may be raised by shareholders at the

Company’s AGM.

24

EJF Investments Limited

Annual

Report and Audited Financial Statements 2022

Corporate Governance Report

Board Committees

Audit and Risk Committee

The Audit and Risk Committee comprises Alan Dunphy, Joanna

Dentskevich and Nick Watkins and meets at least three times

a year. It is chaired by Alan Dunphy. The Board considers it

appropriate for the Chair of the Board to be a member of the

Audit and Risk Committee given the size of the Company and as

she is considered independent.

The key objectives of the Audit and Risk Committee include

a review of the Audited Financial Statements of the Company

to ensure that they are prepared to a high standard and comply

with relevant legislation and guidelines, as appropriate, review of

the Company’s internal control and risk management systems

and to maintain an effective relationship with the Auditor.

With respect to the Auditor, the Audit and Risk Committee’s

role will include the assessment of auditor independence,

the effectiveness of the audit, and a review of the Auditor’s

engagement letter, remuneration and any non-audit services

provided by the Auditor. The Audit and Risk Committee Report

on pages 34 to 38 provides further detail of the Audit and Risk

Committee’s activities during the year.

Management Engagement Committee

The Management Engagement Committee comprises Nick

Watkins, Joanna Dentskevich and Alan Dunphy and meets at

least once a year. It is chaired by Nick Watkins.

The Management Engagement Committee is responsible for

the regular review of the terms of the Management Agreement,

along with the performance of the Administrator, the Manager

and the Company’s other service providers. A formal review is

conducted annually which includes service delivery, the quality

of the personnel assigned to handle the Company’s affairs and

the investment process.

Internal Control and Risk

Management System

The Board is responsible for putting in place a system of

internal controls relevant to the Company and for reviewing

the effectiveness of those systems. It is the responsibility of the

Board to undertake risk assessment and review of the internal

controls in the context of the Company’s objectives that cover

business strategy, operational, compliance and financial risks

faced by the Company. The internal controls are implemented

by the Company’s main service providers: the Manager, the

Administrator, the Registrar and the Custodians. The Board

continues to be responsible for reviewing the adequacy and

effectiveness of the Company’s ongoing risk management

systems and processes. Its system of internal controls, along

with its design and operating effectiveness, is subject to review

by the Board through reports and periodic updates received

from service providers at the quarterly Board meetings of the

Company. The independent Directors met with representatives

of the Manager in November 2022 to review any changes to

the Manager’s controls and the operating effectiveness of the

Manager’s existing controls. The Board is satisfied that each

service provider has effective controls in place to control the risks

associated with the services that they are contracted to provide

to the Company and are therefore satisfied with the internal

controls of the Company.

Anti-bribery and Corruption and

Anti-facilitation of Tax Evasion

The Board acknowledges that the Company’s operations may

give rise to possible claims of bribery and corruption.

In consideration of the UK Bribery Act 2010, the Board has

conducted an assessment of the perceived risks to the Company

arising from bribery and corruption to identify aspects of

business which may be improved to mitigate such risks.

In consideration of the UK Criminal Finances Act 2017, the

Company has adopted an anti-facilitation of tax evasion policy.

The Board has adopted a zero-tolerance policy towards bribery

and facilitation of tax evasion and has affirmed its commitment

to carry out business fairly, honestly and openly.

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

25

Corporate Governance Report

AIFM Directive

The Manager is the AIFM of the Company. In such capacity, the

Manager is responsible for the portfolio and risk management

of the Company, including managing the Company’s assets

and its day-to-day operations, further details of which are set

out in paragraph 11 in the section entitled “Material Contracts”

in Part XV: “Additional Information” of the Prospectus. AIFMD

requires the AIFM to comply with certain disclosure, reporting

and transparency obligations for AIFs that it markets in the EU.

The Company’s Prospectus contains a schedule of disclosures

prepared by the Directors for the purposes of AIFMD.

In addition, AIFMD requires the Company’s Annual Report

to include details of any material changes to the information

contained in that schedule. The Directors confirm that no

material changes have occurred in relation to the information

contained in the schedule.

In making this confirmation, the Directors consider that any

change in respect of which a reasonable investor, becoming

aware of such information, would reconsider its investment

in the Company, including because the information could

impact on the investor’s ability to exercise its rights in relation

to its investment, or otherwise prejudice that investor’s (or

any other investor’s) interest in the Company, should be

considered material.

In setting this threshold, the Directors have had due regard to the

current risk profile of the Company, which outlines the relevant

measures to assess the Company’s exposure or potential

exposure to those risks, as well as the Company’s investment

restrictions set out in the Company’s Prospectus. As required by

the Listing Rules, any material change to the Investment Policy

of the Company will be made only with the approval of the

shareholders.

AIFMD also requires the Company to disclose the remuneration

of the Manager as AIFM, providing analysis between fixed and

variable fees along with information on how much of such

remuneration was paid to senior management at the Manager

and how much was paid to members of staff. As the Manager

has no employees there is no information to report in that

respect and details of the remuneration paid to the Manager are

disclosed in note 17.

ESG

The Directors believe in the importance of a strong corporate

governance framework to ensure responsible investing focused

on the values of the Company and that building trusted

relationships with the Company’s stakeholders is crucial for

delivering the long-term sustainable returns to shareholders.

The Company is not a sustainable investment fund, and whilst

the Investment Policy of the Company has no direct impact

on the environment per se, when pursuing the Investment

Objective and in the selection of the service providers and

advisers of the Company, the Company aims to conduct itself

responsibly, ethically and fairly with the impact of all material

factors, including ESG, on the financial risk and return being

considered in the decisions it makes.

The Manager believes that companies which successfully

manage their ESG risks, and proactively follow ESG best

practices, may experience risk-adjusted outperformance over

the longer-term, through preservation of investor capital and

underpins their commitment to being a responsible fiduciary.

When conducting due diligence on new investments and post

investment monitoring, as well as when taking investment

decisions for the Company, the Manager takes into account its

view of ESG issues and the overall impact they may have on the

creation of long-term investor value.

As the Company’s investment exposure is predominantly

in lower information issuances and securities, an internal

framework to evaluate ESG risks and exposures of the

Company’s investment universe is being developed by the

Manager using commoditised data supplemented by existing

information to evaluate material ESG risks for each investment.

The Manager recognises that there are several reporting

frameworks to build from when considering relevant materiality

factors and have chosen to focus on the SASB’s standards

and values as a foundation to building the Company’s ESG

framework. The SASB’s standards focus on financial materiality

using an overall assessment which is applied to each industry to

determine the relative importance of each factor and sub-factor

depending on external environment and business model, using

existing metrics where possible.

26

EJF Investments Limited

Annual

Report and Audited Financial Statements 2022

Corporate Governance Report

For the year ended 31 December 2022, under the Listing Rules,

the Company, being an investment entity, is not required to

report on TCFD disclosures in its annual reports. However,

it is the intention of the Directors to ensure compliance with

requirements in the Annual Report when required to do so.

Until then, the Company will look to build out its reporting on

ESG, including climate risk.

ESG Strategy

1.

ESG will be incorporated into the Company’s decision-

making processes, policies and procedures and will be

kept up to date.

2.

The Company will ensure that the ESG policies of its service

providers and advisers broadly align with the Company’s ESG

policy to the extent reasonably practicable.

3.

ESG risks will be considered in investment decisions.

4.

The Company will promote ESG acceptance with those it

deals with and invests in.

5.

The Company will regularly report on its progress.

ESG accomplishments during the year

1.

The Manager enhanced the breadth and depth of its ESG

Committee by expanding its membership to 11 members

across different departments within the firm. Through its

expanded membership, the Manager has made substantial

progress in defining and identifying indicia of activities

that pose ESG related risks, and mapped those activities

through the attributable companies to the investable

universe. The Manager expects to incorporate this into the

investment process in the near future. Relatedly, the Manager

has inventoried its own practices by conducting a carbon

footprint analysis of its activities, as well as re-evaluating the

practices of its critical vendors.

2.

Whilst ESG remains the responsibility of the Board, both the

Management Engagement Committee and the Audit & Risk

Committee have been delegated responsibility for those ESG

matters which fall within their terms of reference. During the

year, both committees reviewed their terms of reference to

ensure they appropriately consider ESG matters. In addition,

Joanna Dentskevich has been nominated as the Director

responsible for ESG.

3.

During the year, an assessment was carried out to identify

the impact of ESG risks on the Company along with

identified actions required to ensure the residual risk lies

within appetite.

ESG goals for year

1.

Further develop reporting and transparency on how ESG is

considered within the Investment Policy, to provide further

climate risk disclosures in line with TCFD requirements.

2.

Ensure actions identified during the ESG impact assessment

are carried out.

3.

Review the Company’s ESG policy to ensure it

remains relevant.

Further detail of this can be found on the Company’s website.

Modern Slavery

The Company is not within scope of the Modern Slavery Act

2015, because it has no turnover as defined by the Modern

Slavery Act 2015 and is therefore not obliged to make a human

trafficking statement.

Section 172(1) report

The Board believes in a strong corporate governance structure

to ensure responsible investing focused on the values of the

Company and that building trusted relationships with the

Company’s stakeholders is crucial for the long-term success

of the Company.

Through the Company’s policies and procedures, internal

controls and corporate governance, the Directors believe they

have acted in a way they consider, in good faith, would be most

likely to promote the success of the Company for the benefit of

its members as a whole having regard to the stakeholders, as

identified below, and matters set out in Section 172(1) as required

through their compliance with the AIC Code, in the decisions

taken during the year.

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

27

Corporate Governance Report

Stakeholders

An analysis has been carried out, as shown in the diagram below, to identify the key stakeholders of the Company, interests and how

the Directors have considered the interests of the Company’s stakeholders.

Responsible Investing

Effective Governance

Trust and Collaboration

Ordinary Shareholders

2025 ZDP Shareholders

Interests

Provision of capital to pursue the Investment Objective

and targeting growth and income for the long term

success of the Company. Robust governance

framework and safeguarding of assets

Engagement

Investor Meetings, Broker and Registrar, AGM,

EGMs, RNS announcements, Financial Reports,

Fact Sheets, Ad-hoc Manager Communications

Interests

Knowledge, experience, aligned values and culture within an effective framework for

pursuance of the Investment Objective and long term success of the Company

Engagement

Quarterly and Ad Hoc Board Meetings, Committee Meetings, Due Diligence Meetings and

Reviews, Audit and Interim Review, Specialist Advice, Informal Meetings, Board Training

Interests

Compliance, openness and transparency within

a robust regulatory framework to protect, joint

interests of long term success

Engagement

Annual returns, official reporting and

communications, ad hoc requests and approvals

national risk assessment

Manager, Administrator, Broker, Registry Services, Lawyers, Auditors,

Reporting Accountant, Printer, CDD Services

Regulators

Local Governments and Jurisdictions

28

EJF Investments Limited

Annual

Report and Audited Financial Statements 2022

Corporate Governance Report

Principal Decisions

Beyond that of usual engagement and decision making by the Directors, the table below highlights specific actions where the Directors

have had regard for stakeholder interests during the year.

Principal decisions taken during the year

Description

Stakeholders

Appointment of

Corporate Broker

On 10 January 2022, Liberum Capital Limited was appointed to act as the

Company's Corporate Broker and financial adviser, in order to provide a

wider coverage and the Board are focused on growing that relationship.

Shareholders

The Manager

Prospectus and Rollover Offer

On 4 April 2022, the Company published the Prospectus, in relation to

the Rollover Offer as well as a Placing Programme of up to 70 million new

Ordinary Shares and/or new C Shares and up to 25 million new 2025 ZDP

Shares.

On 5 May 2022, the results of the Rollover Offer were announced, with

valid elections received to roll 10,021,292 2022 ZDP Shares into 2025 ZDP

Shares, representing approximately 66.8% of the total number of 2022

ZDP Shares in issue. Subsequently, 10,996,857 2025 ZDP Shares were

issued on the basis of each 2022 ZDP Share converting into 1.09735 new

2025 ZDP Shares.

Shareholders

The Manager

Continuation Vote

The Directors decided to convene an EGM for the Continuation Vote of the

Company and a notice was issued on 5 April 2022.

Following this, on 5 May 2022, an EGM of the Company was held at which

shareholders were invited to vote on ordinary and special resolutions,

including the Continuation Vote. The Continuation Vote was passed by

shareholders at the EGM.

Shareholders

The Manager

FX Hedge

Following the weakening of Sterling against the US Dollar, the Manager

recommended to the Board that the Company increase the level of foreign

exchange hedge to lock in a portion of currency gains.

Effective 10 May 2022, the Board approved an increase in the level of the

Company’s foreign exchange hedge such that approximately 40% of the

Company’s US Dollar assets were hedged against currency movements, and

also approved that this level may be moved up or down to hedge between

60% of US Dollar assets and the final capital entitlement of the ZDP Shares

only. As at year end, approximately 55% of that exposure was hedged.

Shareholders

The Manager

By Order of the Board

Joanna Dentskevich

Chair

Date: 30 March 2023

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

29

Directors’ Report

The Directors present their Annual Report on the affairs of the

Company for the year ended 31 December 2022. The Corporate

Governance Report set out on pages 21 to 28 forms part

of this report.

Principal Activities, Business Review and

Future Developments

The principal activities of the Group during the year were to

invest in opportunities created by regulatory and structural

changes impacting the financial services sector. No changes

are envisaged in the Group’s principal activities although future

opportunities may include structured debt and equity, loans,

bonds, preference shares, convertible notes and private equity, in

both cash and synthetic formats which may be issued by entities

domiciled in the US, UK and Europe. Information about the use

of financial instruments by the Group is given in note 15 to the

Audited Financial Statements.

Details of significant events since the Statement of Financial

Position date are contained in note 19 to the Audited

Financial Statements.

An indication of likely future developments in the business of

the Company are included in the Chair’s Statement on pages 6

to 8 and the Manager’s Report on pages 9 to 13.

Results and Dividends

Results for the year ended 31 December 2022 are set out in the

Statement of Comprehensive Income on page 48.

The Directors declared and paid dividends of £6,542,536 (2021:

£6,542,536) during the year ended 31 December 2022. Further

details can be found in notes 13 and 19.

Stated Capital

At 31 December 2022, the Company’s issued share capital

comprised 76,953,707 Ordinary Shares (31 December 2021:

76,953,707 Ordinary Shares), of which 15,808,509 were

held in treasury (31 December 2021: 15,808,509). The total

number of voting rights of the Ordinary Shares is 61,145,198

(31 December 2021: 61,145,198). Further details can be

found in note 12.

Disclosure of Information to the Auditor

The Directors who held office at the date of approval of this

Directors’ Report confirm that, so far as they are each aware,

there is no relevant audit information of which the Auditor is

unaware; and each Director has taken all the steps that they

ought to have taken as a Director to make them aware of any

relevant audit information and to establish that the Auditor is

aware of that information.

Financial Risk Management

Information about the Company’s and EJFIH’s financial risk

management objectives is set out in note 15 to the Audited

Financial Statements.

Directors and Directors’ Interests

The Directors are listed on page 18.

Details of the Directors’ remuneration are included in the

Remuneration Report on pages 32 to 33.

Directors’ Insurance

During the financial year ended 31 December 2022 and up until

the date of the signing of the Audited Financial Statements,

the Company has maintained directors’ and officers’ liability

insurance, which is deemed to give appropriate cover for any

potential legal action that could be brought against the Directors.

30

EJF Investments Limited

Annual

Report and Audited Financial Statements 2022

Directors’ Report

Significant Shareholdings

As at 31 December 2022, the Company had been notified in accordance with chapter five of the Disclosure Guidance and Transparency

Rules (which covers the acquisition and disposal of major shareholdings and voting rights), of the following shareholders that had an

interest of greater than 5% in the Company’s issued share capital:

Name

Ordinary Shares

% of total

voting rights

1

Cheetah Holdings Limited

11,816,558

19.33

Premier Miton Investors

5,618,666

9.19

Leon Cooperman

4,000,000

6.54

Sapia Partners

3,580,984

5.86

Wolfson Equities

3,314,960

5.42

Newton Investment Management Limited

3,209,077

5.25

William E Conway Jr

3,113,415

5.09

34,653,660

56.68

1

The total voting rights is the number Ordinary Shares in issue after adjusting for treasury shares. The % of total voting rights is calculated by dividing the number

of Ordinary Shares by the total voting rights.

The Company did not receive any notifications during the period 1 January 2023 to 30 March 2023.

Independent Auditor

A resolution to re-appoint the Auditor will be put to shareholders at the next AGM.

Manager

The Directors are responsible for the determination of the Company’s Investment Policy and have overall responsibility for the Group’s

activities. The Company has, however, entered into a Management Agreement with the Manager under which the Manager has been

appointed to manage the assets of the Group which include research, analysis and selection of investment opportunities for the Group

and monitoring the ongoing performance of the investments.

The Directors consider that the interests of shareholders, as a whole, are best served by the continued appointment of the Manager

to achieve the Company’s Investment Objective.

Political Contributions

The Group did not make any political donations or incur any political expenditure during the year.

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

31

Directors’ Report

Going Concern

The Directors have performed a detailed assessment of the

Company’s ability to meet its liabilities as they fall due for the

period of at least twelve months from the date of signing the

Audited Financial Statements, including evaluating severe but

plausible downside scenarios of a significant reduction in the

liquidity positions and the fair value and cash flow generation of

its investments. The assessment was completed with reference

to the cash position of the Group, the operating expenses and the

potential default risk of the investments held.

In light of the analysis, the Directors are satisfied that, at the

time of approving the Audited Financial Statements, there is

a reasonable expectation that the Company will have adequate

resources to continue in operational existence for a period of at

least twelve months from the date of approval of the Audited

Financial Statements and have therefore prepared the Audited

Financial Statements on a going concern basis.

Viability Statement

The Directors, in conjunction with the Audit and Risk Committee

and the Manager, have conducted a robust assessment of the

viability of the Company, taking into account the emerging and

Principal Risks and uncertainties that the Group faces, and the

impact of extreme but plausible market scenarios on the viability

of the Company over a three year period, albeit the Directors

consider the Company to be a much longer term investment

proposition for its shareholders.

Time period

In establishing the three year time horizon over which to

consider the longer-term viability of the Company, the Directors

considered the nature of the investment portfolio of the Group,

and the Investment Objective of the Company taking into

account the working capital model forecasting.

Stress testing

From their assessment of the Principal Risks, the Directors

consider ‘Credit Risk’ and ‘Availability of cash for investment

opportunities and payment of liabilities’ to be the two key

Principal Risks that most impact the viability of the Company.

These risks were then considered when determining the

scenarios to be used in the stress testing of the extreme market

scenarios used in the stress tests which include:

•

severe but plausible adverse movements in bank and

insurance company default rates;

•

foreign exchange movements impacting margin calls on the

forward currency contracts; and

•

no rollover of 2025 ZDPs maturing in June 2025.

Having considered these scenarios individually as well as

simultaneously in conjunction with the potential remedies that

could be put in place to mitigate the impact on the Company’s

liquidity and cash flows, the Directors have a reasonable

expectation that the Company will be able to continue in

operation and meet its financial covenants and operating

expenses as they fall due over the three-year assessment period.

General Meetings

The 2023 AGM is scheduled for 13 June 2023 at the Company’s

registered office in Jersey. The Directors recognise the

importance of shareholder engagement and the opportunity for

shareholders to attend the AGM should they wish. Any changes

to the AGM date will be communicated via the Company’s

website, www.ejfi.com, and the LSE.

By Order of the Board

Joanna Dentskevich

Chair

Date: 30 March 2023

32

EJF Investments Limited

Annual

Report and Audited Financial Statements 2022

Directors’ Remuneration Report

The Directors are pleased to present their report on remuneration for the year ended 31 December 2022.

The Directors believe that due to the size and nature of the Company it would be unnecessarily burdensome to establish a separate

remuneration committee. Remuneration matters are therefore included in matters reserved for the Board.

Remuneration Policy

Directors are entitled to receive a fixed fee based upon their duties, responsibilities and time spent up to an aggregate limit of £150,000

per annum as well as a fee for any special service at the request of the Company. As such the Chair of the Board and the Chair of the

Audit and Risk Committee receive an additional fee. Directors are also paid all reasonable travel expenses.

No element of the Directors’ remuneration is performance related nor does any Director have any entitlement to pensions, share

options or any long term incentive plans from the Company. In accordance with the AIC Code, no Director is involved in deciding their

remuneration.

No Director has a service contract with the Company, and no such contracts are proposed. Directors’ appointments can be terminated

in accordance with the Company’s Articles and without compensation.

Directors’ Remuneration

As at 31 December 2022, the Directors were each entitled to a fee of £40,000 per annum with additional fees being paid to the Chair

of the Board of £10,000 per annum and to the Chair of the Audit and Risk Committee of £5,000 per annum. Neal Wilson has waived

his right to receive remuneration. Subsequent to the year end, the Board approved an increase to Director fees of 10% effective

1 January 2023.

For the year under consideration, the Directors received the following amounts:

Director

2022

£

2021

£

Joanna Dentskevich

50,000

50,000

Alan Dunphy

45,000

45,000

Nick Watkins

40,000

40,000

Neal Wilson

–

–

Total

135,000

135,000

Directors’ expenses for the year were £13,156 (2021: £1,107).

No other remuneration or compensation was paid by the Company to the Directors during the year (2021: £nil).

Directors’ and officers’ liability insurance cover is maintained by the Company on behalf of the Directors.

The terms of the Directors’ appointments as non-executive Directors are set out in letters issued in April 2017 (as amended in

January 2019).

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

33

Directors’ Remuneration Report

Ordinary Shares held by Directors

Shareholdings by the Directors in the Company as at year end were as follows:

Name

Ordinary Shares

31 December 2022

1

Percentage

of Ordinary

Shares in Issue

31 December 2022

2

Ordinary Shares

31 December 2021

1

Percentage

of Ordinary

Shares in Issue

31 December 2021

2

Neal Wilson

1,718,881

2.811%

1,622,607

2.654%

Joanna Dentskevich

77,896

0.127%

77,896

0.127%

Nick Watkins

10,000

0.016%

3,000

0.005%

ZDP Shares held by Directors

2025 ZDP shares held by the Directors as at year end were as follows:

Name

2025 ZDP Shares

31 December 2022

Percentage of 2025

ZDP Shares in Issue

31 December 2022

2025 ZDP Shares

31 December 2021

Percentage of 2025

ZDP Shares in Issue

31 December 2021

Neal Wilson

1,000,000

5.883%

1,000,000

16.667%

Joanna Dentskevich

30,000

0.177%

30,000

0.500%

Nick Watkins

10,000

0.059%

10,000

0.167%

1

The Directors’ shareholdings are either direct and/or indirect holdings of shares.

2

The calculation of shareholding % is based on number of shares in issue after adjusting for treasury shares.

The Directors did not hold any 2022 ZDP Shares as at 31 December 2021.

Chair

30 March 2023

34

EJF Investments Limited

Annual

Report and Audited Financial Statements 2022

Audit and Risk Committee Report

The Board is supported by the Audit and Risk Committee with

formally delegated duties and responsibilities relating to audit

and risk, as set out in written terms of reference which are

available from the Company’s website.

Chair and Membership

The Audit and Risk Committee is chaired by Alan Dunphy

with its other members being Joanna Dentskevich and Nick

Watkins. All members are independent, have no links with the

Auditor and are independent of the Manager. The Audit and Risk

Committee meets at least three times a year at appropriate times

in the financial reporting cycle and to meet with the Auditor as

appropriate. The membership of the Audit and Risk Committee

and its terms of reference are kept under review.

The Board has considered the composition of the Audit and Risk

Committee and is satisfied it has sufficient recent and relevant

skills and experience. In particular the Board has considered the

requirements of the UK Code that the Audit and Risk Committee

should have at least one member who has recent and relevant

financial experience and that the Audit and Risk Committee

as a whole has competence relevant to the sector in which

the Company invests. The Board considers all of the relevant

requirements to have been met. The relevant qualifications and

experience of each member are detailed on page 18.

Key Responsibilities

The Audit and Risk Committee’s primary role and responsibility

is to review and monitor the integrity of the Company’s Annual

Report and Interim Report to ensure they are fair, balanced

and understandable and provide the information necessary for

shareholders to assess the Company’s performance, business

model and strategy and reporting to the Board accordingly. This

includes reviewing the Independent Auditor’s Report.

The Audit and Risk Committee’s other roles and responsibilities

include, but are not limited to:

•

reporting to the Board on any significant financial reporting

issues and judgements;

•

reviewing and challenging where necessary significant

accounting policies and practices, including the basis on

which the Company is determined as a going concern and

a review of the viability statement included in the Annual

Report taking into account the Company’s financial position

and principal risks identified;

•

reviewing the adequacy and effectiveness of the Company’s

internal financial controls and internal control and risk

management systems;

•

assessing any correspondence from regulators in relation to

the Company’s financial reporting;

•

reviewing the external auditor’s performance, independence

and objectivity to include a report from the external auditor

on its own internal quality procedures;

•

making recommendations to the Board in relation to the

appointment, re-appointment or removal of the external

auditor, the approval of the external auditor’s remuneration

and the terms of the engagement;

•

developing and implementing policies surrounding the

engagement of the external auditor to supply non-audit

services, where appropriate;

•

considering regularly whether the Company should have an

internal audit function and making a recommendation to the

Board accordingly;

•

advising the Board on the Company’s overall risk strategy and

to establish the risk assessment measures and methodologies

to be employed by the Company; and

•

reporting to the Board on how it has discharged

its responsibilities.

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

35

Audit and Risk Committee Report

How the Audit and Risk Committee has

Discharged Its Responsibilities

The Audit and Risk Committee met seven times during the

year (five of which comprised formal committee meetings) and

the individual attendance of the Audit and Risk Committee

members is outlined on page 23. Representatives of the Manager,

Auditor and Administrator were present as required. The main

matters discussed at those meetings were:

•

detailed review of the 2021 Annual Report and

recommendation for approval by the Board;

•

review of the Company’s and EJFIH’s key risks and

internal controls;

•

assessment of the final audit findings document presented by

the Auditor in respect of the audit of the 2021 Annual Report;

•

consideration of the independence of the Auditor;

•

review and approval of the interim review plan of the Auditor

in respect of the 2022 Interim Report;

•

detailed review of the 2022 Interim Report and

recommendation for approval by the Board;

•

review of the effectiveness of the Auditor;

•

review and approval of the annual audit plan of the Auditor in

respect of the 2022 Annual Report; and

•

review of the Company’s proposed ESG policy.

Subsequent to year end, up to the date of approval of the Annual

Report, the Audit and Risk Committee met three times to discuss

risk matters and undertake detailed reviews of the 2022 Annual

Report. The main matters discussed at those meetings were:

•

review and update of the Company’s risk register

and corresponding principal risks for inclusion in the

Annual Report;

•

review of updated terms of reference of the Audit and

Risk Committee;

•

specific consideration of fraud and bribery risk, and

consideration of robustness of the whistleblowing policies

of the Company’s principal service providers;

•

review and challenge of the Manager’s stress tests for the

purposes of the viability statement and consideration of the

duration of the viability period;

•

review of the 2022 Annual Report and recommendation for

approval by the Board;

•

assessment of the final audit findings document presented by

the Auditor in respect of the audit of the 2022 Annual Report;

•

discussion and final approval of the 2022 external auditor

fees for the annual audit; and

•

assessment of the independence of the Auditor.

Monitoring the Integrity of the Audited

Financial Statements including Significant

Judgement and Estimates

The Audit and Risk Committee reviewed the 2022 Interim

Report and 2022 Annual Report prior to discussion and approval

by the Board, and the significant financial reporting issues and

judgements contained therein. It also reviewed the Auditor’s

reports thereon and reviewed the appropriateness of the

Company’s accounting principles and policies and monitored

changes to, and compliance with, accounting standards on an

ongoing basis.

The Audit and Risk Committee have considered and determined

that the Company continues to meet the definition of an

Investment Entity in accordance with IFRS 10 and further that

the Company’s investment in EJFIH should be classified at Level

3, as it is not traded and contains unobservable inputs, and due to

its materiality in the context of the Audited Financial Statements

as a whole, investments are considered to be the area which

should have the greatest effect on the overall audit strategy and

allocation of resources in planning and completing the audit.

In undertaking this review, the Audit and Risk Committee

discussed with the Auditor, the Manager and the Administrator

the critical accounting policies and judgements that have

been applied.

As requested by the Board, the Audit and Risk Committee also

reviewed the Annual Report and was able to confirm to the

Board that, in their view, the Annual Report, taken as a whole,

was fair, balanced and understandable and provided the

information necessary for shareholders to assess the Company’s

position, performance, business model and strategy.

36

EJF Investments Limited

Annual

Report and Audited Financial Statements 2022

Audit and Risk Committee Report

Significant and other Accounting Matters

The significant accounting matters associated with the preparation of the Annual Report are:

Significant accounting matter

How addressed by the Audit and Risk Committee

Valuation of the

investment in EJFIH

EJFIH is not traded and contains unobservable inputs and is therefore classified as a Level 3 investment

under IFRS 13. The Company holds a direct investment in EJFIH and the Board considers that the NAV of

EJFIH is representative of its fair value.

The NAV of EJFIH has been presented in the Annual Report on a look through basis to the underlying

investment positions. See details in notes 9 and 15. EJFIH holds a number of different Level 3 investments

which are also measured at fair value.

The Audit and Risk Committee receives regular updates on the performance of the Portfolio from the

Manager. It also reviews the Manager’s valuation policy and challenges the Manager on the valuation. The

Audit and Risk Committee is not aware of any discrepancies with the valuation methodologies adopted or

the independent valuation procedures carried out by the valuation agents.

The Company values the underlying positions held in EJFIH as per below (further information regarding the

valuation methodologies and the resultant valuations can be found on pages 68 to 69):

Partnership

The Partnership is valued by reference to the EJFIH’s proportionate share of the reported NAV. The

underlying investments by the Partnership into Risk Retention Investments are marked clean to broker

quotes with the Manager estimating the expected accrual of interest earned on each security.

CDO Manager

The Manager has appointed a recognised independent valuation agent to value the CDO Manager based

on the underlying CDO management contract cash flows expectations, using inputs and models developed

by the Manager.

CDO Securities

Current cash-yielding securities are marked clean to broker quotes with interest accrued separately. Legacy

CDO Securities are valued dirty using acceptable probability based discounted cash flow methodologies by

the Manager.

FinTech debt securities

The securities are marked clean to broker quotes with interest accrued separately.

Preference Shares

The shares are marked clean to broker quotes with the Manager estimating the expected accrual of interest

earned on each security.

Derivative financial instruments at FVTPL

The Manager determines the fair value of the forward foreign currency contracts using quoted mid forward

exchange rates as at the reporting date.

Seneca Portfolio

Seneca is valued based on EJFIH’s proportionate share of the reported NAV.

Armadillo Portfolio

The Armadillo Portfolio is valued based on EJFIH’s proportionate share of the reported NAV of each entity.

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

37

Audit and Risk Committee Report

Risk Management

The Board as a whole is responsible for the Company’s system

of internal controls and the Audit and Risk Committee assists

the Board in meeting those obligations, as set out in its terms

of reference. The Board does not currently consider an internal

audit function to be required given the size and nature of

the Company’s operations and instead places reliance on the

external and internal controls applied by the Company’s service

providers as regulated entities. The Audit and Risk Committee

has reviewed the Administrator’s most recent ISAE 3402 Report

on Fund Administration (Report on the description of controls

placed in operation, their design and operating effectiveness

for the period from 1 October 2021 to 30 September 2022) and

is pleased to note that no significant issues were identified.

In addition, the Administrator has provided a bridging letter

covering the period from 1 October 2022 to 31 December 2022,

which confirms the controls referenced in the ISAE 3402

Report are still in place and operated effectively in this period.

Additionally, the Company receives confirmations from

its principal service providers that no material issues have

arisen in respect of their systems of internal controls and

risk management.

During the year, the independent Directors met with

representatives of the Manager at their office in the US to review

any changes to the Manager’s controls and the operating

effectiveness of the Manager’s existing controls. The Audit

and Risk Committee reaffirms that, to date, there are no risk

issues identified in this area which need to be brought to

shareholders’ attention.

External Auditor

It is the responsibility of the Audit and Risk Committee to

monitor the performance, independence, objectivity and

reappointment of the Auditor. The Audit and Risk Committee

met with the Auditor to consider the audit strategy and plan for

the audit. The audit plan for the reporting period was reviewed,

including consideration of the key audit matters and audit risks,

to seek to ensure that the audit was appropriately focused.

The Auditor attended a number of the Audit and Risk Committee

meetings throughout the year, which allowed the Auditor

the opportunity to discuss any matters it wished to raise. The

Auditor provided feedback at each Audit and Risk Committee

meeting on topics such as the key accounting matters,

mandatory communications and the control environment. The

Audit and Risk Committee chair meets with the Auditor ahead

of Audit and Risk Committee meetings to review key audit and

review areas for discussion with the Audit and Risk Committee.

The Auditor is not in attendance when their performance and/or

levels of remuneration are discussed.

The Auditor’s valuation specialists have been engaged to

provide support for the audit of the Company’s asset valuations.

The team are based in Frankfurt, Germany and consist of

50 valuation specialists. They perform valuation testing

by repricing complex financial assets. The team undertook

an independent revaluation exercise, which resulted in an

acceptable level of deviation from an audit perspective for any

differences between the repricing and the Company’s valuations.

A senior representative of the team attended the Audit and Risk

Committee meeting at which the final audit findings document

was presented by the Auditor in respect of the audit of the 2022

Annual Report, to present an overview of the valuation work and

methodology undertaken.

38

EJF Investments Limited

Annual

Report and Audited Financial Statements 2022

Audit and Risk Committee Report

During the years ended 31 December 2022 and 31 December 2021, no non-audit services were provided by the Auditor to the Company.

During the years ended 31 December 2022 and 31 December 2021, the Auditor was remunerated as follows:

Year ended

31 December 2022

£

Year ended

31 December 2021

£

Audit services

Annual audit

137,500

142,750

Interim review

45,000

19,250

Total audit fees

182,500

162,000

Total fees to the Auditor

182,500

162,000

The Audit and Risk Committee continues to be satisfied with the performance of the Auditor. We have therefore recommended to

the Board that the Auditor, in accordance with agreed terms of engagement and remuneration, should continue as the Company’s

Auditor. Accordingly, a resolution proposing the reappointment of the Company’s auditor will be put to the shareholders at the

forthcoming AGM.

A member of the Audit and Risk Committee will be available to shareholders at the forthcoming AGM of the Company to answer any

questions relating to the role of the Audit and Risk Committee.

The Auditor has been appointed since the Company commenced trading. The Audit and Risk Committee is satisfied that the lead audit

partner has the experience, independence and industry knowledge to be an effective lead audit partner.

The Audit and Risk Committee is also responsible for the audit tender process and will take all key decisions covering timing,

approach, evaluation criteria and recommendations. The tender is expected to occur five years following the conclusion of the 2022

Annual Report.

Alan Dunphy

Audit and Risk Committee Chair

Date: 30 March 2023

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

39

Statement of Directors’ Responsibilities

The Directors are responsible for preparing the Annual Report,

including the Directors’ Remuneration Report in accordance

with applicable law and regulations.

The Companies Law requires the Directors to prepare

audited financial statements for each financial year. Under

the Companies Law they are required to prepare the audited

financial statements in accordance with IFRS and applicable law.

Under the Companies Law the Directors must not approve the

audited financial statements unless they are satisfied that they

give a true and fair view of the state of affairs of the Company

and of its profit or loss for that year. In preparing the audited

financial statements, the Directors are required to:

•

select suitable accounting policies and then apply

them consistently;

•

make judgements and estimates that are reasonable,

relevant and reliable;

•

state whether applicable accounting standards have been

followed, subject to any material departures disclosed and

explained in the audited financial statements;

•

assess the Company’s ability to continue as a going concern,

disclosing, as applicable, matters related to going concern; and

•

use the going concern basis of accounting unless they either

intend to liquidate the Company or to cease operations, or

have no realistic alternative but to do so.

The Directors are responsible for keeping proper records that

are sufficient to show and explain the Company’s transactions

and disclose with reasonable accuracy at any time the financial

position of the Company and enable them to ensure that its

audited financial statements comply with the Companies Law.

They are responsible for such internal control as they determine

is necessary to enable the preparation of audited financial

statements that are free from material misstatement, whether

due to fraud or error, and have general responsibility for taking

such steps as are reasonably open to them to safeguard the

assets of the Company and to prevent and detect fraud and other

irregularities.

The Directors are responsible for the maintenance and

integrity of the corporate and financial information included

on the Company’s website. Legislation in Jersey governing the

preparation and dissemination of audited financial statements

may differ from legislation in other jurisdictions.

Responsibility statement of the Directors

in respect of the Annual Report and

Audited Financial Statements

We confirm that to the best of our knowledge:

•

the Audited Financial Statements, prepared in accordance

with IFRS, give a true and fair view of the assets, liabilities,

financial position and profit or loss of the Company as at

and for the year ended 31 December 2022, as required by

DTR 4.1.12R; and

•

the Annual Report includes a fair review of the development

and performance of the business and the position of the

Company, together with a description of the principal risks

and uncertainties that it faces, as required by DTR 4.1.8R

and DTR 4.1.11R.

We consider the Annual Report and Audited Financial

Statements, taken as a whole, are fair, balanced and

understandable and provide the information necessary for

shareholders to assess the Company’s position and performance,

business model and strategy.

This responsibility statement has been approved by the Board

on 30 March 2023 and is signed on its behalf by:

Joanna Dentskevich

Chair

Date: 30 March 2023

40

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

1.

Our opinion is unmodified

We have audited the financial statements of EJF Investments

Ltd (“the Company”) for the year ended 31 December 2022 which

comprise the Statement of Comprehensive Income, Statement

of Financial Position, Statement of Changes in Equity, Statement

of Cash Flows and the related notes, including the accounting

policies in note 2.

In our opinion the financial statements:

•

give a true and fair view, in accordance with International

Financial Reporting Standards as adopted by the issued by

the International Accounting Standards Board (“IASB”), of the

state of the Company’s affairs as at 31 December 2022 and of

its profit for the year then ended; and

•

have been properly prepared in accordance with Companies

(Jersey) Law 1991.

Basis for opinion

We conducted our audit in accordance with International

Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our

responsibilities are described below. We have fulfilled our ethical

responsibilities under, and are independent of the Company in

accordance with, UK ethical requirements including the FRC

Ethical Standard as applied to other listed entities. We believe

that the audit evidence we have obtained is a suffi

cient and

appropriate basis for our opinion.

Overview

Materiality:

financial

statements

as a whole

£1.38m (2021: £1.28m)

1% (2021: 1% of Total assets)

Key audit matter

vs 2021

Recurring risks

Valuation of financial asset

at fair value through profit

or loss

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

41

Independent Auditor’s Report to the Members of EJF Investments Limited

2.

Key audit matters: our assessment of risks of material misstatement

Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial

statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us,

including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the

efforts of the engagement team. This matter was addressed in the context of our audit of the financial statements as a whole, and in

forming our opinion thereon, and we do not provide a separate opinion on this matters. In arriving at our audit opinion above, the key

audit matter was as follows (unchanged from 2021):

The risk

Our response

Valuation of financial asset

at fair value through profit

or loss

£131.96 million

(2021: £129.52 million)

Refer to page 36 Audit and Risk

Committee Report, pages 52 to

56 for accounting policies and

pages 58 to 61 and 64 to 76 for

financial disclosures.

Risk level remains unchanged

from prior year

Subjective valuation:

The financial asset at fair value through profit

or loss represents a 100% (2021: 100%)

holding in EJF Investment Holdings Limited

(“the Holdco”) and constitutes 99% (2021:

99%) of the Company’s total assets.

The fair value of the investment in Holdco

is largely determined by reference to the

underlying investments, which are all held at

fair value. As those underlying investments

are largely made up of financial instruments

for which no observable market price is readily

available, their fair value is determined through

the application of valuation techniques which

involve significant judgement by the Company.

The effect of these matters is that, as part of

our risk assessment, we determined that the

valuation of the investment has a high degree

of estimation uncertainty with a potential

range of reasonable outcomes greater than

our materiality for the financial statements as

a whole, and possibly many times that amount.

The financial statements note 15 discloses the

sensitivity estimated by the Company.

Our procedures included:

• Control Design:

Documenting and assessing the design and

implementation of the Company’s investment valuation

processes and controls. We performed the tests below

rather than seeking to rely on any of the Company’s

controls because the nature of the balance is such that

we would expect to obtain audit evidence primarily

through the detailed procedures described.

• Methodology choice:

Challenging the appropriateness of the valuation

basis selected, with reference to observed industry

best practice.

•

Our valuations experience:

Challenging the investment manager on key

judgements affecting valuations, such as selection

of appropriate discount factors, future cash flows

and other unobservable inputs, with reference to

historical data and market research. Our work included

consideration of events which occurred subsequent to

the year end up until the date of this audit report.

• Independent re-performance:

For the Holdco’s investments in other entities valued

on a net assets value basis, recalculating the valuation

of these investments by applying the ownership

percentages to the relevant net asset value.

For the underlying investments within the other

entities and the underlying investments held directly

by the Holdco, independently assessing the fair

values, including the use of our valuation specialists to

value the investments, using independently derived

valuations models and market observable data.

Comparing the reported valuation with the valuation

derived by us and performing an assessment of

whether an over/understatement of valuation

identified through these procedures was material.

• Assessing transparency:

Consideration of the appropriateness, in accordance

with relevant accounting standards, of the disclosures

in respect of the investment in Holdco and its

underlying investments and the effect of changing

one or more inputs to reasonably possible alternative

valuation assumptions.

42

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

Independent Auditor’s Report to the Members of EJF Investments Limited

3.

Our application of materiality and an

overview of the scope of our audit

Materiality for the financial statements as a whole was set

at £1.38m (2021: £1.28m), determined with reference to a

benchmark of total assets, of which it represents 1% (2021: 1%).

In line with our audit methodology, our procedures on

individual account balances and disclosures were performed

to a lower threshold, performance materiality, so as to reduce

to an acceptable level the risk that individually immaterial

misstatements in individual account balances add up to a

material amount across the financial statements as a whole.

Performance materiality was set at 75% (2021: 75%) of materiality

for the financial statements as a whole, which equates to

£1.04 million (2021: £0.96 million). We applied this percentage

in our determination of performance materiality because we did

not identify any factors indicating an elevated level of risk.

We agreed to report to the Audit and Risk Committee any

corrected or uncorrected identified misstatements exceeding

£0.07m (2021: £0.06m), in addition to other identified

misstatements that warranted reporting on qualitative grounds.

Our audit of the Company was undertaken to the materiality

level specified above and was performed by a single audit team.

The scope of the audit work performed was fully substantive

as we did not rely upon the Company’s internal control over

financial reporting.

Total assets:

£132.68m (2021: £130.46m)

Total assets

Materiality

Materiality

£1.38m

(2021: £1.28m)

Performance

materiality

£1.04m

(2021: £0.96m)

Misstatements

reported to the

Audit Committee

£0.07m

(2021: £0.06m)

4.

Going concern

The Directors have prepared the financial statements on the

going concern basis as they do not intend to liquidate the

Company or to cease its operations, and as they have concluded

that the Company’s financial position means that this is realistic.

They have also concluded that there are no material uncertainties

that could have cast significant doubt over its ability to continue

as a going concern for at least a year from the date of approval of

the financial statements (“the going concern assessment period”).

We used our knowledge of the Company, its industry, and the

general economic environment to identify the inherent risks to

its business model and analysed how those risks might affect the

Company’s financial resources or ability to continue operations

over the going concern period. The risks that we considered

most likely to adversely affect the Company’s available financial

resources, and its ability to operate over this period were:

•

The impact of a significant reduction in the valuation of

the underlying assets in the portfolio, including due to

economic uncertainty and default on underlying collateral

in securitization investments; and

•

Adverse foreign exchange margin calls reducing the

availability of cash to meet ongoing obligations as

they fall due.

We considered whether these risks could plausibly affect

the liquidity in the going concern by assessing the directors’

sensitivities over the level of available financial resources

indicated by the Company’s financial forecasts taking account of

severe, but plausible adverse effects that could arise from these

risks individually and collectively. Our procedures also included

critically assessing the assumptions in the downside scenarios,

in particular whether the default rates on underlying collateral

in securitization investments continued to be appropriate

in light of the potential uncertainties arising from current

market conditions.

We considered whether the going concern disclosure in note 2.1

to the financial statements gives a full and accurate description

of the Directors’ assessment of going concern, including the

identified risks and related sensitivities.

Our conclusions based on this work:

•

we consider that the Directors’ use of the going concern basis

of accounting in the preparation of the financial statements

is appropriate;

•

we have not identified, and concur with the Directors’

assessment that there is not, a material uncertainty related

to events or conditions that, individually or collectively, may

cast significant doubt on the Company’s ability to continue as

a going concern for the going concern period; and

•

we have nothing material to add or draw attention to

in relation to the Directors’ statement in note 2.1 to the

financial statements on the use of the going concern basis

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

43

Independent Auditor’s Report to the Members of EJF Investments Limited

of accounting with no material uncertainties that may cast

significant doubt over the Company’s use of that basis for

the going concern period, and we found the going concern

disclosure in note 2.1 to be acceptable.

However, as we cannot predict all future events or conditions

and as subsequent events may result in outcomes that are

inconsistent with judgements that were reasonable at the time

they were made, the above conclusions are not a guarantee that

the Company will continue in operation.

5.

Fraud and breaches of laws and

regulations – ability to detect

Identifying and responding to risks of material

misstatement due to fraud

To identify risks of material misstatement due to fraud (“fraud

risks”) we assessed events or conditions that could indicate an

incentive or pressure to commit fraud or provide an opportunity

to commit fraud. Our risk assessment procedures included:

•

Enquiring of the Directors and Administrator as to the

Company’s high-level policies and procedures to prevent and

detect fraud, as well as whether they have knowledge of any

actual, suspected or alleged fraud;

•

Obtaining an understanding of the segregation of duties

in place between the Directors, the Administrator and

the Company’s Investment Manager; and

•

Reading Board minutes and Audit and Risk

Committee minutes.

We communicated identified fraud risks throughout the

audit team and remained alert to any indications of fraud

throughout the audit.

As required by auditing standards, we perform procedures

to address the risk of management override of controls, in

particular to the risk that management may be in a position

to make inappropriate accounting entries. We evaluated the

design and implementation of the controls over journal entries

and other adjustments and made inquiries of the Administrator

about inappropriate or unusual activity relating to the processing

of journal entries and other adjustments. We substantively

tested all material post-closing entries by comparing the

identified entries to supporting documentation and, based on

the results of our risk assessment procedures and understanding

of the process, including the segregation of duties between the

Directors and the Administrator, no further high-risk journal

entries or other adjustments were identified.

On this audit we have rebutted the fraud risk related to revenue

recognition because the revenue is non-judgemental and

straightforward, with limited opportunity for manipulation.

We did not identify additional fraud risks.

Identifying and responding to risks of material

misstatement related to compliance with laws

and regulations

We identified areas of laws and regulations that could reasonably

be expected to have a material effect on the financial statements

from our general commercial and sector experience and

through discussion with the Directors and the Administrator (as

required by auditing standards) and discussed with the Directors

the policies and procedures regarding compliance with laws

and regulations.

The potential effect of these laws and regulations on the

financial statements varies considerably.

Firstly, the Company is subject to laws and regulations that

directly affect the financial statements including financial

reporting legislation (including related companies legislation),

distributable profits legislation as set out by Companies (Jersey)

Law 1991 and we assessed the extent of compliance with these

laws and regulations as part of our procedures on the related

financial statement items.

Secondly, the Company is subject to many other laws and

regulations where the consequences of non-compliance could

have a material effect on amounts or disclosures in the financial

statements, for instance through the imposition of fines or

litigation. We identified the following areas as those most likely

to have such an effect: anti-bribery, data protection, anti-money

laundering, market abuse regulations and certain aspects of

company legislation recognising the financial and regulated

nature of the Company’s activities and its legal form. Auditing

standards limit the required audit procedures to identify non-

compliance with these laws and regulations to enquiry of the

Directors and the Administrator and inspection of regulatory

and legal correspondence, if any. Therefore if a breach of

operational regulations is not disclosed to us or evident from

relevant correspondence, an audit will not detect that breach.

Context of the ability of the audit to detect fraud

or breaches of law or regulation

Owing to the inherent limitations of an audit, there is an

unavoidable risk that we may not have detected some material

misstatements in the financial statements, even though we

have properly planned and performed our audit in accordance

with auditing standards. For example, the further removed

non-compliance with laws and regulations is from the events

and transactions reflected in the financial statements, the less

likely the inherently limited procedures required by auditing

standards would identify it.

In addition, as with any audit, there remained a higher risk of

non-detection of fraud, as fraud may involve collusion, forgery,

intentional omissions, misrepresentations, or the override of

internal controls. Our audit procedures are designed to detect

material misstatement. We are not responsible for preventing

non-compliance or fraud and cannot be expected to detect non-

compliance with all laws and regulations.

44

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

Independent Auditor’s Report to the Members of EJF Investments Limited

6.

We have nothing to report on

the other information in the

Annual Report

The directors are responsible for the other information presented

in the Annual Report together with the financial statements. Our

opinion on the financial statements does not cover the other

information and, accordingly, we do not express an audit opinion

or, except as explicitly stated below, any form of assurance

conclusion thereon.

Our responsibility is to read the other information and, in

doing so, consider whether, based on our financial statements

audit work, the information therein is materially misstated

or inconsistent with the financial statements or our audit

knowledge. Based solely on that work we have not identified

material misstatements in the other information.

Disclosures of emerging and principal risks

and longer-term viability

We are required to perform procedures to identify whether

there is a material inconsistency between the directors’

disclosures in respect of emerging and principal risks and

the viability statement, and the financial statements and our

audit knowledge.

Based on those procedures, we have nothing material to add

or draw attention to in relation to:

•

the directors’ confirmation within the viability statement on

page 31 that they have carried out a robust assessment of the

emerging and principal risks facing the Company, including

those that would threaten its business model, future

performance, solvency and liquidity;

•

the Principal Risks, Uncertainties and Emerging Risks

disclosures describing these risks and how emerging risks are

identified, and explaining how they are being managed and

mitigated; and

•

the directors’ explanation in the viability statement of how

they have assessed the prospects of the Company, over what

period they have done so and why they considered that

period to be appropriate, and their statement as to whether

they have a reasonable expectation that the Company will

be able to continue in operation and meet its liabilities as

they fall due over the period of their assessment, including

any related disclosures drawing attention to any necessary

qualifications or assumptions.

Our work is limited to assessing these matters in the context of

only the knowledge acquired during our financial statements

audit. As we cannot predict all future events or conditions and as

subsequent events may result in outcomes that are inconsistent

with judgements that were reasonable at the time they were

made, the absence of anything to report on these statements is

not a guarantee as to the Company’s longer-term viability.

Corporate governance disclosures

We are required to perform procedures to identify whether there

is a material inconsistency between the directors’ corporate

governance disclosures and the financial statements and our

audit knowledge.

Based on those procedures, we have concluded that each of the

following is materially consistent with the financial statements

and our audit knowledge:

•

the directors’ statement that they consider that the annual

report and financial statements taken as a whole is fair,

balanced and understandable, and provides the information

necessary for shareholders to assess the Company’s position

and performance, business model and strategy;

•

the section of the annual report describing the work of the

Audit and Risk Committee, including the significant issues

that the Audit and Risk committee considered in relation

to the financial statements, and how these issues were

addressed; and

•

the section of the annual report that describes the review

of the effectiveness of the Company’s risk management

and internal control systems.

7.

We have nothing to report on the

other matters on which we are

required to report by exception

Under the Companies (Jersey) Law 1991, we are required to

report to you if, in our opinion:

•

proper accounting records have not been kept by

the company, or

•

proper returns adequate for our audit have not been received

from branches not visited by us; or

•

the company’s accounts are not in agreement with the

accounting records and returns; or

•

we have not received all the information and explanations we

require for our audit.

We have nothing to report in these respects.

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

45

Independent Auditor’s Report to the Members of EJF Investments Limited

8.

Respective responsibilities

Directors’ responsibilities

As explained more fully in their statement set out on page 39,

the Directors are responsible for: the preparation of financial

statements that give a true and fair view; such internal control

as they determine is necessary to enable the preparation of

financial statements that are free from material misstatement,

whether due to fraud or error; assessing the Company’s ability

to continue as a going concern, disclosing, as applicable, matters

related to going concern; and using the going concern basis of

accounting unless they either intend to liquidate the Company

or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities

Our objectives are to obtain reasonable assurance about

whether the financial statements as a whole are free from

material misstatement, whether due to fraud or error, and to

issue our opinion in an auditor’s report. Reasonable assurance

is a high level of assurance, but does not guarantee that an audit

conducted in accordance with ISAs (UK) will always detect a

material misstatement when it exists. Misstatements can arise

from fraud or error and are considered material if, individually

or in aggregate, they could reasonably be expected to influence

the economic decisions of users taken on the basis of the

financial statements.

A fuller description of our responsibilities is provided on the

FRC’s website at www.frc.org.uk/auditorsresponsibilities.

The purpose of our audit work and to whom we owe

our responsibilities

This report is made solely to the Company’s members, as a body,

in accordance with Article 113A of the Companies (Jersey) Law

1991. Our audit work has been undertaken so that we might

state to the Company’s members those matters we are required

to state to them in an auditor’s report and for no other purpose.

To the fullest extent permitted by law, we do not accept or

assume responsibility to anyone other than the Company and

the Company’s members, as a body, for our audit work, for this

report, or for the opinions we have formed.

Carla Cassidy

for and on behalf of KPMG LLP

Chartered Accountants and Recognised Auditor

15 Canada Square

London

E14 5GL

30 March 2023

46

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

Independent Auditor’s Report to the Members of EJF Investments Limited

Independent Auditor’s Report

To EJF Investments Limited and the members of EJF Investments Limited

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of EJF Investments Ltd (“The Company”), which comprise the statement of financial position

as of December 31, 2022 and 2021, and the related statements of comprehensive income, changes in equity, and cash flows for the years

then ended, and the related notes to the financial statements.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of EJF Investments

Limited as of December 31, 2022 and 2021, and the results of its operations, changes in its equity, and its cash flows for the year

then ended in accordance with the International Financial Reporting Standards as adopted by the International Accounting

Standards Board.

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our

responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements

section of our report. We are required to be independent of the Company and to meet our other ethical responsibilities, in accordance

with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and

appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the International

Financial Reporting Standards as adopted by the International Accounting Standards, and for the design, implementation, and

maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material

misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the

aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year after the date that the

financial statements are available to be issued.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material

misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high

level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will

always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher

than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of

internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they

would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:

•

Exercise professional judgment and maintain professional skepticism throughout the audit.

•

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and

perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the

amounts and disclosures in the financial statements.

•

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in

the circumstances9, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

Accordingly, no such opinion is expressed.

•

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by

management, as well as evaluate the overall presentation of the financial statements.

•

Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about

the Company’s ability to continue as a going concern for a reasonable period of time.

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

47

Independent Auditor’s Report to the Members of EJF Investments Limited

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing

of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.

Other Information

Management is responsible for the other information included in the annual report. The other information comprises the information

included in the annual report but does not include the financial statements and our auditors’ report thereon. Our opinion on the

financial statements does not cover the other information, and we do not express an opinion or any form of assurance thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and consider whether

a material inconsistency exists between the other information and the financial statements, or the other information otherwise

appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the

other information exists, we are required to describe it in our report.

The purpose of our audit work and to whom we owe our responsibilities

Our report has been prepared for the Company solely in accordance with the terms of our engagement. Our report was designed to

meet the agreed requirements of the Company determined by the Company’s needs at the time. Our report should not therefore be

regarded as suitable to be used or relied on by any party wishing to acquire rights against us other than the Company for any purpose

or in any context.

Subject to the terms and conditions of our letter of engagement dated 8 September 2022 (“the Engagement Letter”), this report is

addressed to the members of the Company (“the Investors”), who may rely on this report under the Contracts (Rights of Third Parties)

Act 1999. The terms of the Engagement Letter are available to Investors on request.

This report should not be regarded as suitable to be used or relied on by any party wishing to acquire any rights against KPMG LLP,

other than the Company and the Investors for any purpose or in any context. Any party other than the Company or the Investors who

obtain access to this report or a copy and choose to rely on this report (or any part of it) will do so at its own risk. To the fullest extent

permitted by law, KPMG LLP, will accept no responsibility or liability in respect of this report to any other party.

London, United Kingdom

30 March 2023

48

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

Statement of Comprehensive Income

for the years ended 31 December 2022 and 31 December 2021

Notes

1 January 2022 to

31 December 2022

£

1 January 2021 to

31 December 2021

£

Dividend income

5

8,500,000

8,200,000

Net foreign exchange (loss)/gain

(439)

466

Net unrealised gain on financial assets held at FVTPL

9

8,941,618

5,366,624

Total income

17,441,179

13,567,090

Investment Management fee

17

(965,902)

(887,308)

Legal fees

(73,495)

(124,168)

Professional fees

(209,916)

(251,252)

Administration fees

(179,701)

(186,161)

Directors’ fees

17

(135,000)

(135,000)

Directors’ and professional indemnity insurance

17

(55,657)

(131,786)

Audit fees

6

(182,500)

(162,000)

Printing fees

(42,526)

(27,067)

Listing fees

(13,660)

(14,843)

Tax services fees

(24,547)

73,680

Other expenses

(18,940)

(17,273)

Total operating expenses

(1,901,844)

(1,863,178)

Expenses reimbursed by the Manager

17

546,976

654,605

Net operating expenses

(1,354,868)

(1,208,573)

Operating profit

16,086,311

12,358,517

Finance costs

7

(1,831,236)

(1,585,306)

Profit and total comprehensive income for the year attributable to shareholders

14,255,075

10,773,211

Weighted average number of Ordinary Shares in issue during the year

61,145,198

61,740,143

Basic and diluted earnings per Ordinary Share

18

23.3p

17.6p

All items in the above statement are derived from continuing operations. No operations were acquired or discontinued during the year.

The accompanying notes on pages 52 to 81 form an integral part of these Audited Financial Statements.

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

49

Notes

31 December 2022

£

31 December 2021

£

Non-current assets

Financial assets at FVTPL

9

131,959,641

129,518,023

Current assets

Cash and cash equivalents

359,298

592,603

Balance due from the Manager

17

348,345

329,711

Prepaid expenses

8

14,730

18,030

Total current assets

722,373

940,344

Total assets

132,682,014

130,458,367

Non-current liabilities

ZDP Shares

11

(19,666,072)

(6,484,818)

Current liabilities

Accounts payable and accrued expenses

10

(504,067)

(448,509)

ZDP Shares

11

–

(18,725,704)

Total current liabilities

(504,067)

(19,174,213)

Total liabilities

(20,170,139)

(25,659,031)

Net assets

112,511,875

104,799,336

Equity

Stated capital

12

85,254,127

85,254,127

Retained earnings

27,257,748

19,545,209

Total Equity

112,511,875

104,799,336

Number of Ordinary Shares in issue at year end (excluding treasury shares)

12

61,145,198

61,145,198

NAV per Ordinary Share

184p

171p

The Audited Financial Statements were approved and authorised for issue by the Board on 30 March 2023 and signed on its behalf by:

Alan Dunphy

Director

The accompanying notes on pages 52 to 81 form an integral part of these Audited Financial Statements.

Statement of Financial Position

as at 31 December 2022 and 31 December 2021

50

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

For the year ended 31 December 2022

Notes

Number of

Ordinary Shares

Stated capital

£

Retained earnings

£

Net assets

attributable to

shareholders

£

Balance at 1 January 2022

61,145,198

85,254,127

19,545,209

104,799,336

Total comprehensive income for the year

attributable to shareholders

–

–

14,255,075

14,255,075

Transactions with shareholders

Dividends paid

13

–

–

(6,542,536)

(6,542,536)

Balance at 31 December 2022

12

61,145,198

85,254,127

27,257,748

112,511,875

For the year ended 31 December 2021

Notes

Number of shares

Stated capital

£

Retained earnings

£

Net assets

attributable to

shareholders

£

Balance at 1 January 2021

61,145,198

85,254,127

15,314,534

100,568,661

Total comprehensive loss for the year

attributable to shareholders

–

–

10,773,211

10,773,211

Transactions with shareholders

Dividends paid

13

–

–

(6,542,536)

(6,542,536)

Balance at 31 December 2021

12

61,145,198

85,254,127

19,545,209

104,799,336

The accompanying notes on pages 52 to 81 form an integral part of these Audited Financial Statements.

Statement of Changes in Equity

for the years ended 31 December 2022 and 31 December 2021

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

51

Notes

1 January 2022 to

31 December 2022

£

1 January 2021 to

31 December 2021

£

Cash flows from operating activities

Profit and total comprehensive income for the year

14,255,075

10,773,211

Adjustments for:

Amortisation of ZDP Shares and issuance costs

7, 11

1,833,501

1,604,084

ZDP Shares issuance costs

11

(793,610)

Net unrealised gain on financial assets held at FVTPL

9

(8,941,618)

(5,366,624)

Net foreign exchange loss/(gain)

439

(466)

Return of capital

9

6,500,000

–

Changes in net assets and liabilities:

Balance due from the Manager

(18,634)

241,017

Prepaid expenses and other assets

3,300

21,758

Accounts payable and accrued expenses

55,558

(138,654)

Net cash generated from operating activities

12,894,011

7,134,326

Cash flow from financing activities

Redemption of ZDP Shares

11

(6,584,341)

–

Dividends paid

13

(6,542,536)

(6,542,536)

Net cash used in financing activities

(13,126,877)

(6,542,536)

Net (decrease)/increase in cash and cash equivalents

(232,866)

591,790

Cash and cash equivalents at the start of the year

592,603

347

Effect of movements in exchange rates

(439)

466

Cash and cash equivalents at the end of the year

359,298

592,603

The accompanying notes on pages 52 to 81 form an integral part of these Audited Financial Statements.

Statement of Cash Flows

for the years ended 31 December 2022 and 31 December 2021

52

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

1.

General information

EJFI is a closed-ended investment company incorporated with

limited liability in the Bailiwick of Jersey on 20 October 2016

under the provisions of the Companies Law with registration

number 122353 and is regulated as a collective investment fund

under the Collective Investment Funds (Jersey) Law 1988. The

Company’s registered office and principal place of business is

IFC1, The Esplanade, St. Helier, Jersey JE1 4BP, Channel Islands.

The principal legislation under which the Company operates is

the Companies Law. The Company’s stated capital comprises

Ordinary Shares admitted to trading on the SFS.

The Company does not have a fixed life. Under the Company’s

Articles, on or about each fifth anniversary of the Company’s

Shares being admitted to trading on LSE, the Directors

shall procure that an EGM of the Company be convened at

which a Continuance Resolution will be proposed. The first

Continuance Resolution was passed at the Company’s EGM held

on 5 May 2022. Refer to note 2 for further information.

The Manager has been appointed by the Company to provide

management and investment management services and the

Administrator has been appointed to provide administration

services to the Company.

EJF holds 100% of the voting rights in the Manager. EJF is an

investment adviser principally located in the US and registered

as such with the SEC and as a CPO and CTA with the CFTC. The

Company has appointed the Manager to act as its AIFM for the

purposes of the AIFM Directive.

Additional information has been provided in Note 20 to allow

the Manager to avail of the audit exemption as prescribed in Rule

206 (4)-2 of the US Investment Adviser Act 1940.

The Company has one subsidiary, EJFIH (incorporated on

9 June 2017), of which the Company owns 100% of shares in

issue. Refer to note 14 for further information.

EJFIH holds 85% (31 December 2021: 85%) of the Partnership’s

interests (refer to note 9 for further information).

Through EJFIH, the Company primarily invests in opportunities

created by regulatory and structural changes impacting the

financial services sector. These opportunities can include

structured debt and equity, loans, bonds, preference shares,

convertible notes, FinTech debt securities and private equity,

in both cash and synthetic formats issued by entities domiciled

in the US, UK and Europe.

2.

Significant accounting policies

2.1

Basis of preparation

(a) Statement of Compliance

The Audited Financial Statements of the Company have

been prepared in accordance with IFRS together with the

interpretations of the International Accounting Standards

and Standing Interpretations Committee as approved by the

International Accounting Standards Committee which remain in

effect. The Audited Financial Statements have been prepared to

give a true and fair view of the Company’s affairs and to comply

with the requirements of the Companies Law.

(b) Basis of measurement

These Audited Financial Statements have been prepared on the

historical cost basis except for the revaluation of financial assets

held at FVTPL.

(c) Going concern

Under the UK Code, voluntarily adopted by the Company, and

Companies Law, the Directors are required to satisfy themselves

that it is reasonable to assume that the Company is a going

concern and to identify any material uncertainties in respect of

the Company’s ability to continue as a going concern for at least

12 months from the date of approving the financial statements.

The Directors have performed a detailed assessment of the

Company’s ability to meet its liabilities as they fall due for the

period of at least twelve months from the date of signing the

Audited Financial Statements, including evaluating severe

but plausible downside scenarios of a significant reduction

in the liquidity of positions and the fair value and cash flow

generation of its investments. The assessment was completed

with reference to the cash position of the Group, the operating

expenses and the potential default risk of the investments held.

In light of the analysis, the Directors are satisfied that, at the

time of approving the Audited Financial Statements, there is

a reasonable expectation that the Company will have adequate

resources to continue in operational existence for a period of at

least twelve months from the date of approval of the Audited

Financial Statements and have therefore prepared the Audited

Financial Statements on a going concern basis.

Notes to the Audited Financial Statements

for the year ended 31 December 2022

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

53

Notes to the Audited Financial Statements

for the year ended 31 December 2022

(d) Functional and presentation currency

The Company’s functional currency is Sterling, which the

Directors deem to be the currency of the primary economic

environment in which it operates, the currency in which finance

is raised, the currency in which distributions are made, the

currency in which investment management fees are paid and

ultimately the currency that would be returned to shareholders if

the Company was wound up. The Group enters into investment

transactions that are denominated in currencies other than

the functional currency, primarily in US Dollars and therefore

is exposed to currency risk. The Company’s performance

is evaluated and reported to shareholders in Sterling and its

liquidity is managed in Sterling. Sterling is considered as the

currency that most faithfully represents the economic effects of

the underlying transactions, events and conditions. The Audited

Financial Statements are presented in Sterling, except where

otherwise indicated, and are rounded to the nearest pound.

(e)

Standards and amendments to existing standards

effective from 1 January 2022

There are no standards, amendments to standards or

interpretations that are effective for annual periods beginning

on 1 January 2022 that have a material effect on the Audited

Financial Statements of the Company.

(f) Standards, amendments and interpretations issued

but not yet effective

Standards that become effective in future accounting periods

and have not been early adopted by the Company:

Standard

Effective for annual periods

beginning on or after

IFRS 17 – Insurance contracts

1 January 2023

IAS 8 – Accounting Policies, Changes

in Accounting Estimates and Errors –

amendments regarding the definition

of accounting estimates

1 January 2023

As the Company does not participate in insurance contracts

in the normal course of its business, the Directors believe that

the application of this IFRS 17 will not have an impact on the

Company’s Audited Financial Statements.

The IAS 8 amendments introduce a new definition for

accounting estimates: clarifying that they are monetary

amounts in the financial statements that are subject to

measurement uncertainty. The amendments also clarify the

relationship between accounting policies and accounting

estimates by specifying that a company develops an accounting

estimate to achieve the objective set out by an accounting policy.

The definition of accounting policies remains unchanged. The

Directors do not believe that the application of this amendment

will have a material impact on the Audited Financial Statements.

A number of other new standards, amendments to standards

and interpretations have been issued, but are not yet effective

and have not been early adopted in preparing these Audited

Financial Statements. None of these are expected to have

a material effect on the Audited Financial Statements

of the Company.

2.2

Foreign currency translations

Foreign currency transactions are translated into the functional

currency using the exchange rates prevailing at the dates of

the transactions. Foreign currency assets and liabilities are

translated into the functional currency using the exchange rate

prevailing at the Statement of Financial Position date.

Foreign exchange gains and losses arising from translation are

included in the Statement of Comprehensive Income.

Foreign exchange gains and losses relating to cash and cash

equivalents are presented in the Statement of Comprehensive

Income within ‘Net foreign exchange (loss)/gain’.

Foreign exchange gains and losses relating to the financial assets

and liabilities carried at FVTPL are presented in the Statement of

Comprehensive Income within ‘Net unrealised gain on financial

assets held at FVTPL’.

2.3

Accounting for subsidiaries

In accordance with IFRS 10 as amended, the Board has

determined that the Company meets the definition of an

investment entity which is exempted from the consolidation of

investment entity subsidiaries. EJFIH was established to hold

investments for the Company and to maximise the Company’s

investment returns. It does not represent a separate substantial

business activity.

The Company has been deemed to meet the definition of an

investment entity per IFRS 10 as the following conditions exist:

•

The Company has obtained funds from investors for

the purpose of providing investors with investment

management services.

•

The Company’s business purpose, which was communicated

directly to investors, is investing funds solely for returns from

capital appreciation and investment income.

•

The Company measures and evaluates all of its investments

on a fair value basis.

The Company obtains funding from a diverse group of external

shareholders, to whom it has committed that its business

purpose is to invest funds solely for returns from capital

appreciation and investment income.

The Company owns 100% of the equity of the Subsidiary. The

Company is exposed to, and has rights to the returns from, the

Subsidiary and has the ability, either directly or through the

Manager, to affect the amount of its returns from the Subsidiary,

representing all the elements of control as prescribed by IFRS 10.

The Subsidiary is used to acquire exposure to a portfolio

comprising a large number of investments. The fair value

method is used to represent the Subsidiary’s performance in its

internal reporting to the Board, and to evaluate the performance

of the Subsidiary’s investments and to make investment

decisions for mature investments.

54

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

Notes to the Audited Financial Statements

for the year ended 31 December 2022

Those investments have documented maturity/redemption

dates or will be sold if other investments with a better risk/

reward profile are identified, which the Manager considers

demonstrate a clear exit strategy.

As a result, under the terms of IFRS 10, the Company does not

consolidate the Subsidiary, and must measure its investment

in the Subsidiary at FVTPL. The Company has determined

that the fair value of the Subsidiary is the Subsidiary’s NAV and

has concluded that the Subsidiary meets the definition of an

unconsolidated subsidiary under IFRS 12 and has made the

necessary disclosures (see notes 9 & 14 for further information).

Additionally, the Subsidiary has been deemed to meet the

definition of an investment entity per IFRS 10 as the above-

mentioned conditions are met.

2.4

Taxation

Under Article 123C of the Jersey Income Tax Law and on the

basis that the Company is tax resident in Jersey, the Company

is regarded as subject to Jersey income tax at a rate of 0%. The

Company is not subject to UK income tax or corporation tax.

The Company is deemed as a non-US corporation for US tax

classification status.

2.5

Financial instruments

(a) Classification

The Company classifies its financial assets and financial

liabilities in the following measurement categories:

•

those to be measured subsequently at fair value; and

•

those to be measured at amortised cost.

The classification depends on the Company’s business model for

managing the financial instruments and the contractual terms

of the cash flows.

The Company has been classified as an investment entity and

as such, its investment in EJFIH is held at FVTPL and measured

in accordance with the requirements of IFRS 9.

Cash comprises current deposits with banks. Cash equivalents

are short-term, highly liquid investments that are readily

convertible to known amounts of cash, are subject to an

insignificant risk of changes in value, and are held for the

purpose of meeting short-term cash commitments rather than

for investment or other purposes.

Receivables, including balance due from the Manager and

prepaid expenses, are balances that have been contracted for

but not yet delivered on the Statement of Financial Position date.

These financial assets are included in current assets, except for

maturities greater than twelve months after the reporting date,

which are classified as non-current assets.

On initial recognition, the Company classifies financial assets

as measured at amortised cost or FVTPL.

A financial asset is measured at amortised cost if it meets both

of the following conditions and is not designated as at FVTPL:

•

it is held within a business model whose objective is to hold

assets to collect contractual cash flows; and

•

its contractual terms give rise on specified dates to cash flows

that are solely payments of principal and interest.

These include trade payables and other short-term monetary

liabilities, which are initially recognised at fair value plus

transaction costs that are directly attributable to their acquisition

or issue. They are subsequently carried at amortised cost.

In accordance with IAS 32, ZDP Shares have been disclosed as

a financial liability as the shares are redeemable at a fixed date

and holders are entitled to a final capital entitlement on the

repayment date. ZDP Shares are measured at amortised cost

using the effective interest rate method. Capitalised issue costs

are being amortised using the effective interest rate method. For

the year ended 31 December 2022, the amortisation of the 2022

ZDP Shares and 2025 ZDP Shares issue costs have been included

in finance costs.

(b) Recognition and initial measurement

Investments made by the Company in EJFIH are recognised

on the trade date when the Company becomes a party to the

contractual provisions of the financial instrument and are

measured initially at fair value.

All other financial assets (cash and cash equivalents, balance

due from Manager and prepaid expenses) and financial

liabilities (accounts payables and accrued expenses) are also

recorded on the trade date and recognised when the Company

becomes a party to the contractual provisions of the financial

instrument and are measured initially at fair value adjusted for

transaction costs.

The Company offsets financial assets and financial liabilities

if the Company has a legally enforceable right to offset the

recognised amounts and interests and intends to settle on a net

basis or realise the asset and liability simultaneously.

.

2.

Significant accounting policies (continued)

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

55

Notes to the Audited Financial Statements

for the year ended 31 December 2022

(c) Subsequent measurement of financial assets

Subsequent to initial recognition, the Investment in EJFIH is

measured at each subsequent reporting date at FVTPL. The

Company holds all of the shares in EJFIH, which is a holding

vehicle used to hold the Company’s investments. EJFIH is

not traded and contains unobservable inputs and is therefore

classified as a Level 3 investment under IFRS 13. The Board

considers that the NAV of EJFIH is representative of its fair value.

EJFIH itself holds a number of Level 3 investments which are

also measured at fair value.

Changes in the fair value of financial assets held at FVTPL are

recognised in net gain or loss on financial assets held at FVTPL

in the Statement of Comprehensive Income as applicable.

Notes 9 and 15 provide an analysis of the financial assets and

financial liabilities of EJFIH on a look-through basis that ties

to the Company’s investment in financial assets at FVTPL.

Derivatives are initially recognised at fair value at the date

a derivative contract is entered into and are subsequently

re-measured to their fair value at each financial reporting date.

The resulting gain or loss is recognised in EJFIH’s Statement

of Comprehensive Income immediately. Derivatives are

classified as financial assets or financial liabilities at FVTPL,

attributable transaction costs are recognised in the Statement

of Comprehensive Income when incurred. EJFIH holds

derivative financial instruments to minimise its exposure

to foreign exchange risks.

The derivative transactions are measured at their fair value

at the reporting date.

Subsequent measurement of cash and cash equivalents

and receivables depends on the entity’s business model for

managing the asset and the cash flow characteristics of the asset.

Assets that are held for collection of contractual cash flows

where those cash flows represent solely payments of principal

and interest are measured at amortised cost. Interest income

from these financial assets is included in finance income using

the effective interest rate method. Any gain or loss arising on de-

recognition is recognised directly in profit or loss and presented

in other gains/(losses) together with foreign exchange gains and

losses. Impairment losses are presented as separate line item in

the Statement of Comprehensive Income.

(d) Impairment

The Company assesses on a forward-looking basis the expected

credit loss associated with its cash and cash equivalents

and receivables carried at amortised cost. The impairment

methodology applied depends on whether there has been

a significant increase in credit risk or indicators of impairment.

For cash and cash equivalents and receivables, the Company

applies the simplified approach permitted by IFRS 9, which

requires expected 12-month losses to be recognised from initial

recognition of the receivables, see note 15 for further details.

(e)

De-recognition of financial assets and financial liabilities

A financial asset (in whole or in part) is derecognised either:

•

when the Company has transferred substantially all the risks

and rewards of ownership; or

•

when it has neither transferred nor retained substantially all

the risks and rewards and when it no longer has control over

the assets or a portion of the asset; or

•

when the contractual right to receive cash flow has expired.

A financial liability (in whole or in part) is derecognised when the

Company has extinguished its contractual obligations, it expires

or is cancelled. Any gain or loss on de-recognition is taken to

Statement of Comprehensive Income.

2.6

Dividend income

Dividend income is recognised in the Statement of

Comprehensive Income on the date on which the right to receive

payment is established. This is usually the date on which the

directors of the relevant company approve the payment of

a dividend. Dividend income from EJFIH is recognised in the

Statement of Comprehensive Income as a separate line item.

2.7

Interest income and expense

Interest income and expense, are recognised as other income

in the Statement of Comprehensive Income, using the effective

interest method. The effective interest rate is the rate that exactly

discounts the estimated future cash payments and receipts

through the expected life of the financial instrument (or, when

appropriate, a shorter period) to the carrying amount of the

financial instrument on initial recognition.

2.8

Dividends payable

Dividends declared and approved are charged against equity.

A corresponding liability is recognised for any unpaid dividends

prior to year-end. Dividends approved but not declared will be

disclosed in the notes to the Audited Financial Statements.

56

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

Notes to the Audited Financial Statements

for the year ended 31 December 2022

2.9

Expenses

Fees and other operating expenses are recognised in the

Statement of Comprehensive Income on an accruals basis.

2.10 Ordinary shares

The Ordinary Shares of the Company are classified as equity

based on the substance of the contractual arrangements

and in accordance with the definition of equity instruments

under IAS 32. The proceeds from the issue of Ordinary Shares

are recognised in the Statement of Changes in Equity, net

of issue costs.

Where the Company repurchases its own Ordinary Shares

(treasury shares), the consideration paid, including any directly

attributable costs, is deducted from equity attributable to the

shareholders until the Ordinary Shares are cancelled, re-issued

or disposed of. Where such shares are subsequently sold

or reissued, any consideration received, net of any directly

attributable issue costs, is included in equity attributable to

the shareholders.

3.

Use of judgements and estimates

In the application of the Company’s accounting policies,

the Board is required to make judgements, estimates and

assumptions about the carrying amounts of assets and liabilities

that are not readily apparent from other sources. The estimates

and associated assumptions are based on historical experience

and other factors that are considered to be relevant. Actual

results may differ from these estimates. The estimates and

underlying assumptions are reviewed on an ongoing basis.

The critical judgements and estimations of uncertainty at the

Statement of Financial Position date that the Directors have

made in the process of applying the Company’s accounting

policies and that have the most significant effect on the

amounts recognised in the Audited Financial Statements are

as set out below:

(a)

Significant judgements

Non-consolidation of EJFIH

The Directors have used their judgement to determine that

the Company meets the definition of an investment entity

as defined in IFRS 10.

As the Company satisfies the criteria for an investment entity

and has the typical characteristics of an investment entity as

explained in note 2.3 “Accounting for subsidiaries”, the Board

considers that the Company is an investment entity. Accordingly

the Company’s subsidiary, EJFIH, has not been consolidated but

has been fair valued and accounted for at FVTPL.

(b)

Significant estimates

Fair value measurements and valuation processes

The Company’s investment in EJFIH has been classified as

a Level 3 investment and is measured at fair value for financial

reporting purposes. The estimate of the NAV of EJFIH relies

heavily on the estimate of the fair value of the underlying assets

and liabilities. EJFIH uses market-observable data to the extent

it is available. However, certain valuations use unobservable

data which involves more estimation uncertainty. The Manager

has also appointed a recognised independent valuation agent

to provide comfort over the valuations derived from models

developed by the Manager where appropriate.

The Manager works closely with the independent valuation

agent to establish the appropriate valuation techniques and

inputs to the model. The fair value of assets classified as Level 3

is determined by the use of valuation techniques. The selection

of the appropriate valuation technique (including the use of

NAV and discounted cash flow analysis) and the selection of

unobservable inputs into those valuation techniques requires

judgement and estimation (see note 15 for further information).

4.

Segmental reporting

IFRS 8 requires a “management approach”, under which segment

information is presented on the same basis as that used for

internal reporting purposes.

The Board has considered the requirements of IFRS 8, and is of

the view that the Company is engaged in a single segment of

business via its investment in EJFIH mainly in one geographical

area, Jersey, and therefore the Company has only a single

operating segment.

2.

Significant accounting policies (continued)

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

57

Notes to the Audited Financial Statements

for the year ended 31 December 2022

5.

Dividend income

The Company received the following dividends from EJFIH:

Date received

1 January 2022 to

31 December 2022

£

1 January 2021 to

31 December 2021

£

10 February 2021

–

2,100,000

6 May 2021

–

2,200,000

19 August 2021

–

2,000,000

10 November 2021

–

1,900,000

10 February 2022

2,100,000

–

27 April 2022

2,400,000

–

11 August 2022

2,000,000

–

15 November 2022

2,000,000

–

Total dividend income

8,500,000

8,200,000

6.

Auditor’s remuneration

The analysis of the Auditor’s remuneration is as follows:

1 January 2022 to

31 December 2022

£

1 January 2021 to

31 December 2021

£

Audit and audit related services

Annual audit

137,500

142,750

Audit related services – interim review

45,000

19,250

Total audit and audit related fees

182,500

162,000

Total fees to the Auditor

182,500

162,000

7.

Finance costs

1 January 2022 to

31 December 2022

£

1 January 2021 to

31 December 2021

£

ZDP Shares finance costs and issue costs (see note 11)

1,833,501

1,604,084

Prime broker costs

3,508

(18,778)

Other interest

(5,773)

–

Total finance costs

1,831,236

1,585,306

58

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

Notes to the Audited Financial Statements

for the year ended 31 December 2022

8.

Prepaid expenses

31 December 2022

£

31 December 2021

£

Directors’ and professional indemnity insurance

3,670

9,577

Website fee

–

1,918

Professional fees

7,939

6,535

Regulatory fee

3,121

–

Total prepaid expenses

14,730

18,030

9.

Financial assets at FVTPL

Investment in EJFIH

During the year ended 31 December 2022, the Company made no further investment in EJFIH (31 December 2021:

no further investment).

The investment in EJFIH is used to acquire exposure to a portfolio comprising a large number of investments. The investment

in EJFIH is measured at FVTPL. The Company has determined that the fair value of EJFIH is its NAV.

Below is a summary of the movement in the investment in EJFIH, held by the Company:

31 December 2022

£

31 December 2021

£

Opening balance

129,518,023

124,151,399

Return of capital

1

(6,500,000)

–

Net gain on investment in EJFIH

2

8,941,618

5,366,624

Investment in EJFIH at FVTPL at the end of the year

131,959,641

129,518,023

On a look-through basis, the following table discloses EJFIH’s financial assets at FVTPL, which agrees to the Company’s financial

assets at FVTPL:

31 December 2022

£

31 December 2021

£

EJFIH’s investments at FVTPL:

Armadillo Portfolio

1,228,944

1,169,018

Investment in the Partnership

93,786,870

88,051,619

Investment in Seneca

11,177,335

6,671,007

Investment in the CDO Manager

8,052,203

8,711,100

CDO Securities

1,384,667

1,395,298

Preference Shares

1,426,829

1,246,613

Investment in UK listed bond

–

3,161,940

FinTech debt securities

2,552,965

2,830,682

US treasury bills

1,492,698

–

Net Derivative financial liabilities (note 15)

(932,866)

(921,722)

EJFIH’s investments at FVTPL

120,169,645

112,315,555

EJFIH’s other assets and liabilities:

Cash and cash equivalents

7,143,828

14,319,541

Cash and cash equivalents held as margin

4,383,075

2,836,856

Receivables

263,093

46,071

EJFIH’s NAV at the end of the year

131,959,641

129,518,023

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

59

Notes to the Audited Financial Statements

for the year ended 31 December 2022

(a)

EJFIH’s investments in private investment companies

Investment in the Armadillo Portfolio

EJFIH’s investments in private investment entities include the Partnership interests in the Armadillo Portfolio. The investment

strategy of the Armadillo Portfolio is to make high interest rate loans to third-party law firms engaged in mass tort litigation.

The Company, through its investment in EJFIH, had a 53.4% holding in Armadillo I and 1% holding in Armadillo II as at

31 December 2022 (50.3% holding in Armadillo I and 1% holding in Armadillo II as at 31 December 2021).

The following table summarises activity for the investment in the Armadillo Portfolio:

31 December 2022

£

31 December 2021

£

Opening balance

1,169,018

2,053,370

Distributions

–

(1,738,360)

Realised gains on distributions

1

–

84,335

Unrealised gains

1

59,926

769,673

Investment in the Armadillo Portfolio at FVTPL held by EJFIH

1,228,944

1,169,018

Investment in the Partnership

As at 31 December 2022, EJFIH held 85% or 110,179,904 units (31 December 2021: EJFIH held 85% or 117,929,934 units) issued by the

Partnership. The Partnership’s purpose is to retain an interest of at least 5% in securitisations sponsored by EJF pursuant to regulatory

requirements within the Dodd-Frank reforms in the US and EU risk retention rules. The investment in the Partnership is valued at

£93,786,870 (31 December 2021: £88,051,619).

As at 31 December 2022, the remaining units outstanding are held by the Manager and EJF Investments GP Inc. and respectively

totalled 19,444,129 units (31 December 2021: 20,012,174 units) and 165 units (31 December 2021: 165 units).

The following table summarises activity for the investment in the Partnership:

31 December 2022

£

31 December 2021

£

Opening balance

88,051,619

88,334,641

Additions

–

17,640,992

Return of Capital

(5,843,994)

(22,044,476)

Distributions

(4,098,273)

(5,997,811)

Realised gains on distributions

1

4,101,109

5,997,811

Unrealised gains

1

11,576,409

4,120,462

Investment in the Partnership at FVTPL held by EJFIH

93,786,870

88,051,619

Investment in Seneca

EJFIH’s investments in private investment entities includes partnership and loan interests in Seneca. The investment strategy

of Seneca is to invest in MSRs.

MSRs represent a stream of servicing income attached to mortgages originated in the US, producing regular and predictable cash-flows.

Seneca only invests in MSRs originally attached to prime mortgages underwritten to Fannie Mae and Freddie Mac standards.

The following table summarises activity for the investment in Seneca:

31 December 2022

£

31 December 2021

£

Opening balance

6,671,007

1,244,059

Additions

1,947,105

4,367,696

Realised gains on distributions

1

595,054

–

Unrealised gains

1

4,754,047

1,059,252

Distributions

(2,789,878)

–

Investment in Seneca at FVTPL held by EJFIH

11,177,335

6,671,007

60

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

Notes to the Audited Financial Statements

for the year ended 31 December 2022

(b)

EJFIH’s investment in private operating company

Investment in the CDO Manager

The CDO Manager, which is 51% owned by the Manager and 49% owned by EJFIH, provides collateral management services to various

CDO structures. The CDO Manager provides such services directly to those CDO structures on commercially reasonable terms. The

CDO Manager is also expected to provide collateral management services to future EJF sponsored securitisations as it will have the

benefit, for so long as the Manager is the manager of the Company, of a right of first refusal to be appointed as the provider of collateral

administration, monitoring and management services in respect of each EJF Securitisation. The CDO Manager may also provide

collateral management services to non-EJF securitisations. The CDO Manager is expected to benefit from collateral management fees

on all CDOs it services and manages until maturity of such CDOs.

The following table summarises activity for the investment in the CDO Manager:

31 December 2022

£

31 December 2021

£

Opening balance

8,711,100

9,463,395

Distributions

(655,078)

(426,213)

Unrealised losses

1

(3,819)

(326,082)

Investment in the CDO Manager at FVTPL held by EJFIH

8,052,203

8,711,100

EJFIH through its 49% interest in the CDO Manager, has an exposure to the cash flows of four REIT TruPS CDO collateral management

The CDO Manager has a total NAV of £16,433,067 as at 31 December 2022 (31 December 2021: £17,777,755). EJFIH’s interest in the CDO

Manager has a value of £8,052,203 as at 31 December 2022 (31 December 2021: £8,711,100).

The management fees of each REIT TruPS CDO collateral management contract vary, ranging from 15bps to 30bps of the outstanding

(c)

EJFIH’s investments in trading securities

CDO Securities

EJFIH’s CDO Securities portfolio consists of REIT TruPS CDO Securities issued prior to the financial crisis by an unaffiliated third-

party sponsor. The remaining CDO security is generating current income. The bond holdings range from senior class A bonds to

subordinated class F bonds. For the year ended 31 December 2022, EJFIH accrued £147,136 (31 December 2021: EJFIH accrued £59,170)

of interest income presented as investment income in EJFIH.

The following table summarises activity for the investment in CDO Securities:

31 December 2022

£

31 December 2021

£

Opening balance

1,395,298

772,225

Distributions

–

(20,334)

Unrealised (losses)/gains from CDO Securities

1

(10,631)

643,407

CDO Securities at FVTPL held by EJFIH

1,384,667

1,395,298

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

61

Notes to the Audited Financial Statements

for the year ended 31 December 2022

Preference Shares

EJFIH owns an interest in a depositor vehicle which holds an interest in the TFINS 2017-2 Preference Shares originally issued as part

of the securitisation in October 2017.

The following table summarises activity for the investment in Preference Shares:

31 December 2022

£

31 December 2021

£

Opening balance

1,246,613

1,234,324

Distributions

–

(122,410)

Unrealised gains from Preference Shares

1

180,216

134,699

Preference Shares at FVTPL held by EJFIH

1,426,829

1,246,613

1

Includes fluctuations in foreign exchange rates.

Investment in UK listed bond

During the years ended 31 December 2022 and 31 December 2021, the Company, through its investment in EJFIH, was invested in

a Sterling denominated UK listed fixed rate note held with a large UK bank. The bond had a fixed coupon of 5.875%, maturing in 2049.

The following table summarises activity for the investment in UK listed bond:

31 December 2022

£

31 December 2021

£

Opening balance

3,161,940

–

Disposals

(2,685,000)

–

Additions

–

3,228,750

Realised loss on disposal

(543,750)

–

Unrealised gains/(losses)

66,810

(66,810)

Investment in UK listed bond at FVTPL held by EJFIH

–

3,161,940

There were no investments held in UK listed bonds as at 31 December 2022.

FinTech debt securities

At 31 December 2022, the Company, through its investment in EJFIH, was invested in FinTech debt securities issued by entities in the

US, UK and Europe. The securities are denominated in different currencies, have fixed coupons between 10% and 13.25% and are due

to mature in 2025, 2026 and 2027 respectively.

The following table summarises activity for the investment in FinTech debt securities:

31 December 2022

£

31 December 2021

£

Opening balance

2,830,682

–

Additions

3,634,519

3,048,735

Disposals

(2,542,281)

–

Realised gains on disposal

1

46,037

–

Unrealised losses

1

(1,415,992)

(218,053)

FinTech debt securities at FVTPL held by EJFIH

2,552,965

2,830,682

1

Includes fluctuations in foreign exchange rates.

US treasury bills

At 31 December 2022, the Company, through its investment in EJFIH, was invested in US treasury bills. The securities have fixed

coupons between 2.75% – 4.25% and are due to mature in 2024, 2027 and 2032.

The following table summarises activity for the investment in US treasury bills:

31 December 2022

£

Opening balance

–

Additions

1,616,533

Unrealised losses

1

(123,835)

US treasury bills at FVTPL held by EJFIH

1,492,698

1

Includes fluctuations in foreign exchange rates.

There were no investments held in US treasury bills as at 31 December 2021.

62

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

Notes to the Audited Financial Statements

for the year ended 31 December 2022

10. Other payables and accrued expenses

31 December 2022

£

31 December 2021

£

Amount due to EJFIH

3,690

1,662

Management fee

239,750

228,983

Legal fees

64,500

42,167

Audit fees

137,500

142,750

Sundry creditors

58,627

32,947

Total other payables and accrued expenses

504,067

448,509

The amount due to EJFIH is interest free and repayable on demand. The balance consists of amounts paid by EJFIH in respect of the

Company’s expenses.

11.

ZDP shares

On 1 December 2017, the Company issued 15,000,000 2022 ZDP Shares at a gross redemption yield of 5.75%. Approximately 30%

of the available 2022 ZDP Shares were issued pursuant to the initial placing and offer for subscription at a price per 2022 ZDP Share

of 100 pence. The holders of the 2022 ZDP Shares received a final capital entitlement of 132.25 pence on the repayment date of

30 November 2022. As of 31 December 2022, there were no 2022 ZDP Shares outstanding.

On 17 June 2020, the Company issued 6,000,000 2025 ZDP Shares at a gross redemption yield of 7.00%. The 2025 ZDP Shares were

issued pursuant to the initial placing and offer for subscription at a price per 2025 ZDP Share of 100 pence. The holders of the 2025 ZDP

Shares will have a final capital entitlement of 140 pence on the repayment date of 18 June 2025.

On 4 April 2022, the Company published the Prospectus containing details of the Rollover Offer.

On 5 May 2022, the result of the Rollover Offer was announced and valid elections were received to roll 10,021,292 2022 ZDP Shares

into new 2025 ZDP Shares, representing approximately 66.8% of the total number of 2022 ZDP Shares in issue. On 10 May 2022,

10,996,857 new 2025 ZDP Shares were issued on the basis of each 2022 ZDP Share converting into 1.09735 new 2025 ZDP Shares.

As of 31 December 2022, there were 16,996,857 (31 December 2021: 6,000,000) 2025 ZDP Shares outstanding.

Holders of ZDP Shares are not entitled to any dividends paid by the Company. The following table reconciles the liability for ZDP

Shares, held at amortised cost, for the reporting period.

The table below details changes in the Company’s liabilities from financing activities, including both cash and non-cash changes.

2022 ZDP Shares

31 December 2022

£

2025 ZDP Shares

31 December 2022

£

2022 ZDP Shares

31 December 2021

£

2025 ZDP Shares

31 December 2021

£

Opening balance

18,725,704

6,484,818

17,588,170

6,018,268

Conversion of ZDP Shares

(12,845,292)

12,845,292

–

–

ZDP Shares issuance costs

–

(793,610)

–

–

Amortisation of ZDP Shares, including finance costs and issuance costs

703,929

1,129,572

1,137,534

466,550

Redemption of ZDP Shares

(6,584,341)

–

–

–

ZDP Shares closing balance

–

19,666,072

18,725,704

6,484,818

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

63

Notes to the Audited Financial Statements

for the year ended 31 December 2022

12. Stated capital

Net assets attributable to shareholders is represented by Ordinary Shares that carry one vote each and have equal voting rights.

Ordinary Shares are entitled to dividends when declared. The Company has no restrictions or specific capital requirements on the

issue and repurchase of Ordinary Shares.

The analysis of movements in the number of Ordinary Shares and the corresponding changes to the Company’s stated capital

as a result of transactions with shareholders during the year were as follows:

Ordinary Shares issued and fully paid

Number of Shares

Stated Capital

£

Opening balance as at 1 January 2022 and 2021

61,145,198

85,254,127

Closing balance as at 31 December 2022 and 2021

61,145,198

85,254,127

As at 31 December 2022, the Company had 15,808,509 treasury shares (31 December 2021: 15,808,509).

13. Dividends paid

The Company paid the following dividends on its Ordinary Shares during the year ended 31 December 2022:

Period to:

Declared date

Ex-dividend date

Record date

Payment date

Dividend rate per

Ordinary Share

£

Net dividend paid

£

31 Dec 2021

27 Jan 2022

3 Feb 2022

4 Feb 2022

28 Feb 2022

0.02675

1,635,634

31 Mar 2022

26 Apr 2022

5 May 2022

6 May 2022

31 May 2022

0.02675

1,635,634

30 June 2022

28 Jul 2022

4 Aug 2022

5 Aug 2022

31 Aug 2022

0.02675

1,635,634

30 Sep 2022

27 Oct 2022

3 Nov 2022

4 Nov 2022

30 Nov 2022

0.02675

1,635,634

6,542,536

The Company paid the following dividends on its Ordinary Shares during the year ended 31 December 2021:

Period to:

Declared date

Ex-dividend date

Record date

Payment date

Dividend rate per

Ordinary Share

£

Net dividend paid

£

31 Dec 2020

28 Jan 2021

4 Feb 2021

5 Feb 2021

26 Feb 2021

0.02675

1,635,634

31 Mar 2021

28 Apr 2021

6 May 2021

7 May 2021

28 May 2021

0.02675

1,635,634

30 June 2021

29 Jul 2021

6 Aug 2021

6 Aug 2021

31 Aug 2021

0.02675

1,635,634

30 Sep 2021

28 Oct 2021

4 Nov 2021

5 Nov 2021

30 Nov 2021

0.02675

1,635,634

6,542,536

64

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

Notes to the Audited Financial Statements

for the year ended 31 December 2022

14.

Interest in unconsolidated subsidiaries and associates

The table below discloses the unconsolidated subsidiaries and associates in which the Company holds an interest, but does not

consolidate in accordance with IFRS 12:

Name of entity

Type of entity

Principal place

of business

Purpose

Interest held by

the Company

Interest held

EJFIH

Private Company

Jersey

To hold a portfolio of investments in

order to generate capital appreciation

and investment income.

100%

Direct

Partnership

Limited Partnership

Delaware

To hold a portfolio of investments in

order to generate capital appreciation

and investment income.

85%

Indirect

CDO Manager

Limited Liability Company

Delaware

To generate management fee income.

49%

Indirect

Armadillo I

Limited Partnership

Delaware

To generate income from high-yielding

loans to US law firms engaged in mass

tort litigation.

53.4%

(31 December

2021: 50.3%)

Indirect

Seneca

Limited Partnerships

Delaware

To generate income from MSRs.

100%

Indirect

There has been no change in the Interest held by the Company in the above mentioned entities since the year ended 31 December 2021,

except where stated.

15.

Financial risk management

The Board has overall responsibility for the oversight of the Company’s risk management framework. The Company’s risk

management policies are established by the Manager to identify and analyse the risks faced by the Company, to set appropriate risk

limits and controls and to monitor risks and adherence to limits. Risk management policies are reviewed regularly by the Manager

to reflect changes in market conditions and the Company’s activities. This note presents information about the Company’s exposure

to each of the financial risks, the Company’s objectives, policies and processes for measuring and managing risk, and the Company’s

management of capital.

The Company is exposed to a number of risks through its investment in EJFIH. The risks set out below relate to those risks faced by the

Company through its underlying investments.

(a)

Market risk

Market risk is the risk that changes in market prices such as interest rates, foreign exchange rates, other price risk and credit spreads

will affect the Company’s income and/or the value of its holding in EJFIH. The changes in credit spreads affect EJFIH’s net equity or

net income, and hence the value of the Company’s investment in EJFIH.

The Company’s exposure to market risk comes mainly from movements in the value of its investment in EJFIH and on a look-through

basis to the underlying investments in its portfolio.

The objective of market risk management is to manage and control market risk exposures within acceptable parameters while

optimising the return on risk. The Company’s strategy for the management of market risk is driven by the Company’s investment

objective. The Company seeks to generate attractive risk-adjusted returns for its shareholders, by investing in opportunities created by

regulatory and structural changes impacting the financial services sector. These opportunities are anticipated to include structured

debt and equity, loans, bonds, preference shares, convertible notes and private equity, in both cash and synthetic formats, and may

be issued by entities domiciled in the US, UK and Europe. The various components of the Company’s market risk are managed on an

ongoing basis by the Manager in accordance with policies and procedures in place, as detailed below.

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

65

Notes to the Audited Financial Statements

for the year ended 31 December 2022

In addition, the Company, through EJFIH, intends to mitigate market risk generally by not making investments that would cause it to

have exposure to any one individual asset exceeding:

•

20% of the Company’s gross assets invested in any single capital solutions, ABS investment or Specialty Finance Investment at the

time of investment; and

•

25% of the Company’s gross assets in any single non-EJF sponsored Risk Retention Investment.

The Company’s position exposure is monitored on an ongoing basis by the Manager and reviewed on a quarterly basis by the Board

and the Administrator.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market

interest rates. The Group’s interest-bearing financial assets and liabilities expose the Company to risks associated with the effects of

fluctuations in the prevailing levels of market interest rates on its financial position and cash flows.

The Group is exposed to the risk that the fair value of their investments or future cash flows of the financial instruments will

fluctuate as a result of changes in market interest rates. The Group is also exposed to interest rate risk in respect of their cash and

cash equivalents.

The Manager assesses interest rate risk on an ongoing basis and may, if deemed necessary, choose to utilise appropriate strategies to

manage interest rate risk using, for example, interest rate swaps.

Sensitivity analysis

The weighted average effective duration of the portfolio has been used to identify the potential NAV impact of a 0.25% parallel shift in

the relevant reference rate curve.

The percentage has been determined as reasonable by the Directors based on potential volatility due to changes in interest

reference rates.

31 December 2022

Change in fair value

£

£

Change in rate

0.25%

(0.25%)

NAV

£(348,165)

£348,165

31 December 2021

Change in fair value

£

£

Change in rate

0.25%

(0.25%)

NAV

£(185,099)

£185,099

Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign

exchange rates.

The Group is directly exposed to currency risk in respect of its cash and cash equivalents and derivatives denominated in currencies

other than Sterling, and its investments.

The Group enters into transactions that are denominated in currencies other than their functional currency, primarily in US Dollar.

Consequently, the Group is exposed to risk that the exchange rate of its currency relative to other foreign currencies may change in

a manner that has an adverse effect on the fair value or future cash flows of financial assets or financial liabilities denominated in

currencies other than Sterling.

The Manager monitors the exposure to foreign currencies and reports to the Board monthly. The Manager measures the risk of the

foreign currency exposure by considering the effect on the NAV and income of a movement in the rates of exchange to which the

assets, liabilities, income and expenses are exposed.

There were no forward foreign exchange derivatives held by the Company during the years ended 31 December 2022 and

31 December 2021.

66

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

Notes to the Audited Financial Statements

for the year ended 31 December 2022

At 31 December 2022 and 31 December 2021, the following forward foreign exchange contracts were held by EJFIH and are included

within the financial liabilities of EJFIH:

Maturity date

Counterparty

Contract amount

(GBP)

Buy

Sell

31 December 2022

£

21 February 2023

Citibank N.A.

8,400,000

GBP

USD

(1,272,206)

16 March 2023

Citibank N.A.

30,562,246

GBP

USD

172,837

23 March 2023

Citibank N.A.

30,554,633

GBP

USD

166,503

Derivative financial liabilities held by EJFIH

(932,866)

Maturity date

Counterparty

Contract amount

(GBP)

Buy

Sell

31 December 2021

£

21 February 2023

Citibank N.A.

8,400,000

GBP

USD

(268,528)

30 November 2022

Citibank N.A.

19,837,500

GBP

USD

(653,194)

Derivative financial liabilities held by EJFIH

(921,722)

The carrying amount of the Group’s financial assets in individual foreign currencies, expressed in Sterling and as a percentage of its net

assets, was as follows:

31 December 2022

Currency

£

% of net assets

US Dollar

129,403,727

115%

Euro

3,207,360

3%

31 December 2021

Currency

£

% of net assets

US Dollar

126,325,357

121%

Euro

843,013

1%

The table below sets out the effect on the net assets/increase in net assets attributable to holders of tradable Ordinary Shares of

a reasonably possible weakening of Sterling against the US Dollar by 10% at 31 December 2022 (10% at 31 December 2021). 10%

is considered to continue to be deemed reasonable as it reflects past experience. The analysis assumes that all other variables,

in particular interest rates, remain constant.

31 December 2022

31 December 2021

Effect in Sterling

£14,378,192

£14,036,151

Effect in % of net assets attributable to the holders of tradable Ordinary Shares

13%

13%

Effect in % of increase in total comprehensive income/(loss) attributable to the holders

of tradable Ordinary Shares

101%

130%

The table below sets out the effect on the net assets/decrease in net assets attributable to holders of tradable Ordinary Shares of

a reasonably possible strengthening of Sterling against the US Dollar by 10% at 31 December 2022 (10% at 31 December 2021).

31 December 2022

31 December 2021

Effect in Sterling

£(11,763,975)

£(11,484,123)

Effect in % of net assets attributable to the holders of tradable Ordinary Shares

(10%)

(11%)

Effect in % of decrease in total comprehensive income/(loss) attributable to the holders

of tradable Ordinary Shares

(83%)

(107%)

No sensitivity analysis has been performed for financial assets denominated in Euro as the balance is not significant.

15.

Financial risk management (continued)

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

67

Notes to the Audited Financial Statements

for the year ended 31 December 2022

Other price risk

Other price risk is the risk that the fair value of the investment in EJFIH will fluctuate as a result of changes in market prices (other than

those arising from interest rate risk or currency risk), whether caused by factors specific to an individual investment or its issuer or

factors affecting all instruments traded in the market.

Price risk is managed by the Manager by diversifying the portfolio geographically across the US, the UK and Europe, through holding

diversified collateral in the underlying securitisations. Also, if the price risk is not in accordance with the Investment Policy or

guidelines of the Company, then the Manager is required to rebalance the portfolio prior to the end of the reporting period following

each determination of such occurrence.

The following table sets out the concentration of the portfolio profile which shows the total exposure to market risk, held by the Group

at the reporting date.

31 December 2022

31 December 2021

£

%

£

%

Armadillo Portfolio

1,228,944

1

1,169,018

1

Investment in the Partnership

1

93,786,870

71

88,051,619

68

Investment in Seneca

11,177,335

9

6,671,007

5

Investment in CDO Manager

8,052,203

6

8,711,100

7

CDO Securities

1,384,667

1

1,395,298

1

Preference Shares

1,426,829

1

1,246,613

1

Investment in UK listed bond

–

0

3,161,940

3

FinTech debt securities

2,552,965

2

2,830,682

2

US treasury bills

1,492,698

1

–

–

Net Derivative financial liability

(932,866)

(1)

(921,722)

(1)

Financial assets and liabilities at FVTPL

120,169,645

91

112,315,555

87

Cash and cash equivalents

7,143,828

6

14,319,541

11

Cash and Cash equivalents held as margin

4,383,075

3

2,836,856

2

Other

263,093

0

46,071

0

Investment in EJFIH

131,959,641

100

129,518,023

100

The investment held in the Partnership includes the following underlying investment positions:

31 December 2022

31 December 2021

£

% of NAV

£

% of NAV

TFINS 2017-2

14,456,262

13

12,939,700

12

TFINS 2018-1

22,066,685

20

19,753,178

19

TFINS 2018-2

16,244,931

14

14,543,305

14

TFINS 2019-1

14,799,555

13

13,248,973

13

TFINS 2019-2

15,332,045

14

13,726,042

13

TFINS 2020-1

13,779,690

12

12,304,168

12

TFINS 2020-2

8,607,907

8

7,705,439

7

TFINS 2021 Securitization Ltd

1

–

–

3,163,570

3

Investments held by the Partnership

105,287,075

94

97,384,375

93

Other net assets

5,050,419

4

6,205,765

6

NAV of the Partnership

110,337,494

98

103,590,140

99

% held by EJFIH

85

85

Fair value of EJFIH’s investment in the Partnership

93,786,870

83

88,051,619

84

68

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

Notes to the Audited Financial Statements

for the year ended 31 December 2022

The Company holds all of the shares in EJFIH, which is a holding

vehicle used to hold the Company’s investments. The Board

believes it is appropriate to value this entity based on the fair

value of its portfolio of investment assets held plus its other

assets and liabilities.

IFRS 13 requires disclosure of fair value measurement by level.

The level of financial assets or financial liabilities within the

fair value hierarchy is determined on the basis of the lowest

level input that is significant to the fair value measurement.

The hierarchy gives the highest priority to unadjusted quoted

prices in active markets for identical assets or liabilities (Level 1

measurements) and the lowest priority to unobservable inputs

(Level 3 measurements). The three levels of the fair value

hierarchy under IFRS 13 are as follows:

Level 1

Inputs that are quoted market prices (unadjusted)

in active markets for identical instruments.

Level 2

Inputs other than quoted prices included within Level

1 that are observable either directly (i.e. as prices) or

indirectly (i.e. derived from prices). This category

includes instruments valued using: quoted market

prices in active markets for similar instruments;

quoted prices for identical or similar instruments in

markets that are considered less than active; or other

valuation techniques in which all significant inputs are

directly or indirectly observable from market data.

Level 3

Inputs that are unobservable. This category includes

all instruments for which the valuation technique

includes inputs not based on observable data and

the unobservable inputs have a significant effect on

the instrument’s valuation. This category includes

instruments that are valued based on quoted prices

for similar instruments but for which significant

unobservable adjustments or assumptions

are required to reflect differences between

the instruments.

The Company’s investment in EJFIH, through the acquisition of

shares, is classified within Level 3, as it is not traded and contains

unobservable inputs. The Board considers that the NAV of EJFIH

is representative of its fair value.

The investments held by EJFIH in the underlying portfolio are

measured as below:

The fair values of financial assets and financial liabilities that are

traded in active markets are based on prices obtained directly

from an exchange on which the instruments are traded or

obtained from a broker that provides an unadjusted quoted price

from an active market for identical instruments. For all other

financial instruments, the Company determines fair values

using other valuation techniques.

For financial instruments that trade infrequently and have

little price transparency, fair value is less objective and

requires varying degrees of judgement depending on liquidity,

uncertainty of market factors, pricing assumptions and other

risks affecting the specific instrument.

Valuation techniques include net present value and discounted

cash flow models, comparison with similar instruments for

which observable market prices exist and other valuation

models. Assumptions and inputs used in valuation techniques

include risk-free and benchmark interest rates, credit spreads

and other premia used in estimating discount rates, bond and

equity prices, foreign currency exchange rates, equity indices,

EBITDA multiples and revenue multiples and expected price

volatilities and correlations.

The objective of valuation techniques is to arrive at a fair value

measurement that reflects the price that would be received

to sell the asset or paid to transfer the liability in an orderly

transaction between market participants at the measurement

date. The Company uses widely recognised valuation models

for determining the fair value of common and simple financial

instruments, such as interest rate and currency swaps that use

only observable market data and require little management

judgement and estimation. Observable prices and model

inputs are usually available in the market for listed debt and

equity securities, exchange traded derivatives and simple

OTC derivatives such as interest rate swaps. The availability

of observable market prices and model inputs reduces the

need for management judgement and estimation and reduces

the uncertainty associated with the determination of fair

values. The availability of observable market prices and inputs

varies depending on the products and markets and is prone to

changes based on specific events and general conditions in the

financial markets.

For more complex instruments, the Company uses proprietary

valuation models, which are developed from discounted

cash flow models. Some or all of the significant inputs into

these models may not be observable in the market and are

derived from market prices or rates or are estimated based

on assumptions.

Valuation models that employ significant unobservable

inputs require a higher degree of management judgement and

estimation in the determination of fair value. Management

judgement and estimation are usually required for the selection

of the appropriate valuation model to be used, determination of

expected future cash flows on the financial instrument being

valued, determination of the probability of counterparty default

and prepayments and selection of appropriate discount rates.

Fair value estimates obtained from models are adjusted for

any other factors, such as liquidity risk or model uncertainties,

to the extent that the Company believe that a third-party

market participant would take them into account in pricing

a transaction. Fair values reflect the credit risk of the instrument

15.

Financial risk management (continued)

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

69

Notes to the Audited Financial Statements

for the year ended 31 December 2022

and include adjustments to take account of the credit risk of

the Company and the counterparty where appropriate. For

measuring derivatives that might change classification from

being an asset to a liability or vice versa, such as interest rate

swaps, fair values include adjustment for both own credit risk

and counterparty credit risk.

The Manager has also appointed a recognised independent

valuation agent to provide comfort over the valuations derived

from models developed by the Manager where appropriate.

Valuation approach for specific instruments

The fair value of the foreign currency forward contracts is

determined using quoted mid forward exchange rates at the

reporting date.

Valuation approach for specific instruments held through

the Group

The fair value of investments in the private investment entities

and private operating company is determined using the NAV

of the entity (Level 3 valuation). The NAV is used when the

units or partnership interests in a fund are redeemable at the

reportable NAV at, or approximately at, the measurement date.

If this is not the case, then NAV is used as a valuation input and

an adjustment is applied for lack of marketability/restricted

redemptions. This adjustment is based on management

judgement after considering the period of restrictions and the

nature of the underlying investments. No such adjustment was

deemed necessary for the years ended 31 December 2022 and

31 December 2021.

At 31 December 2022, the investment portfolio included bonds

issued by Kodiak, Attentus and Taberna, which are unaffiliated

third-party CDO sponsors. These distressed bonds are valued at

their clean prices (including any expected interest accruals).

The fair value of distressed bonds is determined by the Manager

using acceptable probability based discounted cash flow

methodologies.

Valuation framework

The Company has an established control framework with

respect to the measurement of fair values. This framework

includes the Manager’s valuation committee, which operates

independently of the Manager’s investment team, and feeds

into the monthly NAV process for review by the Board and has

overall responsibility for fair value measurements. Specific

controls include:

•

verification of observable pricing inputs;

•

re-performance of model valuations;

•

a review and approval process for new models and changes

to such models;

•

analysis and investigation of significant valuation

movements; and

•

review of unobservable inputs and valuation adjustments.

When third party information, such as broker quotes or

pricing services, is used to measure fair value, the portfolio

valuation function assesses the evidence obtained from the

third parties to support the conclusion that these valuations

meet the requirements of IFRS, including the level in the fair

value hierarchy in which the valuations should be classified.

This includes:

•

verifying that the broker or pricing service is approved

by the Manager for use in pricing the relevant type of

financial instrument;

•

understanding how the fair value has been arrived at and the

extent to which it represents actual market transactions and

whether it represents a quoted price in an active market for an

identical instrument;

•

when prices for similar instruments are used to measure fair

value, understanding how these prices have been adjusted

to reflect the characteristics of the instrument subject to

measurement; and

•

if a number of quotes for the same financial instrument have

been obtained, then understanding how fair value has been

determined using those quotes.

For underlying instruments not traded in an active market and

defined as Level 3 investments, the fair value is determined

by using appropriate valuation techniques. Management also

makes estimates and assumptions concerning the future. The

resulting accounting estimates will by definition, seldom equal

the related actual results. The estimates and assumptions that

have a significant risk of causing a material adjustment to the

carrying amounts of assets are outlined below.

Fair value hierarchy – financial assets at FVTPL held

by the Company

Investments classified within Level 3 have significant

unobservable inputs, as they trade infrequently. Level 3

instruments include private equity and CDO Securities. As

observable prices are not available for these securities, the

Company has used valuation techniques to derive the fair value.

The Company’s investment in EJFIH is classified within Level 3,

as it is not traded and contains unobservable inputs. The Board

considers that the NAV of EJFIH is representative of its fair value.

The table below analyses financial instruments, held by the

Company, measured at fair value at the reporting date by

the level in the fair value hierarchy into which the fair value

measurement is categorised. The amounts are based on the

values recognised in the Statement of Financial Position as

at 31 December 2022 and 31 December 2021. All fair value

measurements below are recurring.

70

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

Notes to the Audited Financial Statements

for the year ended 31 December 2022

As at 31 December 2022

Level 1

£

Level 2

£

Level 3

£

Investment held in EJFIH

–

–

131,959,641

Financial assets at FVTPL

–

–

131,959,641

As at 31 December 2021

Level 1

£

Level 2

£

Level 3

£

Investment held in EJFIH

–

–

129,518,023

Financial assets at FVTPL

–

–

129,518,023

The following table shows the movement of level 3 assets during the years ended 31 December 2022 and 31 December 2021:

Year ended 31 December 2022

Opening fair value

1 January

2022

£

Additions

£

Realised gains

£

Unrealised gains

£

Distributions

£

Ending fair value

31 December

2022

£

EJFIH

129,518,023

–

–

8,941,618

(6,500,000)

131,959,641

Total financial assets

129,518,023

–

–

8,941,618

(6,500,000)

131,959,641

Year ended 31 December 2021

Opening fair value

1 January

2021

£

Additions

£

Realised gains

£

Unrealised gains

£

Distributions

£

Ending fair value

31 December

2021

£

EJFIH

124,151,399

–

–

5,366,624

–

129,518,023

Total financial assets

124,151,399

–

–

5,366,624

–

129,518,023

Fair value hierarchy – financial assets at FVTPL held by EJFIH

The tables below are supplemental disclosures of the financial instruments, held by EJFIH, measured at fair value at the reporting date

by the level in the fair value hierarchy into which the fair value measurement is categorised. The amounts are based on the values

recognised in the Statement of Financial Position as at 31 December 2022 and 31 December 2021. All fair value measurements below

are recurring.

As at 31 December 2022

Level 1

£

Level 2

£

Level 3

£

Armadillo Portfolio

–

–

1,228,944

Investment in the Partnership

–

–

93,786,870

Investment in Seneca

–

–

11,177,335

Investment in the CDO Manager

–

–

8,052,203

CDO Securities

–

–

1,384,667

Investment in Preference Shares

–

–

1,426,829

FinTech debt securities

–

2,552,965

–

US treasury bills

1,492,698

–

–

Financial assets at FVTPL

1,492,698

2,552,965

117,056,848

Level 1

£

Level 2

£

Level 3

£

Derivative financial liabilities

–

(932,866)

–

Financial assets at FVTPL

–

(932,866)

–

15.

Financial risk management (continued)

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

71

Notes to the Audited Financial Statements

for the year ended 31 December 2022

As at 31 December 2021

Level 1

£

Level 2

£

Level 3

£

Armadillo Portfolio

–

–

1,169,018

Investment in the Partnership

–

–

88,051,619

Investment in the CDO Manager

–

–

8,711,100

CDO Securities

–

–

1,395,298

Investment in Seneca

–

–

6,671,007

Investment in Preference Shares

–

–

1,246,613

Investment in UK listed bond

–

3,161,940

–

FinTech debt securities

–

2,830,682

–

Financial assets at FVTPL

–

5,992,622

107,244,655

Level 1

£

Level 2

£

Level 3

£

Derivative financial liabilities

–

(921,722)

–

Financial assets at FVTPL

–

(921,722)

–

Level 3 reconciliation

The following tables show a reconciliation of all movements in the fair value of financial assets held at FVTPL by EJFIH and categorised

within level 3 for the year ended 31 December 2022:

Opening fair

value as at

1 January 2022

£

Additions

£

Realised gains

£

Unrealised gains/

(losses)

£

Disposals

£

Ending fair

value as at

31 December 2022

£

Armadillo Portfolio

1,169,018

–

–

59,926

–

1,228,944

Investments in the Partnership

88,051,619

–

4,101,109

11,576,409

(9,942,267)

93,786,870

Investment in Seneca

6,671,007

1,947,105

595,054

4,754,047

(2,789,878)

11,177,335

Investment in CDO Manager

8,711,100

–

–

(3,819)

(655,078)

8,052,203

CDO Securities

1,395,298

–

–

(10,631)

–

1,384,667

Investment in Preference Shares

1,246,613

–

–

180,216

–

1,426,829

Total financial assets

107,244,655

1,947,105

4,696,163

16,556,148

(13,387,223)

117,056,848

During the year ended 31 December 2022, there were no reclassifications between levels of the fair value hierarchy.

The following table is for the year ended 31 December 2021:

Opening fair

value as at

1 January 2021

£

Additions

£

Realised gains

£

Unrealised gains/

(losses)

£

Disposals

£

Ending fair

value as at

31 December 2021

£

Armadillo Portfolio

2,053,370

–

84,335

455,788

(1,424,475)

1,169,018

Investments in the Partnership

88,334,641

17,640,992

1,203,661

4,120,455

(23,248,130)

88,051,619

Investment in CDO Manager

9,463,395

–

–

(752,295)

–

8,711,100

CDO Securities

772,225

–

5,276

623,287

(5,490)

1,395,298

Investment in Seneca

1,244,059

4,367,696

–

1,059,252

–

6,671,007

Investment in Preference Shares

1,234,324

–

–

12,289

–

1,246,613

Total financial assets

103,102,014

22,008,688

1,293,272

5,518,776

(24,678,095)

107,244,655

During the year ended 31 December 2021, there were no reclassifications between levels of the fair value hierarchy.

Significant unobservable inputs used in measuring fair value held by the Company – Level 3

The following table shows the sensitivity of fair values in Level 3 to the NAV of the investment in EJFIH.

Financial assets

Company

fair value at

31 December 2022

£

Company

fair value at

31 December 2021

£

Valuation techniques and inputs

Significant unobservable inputs

Investment in EJFIH

131,959,641

129,518,023

NAV of EJFIH

The NAV of EJFIH is calculated under IFRS

Sensitivity analysis for significant changes for unobservable inputs within Level 3 hierarchy

There are a number of unobservable inputs and assumptions used in the valuation of the EJFIH Level 3 investments. Changes

in any of these inputs and assumptions will have an impact on the valuation of these investments. The table below assumes

the overall valuation changed by 10% and that the portfolio of investments is correlated to this overall movement in valuations.

72

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

Notes to the Audited Financial Statements

for the year ended 31 December 2022

However, this level of correlation is not possible and certain inputs and assumptions will be sensitive to lesser/greater changes.

The overall impact of 10% has been selected as this is considered reasonable given the current level of volatility observed both on

a historical basis and market expectations for future movements.

Financial assets

31 December 2022

£

31 December 2021

£

Investment in EJFIH

131,959,641

129,518,023

Increase by 10%

145,155,605

142,469,825

Decrease by 10%

118,763,677

116,566,221

Significant unobservable inputs used in measuring fair value held by EJFIH – Level 3

The estimated fair values of EJFIH’s investment in the CDO Manager was determined through the use of Level 3 inputs. A discounted

cash flows method was employed to estimate the fair values as of 31 December 2022 and 31 December 2021. Projected cash flows were

calculated using a third-party provider of cash flow information for structured securities for each CDO contract. Key assumptions

included: prepayment assumptions, default rates and loss severity, recovery lags, and the discount rate. These inputs were based on

internal assumptions and market participant benchmarks for comparable bonds. An independent valuation agent was used to provide

a final valuation report for CDO Manager.

EJFIH’s remaining Level 3 investments have been valued using broker quotes or the EJFIH’s proportionate share of the NAV of the entity.

(b)

Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered

into with the Group or a vehicle in which the Group invests, resulting in a financial loss to the Company. It arises principally from debt

securities, derivative financial assets and cash and cash equivalents. For risk management reporting purposes, the Company considers

and aggregates all elements of credit risk exposure (such as individual obligation default risk, country risk and sector risk).

Credit risk is monitored on an ongoing basis by the Manager in accordance with the policies and procedures in place. The Manager monitors

the Group’s cash activity, concentrations of deposits with counterparties and the creditworthiness of said counterparties and obtains

periodic collateral assessments from an affiliate managing Armadillo Portfolio’s loan portfolio. The Company’s credit risk is monitored

on a quarterly basis by the Board. If the credit risk is not in accordance with the Investment Policy or guidelines of the Company, then the

Manager is obliged to address the impact and to liquidate holdings within a reasonable amount of time, however as EJFIH’s portfolio assets

are generally illiquid in nature more time may be required to address the impact the credit risk has on any such illiquid assets.

EJFIH’s activities may give rise to settlement risk. Settlement risk is the risk of loss due to the failure of an entity to honour its

obligations to deliver cash, securities or other assets as contractually agreed. For the majority of transactions, the Manager mitigates

this risk by conducting settlements through a broker to ensure that a trade is settled only when both parties have fulfilled their

contractual settlement obligations. Settlement limits form part of the credit approval and limit monitoring processes described below.

In the opinion of the Board, the carrying amount of financial assets best represent the maximum credit risk exposure to the Company.

The Company’s financial assets exposure to credit risk amounted to the following:

31 December 2022

£

31 December 2021

£

Armadillo Portfolio

1,228,944

1,169,018

Investment in the Partnership

93,786,870

88,051,619

Investment in Seneca

11,177,335

6,671,007

Investment in CDO Manager

8,052,203

8,711,100

CDO Securities

1,384,667

1,395,298

Preference Shares

1,426,829

1,246,613

Investment in UK listed bond

–

3,161,940

FinTech debt securities

2,552,965

2,830,682

US treasury bills

1,492,698

–

Derivative financial liabilities

(932,866)

(921,722)

Cash and cash equivalents

7,143,828

14,319,541

Cash and cash equivalents held as margin

4,383,075

2,836,856

Investment in EJFIH

131,696,548

129,471,952

Cash and cash equivalents

359,298

592,603

Balance due from the Manager

348,345

329,711

Total financial assets

132,404,191

130,394,266

15.

Financial risk management (continued)

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

73

Notes to the Audited Financial Statements

for the year ended 31 December 2022

Cash and cash equivalents

The Company’s and EJFIH’s cash is predominantly held with BNPP and Citibank N.A. The Manager monitors the financial position and

creditworthiness of all its financial institutions on a quarterly basis.

Balances due from brokers

Balances due from brokers represent margin accounts, cash collateral for currency contracts and transactions awaiting settlement.

Credit risk relating to unsettled transactions is considered low due to the short settlement period involved and the high credit quality

of the brokers used. As at the reporting date, the balance due from brokers was held by Citibank N.A. The Manager monitors the

financial position and creditworthiness of the brokers on a quarterly basis.

The following table shows the external ratings of the financial institutions holding cash or collateral deposits on behalf of the Group,

using available ratings from Moody’s.

Institution

Rating Agency

31 December 2022

31 December 2021

Citibank N.A.

Moody’s

Aa3

Aa3

BNPP

Moody’s

Aa3

Aa3

Balance due from the Manager

The balance due from the Manager relates to the arrangement with the Manager to absorb ongoing operating expenses incurred by

the Company, excluding management fees, incentive fees and expenses considered not ongoing. The Company applies the simplified

approach permitted by IFRS 9, which requires expected 12 month losses to be recognised from initial recognition. The balance due

from the Manager is considered to be low credit risk. Accordingly no impairment losses have been recognised in the Statement of

Comprehensive Income.

Armadillo Portfolio

At 31 December 2022, the Company, through its investment in EJFIH, held an interest in the Armadillo Portfolio. In the event of any

default on the Armadillo Portfolio’s loan investments by a counterparty, EJFIH will bear a risk of loss of principal and accrued interest

on the loan investment, which could have an adverse effect on EJFIH’s income and ability to meet financial obligations. This would

also affect the Company’s investment in EJFIH as it is exposed to any fair value movements in EJFIH.

The Armadillo Portfolio is not rated (31 December 2021: not rated).

Investment in the Partnership

At 31 December 2022, the Company, through its investment in EJFIH, held an interest in the Partnership. The Partnership is exposed

to the credit risk of its counterparties or the counterparties of the securitisations in which it invests. In the event of a bankruptcy or

insolvency of such a counterparty, the securitisation in which such an investment is held could suffer significant losses, including

the loss of that part of EJFIH’s or the securitisation’s portfolio financed through such a transaction, declines in the value of their

investment, including declines that may occur during an applicable stay period, the inability to realise any gains on their investment

during such period and fees and expenses incurred in enforcing their rights. This would also affect the Company’s investment in

EJFIH as it is exposed to any fair value movements in EJFIH.

The securitisations in which the Partnership has invested are not rated (31 December 2021: not rated).

Investment in Seneca

At 31 December 2022, the Company, through its investment in EJFIH, was invested in partnership and loan interests in Seneca. The

investment strategy of Seneca is to invest in MSRs. MSRs represent a stream of servicing income attached to mortgages originated

in the US producing regular and predictable cash-flows. Seneca only invests in MSRs originally attached to prime mortgages

underwritten to Fannie Mae and Freddie Mac standards. There is little to no credit risk associated with MSRs and the main risk is

prepayment of the underlying mortgage, and thus extinguishment of the associated MSR contract and servicing fee stream.

The Seneca positions in which the Company has invested are not rated (31 December 2021: not rated).

Preference shares

The Company, through its investment in EJFIH, is exposed to the credit risk of its counterparties or the counterparties of the

securitisation preference shares in which it invests. In the event of a bankruptcy or insolvency of such a counterparty, the preference

shares could suffer significant losses resulting in declines in the value of the shares, including the inability to realise any gains on

their investment during such period and fees and expenses incurred in enforcing their rights. This would also affect the Company’s

investment in EJFIH as it is exposed to any fair value movements in EJFIH.

The preference shares in which EJFIH has invested are not rated (31 December 2021: not rated).

74

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

Notes to the Audited Financial Statements

for the year ended 31 December 2022

Investment in CDO Securities

At 31 December 2022, the Company, through its investment in EJFIH, was invested in distressed and cash yielding CDO Securities

issued by Attentus, Kodiak and Taberna, which are unaffiliated third-party CDO sponsors.

EJFIH is exposed to the credit risk of their CDO security counterparties or the counterparties of the securitisations in which it invests.

In the event of a bankruptcy or insolvency of such a counterparty, EJFIH, or a securitisation in which such an investment is held, could

suffer significant losses including the loss of that part of EJFIH’s or the securitisation’s portfolio financed through such a transaction,

declines in the value of their investment, including declines that may occur during an applicable stay period, the inability to realise

any gains on their investment during such period and fees and expenses incurred in enforcing their rights. This would also affect the

Company’s investment in EJFIH as it is exposed to any fair value movements in EJFIH.

The CDO Securities are not rated (31 December 2021: not rated).

Investment in FinTech debt securities

At 31 December 2022, the Company, through its investment in EJFIH, was invested in FinTech debt securities issued by entities in

the US, UK and Europe. The securities are denominated in different currencies, have fixed coupons between 10–13.25% and are due

to mature in 2025, 2026 and 2027 respectively.

One position is rated Caa3 by Moody’s (31 December 2021: Caa3) and another BB- by Standard & Poor’s (31 December 2021: not held

by EJFIH). The third position is not rated (31 December 2021: not rated).

Concentration of credit risk

The Manager reviews the credit risk of counterparties (primarily prime brokers or custodians when applicable) that hold

a concentration of the Group’s assets, in particular, the Group’s cash deposits.

The Group’s exposure was concentrated as below:

31 December 2022

31 December 2021

£

%

£

%

Citibank N.A.

7,138,966

96

14,315,265

96

BNPP

364,160

4

596,879

4

Total

7,503,126

100%

14,912,144

100%

Collateral and other credit enhancements, and their financial effect

The Group mitigates the credit risk of derivatives by entering into master netting agreements and holding collateral in the form of cash

and marketable securities.

Derivatives

Derivative transactions are either transacted on an exchange with central clearing counterparties (CCPs) or entered into under

ISDA master netting agreements. In general, under these agreements, in certain circumstances – e.g. when a credit event such

as a default occurs – all outstanding transactions under the agreement are terminated, the termination value is assessed and

only a single net amount is due or payable in settlement of all transactions with the counterparty. EJFIH has executed a credit

support annex in conjunction with the ISDA agreement, which requires EJFIH and its counterparties to post collateral to mitigate

counterparty credit risk.

The derivatives are entered into with Citibank N.A., which is rated Aa3 (31 December 2021: Aa3), based on Moody’s Agency.

Impairment of financial assets

The Company is subject to the expected credit loss model (ECL) on its financial assets that are carried at amortised cost. While

cash and cash equivalents and balances due from brokers are also subject to the impairment requirements of IFRS 9, the identified

impairment loss was nil. The Company is also exposed to credit risk in relation to financial assets that are measured at FVTPL.

The maximum exposure at the end of the reporting period is the carrying amount of these financial assets.

(c)

Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that

are settled by delivering cash or another financial asset.

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

75

Notes to the Audited Financial Statements

for the year ended 31 December 2022

The Company’s policy and the Manager’s approach to managing liquidity risk in the Group is to ensure, as far as possible, that the

Group will always have sufficient liquidity to meet its liabilities when due, under both normal and stress conditions, without incurring

unacceptable losses or risking damage to the Company’s reputation.

The Prospectus provides for the Board to pay quarterly dividends of available cash to shareholders following the recommendation of

the Manager. Therefore, the Company may be exposed to the liquidity risk of not meeting this target at each quarterly distribution date.

The Group’s financial assets include illiquid investment securities and investments in private investment entities. As a result, the

Group may not be able to liquidate some of its interest in these instruments in due time to meet its liquidity requirements.

The Company’s liquidity is managed on an ongoing basis by the Manager. Since the Company’s liability obligations consist of current

liabilities related to its standard operating activity, liquidity risk is deemed to be low. Current liabilities are paid and reported to the

Board on a quarterly basis unless a special meeting is required.

31 December 2022

31 December 2021

Liquid assets

£11,897,133

£21,234,477

Current liabilities

£504,067

£19,174,213

Liquid assets as a % of current liabilities

2,360%

111%

The Group manages its liquidity risk by maintaining a current ratio (liquid assets divided by current liabilities) of no less than

approximately 100%. The tables below set out the Group assets with an expected liquidation period within 90 days (liquid assets)

to the Company’s current liabilities (presented inclusive of interest) as at 31 December 2022 and 31 December 2021:

31 December 2022

Less than

7 days

£

7 days to

1 month

£

1 month to

3 months

£

3 months to

over 1 year

£

Total

£

Liquid Assets

Cash

7,503,125

–

–

–

7,503,125

Balance due from the Manager

–

348,345

–

–

348,345

FinTech debt securities

–

2,552,965

–

–

2,552,965

US treasury bills

–

1,492,698

–

–

1,492,698

Total

7,503,125

4,394,008

–

–

11,897,133

31 December 2022

Less than

7 days

£

7 days to

1 month

£

1 month to

3 months

£

3 months to

over 1 year

£

Total

£

Financial liabilities

Amount payable to EJFIH

–

–

3,690

–

3,690

Accounts payable and accrued expenses

–

–

500,377

–

500,377

Total

–

–

504,067

–

504,067

31 December 2021

Less than

7 days

£

7 days to

1 month

£

1 month to

3 months

£

3 months to

over 1 year

£

Total

£

Liquid Assets

Cash

14,912,144

–

–

–

14,912,144

Balance due from the Manager

–

329,711

–

–

329,711

Investment in UK listed bond

–

3,161,940

–

–

3,161,940

FinTech debt securities

–

2,830,682

–

–

2,830,682

Total

14,912,144

6,322,333

–

–

21,234,477

31 December 2021

Less than

7 days

£

7 days to

1 month

£

1 month to

3 months

£

3 months to

over 1 year

£

Total

£

Financial liabilities

Amount payable to EJFIH

–

–

1,662

–

1,662

Accounts payable and accrued expenses

–

–

446,847

–

446,847

ZDP Shares

–

–

–

18,725,704

18,725,704

Total

–

–

448,509

18,725,704

19,174,213

The tables above show the undiscounted cash flows of the Company’s financial liabilities on the basis of their earliest possible

contractual maturity. The Company’s expected cash flows on these instruments are not expected to vary significantly from this analysis.

76

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

Notes to the Audited Financial Statements

for the year ended 31 December 2022

The Group further manages its liquidity risk by holding at least 2% of its NAV in assets with an expected liquidation period within

90 days. The ratio of assets with an expected liquidation period within 90 days (liquid assets) to total net assets is set out below:

31 December 2022

31 December 2021

Liquid assets

£11,897,133

£15,241,855

Total NAV

£112,511,875

£104,799,336

Liquid assets as % of total NAV

11%

15%

16. Capital risk management

The Company’s issued capital is represented by Ordinary Shares.

As a result of the ability to issue, repurchase and resell shares, the capital of the Company can vary. The Company is not subject to

externally imposed capital requirements and has no restrictions on the issue, repurchase or resale of its shares. The Company’s

objectives for managing capital are:

•

to invest the capital in investments meeting the description, risk exposure and expected return indicated in its Prospectus;

•

to achieve consistent returns while safeguarding capital by investing in a diversified Portfolio;

•

to maintain sufficient liquidity to meet the expenses of the Company; and

•

to maintain sufficient size to make the operation of the Company cost-efficient.

The policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future

development of the business. The Board monitors the return on capital, as well as the level of dividends to Ordinary Shareholders.

The Company may utilise borrowings for share buybacks, short-term liquidity purposes and investments, seeking leverage via bank

financing, term loans, or debt instruments. The Company has the availability to borrow up to 35% of its NAV (calculated at the time

of drawdown), provided that:

i.

the maximum amount for borrowings for long-term investment purposes within such limit will be 30% of the NAV; and

ii.

borrowings for long-term investment purposes may only be incurred when the minimum cover amount, 3.5x for ZDP Shares,

is met (calculated at the time of drawdown).

The Company’s net debt to equity ratio at the year end was as follows:

31 December 2022

£

31 December 2021

£

ZDP Shares

19,666,072

25,210,522

Accounts payable and accrued expenses

504,067

448,509

Less: cash and cash equivalents

(359,298)

(592,603)

Net debt

19,810,841

25,066,428

Total equity

112,511,875

104,799,336

Net debt to adjusted equity ratio

0.18

0.24

15.

Financial risk management (continued)

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

77

Notes to the Audited Financial Statements

for the year ended 31 December 2022

17.

Related party transactions and other material contracts

Transactions

Investment transactions between EJFIH and the Armadillo

Portfolio ,the Partnership, Seneca and the CDO Manager are

disclosed in Note 9.

Investment Management fee

In accordance with the Management Agreement, the Manager

has been appointed as the manager of the Company, the

Partnership and the General Partner. In such capacity, the

Manager is responsible for the portfolio and risk management

of the Group, including: (i) managing the Company’s assets and

its day-to-day operations; (ii) the selection, purchase and sale of

investment securities held via EJFIH; (iii) providing financing

and risk management services; and (iv) providing advisory

services to the Board.

The Management Agreement was amended and restated

on 30 March 2017 to account for the management of the risk

retention investments and revise the terms of the incentive fee

charged to the Company.

On 27 February 2019, the Management Agreement was

amended and restated to allow settlement of the Incentive Fee

through multiple transactions over an agreed upon timeframe

between the Company and the Manager.

On 22 August 2019, the Management Agreement was amended

and restated to provide flexibility in the cash settlement of the

Incentive Fee being used to facilitate a share purchase on the

secondary market or subscription for new shares.

In accordance with the terms of the Management Agreement,

the Company pays a management fee calculated monthly and

payable quarterly in arrears. Subject to certain limitations, the

monthly management fee is equal to 0.0833% (one-twelfth of

1%) of the Company’s NAV.

For the year ended 31 December 2022, the Company accrued

management fees of £965,902 (31 December 2021: £887,308)

which is presented within operating expenses in the Statement

of Comprehensive Income.

The Company recognised an outstanding amount due to the

Manager of £239,750 as at 31 December 2022 (31 December 2021:

£228,983) presented in other payables and accrued expenses in

the Statement of Financial Position (refer to note 10).

Directors’ fees

The Directors are entitled to a fee for their services at a rate to be

determined from time to time by the Board. Director’s fees are

currently £40,000 each per annum. Neal Wilson has waived his

right to receive remuneration for his service as Director.

Joanna Dentskevich is entitled to an additional fee of £10,000

per annum in respect of her role as Chair of the Board.

Alan Dunphy is entitled to an additional fee of £5,000

per annum in respect of his role as Chair of the Audit and

Risk Committee.

For the year ended 31 December 2022, the Company recorded

Directors’ fees of £135,000 (31 December 2021: £135,000). As at

31 December 2022, £nil (31 December 2021: £nil) of this amount

was outstanding.

Neal Wilson also serves as an officer (CEO) of the Manager

and an officer and director of other affiliates of the Manager

including EJF, the General Partner of the Partnership, and the

general partner of Armadillo I and Armadillo II. Therefore,

conflicts may arise as this individual allocates his time between

the Company, EJF and other programmes and activities in

which they are involved. All of the independent Directors must

consent to and approve any of the Company’s conflicted trades,

which also involve approval by one of these affiliates and its

officers, directors and employees. With respect to Risk Retention

investments to be issued in connection with all future EJF

Securitisations, the Partnership has the right of first refusal over

other funds managed by EJF.

Directors’ and Officers’ liability insurance cover is maintained

by the Company on behalf of the Directors. During the year

ended 31 December 2022, the Company recorded Directors’ and

Officers’ liability and professional indemnity insurance expense

of £55,657 (31 December 2021: £131,786).

Incentive fee

The Manager is entitled to an incentive fee which is calculated

in relation to the assets attributable to Ordinary Shares, in

accordance with the Management Agreement. The Incentive Fee

amount is equal to 10% of the amount by which the Adjusted

NAV attributable to Ordinary Shares exceeds the higher of

(i) the Incentive Hurdle at the relevant time and (ii) the High

Watermark at the relevant time, in respect of the relevant

Incentive Fee Period.

The Incentive Fee is calculated in respect of each Incentive Fee

Period, save for the final Incentive Fee Period being the date

that the Management Agreement is terminated or, where the

Management Agreement has not been terminated, the actual

date of termination of the provision by the Manager of the non-

retained services as defined in the Management Agreement.

78

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

Notes to the Audited Financial Statements

for the year ended 31 December 2022

During the year ended 31 December 2022, the Company did not accrue an incentive fee liability (31 December 2021: £nil).

On 28 January 2021, the Company announced that the Manager had acquired 283,441 Ordinary Shares of no par value in the Company

at an average price of 175 pence per share. The Company was also notified on the same date that the Manager had allocated these

Ordinary Shares to certain of its officers and affiliates. Please refer below for details of the Ordinary Shares held by each of the Manager’s

officers and affiliates. This transaction represented full satisfaction of the Incentive Fee payable by the Company to the Manager for the

Incentive Fee Period ended 31 December 2019 and the recipients of the Ordinary Shares are subject to a lock-up deed.

Ordinary Shares held by related parties

Shareholdings by the Directors in the Company as at the year end are as follows:

Name

Ordinary Shares

Percentage of

Ordinary Shares

in Issue

Ordinary Shares

Percentage of

Ordinary Shares

in Issue

31 December 2022

1

31 December 2022

2

31 December 2021

1

31 December 2021

2

Neal Wilson

1,718,881

2.811%

1,622,607

2.654%

Joanna Dentskevich

77,896

0.127%

77,896

0.127%

Nick Watkins

10,000

0.016%

3,000

0.005%

On 29 June 2022, Neal J. Wilson purchased 96,274 Ordinary Shares at a price of 121 pence per share in a private off-market transaction.

On 16 November 2022, Nick Watkins purchased 7,000 Ordinary Shares at a price of 135.64 pence per share on the LSE main market.

Shareholdings by officers of the Manager and its affiliates as at year end are as follows:

Name

Ordinary Shares

Percentage of

Ordinary Shares

in Issue

Ordinary Shares

Percentage of

Ordinary Shares

in Issue

31 December 2022

1

31 December 2022

2

31 December 2021

1

31 December 2021

2

EJF Capital Limited

1,878,246

3.07%

1,878,246

3.07%

Peter Stage

141,501

0.23%

141,501

0.23%

Matthew Gill

3

N/A

N/A

1,000

0.002%

Emanuel Friedman

4

11,816,558

19.33%

11,816,558

19.33%

Jason Ruggiero

165,336

0.27%

165,336

0.27%

Neal Wilson and Peter Stage are both officers of The Manager. As Neal Wilson is also a Director of the Company, his shareholdings

are presented in the table detailing the shares held by the Directors in the Company at the year end.

Emanuel Friedman (co-CEO of EJF) and Jason Ruggiero (co-chief investment officer of EJF) are both voting members of the

Investment Committee.

ZDP Shares held by related parties

ZDP Shareholdings by the Directors in the Company as at year end are as follows:

Name

2025 ZDP Shares

Percentage of

ZDP 2025 Shares

in Issue

2025 ZDP Shares

Percentage of

ZDP 2025 Shares

in Issue

31 December 2022

1

31 December 2022

2

31 December 2021

1

31 December 2021

2

Neal Wilson

1,000,000

5.883%

1,000,000

16.667%

Joanna Dentskevich

30,000

0.177%

30,000

0.500%

Nick Watkins

10,000

0.059%

10,000

0.167%

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

79

Notes to the Audited Financial Statements

for the year ended 31 December 2022

2025 ZDP Shareholdings by officers of the Manager and its affiliates are as follows:

Name

2025 ZDP Shares

Percentage of

ZDP 2025 Shares

in Issue

2025 ZDP Shares

Percentage of

ZDP 2025 Shares

in Issue

31 December 2022

1

31 December 2022

2

31 December 2021

1

31 December 2021

2

Matthew Gill

3

N/A

N/A

1,000

0.020%

1

The shareholdings are either direct and/or indirect holdings of ZDP Shares.

2

The calculation of shareholding percentage is based on number of ZDP Shares in issue after adjusting for treasury shares.

3

Matthew Gill ceased to be an officer of the Manager on 21 October 2022.

During the year ended 31 December 2022, the Manager absorbed 60% (31 December 2021: 75%) of the Company’s recurring operating

expenses, aside from management and incentive fees.

For the year ended 31 December 2022, £546,976 (2021: £654,605) of operating expenses were offset by reimbursements from the

Manager and are presented in the Statement of Comprehensive Income.

As at 31 December 2022, the Company had a receivable balance of £348,345 (31 December 2021: £329,711) from the Manager relating to the

reimbursement of these operating expenses and is included as the balance due from the Manager in the Statement of Financial Position.

Basic earnings per share is calculated by dividing the earnings/(losses) for the year by the weighted average number of Ordinary

Shares in issue during the year.

The weighted average number of Ordinary Shares in issue is 61,145,198 (31 December 2021: 61,145,198).

The diluted earnings per share is calculated by considering adjustments required to the earnings and weighted average number of

shares for the effects of potential dilutive Ordinary Shares. The weighted average of the number of Ordinary Shares is adjusted for

any convertible instruments. At 31 December 2022 and 31 December 2021, there were no convertible instruments that would have an

impact on the weighted average number of Ordinary Shares.

The Board has evaluated subsequent events for the Company through to 30 March 2023, the date the Audited Financial Statements

are available to be issued, and other than those listed below, concluded that there are no material events that require disclosure or

adjustment to the Audited Financial Statements.

On 26 January 2023, the Company declared a final dividend of 2.675p per share in respect of the quarter ended 31 December 2022.

The dividend was payable to shareholders on the register as at close of business on 3 February 2023 and the corresponding ex-dividend

date was 2 February 2023. Payment was made on 28 February 2023.

On 20 February 2023, the Company announced its intention to issue further 2025 ZDP Shares pursuant to the Company’s Placing

Programme as detailed in the Prospectus.

On 27 February 2023, the Company announced that 2,277,046 new 2025 ZDP Shares would be issued at 119.78 pence per 2025 ZDP share,

raising gross proceeds of approximately £2.73 million. Following Admission, the total number of 2025 ZDP Shares in issue was 19,273,903.

On 6 March 2023, the Company subscribed for a further 2,700,000 ordinary shares in EJFIH at £1 each.

80

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

Notes to the Audited Financial Statements

for the year ended 31 December 2022

20. Reconciliation of IFRS to US GAAP

The Manager is a registered adviser with the SEC. To meet the requirements of Rule 206(4)-2 under the Investment Advisors Act

1940 (the “Custody Rule”) the Audited Financial Statements have also been audited in accordance with US GAAS. As such, two

independent Auditor’s reports are included on pages 40 to 47, one under International Standards on Auditing as required by the Crown

Dependencies Audit Rules and the other under US GAAS. Compliance with the Custody Rule also requires a reconciliation of the

operating profit and net assets under IFRS to US GAAP.

The Company has been assessed to be an investment entity in accordance with IFRS 10 as well as an investment company in

accordance with ASC 946. Hence, under both accounting frameworks, the Company does not need to consolidate its investment

in EJFIH and instead has accounted for it at FVTPL.

The operating profit and NAV of the Company under both IFRS and US GAAP have no material differences and therefore no

reconciliation has been presented in these Audited Financial Statements.

Under US GAAP, the Company is required to disclose its financial highlights and a schedule of investments. All investments are within

the financial services sector.

Financial highlights

Financial highlights for the year ended 31 December 2022 are as follows:

NAV total return, since inception

Beginning of year

69.84%

End of year

93.38%

Expense ratio to average NAV

Expenses before incentive fees

1.70%

Expenses reimbursed by the Manager

(0.49%)

Expenses, including incentive fees

1.21%

Investment income

7.61%

Expenses

(1.70%)

Net investment income ratio

5.91%

Schedule of investments

31 December 2022

Investments in trading securities

Cost

Asset currency

Cost

£

Fair Value

£

% of NAV

Cayman Islands

TR PFD INS NOTE 2017-2 – Equity Notes (Z Notes)

1,648,054

1,272,936

1,426,829

1.27

ATTN 2006-1X J 2% 06-10/05/2036 DFLT – Combination Notes

404,646

303,775

1,384,667

1.23

ATTN 2007-3A F 9.532% 07-11/10/2042 DFLT – Class F Notes

–

–

–

–

TBRNA 2006-6A C 06-05/12/2036 FRN DFLT – Class C Notes

1,562

1,167

–

–

ATTN 2006-1A D 06-10/05/2036 FRN – Class D Notes

–

–

–

–

KDIAK 2006-1A G 06-07/08/2037 FRN – Class G Notes

–

–

–

–

KDIAK 2007-2A F 07-07/11/2042 FRN – Class F Notes

–

–

–

–

TBRNA 2005-4A C3 0% 05-05/05/2036 – Class C-3 Notes

–

–

–

–

TBRNA 2006-5A A3FV 06-05/08/2036 FRN – Class A-3 Notes

–

–

–

–

Total Cayman Islands

2,054,262

1,577,878

2,811,496

2.50

US

EXELA INTER 11.5% 21-15/07/2026

2,958,450

2,205,435

476,559

0.42

US TREASURY N/B 4.125% 22-30/09/2027

782,239

693,659

643,405

0.57

US TREASURY N/B 4.25% 22-30/09/2024

300,601

266,723

246,850

0.22

US TREASURY N/B 2.75% 22-15/08/2032

739,114

656,151

602,443

0.54

Total US

4,780,404

3,821,968

1,969,257

1.75

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

81

Notes to the Audited Financial Statements

for the year ended 31 December 2022

Great Britain

MAREX GROUP 22-30/12/2027 FRN

1,000,000

815,613

842,607

0.75

Total Great Britain

1,000,000

815,613

842,607

0.75

Sweden

QRED AB 22-22/04/2025 FRN

1,400,000

1,165,962

1,233,799

1.10

Total Sweden

1,400,000

1,165,962

1,233,799

1.10

Investments in private investment companies

US

EJF Investments LP - Shares

108,891,468

83,041,991

93,786,870

83.36

Investment in Armadillo Finance FD LP

4,725,839

3,277,183

1,147,666

1.02

Investment in Armadillo Finance FD II LP

1

1

81,279

0.07

Seneca Base Offshore LP

3,186,984

2,410,521

4,647,932

4.13

Seneca EJFI Excess LP

3,167,205

2,371,876

5,557,813

4.94

Seneca EJFI Excess FR LP

734,458

585,635

971,589

0.86

Total US

120,705,955

91,687,207

106,193,149

94.38

Investments in private operating company

US

EJF CDO manager LLC

8,547,026

6,379,606

8,052,203

7.16

Total US

8,547,026

6,379,606

8,052,203

7.16

Derivatives

Forward currency contracts

Maturity

Fair Value

£

% of NAV

Purchase £8.4m/sell US$11.7m

21 February 2023

(1,272,206)

(1.13)

Purchase £30.6m/sell US$36.8m

16 March 2023

172,837

0.15

Purchase £30.6m/sell US$36.8m

23 March 2023

166,503

0.15

Total Derivatives

(932,866)

(0.83)

Other net assets

1

11,789,996

10.48

Total other net assets

11,789,996

10.48

Total Investments

131,959,641

117.29

1

Other net assets comprises EJFIH’s cash and cash equivalents, cash and cash equivalents held as margin and receivables.

82

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

Glossary of Terms

Term

Definition

ABS

Asset backed securities.

Adjusted NAV attributable to

Ordinary Shares

Adjusted NAV attributable to Ordinary Shares is calculated as an amount equal to the NAV

attributable to Ordinary Shares: (i) excluding any increases or decreases in NAV attributable to

Ordinary Shares attributable to the issue or repurchase of any Ordinary Shares; (ii) adding back the

aggregate amount of any dividends paid or distributions made in respect of any Ordinary Shares; (iii)

excluding the aggregate amount of dividends and distributions accrued but unpaid in respect of any

Ordinary Shares; and (iv) excluding the amount of any accrued but unpaid Incentive Fees payable in

relation to the NAV attributable to Ordinary Shares, in each case without double counting.

Administrator

BNP Paribas S.A. Jersey Branch.

Admission

The Company’s Ordinary Shares which were admitted to trading on the Specialist Fund Segment of

the London Stock Exchange on the 7th April 2017.

AGM

Annual General Meeting.

AIC Code

The 2019 Association of Investment Companies Code of Corporate Governance.

AIF

An alternative investment fund, as defined in the AIFM Directive.

AIFM

An alternative investment fund manager, as defined in the AIFM Directive.

AIFMD or AIFM Directive

The Alternative Investment Fund Managers Directive 2011/61/EU.

Annual Report

Annual Report and Audited Financial Statements.

Annualised Dividend Yield

Has the meaning on page 87.

APM

Alternative performance measure. The calculation methodology and rationale for disclosing each of

the APMs has been disclosed on pages 86 to 87.

Armadillo I

Armadillo Financial Fund LP.

Armadillo II

Armadillo Financial Fund II LP.

Armadillo Portfolio

A portfolio of high-yielding loans to US law firms engaged in mass tort litigation by way of the holding

of limited partner interests in Armadillo I and Armadillo II.

Articles

The articles of association of the Company.

Auditor

KPMG LLP.

BNPP

BNP Paribas S.A.

Board

The board of Directors of the Company.

CAT

Catastrophe.

CDO

Collateralised Debt Obligation.

CDO Securities

Bonds issued by Kodiak, Attentus and Taberna, which are unaffiliated third-party CDO sponsors.

CDO Manager

EJF CDO Manager LLC, a Delaware limited liability company.

CDD

Customer due diligence.

CEO

Chief Executive Officer.

CFTC

US Commodities and Futures Trading Commission.

Companies Law

The Companies (Jersey) Law 1991, as amended.

Company or EJFI

EJF Investments Limited, a closed-ended investment company incorporated with limited liability in

the Bailiwick of Jersey under the Companies Law on 20 October 2016 with registered number 122353.

Continuance Resolution

Ordinary resolution for the business of the Company to continue, to be proposed at an EGM, as

procured by the Directors, to be held on or about the fifth anniversary of Admission, and every

five years thereafter. If not passed, the Directors will take such actions as they deem appropriate to

commence the liquidation of the assets of the Company (having regard to the prevailing liquidity

of the assets of the Company and, if applicable, any rules imposed by the Securitisation and Risk

Retention Regulations).

Continuation Vote

Vote to be held at an EGM to consider a Continuance Resolution.

Corporate Broker

Liberum Capital Limited.

CPO

Commodity pool operator.

CTA

Commodity trading adviser.

Custodians

Citigroup Global Markets Inc. and Citibank N.A.

Dodd-Frank

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

DTR

Disclosure Guidance and Transparency Rules.

EGM

Extraordinary general meeting.

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

83

Glossary of Terms

Term

Definition

EJF

EJF Capital LLC.

EJFIH or Subsidiary

EJF Investments Holdings Limited.

EJF Securitisations

EJF or EJF Affiliate-sponsored securitisations.

ESG

Environmental, social and governance.

EU

The European Union.

FBR

Friedman, Billings, Ramsey Group.

FCA

Financial Conduct Authority.

Fed

US Federal Reserve.

FINS 2019-1

Financial Note Securitization 2019-1 Ltd.

FinTech

Financial Technology.

FRC

Financial Reporting Council.

FSMA

Financial Services and Markets Act 2000.

FVTPL

Fair Value Through Profit or Loss.

FX

Foreign exchange.

GAAP

Generally Accepted Accounting Standards.

GAAS

Generally Accepted Auditing Standards.

General Partner

EJF Investments GP Inc., being general partner of the Partnership.

Group

The Company and its Subsidiary.

High Watermark

High Watermark is calculated using the Adjusted NAV attributable to Ordinary Shares as determined

on the last day of the latest previous Incentive Fee Period in respect of which an Incentive Fee was

payable to the Manager.

IAS 32

Financial Instruments: Presentation.

IASB

International Accounting Standards Board.

IFRS

International Financial Reporting Standards as issued by the International Accounting Standards Board.

IFRS 8

International Financial Reporting Standard 8, “Operating Segments”.

IFRS 9

International Financial Reporting Standard 9, “Financial Instruments” (Issued in July 2014).

IFRS 10

International Financial Reporting Standard 10, “Consolidated Financial Statements”.

IFRS 12

International Financial Reporting Standard 12, “Disclosure of Interest in Other Entities”.

IFRS 13

International Financial Reporting Standard 13, “Fair Value Measurement”.

IFRS 17

International Financial Reporting Standard 17, “Insurance Contracts”.

Incentive Fee

The incentive fee to which the Manager is entitled as described in the section entitled “Fees and

Expenses” in Part V: “Directors, the Manager and Administration” of the Prospectus.

Incentive Fee Period

Each 12-month period starting on 1 January and ending on 31 December in each calendar year.

Incentive Hurdle

Incentive hurdle is calculated using the Adjusted NAV attributable to Ordinary Shares on the date

of Admission, and then the beginning NAV of each subsequent period, compounded annually (with

effect from 31 December 2017) at a rate equal to an internal rate of return of 8% per annum.

Interim Report

Interim Report and Unaudited Condensed Interim Financial Statements.

Investment Committee

Investment committee of the Manager.

Investment Objective

The Company seeks to generate attractive risk adjusted returns for its shareholders by investing in

opportunities created by regulatory and structural changes impacting the financial services sector.

These opportunities are anticipated to include structured debt and equity, loans, bonds, preference

shares, convertible notes, FinTech debt securities and private equity, in both cash and synthetic

formats, and may be issued by entities domiciled in the US, UK and Europe.

Investment Policy

The Company seeks to achieve its Investment Objective by pursuing a policy of investing in

a diversified portfolio of investments that are derived from the changing financial services

landscape.

ISDA

International Swaps and Derivatives Association.

Listing Rules

The listing rules made by the FCA under Part VI of the FSMA.

LSE

The London Stock Exchange.

M&A

Mergers and Acquisitions.

Management Agreement

The Amended and Restated Management Agreement dated 30 March 2017 between the Company,

the Partnership, the General Partner, the Manager and EJF (as amended from time to time).

84

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

Glossary of Terms

Term

Definition

Manager

EJF Investment Manager LLC.

MGA

Managing General Agent.

MGU

Managing General Underwriter.

MSRs

Mortgage servicing rights.

NAV per Ordinary Share

Has the meaning on page 86.

Net Asset Value or NAV

The NAV means the Company’s assets less liabilities. The Company’s assets and liabilities are valued

in accordance with International Financial Reporting Standards.

Ordinary Shares

The non-redeemable Ordinary Shares of no par value in the share capital of the Company which,

for the avoidance of doubt, includes all classes of Ordinary Shares (denominated in such currency)

as the Directors may determine in accordance with the Articles (and for the purposes of the

Prospectus, the Ordinary Shares shall be denominated in Sterling) having the rights and subject to

the restrictions set out in the Articles.

Ordinary Shareholders

The holder or one or more Ordinary Shares.

Ordinary Share Price

Closing price as the respective reporting date as published on the London Stock Exchange.

Partnership

EJF Investments LP (a Delaware limited partnership formed under the laws of the US state of Delaware).

Placing Programme

As described in Part X: “Details of the Placing Programme” of the Prospectus”.

Portfolio

The Company’s and the Subsidiary’s portfolio of investments from time to time.

Preference Shares

Investment in TFINS 2017-2 depositor vehicle.

Principal Risks

Those risks, or a combination thereof, that are considered to materially threaten the Company’s

ability to meet its Investment Objective, solvency or liquidity.

Prospectus

The Company’s prospectus dated 4 April 2022.

REIT

Real estate investment trust.

Risk Retention

Has the meaning given to it in Part III: “The Market Opportunity” of the Prospectus.

Risk Retention and

Related Investments

Has the meaning given to it in paragraph 4.1(a) of Part II: “The Company” of the Prospectus.

Risk Retention Investments

Has the meaning given to it in paragraph 4.1(a) of Part II: “The Company” of the Prospectus.

Rollover Offer

The offer to 2022 ZDP Shareholders to convert some or all of their existing 2022 ZDP Shares into

2025 ZDP Shares.

SASB

Sustainability Accounting Standards Board.

SEC

US Securities and Exchange Commission.

Section 172(1)

Section 172(1) of the UK Companies Act 2006.

Securitisation and

Related Investments

Has the meaning given to it in paragraph 4.1(a) of Part II: “The Company” of the Prospectus.

Seneca

A residential mortgage servicer in the US which is owned and controlled by EJF, and through which

MSR investments are made.

SFS

The Specialist Fund Segment of the London Stock Exchange.

Specialty Finance Investments

Represent less liquid UK, European and US specialty finance investments such as (but not limited to):

(i) growth equity capital to newly formed companies with scalable specialty finance platforms (such

as FinTech); (ii) secured and unsecured lending; (iii) investments collateralized by real estate and real

estate related assets; and (iv) other illiquid, specialty finance investment opportunities.

Sterling or GBP or £

Pound sterling – the currency of the UK.

TCFD

Task Force on Climate-related Financial Disclosures.

Target Dividend

The Company targeted an annual dividend of 10.7p per Ordinary Share for the years ended

31 December 2021 and 31 December 2022.

Target Return

The Company targets an annual total return on NAV per Share of 8% to 10% per annum.

TFINS 2017-2

TruPS Financials Note Securitization 2017-2 Ltd.

TFINS 2018-1

TruPS Financials Note Securitization 2018-1 Ltd.

TFINS 2018-2

TruPS Financials Note Securitization 2018-2 Ltd.

TFINS 2019-1

TruPS Financials Note Securitization 2019-1 Ltd.

TFINS 2019-2

TruPS Financials Note Securitization 2019-2 Ltd.

TFINS 2020-1

TruPS Financials Note Securitization 2020-1 Ltd.

Total Return

As defined in Alternative Performance Measures on page 86.

TruPS

Trust preferred securities.

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

85

Glossary of Terms

Term

Definition

TruPS CDO Collateral

Has the meaning given in paragraph 4.2(b) of Part II: “The Company” of the Prospectus.

UK

United Kingdom.

UK Code

2018 UK Corporate Governance Code.

US

United States of America.

US$ or USD

United States Dollar.

US GAAS

Generally Accepted Auditing Standards applicable in the United States.

2022 ZDP Shares

The redeemable Zero Dividend Preference shares of no par value in the Company which were

redeemed on 30 November 2022, which bore a gross redemption yield of 5.86%.

2025 ZDP Shares

The redeemable Zero Dividend Preference shares of no par value in the Company with

a repayment date of 18 June 2025 and bearing a gross redemption yield of 7.00%.

ZDP Shares

2022 ZDP Shares and 2025 ZDP Shares.

ZDP Shareholder

The holder of one or more ZDP Shares.

ZDP Share Price

Closing price as at the respective reporting date as published on the London Stock Exchange.

86

EJF Investments Limited

Annual Report and Audited Financial Statements 2022

Alternative Performance Measures

NAV per Ordinary Share

NAV per Ordinary Share means an amount equal to, as at the relevant date, the NAV attributable to Ordinary Shares divided by the

Ordinary Shares in issue as at such date.

Reason for use

Common industry performance benchmark for calculating the Total Return and Share Price (Discount)/Premium to NAV per

Ordinary Share.

Recalculation

NAV per Ordinary Share is calculated as follows:

31 December 2022

31 December 2021

Net Assets as per Statement of Financial Position

£112,511,875

£104,799,336

Number of Ordinary Shares in issue at year end (excluding treasury shares)

61,145,198

61,145,198

NAV per Ordinary Share

184p

171p

Total Return

The increase in the NAV per Ordinary Share plus the total dividends paid per Ordinary Share during the period, with such dividends

paid being re-invested at NAV, as a percentage of the NAV per share as at period end.

Compounded monthly returns per the monthly published performance reports, inclusive of dividends.

Reason for use

To provide transparency in the Company’s performance and to help investors identify and monitor the compounded returns