Lument Finance Trust (70X0) Risk Analysis

As permitted by Maryland law, our charter eliminates the liability of our directors and officers to us and our stockholders for money damages, except for liability resulting from: - actual receipt of an improper benefit or profit in money, property or services; or - a final judgment based upon a finding of active and deliberate dishonesty by the director or officer that was material to the cause of action adjudicated. In addition, our charter requires us, to the maximum extent permitted by Maryland law, to indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of final disposition of a proceeding to any individual who is a present or former director or officer and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity or any individual who, while a director or officer and at our request, serves or has served as a director, officer, partner, trustee of another corporation, REIT, partnership, joint venture, trust, employee benefit plan or any other enterprise and who is made or threatened to be made a party to the proceeding by reason of his or her service in that capacity. Maryland law permits indemnification of our directors and officers in connection with a proceeding, unless it is established that (i) the act or omission of the individual was material to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty, or the individual actually received an improper personal benefit in money, property or services, or (ii) in the case of a criminal proceeding, the individual had reasonable cause to believe that the act or omission was unlawful. As part of these indemnification obligations, we may be obligated to fund the defense costs incurred by our directors and officers. We also are permitted to purchase and maintain insurance or provide similar protection on behalf of any directors, officers, employees and agents, including our Manager and its affiliates, against any liability asserted which was incurred in any such capacity with us or arising out of such status. This may result in us having to expend significant funds, which will reduce the available cash for distribution to our stockholders.

Our charter provides that, subject to the rights of any class or series of preferred stock, a director may be removed only by the affirmative vote of at least two-thirds of all the votes entitled to be cast generally in the election of directors. Our charter and bylaws provide that vacancies generally may be filled only by a majority of the remaining directors in office, even if less than a quorum. These requirements make it more difficult to change management by removing and replacing directors and may prevent a change in control that is in the best interests of stockholders.

Our board of directors determines our major policies, including with regard to financing, growth, debt capitalization, REIT qualification and distributions. Our board of directors may amend or revise these and other policies without a vote of the stockholders. Under our charter and the MGCL, our common stockholders generally have a right to vote only on the following matters: - the election or removal of directors;- the amendment of our charter, except that our board of directors may amend our charter without stockholder approval to: ?change our name;?change the name or other designation or the par value of any class or series of stock and the aggregate par value of our stock;?increase or decrease the aggregate number of shares of stock that we have the authority to issue; and ?increase or decrease the number of our shares of any class or series of stock that we have the authority to issue;- our liquidation and dissolution; and - our being a party to a merger, consolidation, sale or other disposition of all or substantially all of our assets or statutory share exchange. All other matters are subject to the discretion of our board of directors.

Certain provisions of the Maryland General Corporation Law ("MGCL") may have the effect of delaying, deferring or preventing a transaction or a change of control of our company that might involve a premium price for holders of our equity securities or otherwise be in their best interests. Subject to certain limitations, provisions of the MGCL prohibit certain business combinations between us and an "interested stockholder" (defined generally as any person who beneficially owns 10% or more of the voting power of our outstanding voting stock or an affiliate or associate of ours who beneficially owned 10% or more of the voting power of our then outstanding stock during the two-year period immediately prior to the date in question) or an affiliate of the interested stockholder for five years after the most recent date on which the stockholder became an interested stockholder. After the five-year period, business combinations between us and an interested stockholder or an affiliate of the interested stockholder must generally either provide a minimum price to our stockholders (as defined in the MGCL) in the form of cash or other consideration in the same form as previously paid by the interested stockholder or be recommended by our board of directors and approved by the affirmative vote of at least 80% of the votes entitled to be cast by holders of our outstanding shares of voting stock and at least two-thirds of the votes entitled to be cast by stockholders other than the interested stockholder and its affiliates and associates. These provisions of the MGCL relating to business combinations do not apply, however, to business combinations that are approved or exempted by our board of directors prior to the time that the interested stockholder becomes an interested stockholder. Pursuant to the statute, our board of directors has by resolution exempted business combinations between us and the XL Companies and certain affiliates thereof, the parent of which is AXA SA, between us and Hunt Investors and affiliates thereof and between us and Lument Investment Holdings, LLC and affiliates thereof. Consequently, the five-year prohibition and the supermajority vote requirements will not apply to business combinations between us and the exempted parties. As a result, the exempted companies may be able to enter into business combinations with us that may not be in the best interest of our stockholders without compliance by us with the supermajority vote requirements and other provisions of the statute. However, our board of directors may repeal or modify these exemptions at any time in the future, in which case the applicable provisions of this statute will become applicable to business combinations between us and the previously exempted parties. The "control share" provisions of the MGCL provide that holders of "control shares" of a Maryland corporation (defined as shares which, when aggregated with other shares controlled by the stockholder (except solely by virtue of a revocable proxy), entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a "control share acquisition" (defined as the direct or indirect acquisition of ownership or control of "control shares") have no voting rights with respect to such shares except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding votes entitled to be cast by the acquirer of control shares, our officers and our employees who are also our directors. Our bylaws contain a provision exempting from the control share acquisition statute any and all acquisitions by any person of shares of our stock. There can be no assurance that this provision will not be amended or eliminated at any time in the future. Additionally, Title 3, Subtitle 8 of the MGCL permits our board of directors, without stockholder approval and regardless of what is currently provided in our charter or bylaws, to elect to be subject to certain provisions relating to corporate governance that may have the effect of delaying, deferring or preventing a transaction or a change of control of our company that might involve a premium to the market price of our equity securities or otherwise be in our stockholders' best interests. Those provisions are (i) a classified board; (ii) a two-thirds vote requirement for removing a director; (iii) a requirement that the number of directors be fixed only by vote of the directors; (iv) a requirement that a vacancy on the board be filled only by affirmative vote of a majority of the remaining directors in office and for the remainder of the full term of the class of directors in which the vacancy occurred; (v) and a majority requirement for the calling of a special meeting of stockholders. We are subject to all of those provisions except for a classified board, either by provisions of our charter and bylaws unrelated to Subtitle 8 or by reason of an election in our charter to be subject to certain provisions of Subtitle 8.

In order for us to maintain our REIT qualification for each taxable year after December 31, 2012, during the last half of any taxable year no more than 50% in value of our outstanding capital stock may be owned, directly or indirectly, by five or fewer individuals. "Individuals" for this purpose include natural persons, private foundations, some employee benefit plans and trusts, and some charitable trusts. To assist us in maintaining our qualification as a REIT among other purposes and subject to certain exceptions, our charter generally prohibits any person from directly or indirectly owning more than 9.8% in value or in number of shares, whichever is more restrictive, of the outstanding shares of our common stock or more than 9.8% in value or in number of shares, whichever is more restrictive, of the outstanding shares of our capital stock. On February 17, 2022, in connection with the closing of our rights offering, in which we issued and sold an aggregate of 27,277,269 shares of our common stock, our board of directors adopted resolutions decreasing the common stock ownership limit and the aggregate stock ownership limit from 9.8% to 8.75% for all stockholders who are not excepted holders. The ownership limitations in our charter could have the effect of discouraging a takeover or other transaction in which holders of our equity securities might receive a premium for their shares over the then prevailing market price or which holders might believe to be otherwise in their best interests. Our board of directors has granted exemptions to the aggregate stock ownership limit and the common stock ownership limit in our charter to (i) XL Bermuda Ltd, (ii) Lument Investment Holdings, LLC, an affiliate of our Manager, and (iii) the Hunt Investors.

Our charter authorizes us to issue additional authorized but unissued shares of common or preferred stock. In addition, our board of directors may, without stockholder approval, amend our charter to increase the aggregate number of our shares of stock or the number of shares of stock of any class or series that we have authority to issue and classify or reclassify any unissued shares of common or preferred stock and set the preferences, rights and other terms of the classified or reclassified shares. As a result, our board of directors may establish a series of common or preferred stock that could delay or prevent a transaction or a change in control that might involve a premium price for our share class or of common stock or otherwise be in the best interest of our stockholders.

Lument Investment Holdings, LLC and Hunt Companies Equity Holdings, LLC and James C. Hunt (together, the "Hunt Investors") hold a significant interest in our outstanding common stock. As of March 1, 2026, Lument Investment Holdings, LLC owned 27.3% of our outstanding common stock and the Hunt Investors owned 12.3% of our outstanding common stock. In addition, James C. Hunt, is a member of our board of directors. As a result, each of Lument Investment Holdings, LLC and the Hunt Investors has the ability to influence the outcome of matters that require a vote of our stockholders, including election of our board of directors and other corporate transactions, regardless of whether others believe that the transaction is in our best interests.

If we decide to issue additional equity securities or to issue debt in the future that rank senior to our common stock, it is likely that they will be governed by an indenture or other instrument containing covenants restricting our operating flexibility. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common stock and may result in dilution to owners of our common stock. We and, indirectly, our stockholders, will bear the cost of issuing and servicing such securities. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus holders of our common stock will bear the risk of our future offerings reducing the market price of our common stock and diluting the value of their stock holdings in us. Furthermore, the compensation payable to our Manager will increase as a result of future issuances of our equity securities even if the issuances are dilutive to existing stockholders.

We intend to announce quarterly dividends in arrears on a quarterly basis to holders of our common stock. If substantially all of our taxable income has not been paid by the close of any calendar year, we intend to declare a special dividend to holders of our common stock prior to December 31st of the current year, to achieve this result. We have not established a minimum distribution payment level on our common stock and our ability to make distributions has been and in the future may be adversely affected by the risk factors described in this Annual Report on Form 10-K. All distributions to our common stockholders will be made at the discretion of our board of directors and will depend on our earnings, our financial condition, maintenance of our REIT status and such other factors as our board of directors may deem relevant from time to time. There can be no assurance of our ability to make distributions to our common stockholders, or that our board of directors will not determine to reduce such distributions, in the future. In addition, some of our distributions to our common stockholders may continue to include a return of capital.

As a "smaller reporting company," the Company has relied on exemptions from certain disclosure requirements that are applicable to other public companies. The Company may continue to rely on such exemptions for so long as the Company remains a "smaller reporting company." These exemptions include reduced financial disclosure and reduced disclosure obligations regarding executive compensation. We may continue to rely on such exemptions for so long as we remain a smaller reporting company under applicable SEC rules and regulations. The Company's reliance on these exemptions may result in the public finding the Company's securities to be less attractive and adversely impact the market price of the Company's securities or the trading market thereof.

The investments we make in accordance with our investment objectives may result in a greater amount of risk as compared to alternative investment options, including relatively higher risk of volatility or loss of principal. Our investments may be speculative and aggressive, and therefore an investment in our securities may not be suitable for someone with lower risk tolerance. One of the factors that investors may consider in deciding whether to buy or sell shares of our securities is our distribution rate as a percentage of the trading price of our securities relative to market interest rates and distribution rates of our competitors. If the market price of our securities is based primarily on the earnings and return that we derive from our investments and income with respect to our investments and our related distributions to stockholders, and not from the market value of the investments themselves, then interest rate fluctuations and capital market conditions are likely to adversely affect the market price of our securities. For instance, if market rates rise without an increase in our distribution rate, the market price of our securities could decrease as potential investors may require a higher distribution yield on our securities or seek other securities paying higher distributions or interest. In addition, rising interest rates would result in increased interest expense on our variable rate debt, thereby reducing cash flow and our ability to service our indebtedness and make distributions to our stockholders.

Our common stock is listed on the NYSE under the symbol "LFT." Stock markets, including the NYSE, have experienced significant price and volume fluctuations over the past several years. As a result, the market price of our securities has been and is likely to continue to be similarly volatile, and investors in our securities have experienced since the initial offering of our securities and may continue to experience a decrease in the value of their securities. Accordingly, no assurance can be given as to the ability of our stockholders to sell their securities or the price that our stockholders may obtain for their securities. Some of the factors that negatively affect the market price of our securities include: - changes in our dividend rates or frequency of payments thereof;- actual or anticipated variations in our quarterly operating results;- changes in our earnings estimates or publication of research reports about us or the real estate industry;- changes in market valuations of similar companies;- adverse market reaction to any increased indebtedness we incur in the future;- additions to or departures of our Manager's key personnel;- actions by our stockholders;- speculation in the press or investment community;- trading prices of common and preferred equity securities issued by REITs and other similar companies;- failure to satisfy REIT requirements;- general economic and financial conditions;- government action or regulation; and - our issuance of additional preferred equity or debt securities.

Pursuant to the Management Agreement, our Manager does not assume any responsibility other than to render the services called for thereunder and will not be responsible for any action of our board of directors in following or declining to follow its advice or recommendations. Our Manager maintains a contractual as opposed to a fiduciary relationship with us, although our officers who are also employees of an affiliate of our Manager will have a fiduciary duty to us under Maryland law, as our officers. Under the terms of the Management Agreement, our Manager, its officers, members, managers, directors, personnel, trustees, partners, stockholders, equity holders, any person controlling or controlled by our Manager and any person providing sub-advisory services to our Manager will not be liable to us, our directors, our stockholders or any partners for acts or omissions performed in accordance with and pursuant to the Management Agreement, except because of acts or omissions constituting bad faith, willful misconduct, gross negligence or reckless disregard of their duties under the Management Agreement, as determined by a final non-appealable order of a court of competent jurisdiction. In addition, we have agreed to indemnify our Manager, its officers, stockholders, members, managers, directors, personnel, trustees, partners, stockholders, equity holders, any person controlling or controlled by our Manager and any person providing sub-advisory services to our Manager with respect to all expenses, losses, damages, liabilities, demands, charges and claims arising from acts or omissions of our Manager not constituting bad faith, willful misconduct, gross negligence or reckless disregard of duties, performed in good faith in accordance with and pursuant to the Management Agreement. As a result, we could experience poor performance or losses for which our Manager would not be liable.

Our Manager is authorized to follow very broad investment guidelines. Our board of directors periodically reviews and updates our investment guidelines and our investment portfolio but does not generally review or approve specific investments. In addition, in conducting periodic reviews, our board of directors may rely primarily on information provided to them by our Manager. Furthermore, our Manager may use complex strategies, and transactions entered into by our Manager may be costly, difficult or impossible to unwind by the time they are reviewed by our board of directors. Our Manager will have great latitude within the broad parameters of our investment guidelines in determining the types and amounts of mortgage related investments it may decide are attractive investments for us, which could result in investment returns that are substantially below expectations or that result in losses, which would adversely affect our business operations and results. In addition, our Manager may invest up to $75 million in any investment on our behalf without restriction and generally without prior approval of our board of directors. Our Manager is generally permitted to invest our assets in its discretion, provided that such investments comply with our investment guidelines. Our Manager's failure to generate attractive risk-adjusted returns on an investment which represents a significant dollar amount would adversely affect us. Further, decisions made and investments and financing arrangements entered into by our Manager may not fully reflect the best interests of our stockholders.

Because we employ financial leverage in funding our portfolio, mismatches in the maturities of our assets and liabilities can create risk in the need to continually renew or otherwise refinance our liabilities. Our net interest margins will be dependent upon a positive spread between the returns on our asset portfolio and our overall cost of funding. Our Manager's risk management tools include software and services licensed or purchased from third parties, in addition to proprietary systems and analytical methods developed internally. There can be no assurance that these tools and the other risk management techniques described above will protect us from asset/liability risks.

We are subject to conflicts of interests arising out of our relationship with our Manager, including our Manager's ultimate parent, ORIX, and its affiliates. We are managed by our Manager, an ORIX affiliate, and our executive officers are employees of one or more affiliates of our Manager. There is no guarantee that the policies and procedures adopted by us, the terms and conditions of the Management Agreement or the policies and procedures adopted by our Manager, ORIX and their respective affiliates, will enable us to identify, adequately address or mitigate all potential conflicts of interest. Some examples of conflicts of interest that may arise by virtue of our relationship with our Manager and ORIX include: - Affiliated Service Providers: Our Manager uses ORIX for certain investment and non-investment related services including, but not limited to, underwriting, credit risk, legal and compliance and related support services, general services, human resources, portfolio transaction services, finance and accounting, audit, administrative services, and information and technology support services. Such arrangements may create a conflict as our Manager could be viewed as placing the interests of other ORIX affiliates ahead of the Company's interests. Furthermore, LREC, an ORIX affiliate, acts as servicer with respect to mortgage assets held by the Company, and servicer and special servicer with respect to the mortgage assets for our securitized debt obligations and secured financing agreements. Such affiliate relationships may influence our Manager in deciding whether to select a service provider because our Manager may have financial or other business incentives to recommend and engage an ORIX affiliate, even if another person or vendor may be more qualified to provide the applicable service, or may provide such service at a more favorable rate or arrangement. - Shared Personnel: In addition to responsibilities with respect to the management and investment activities of LFT, the Manager, its affiliates and their personnel could have similar responsibilities with respect to ORIX and its affiliates and could have other business commitments. Conflicts of interest may arise as a result of certain personnel serving in dual or multiple capacities (e.g. officers, directors, principals, employees, partners, managers, members, agents, nominees), including with respect to the allocation of time, services and resources of such personnel. Dual role situations exist across the business. In serving in these multiple capacities, personnel may have obligations to Lument, ORIX or their affiliates, the fulfillment of which may not be in the best interest of the Company. - ORIX's Investment Advisory and Proprietary Activities: ORIX makes investments pursuant to an investment strategy that is similar to the investment strategy implemented by Lument IM with respect to LFT. Therefore, ORIX or an affiliate may originate opportunities that are suitable for LFT but are allocated to entities primarily owned by ORIX or its affiliates. ORIX invests and trades in securities, real estate, loans or other financial interests and makes other investments for its own investment vehicles utilizing strategies and types of securities that, from time to time, compete or will be in conflict with the Manager's activities on behalf of LFT. Our Manager may be incentivized by virtue of its relationship with ORIX and its affiliates to compete less vigorously with ORIX for investment opportunities or otherwise conduct its activities in a manner that may disadvantage the Company. Our Manager may also provide advice or take action in performance of its duties for ORIX and its investment vehicles that may differ from the timing and nature of actions taken by the Manager with respect to the Company. In some instances, such actions could be adverse to the Company, and the Manager has an incentive to favor the interests of its affiliates in such circumstances. As a general matter, decisions with respect to ORIX and its affiliates' proprietary accounts are made by the ORIX investment committee, which is different from the investment committee making investment decisions for the Manager on behalf of the Company. In addition, the portfolio strategies that the Manager or its affiliates use could conflict with the transactions and strategies the Manager employs in managing the Company and may affect the prices and availability of securities and other financial instruments in which the Manager invests on behalf of the Company. ORIX or its affiliates invest, and will likely continue to invest, in some of the same loans as the Company, sometimes at the same time and as part of the same transaction and at other times before or after the Company invests. Since decisions with respect to ORIX and its affiliates' proprietary accounts are made by a different investment committee than the committee making decisions on behalf of the Company, these decisions could result in the Company having a different outcome than ORIX's accounts, including that the Company's account value could be adversely impacted in comparison to ORIX's accounts. In addition, there is some overlap in the investment committee compositions between the ORIX, Lument and Lument IM investment committees, and members of each committee currently serve and may continue to serve as observers of the other committees. In addition, we are expected, from time to time, to make an investment in, or a loan to, other companies in which ORIX and its affiliates (each, an "Investing Party") are also expected to invest, or already have invested, in a different part of the capital structure, which may mean that an Investing Party's interest in such a company may have different rights, preferences and privileges than the company interests held by us. There may be instances where such a company becomes insolvent or bankrupt or where an Investing Party's interests in such a company may otherwise conflict with the interests of other Investing Parties. To the extent that LFT holds securities or other financial interests (e.g., bank debt) in a company with rights, preferences and privileges that are different than interests held by an Investing Party in the same company, the Manager and its affiliates may be presented with decisions when LFT's interests and the interests of the Investing Parties conflict. It is possible that our interest may be subordinated or otherwise adversely affected by virtue of other Investing Parties' involvement and actions relating to such investment, in a bankruptcy proceeding or otherwise. From time to time, we also expect to hold an interest in the more senior portion of an issuer's capital structure while another Investing Party holds a more junior security of that issuer. Because ORIX is the owner of the Manager, the Manager would experience a conflict of interest in making determinations regarding the senior securities we held, as decisions to enforce remedies or take other actions against the obligors under such senior securities or the related collateral could adversely impact the value of the more junior securities. In such situations, the Manager may be incentivized to decline to enforce such remedies or take such actions on behalf of the senior securities we hold in order to protect the value of the junior securities, which could adversely affect our return. Because our Manager is an ORIX subsidiary, it may be incentivized to make decisions for the benefit of one Investing Party to our detriment if dissatisfaction would cause one of the Investing Parties to redeem capital or discontinue its relationship with ORIX or its affiliates. - Allocation of Investment Opportunities: Certain conflicts of interest may arise from the fact that ORIX, its affiliates, and our Manager may provide investment management and other services both to us and to other persons or entities, including without limitation, proprietary accounts of ORIX, other clients of the Manager that may be established in the future or clients of affiliates of the Manager, whether or not the investment objectives or policies of such other persons or entities are similar to ours. Because our Manager is affiliated with ORIX, it may have an incentive to retain more favorable investment opportunities for ORIX and its affiliates. LFT may not have exclusivity over otherwise suitable investment opportunities, and there is no guarantee that LFT will be able to participate in all investment opportunities that may fall within our investment objectives. Limits on investments or investment decisions by ORIX not to participate in certain investments will, in certain cases, significantly constrain our Manager's ability to make investments on behalf of the Company, particularly with regard to opportunities involving the extension of larger loans. These restrictions could prevent the Company from participating in an attractive investment opportunity in which it would have otherwise participated. The Manager or its affiliates, from time to time, sources loans in which participations and/or assignments may be purchased by the Company. The ability of the Company to invest in such loans will be dependent upon the ability of the Manager to secure financing for such loans, either from another affiliate of the Manager or from a third party. There can be no guarantee that any affiliate of the Manager will be willing or able to make such financing available or that financing from a third party will be available on commercially reasonable terms. If such financing is not available or is not available on terms that are commercially reasonable,loan participations or assignments will not be available for the Company to purchase, which may have a material adverse effect on LFT. In the event the Manager or its affiliates source a loan at a time when the Company does not have capacity to make such loan, an ORIX affiliate may initially fund the loan, with the potential for a subsequent sale of the loan or a loan participation to the Company when capacity becomes available in the future. Per our Manager's allocation policy for the Company, the Manager or its affiliates have no obligation to sell or transfer any assets to the Company. - Affiliate Financing: Certain ORIX affiliates are providers of mortgage financing for commercial real estate, conventional and affordable multifamily and seniors housing, and healthcare providers, and originate and service loans for various multifamily properties ("Affiliated Mortgage Providers"). These Affiliated Mortgage Providers provide mortgage financing to third parties and other ORIX affiliates that seek to lend to existing borrowers of LFT assets when a loan is nearing maturity or the borrower is seeking alternative financing. While the terms of such financings are negotiated with such borrowers, in certain circumstances it may be customary or beneficial for legal, tax, regulatory or other reasons for such transactions to involve both the Company and an affiliated lender, or proceeds from one transaction may be used to pay off another such transaction. In connection with such transactions, the Manager will share information about LFT and its assets with Affiliated Mortgage Providers to facilitate such financing and enable the Affiliated Mortgage Providers to market their services to prospective third-party clients. In addition, certain loans held by the Company provide for the payment of an exit fee by the borrower. The Company has agreed to waive such exit fees if a borrower refinances the applicable loan with permanent financing provided by the Manager or any of its affiliates. To the extent such an exit fee is waived as a result of a borrower refinancing the applicable loan with permanent financing from the Manager or any of its affiliates, the expenses reimbursable to the Manager for the quarter in which such exit fee was waived shall be reduced by an amount equal to 50% of the amount of any waived exit fee, capped at a waived exit fee of 1%. - Principal Trades: As discussed above, from time to time, the Manager will cause the Company to buy a loan or loan participation from an affiliate of the Manager, Lument Structured Finance, LLC ("LSF"). A conflict of interest will arise from such principal transactions because a Manager affiliate is on one side of the transaction and the Company is on the other side of the transaction. Pursuant to Section 206(3) of the Investment Advisers Act of 1940, as amended, the Manager is required to provide disclosure to the Company that it is acting as principal and the potential conflicts that arise from such transaction and obtain prior consent from the Company for all such principal transactions on a transaction-by-transaction basis. In the event that the Company declines to provide consent to a principal transaction in respect of the purchase of a loan or loan participation, the Manager will be unable to consummate the investment for the Company and the opportunity will not be available to the Company. - Information Barriers: Our Manager and ORIX currently operate without information barriers across the business. Consequently, in the event ORIX or its affiliates, including our Manager, acquires confidential or material non-public information, our Manager may be restricted in acquiring or disposing of investments on our behalf until such time as the information becomes public or is no longer deemed material. Due to these restrictions, our Manager may not be able to initiate a transaction on our behalf that it otherwise might initiate and may not be able to purchase or sell an investment that it might have purchased or sold, which could negatively affect our investment results. - Broad Activities: ORIX engages in a broad range of financial activities, including but not limited to billions of invested or committed capital on behalf of clients and its own proprietary accounts utilizing various investment funds, vehicles, REITs, and accounts. ORIX continues to expand its range of activities and will not be restricted in the scope of business or performance of its services, even if such activities may overlap, compete or conflict with the Company's business. - Pre-existing Relationships: The Manager and its affiliates have pre-existing relationships with a significant number of loan obligors. In servicing and administering the loans, each of the Manager and its affiliates may take into account these relationships or the relationships of its affiliates with obligors or issuers and their respective affiliates, which can create a conflict of interest. Various affiliates of the Manager also have relationships with investors, including institutional investors and their senior management. The existence and development of these relationships can potentially influence whether or not the Manager undertakes a particular investment and, if so, the form and level of such investment.