GLIF.L Regulatory News (GLIF)

Greenwich Loan Income Fund Limited

Full Year Results 2012

3 April 2013

Greenwich Loan Income Fund Limited ("GLIF" or the "Company"), a specialist lender to small and medium sized enterprises, today announces its audited results for the twelve months ended 31 December 2012.

Financial highlights

·; Net asset value at 31 December 2012 of 49.1p per share (30 December 2011: 48.3p)

·; Invested assets with a fair value of £186.2m and cash of £27m at 31 December 2012, of which £16.6m of cash is within the CLO structure

·; Net income generation continues to grow - 8.7% increase in the Company's Q3 dividend

·; Share price increase of 20.2% from 42.75p to 51.38p during 2012

·; Total shareholder return of 31.2% - 627% return since 2009

·; Interest income, dividends and other income totaling GBP15.4m (2011: GBP12.2m)

·; Operating expenses fell from GBP6.8m in 2011 to GBP5.4m in 2012.

Company highlights

·; Acquisition of BMS Finance plc ("BMS"), a specialist lender to small growth companies, primarily in the UK. Results continue to look promising.

·; Seeking shareholder approval to change the name of the Company to "GLI Finance Limited", to better reflect a more broadly based finance business in increasingly diverse geographic locations

·; Expanding executive management team - Geoff Miller appointed CEO and an internal CFO to be appointed

Outlook and strategy

·; Focus on secured lending to small and medium sized enterprises

·; Diversify that lending across geographies and types of business;

·; Drive down cost/income ratio;

·; Optimise capital structure.

·; Multiple opportunities for growth across a number of jurisdictions, both in structured finance such as CLOs and in finance businesses such as BMS

Commenting, Patrick Firth, Chairman of GLIF, said:

"The Board is delighted to present another positive set of results for the Company in a year of significant positive change. We expect 2013 to be a year of significant growth in our non-US business, whilst indications remain positive that our US business will continue to produce returns at the upper end of our 10-15% return on equity target.

As we grow, we will remain a secured corporate lender because we believe that is where there will be a sustainable competitive advantage in specialist niches dependent on in-depth knowledge to unlock the attractive risk adjusted return potential. We believe that, as a finance business, GLIF is opening a new and potentially exciting chapter in its growth.

For further information, please contact:

Geoffrey Miller

Greenwich Loan Income Fund Limited

+1 203 916 0003

+44 7408 830719

Investec Bank plc

Tim Mitchell

Jeremy Ellis

+44 (0)20 7597 5970

Panmure Gordon

Dominic Morley

Fred Walsh

+44 (0)20 7886 2500

Jack Hickey

FTI Consulting

+44 (0) 207 269 7196

Greenwich Loan Income Fund Limited

For the year ended 31 December 2012

CHAIRMAN'S STATEMENT

I am pleased to report the results of Greenwich Loan Income Fund Limited ("GLIF" or the "Company") for the year ended 31 December 2012.

In 2010 and 2011 a solid platform had been built from which to grow our business of providing secured lending to small and medium sized businesses. Our increasingly diverse business now lends money directly and indirectly to produce good levels of return that have underpinned a progressive dividend policy and led to a healthy share price performance.

The major corporate event came at the end of the year, with the acquisition of BMS Finance. This acquisition was the culmination of almost a full year's work by our team and advisers, and we are delighted with the way in which BMS is bedding down within GLIF.

Our net income generation continues to grow and for the third quarter of 2012 we announced an 8.7% increase in the Company's quarterly dividend. This increase was underpinned by a combination of a reduction in the cost base of the company and a significant increase in the income generated by the business.

As I have stated on previous occasions, the Board believes that a sustainable and progressive dividend is more valuable to long-term shareholders than achieving the highest possible dividend in any one period and therefore, although our short term net income generation has grown faster than our dividend, the Board will continue to take a longer term view.

Global capital constraints within the financial system remain a major positive for our business. We expect that small and medium sized businesses will continue to find capital in short supply and therefore that capital available will be priced accordingly. However, with the search for yield globally becoming more and more intense, our role is to ensure that we exploit niches in the market that require significant experience and knowledge to lend into and where returns will continue to be good, and not to move more into the mainstream where it is more likely that the weight of money seeking yield may distort parts of the market.

This will also mean that we will need to continue to evolve our lending and be quick to react to changing market conditions. We are strengthening our resources both internally and externally in order that we have these capabilities in hand.

Performance

The strong operational performance of the Company was reflected in a share price increase of 20.2% from 42.75p to 51.38p during the year and the Company paid 4.7p (vs 4p in the previous year) in dividends, producing a total shareholder return of 31.2% for the year. This compares to a total shareholder return of 59.8% in 2011 and 25.5% in 2010. Since the changes to the Board in the middle of 2009, the total shareholder return has been 627%.

Financials

As of 31 December 2012, the Company and its subsidiaries T2 Income Fund CLO I Ltd ("the CLO"), Asset Management Investment Company Ltd and GLIF BMS Holdings Ltd (the "Group") had invested assets with a fair value of approximately GBP186.2m, and cash of GBP27.0m (including GBP16.6m required to be retained within the CLO structure, available for new investment opportunities).

The CLO portfolio is comprised of variable rate investments and, on a weighted average basis, carried a spread of approximately 527 basis points over LIBOR on performing assets.

The Company's Net Asset Value per Share ("NAV") as of 31 December 2012 was 49.1p. This compares to a NAV as of 31 December 2011, on a consistent basis of 48.3p. The previously reported NAV for the end of 2011 of 73.4p valued the debt of the CLO at fair value, where our policy is now to reflect the value of our holding in the CLO by valuing the CLO debt at its par value. This has the effect of reducing the NAV by GBP10.7m, but the effect per share is reduced this year, as the shares in issue increased as a result of the BMS acquisition.

For the year ended 31 December 2012, GLIF received interest income, dividends and other income totaling GBP15.4m, compared to GBP12.2m for 2011. Operating expenses fell from GBP6.8m in 2011 to GBP5.4m in 2012.

AGM

At this year's AGM there will be a number of resolutions in addition to the normal business of the AGM. As well as some "housekeeping" issues, there are a number of significant areas that reflect GLIF's desire to ensure that as it grows in size and substance, so does its structure and governance.

Firstly we are proposing to update the Company's Articles, which become "Articles of Incorporation", rather than "Articles of Association", in line with Guernsey Company law. Of particular note, we are seeking to enshrine shareholder pre-emption rights within the Articles and update our scrip dividend provisions. It is intended that we introduce a scrip dividend option from the next dividend, to be declared in April.

Name change

We will also be asking shareholders to approve a change in name for GLIF. The name "Greenwich Loan Income Fund Limited" was introduced in 2009, to reflect the fact that at that time all of the Company's assets were managed in Greenwich, Connecticut. Since then we have expanded our business, brought in advisors on assets elsewhere in the world and internalised the management of the business as a whole. We are therefore asking shareholders to approve the change of our name to "GLI Finance Limited". This will allow us to ensure continuity with the great success that the business has seen since we adopted the "GLIF" acronym.

The name change reflects the fact that, as the business has grown from its original shape, so it has gradually become more of a finance business than an investment company. It is true that GLIF has always been a hybrid business that sat somewhere between a finance company and an investment company. As a business we provide loans financed partly with equity, and partly with debt. To that extent we are similar to a bank. The key differences are that all of our lending is secured, we have only corporate loans rather than retail, and our debt is of longer average duration than our loans.

As we develop the business we intend to maintain these differences to the mainstream banking sector, as this should ensure that we have the potential to achieve an attractive return on equity for our shareholders, without the same liquidity risks to which others in the financial sector have been vulnerable.

Corporate Strategy

Our acquisition of BMS Finance in November gave us greater capability to originate our own lending, and it would be our intention to continue to build our origination capability, both in the UK and the rest of the world. This will focus on smaller companies, where the returns to GLIF on an unlevered basis fall within our 10-15% target return.

We are also working actively with funding partners on new CLO projects that will see GLIF able to produce the equity returns we are seeking, but from portfolios of senior secured loans of medium sized businesses. At present we regard UK and Europe as most promising in this regard. We will continue to look for opportunities to develop our US business, but at present it is more of a cash cow, helping to fund the development of the rest of the business.

Executive Team

With the rapid development of the corporate strategy, we have taken action both internally and externally to strengthen the resources available to your company.

Internally there is a need for GLIF to have the resources necessary to manage its growth, and this will mean adding additional executive personnel over time. We are actively seeking someone to join as the Chief Financial Officer (CFO), a position until now very ably filled by Patrick Conroy of T2 Advisers, to assist both in the management of our increasingly diverse existing business but also in analyzing potential new areas for growth, both organic and through acquisition. For shareholders we will want to ensure that any new CFO can ensure that our financial statements are in future slightly less daunting and more easily comparable with other financial businesses.

To reflect the fact that there will in future be an executive team, rather than just one Executive Director, Geoff Miller's title will henceforth be Chief Executive Officer (CEO). Geoff will remain the one executive on the Board, to ensure that the Board remains majority independent at all times.

As we grow the executive resources within GLIF it is necessary to ensure the executives in question are suitably incentivised to continue to deliver superior shareholder returns, whilst having their interests aligned with shareholders. To this end the Remuneration Committee has resolved to amend the current incentive structure, which was applicable solely to Geoff, to an incentive pool, which will be allocated at the Remuneration Committee's discretion. The total pool available will be, as before, 10% of the total shareholder return in excess of 12%, with the amount to be actually paid out capped at 0.5% of net asset value (NAV) in any one year.

To ensure that incentive payments are primarily long term in nature, all payments from the incentive pool will be made one third in cash and two-thirds GLIF equity, the acquisition price of which for the individual will be the prevailing share price or NAV, whichever is higher. All executives will have to hold all of their GLIF equity for their entire period of employment by GLIF.

As these changes require amendments to the CEO's service agreement that both significantly reduces the future cash payments made to him and ties his GLIF holding up for the foreseeable future, the Remuneration Committee resolved to pay to him the amount accrued within the incentive pool as at the end of 2012, one half in cash and one half in shares. This payment is subject to clawback, should the GLIF share price fail to retain its current level.

The Board believes that having a remuneration policy that incentivises performance primarily through equity that has to be held for an executive's entire tenure with the Company aligns those executives with shareholders, and will put GLIF at the forefront of movement towards longer term incentive structures for those in the finance industry.

External Advisers

Externally we are reviewing the ways in which our advisers are remunerated to better align their interests with shareholders. As a finance business we will judge our performance on costs, internally and externally, against the net return we provide our shareholders. The cost/income ratio, more closely associated with finance businesses, will become far more important than the total expense ratio by which investment company costs tend to be measured. There were times in the past when the Company's cost/income ratio exceeded 100%, as a result of the lack of volatility in the assets under management when compared with the volatility in the returns to shareholders.

As a first step in this regard the Board is engaging GMB Partners LLP to advise on UK, European and US CLO paper and senior secured loans. With a modest base fee, it is intended that the vast majority of their return comes from a share in the net return to GLIF shareholders on the assets on which they advise.

Prospects

We expect 2013 to be a year of significant growth in our non-US business, whilst indications remain positive that our US business will continue to produce returns at the upper end of our 10-15% return on equity target. Since the beginning of 2011 when we clarified the investing policy with unanimous shareholder approval, we have been clear that our long term aim is an equal split of the business between US and non-US assets.

As we grow, we will remain a secured corporate lender because we believe that is where there will be a sustainable competitive advantage in specialist niches dependent on in-depth knowledge to unlock the attractive risk adjusted return potential.

We believe that, as a finance business, GLIF is opening a new and potentially exciting chapter in its growth.

Finally I would like to thank shareholders for their continued support as we have sought to establish a solid base from which to drive our Company forward. As a finance company, the Board of GLIF believes that our Company has an exciting future ahead.

Patrick Firth

Non-Executive Chairman

Date: 2 April 2013

CHIEF EXECUTIVE OFFICER'S REVIEW

The past year has seen further significant changes within Greenwich Loan Income Fund, as the business continues to develop its portfolio of businesses. The most notable addition to the business was the acquisition of BMS Finance, our UK finance business, but at a Group level we also saw significant change, which we are now asking shareholders to reflect in changing the name of the business at the forthcoming AGM.

Whilst Greenwich Loan Income Fund accurately described our business when expansion outside of the US was an aspiration rather than a reality, GLI Finance will reflect our growth as a more broadly based finance business, providing secured finance to small and medium sized businesses in increasingly geographically diverse locations. The choice of name allows the acronym "GLIF" to be retained, as it has become closely associated with the business in the past three years, and given the success we have had we feel that this is something that is important.

As we develop the Company it will be necessary to build more resource at the Group level. At present I am the only employee at the Group level, but we hope to appoint a Chief Financial Officer shortly, and as the Chairman has laid out, preparations in terms of changes to the executive bonus scheme have already been agreed by the Board. I was more than happy to both commit to retaining all of my GLIF stock for my remaining tenure within the Company, and also to receive the majority of any future bonus in stock, as I remain confident in the long term prospects for the business.

The strategy remains as it has been for the past three years:

- Focus on secured lending to small and medium sized enterprises;

- Diversify that lending across geographies and types of business;

- Drive down cost/income ratio;

- Optimise capital structure.

Our vocabulary in expressing these strategic goals in the past has been hampered by our classification as an investment company. Concluding that we are more akin to a finance business than an investment company does allow a more comprehensive explanation of these key strategies.

Focus on Secured Lending to Small and Medium Sized Enterprises

Our business is positioned in an area that is likely to see above average returns for some years to come, as the scarcity of capital for corporate lending continues to have an effect. However, at the same time there are both political pressures to boost lending by banks and a hunger for yield from investors and both will put downward pressure on returns. The key to avoiding the erosion of return is seeking the more niche lending, where it is possible to maintain good returns, as the loans require specialist expertise and knowledge, rather than straightforward banking skills. These more niche areas of lending have higher barriers to entry, hence returns are far less likely to be competed away by yield-seeking investors, and neither are they subject to the same political pressures as more mainstream lending, because these loans would attract a premium cost of funding in any market conditions.

Diversify that Lending Across Geographies and Types of Business

Our business historically was focused on the US, although originally it was intended that there would be exposure to Europe. The GLIF Board has been comfortable with maintaining a high exposure to the US as credit conditions stabilised in the aftermath of the global financial crisis, but it is clearly better for us as a sterling-based business if we diversify the currency exposure we are running over time. We continue to examine a number of opportunities in the UK, Europe and the rest of the world. Where we expand into a new geography or type of business it will be along the lines that we have adopted with BMS, that we took some time to get to understand the business, acquired it through a deal which exposed a relatively modest amount of the GLIF balance sheet initially but we then intend to build out the platform extensively in the future.

Drive Down Cost/Income Ratio

This is one of the key differences from an investment company within our business, and will be a central focus of our strategy in future. An investment company judges its costs based on the proportion of its gross or net assets those costs represent, the assumption being that the capital value will rise over time, as markets rise with the growth in the underlying companies and economies. However, within our type of business the asset levels should remain relatively stable, and in the case of a pure loan may offer only downside rather than upside in capital terms. Therefore the proportion of our assets paid in costs is not as relevant as the proportion of our return that we are paying by way of costs. Hence we are seeking wherever possible to drive down our cost/income ratio. This may seem odd for investment company investors, but would be quite normal for financial businesses. As a result we expect to see a far greater proportion of our costs being variable in future, as opposed to relatively fixed cost of fees based on assets under management.

Optimise Capital Structure

We have used debt within our business since early in the Company's life, both at the Group level and at the subsidiary level, and it has added significantly to the Company's returns to shareholders. For investment companies leverage has been a controversial subject since the split capital investment company sector ran into trouble a decade ago. The implementation of the Retail Distribution Review has only reinforced the view that leveraged funds are unsuitable for many clients, although ironically those same investors may hold a financial company directly or indirectly that is significantly more geared than any fund. Within our business debt-funding is matching our assets with liabilities with the same characteristics, except that the average duration of our debt is longer than our assets. We will look at utilising debt within our business, both at the Group and at a subsidiary level, where we feel this can add to the return without significantly adding to the risk profile of the business as a whole. We will also look at alternative forms of capital at the Group level, just as banks will utilise preference shares and other instruments. However, this will be only one aspect of the capital management. We will also look to utilise the capital structure to align the interests of managers with shareholders. For example, the BMS management subscribed for stock in GLIF BMS Holdings Ltd ("GBH"), the holding company of BMS Finance, alongside GLIF. Whilst this provides the management team with a share in the success of BMS, it also puts them in a "first loss" position within the capital structure, as the GBP1m of share capital of GBH ranks behind GLIF's GBP11.6m loan note.

Review of Businesses

As a whole 2012 saw continued success in the US business, a winding down of the business of Asset Management Investment Company Ltd ("AMIC") and the acquisition of BMS Finance.

US Business

The US business has a number of elements that at present fall under the remit of T2 Advisers, but this will in future be reorganised so as to ensure the correct focus on key aspects of performance delivery by external advisers, whilst the overall strategy is brought in-house.

T2 CLO I Ltd, the Company's largest asset and the main focus of T2 Advisers' efforts on the Company's behalf, continues to perform well. During 2012 the CLO paid out a record level of income, but with the reinvestment period of the CLO coming to an end in July of this year, it is imperative that the managers are correctly incentivized to deliver returns to GLIF. It is therefore intended that the existing management contract amended to focus on T2 CLO I Ltd in the future, and that the majority of return under the management contract come by way of incentive fees, based on the returns to GLIF shareholders. It is expected that the initial cost of these arrangements will be similar to the fee currently paid to T2 Advisers.

On the other CLO equity positions, it is intended that the Company be advised in future by GMB Partners LLP, with the intention of optimising the returns on an ongoing basis. Both Halcyon and GSC produced strong cash flows during 2012, and as both have reinvestment periods stretching into 2014, we would expect healthy results in 2013 as well.

The remaining positions in the US business that will in future be managed internally are two positions purchased from T2 CLO I Ltd in 2009, namely Stratus Technologies equity and Koosharem 2nd Lien Loan, and Lombardia Capital Partners loan and warrant we acquired through the AMIC transaction.

AMIC

The remaining assets within AMIC were transferred to the Group during the year, with only a small amount of cash left remaining in AMIC, pending its winding up. The acquisition proved highly successful and the Group will retain the relationship with two of the holdings, IFDC and Lombardia Capital Partners.

BMS Finance

We completed the acquisition of BMS Finance, a specialist lender to small growth companies, primarily in the UK, in November. This was financed through the setting up of a new subsidiary, GLIF BMS Holdings Ltd, financed with GBP11.6m of a loan note to GLIF, which paid for the acquisition, and GBP1m of equity capital that was subsequently subscribed GBP667k by GLIF and GBP333k by the BMS management.

What was acquired for GBP11.6m was a 70% interest in Noble Venture Finance II LLP ("NVF") and 100% interest in BMS Finance AB Ltd, the UK operating business.

The NVF limited partnership was in wind down when we acquired BMS, and will continue to be run off by the BMS team. Of the GBP1.6m we paid for NVF, GBP1.4m had been returned in cash by the year end and what remains within the structure is a series of positions that may or may not realise any value in years to come, but do not represent any potential downside for GLIF and may provide some upside.

The principal business of BMS Finance is BMS Finance AB Ltd. This business lends to small growth companies, typically with revenue in single digit millions, approaching profitability and with a need for cash to expand their business and a value to the assets or the business that allows BMS to get comfortable that the loan can be recovered. The loans normally fall in the GBP0.5m to GBP2.0m range and usually come with a warrant in the business. The combination of a senior secured loan position and a warrant potentially enables BMS to realise a mezzanine style level of return, but with senior security.

We are working with the management team on a strategy to build the business from its current level. This will involve both enhanced distribution and enhancing the analytical resources within the firm.

It is early days, but we have been impressed with the management team, results continue to look promising, the pipeline of business is good and we regard this as an exciting addition to the Group.

Europe

At present we have only one small holding in Europe, that of IFDC equity. This Japanese long-only equity manager has an unparalleled track record, and correctly turned bullish before the recent strong run in the market. Although Japan remains out of favour with many investors, the company is very well placed for a pick up in demand. We receive a strong dividend from the business, and hence our retention of 30% of the stake we acquired from the AMIC transaction.

There may be opportunities opening up with the first CLOs beginning to be structured once more in Europe. We have been looking closely at this area and we do believe that some interesting returns may be available as we move forward. Any CLO would naturally have to focus heavily on Northern Europe for us to be comfortable with the risk/reward.

Outlook

We have multiple opportunities for growth in the business across a number of jurisdictions, both in structured finance such as CLOs, where we can deploy capital rapidly, and in finance businesses such as BMS, which take longer to consummate but carry the advantage of a sustainable competitive advantage.

The intention remains to deliver a mid-teens ROE to our investors and to pay a good proportion of that as a predictable sterling dividend, whilst reinvesting the remainder for growth in the loan book in the future.

Geoffrey Miller

Chief Executive Officer

Date: 2 April 2013

DIRECTORS' REPORT

The Directors present their annual report and the audited consolidated and Company financial statements (the "financial statements") for the year ended 31 December 2012. 

The Directors submit their Report together with the Consolidated and Company Statements of Comprehensive Income, the Consolidated and Company Statements of Financial Position, the Consolidated and Company Statements of Changes in Shareholders' Equity, the Consolidated and Company Statements of Cash Flows and the related notes for the year ended 31 December 2012, which have been prepared in accordance with International Financial Reporting Standards, in accordance with any relevant enactment for the time being in force, and are in agreement with the accounting records, which comply with Section 238 of the Companies (Guernsey) Law, 2008.

Principal Activities

Greenwich Loan Income Fund Limited (the "Company") was incorporated and domiciled in Guernsey, Channel Islands, as a company limited by shares and with limited liability on 9 June 2005 in accordance with The Companies (Guernsey) Law, 1994 (since superseded by The Companies (Guernsey) Law, 2008). The address of the registered office is P.O. Box 296, Sarnia House, Le Truchot, St Peter Port, Guernsey, GY1 4NA. The Company is a Guernsey Authorised Closed-ended Investment Scheme and is subject to the Authorised Closed-ended Investment Scheme Rules 2008. The Company was admitted to the AIM market of the London Stock Exchange on 5 August 2005.

The Company is an investment company, and its investment policies and strategies are managed by an outside investment manager, T2 Advisers, LLC ("T2 Advisers" or the "Investment Manager"), a registered investment adviser in the United States, under the terms of an investment management agreement. T2 Advisers is also the collateral manager for T2 Income Fund CLO I Ltd ("T2 CLO" or the "CLO").

On 26 October 2009, the Company received approval from shareholders and the Guernsey authorities to change its name from T2 Income Fund Limited to Greenwich Loan Income Fund Limited.

A Cayman Islands registered company, T2 CLO, was created on 11 October 2006. The Company owns the residual economic interest of T2 and therefore the operating results of T2 CLO are consolidated in these financial statements. On 31 January 2011, the Company acquired a wholly owned subsidiary, Asset Management Investment Company plc and the operating results are consolidated in these financial statements. Subsequent to this transaction Asset Management Investment Company plc changed its name to Asset Management Investment Company Limited ("AMIC"). As a result of this acquisition 11,333,610 new Ordinary Shares in the Company were issued. These additional new Ordinary Shares were admitted to the AIM market of the London Stock Exchange ("AIM") on 1 February 2011.

On 1 February 2011, all the Company's 98,633,610 Ordinary Shares in issue were admitted to trading on the Official List of the Channel Island Stock Exchange ("CISX").

Formation of Additional Subsidiary

As announced on 7 November 2012, the Company subscribed to 666,667 ordinary shares of GBP1 each (66.7%) in the capital of GLIF BMS Holdings Limited ("BMS"), a joint venture vehicle formed by the Company with the management team of BMS Finance AB Limited, who own the remaining 333,333 ordinary shares of GBP1 each (33.3%) in the capital of BMS.

This new partly owned subsidiary of the Company was formed to receive the assets of BMS Specialist Debt Fund Limited (the "Seller") acquired by the Company via the Asset Sale and Purchase Agreement, dated 6 November 2012, between the Company and the Seller. The Assets acquired comprised all of the issued share capital of BMS Finance AB Limited ("BMS Finance AB"), which is a UK-based specialist private finance company. BMS Finance AB was being financed by a deep discount bond issued to the Seller standing at the nominal sum of GBP20,738,000 (the "DDB"), as at the transaction date, which was also acquired by the Company pursuant to the Asset Sale and Purchase Agreement. In addition to the shares in BMS Finance AB and the DDB, the Company also acquired the Seller's interest in Noble Venture II Nominees Limited ("NV2N"), formerly Noble Venture Finance II Limited Partnership, and legacy warrants to subscribe for shares in Eazyfone Limited and EGS Group Limited (the "Warrants").

The value ascribed to the Assets was GBP1 in respect of the shares of BMS Finance AB, GBP9,977,954 in respect of the DDB, GBP1,613,106 in respect of the interest in NV2N. and GBP1 in respect of all of the 4 Warrants. The Company paid for these Assets by issuing a total of 20,545,400 Ordinary Shares (split between 2,518,271 Placing Shares and 18,027,129 Consideration Shares) at their Net Asset Value as at 30 September 2012 (being equal to the Net Asset Value per Ordinary Share of the Company) plus GBP1,310,998 in cash.

Immediately upon completion of the Asset Sale and Purchase Agreement, the Company has agreed to transfer the Assets to BMS pursuant to the Transfer Agreement.

The 20,545,400 additional new Ordinary Shares issued by the Company to facilitate this transaction were admitted to AIM and the CISX on 12 November 2012. Following admission the Company's total issued Ordinary Shares totalled 119,179,010.

Group

As at 31 December 2012, the Group comprised the Company, CLO, AMIC, BMS, BMS Finance AB and NV2N.

Directors

A list of the Directors who served the Company during the year is shown on page 3.

Results and Dividends

The Group and Company results for the year are set out on pages 17 and 18. Dividends of GBP4,892,597 were paid during the year (31 December 2011: GBP3,832,008).

Corporate Governance

Compliance

As a Guernsey incorporated company and under the AIM Rules for Companies, it is not a requirement for the Company to comply with The UK Corporate Governance Code issued by the Financial Reporting Council in September 2012 (formerly the Combined Code) and applicable for accounting periods beginning on or after 1 October 2012 (the "new Code"). However, the Directors place a high degree of importance on ensuring that high standards of corporate governance are maintained and have considered the principles and recommendations of the new Code. Furthermore, the Directors have considered the provisions of the Finance Sector Code of Corporate Governance published by the Guernsey Financial Services Commission ("GFSC") in September 2011 (the "Guernsey Code"), and the AIC Code of Corporate Governance (the "AIC Code").

The AIC Code, as explained by the AIC Guide, addresses all the principles set out in the new Code and the Board considers that reporting against the principles and recommendations of the AIC Code will provide better information to shareholders, therefore, the Company will continue to adopt the relevant provisions of the AIC Code.

As at 31 December 2012, the Company complied substantially with the relevant provisions of the new Code and the AIC Code and it is the intention of the Board that the Company will comply with those provisions (save with regard to the following provisions listed below) throughout the year ending 31 December 2013:

§ The appointment of a Senior Independent Director: Given the size and composition of the Board it is not felt necessary to separate the roles of Chairman and Senior Independent Director. The Board considers that all the independent Directors have different qualities and areas of expertise on which they may lead where issues arise and to whom concerns can be conveyed.

§ Establishment of nomination committee: Due to its size and composition, the Board does not consider it necessary to establish a nomination committee. The Board as a whole monitors performance and plans for director succession, either through Board meetings or, if appropriate, through the use of an appropriately constituted committee. Prospective candidates will be considered on merit, against objective criteria and with due regard for the benefits of diversity on the Board, including gender.

§ Establishment of management engagement committee: Due to its size and composition, the Board does not consider it necessary to establish a management engagement committee. The Board as a whole monitors the performance of the Company's service providers, either through Board meetings or, if appropriate, through the use of an appropriately constituted committee.

§ Internal audit function: The Board has reviewed the need for an internal audit function, as recommended by the Code. 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 operate as intended.

Independence of Directors

As at 31 December 2012, the Board consisted of four members, three of whom are non-executive and independent. During the prior year, Mr Miller became an executive Director of the Company under a Service Agreement effective from 31 March 2011.

The Directors recognise the importance of succession planning for the Company's Board and review the composition of the Board annually. However, the Board is of the view that length of service will not necessarily compromise the independence or contribution of Directors of an investment company where continuity and experience can be a benefit to the Board. Furthermore, the Board agrees with the view expressed in the AIC Code that long serving Directors should not be prevented from forming part of an independent majority or from acting as Chairman. Consequently no limit has been imposed on the overall length of service of the Directors.

Each Director will retire, and seek reappointment at every third annual general meeting ("AGM").

The Directors believe that the Board has a balance of skills and experience which enable it to provide effective strategic leadership and proper governance of the Company.

The Board has contractually delegated external agencies for the management of the investment portfolio, the custodial services and the day to day accounting and company secretarial requirements. Each of these contracts was only entered into after proper consideration by the Board of the quality and services offered.

The Board conducts an annual evaluation of its own performance and that of its committees and individual Directors.

Board Committees

Audit Committee

An Audit Committee has been appointed and is responsible for reviewing and monitoring internal financial control systems and risk management systems on which the Group is reliant, considering the annual accounts and audit report, considering the appointment and remuneration of the Company's auditors and monitoring and reviewing annually their independence, objectivity, effectiveness and qualifications. The members of the Audit Committee are James Carthew (Chairman), Patrick Firth and Frederick Forni. The Audit Committee has performed reviews of the internal financial control systems and risk management systems during the year. The Audit Committee is satisfied with the internal financial control systems of the Group. The Audit Committee will meet at least twice a year.

Remuneration Committee

Further to the appointment of Geoffrey Miller as an executive Director, the Board resolved in 2011 to appoint a Remuneration Committee comprised of Fred Forni as Chairman, Patrick Firth and James Carthew. The key duties include, but are not limited to, agreeing a framework for Director remuneration, ensuring management staff are appropriately incentivised to enhance performance, and reviewing the effectiveness of the remuneration policy on an ongoing basis. The Remuneration Committee was formed on 16 August 2011 and has adopted a formal terms of reference.

Executive Directors Remuneration

As detailed in note 4 to the financial statements, in addition to his fixed salary, Mr Miller is entitled to a contractual bonus equivalent to 10% of the total return, from dividends and from the Company's share price, in excess of 12%, full details of which are available on the Company's website (www.glifund.com). As this bonus is a non-fixed amount, total Directors remuneration will fluctuate year on year.

Management Engagement and Nomination Committees 

The Directors do not consider it necessary to establish separate management engagement and nomination committees at this stage. The business which would have otherwise been delegated to such committees is considered by the Board as a whole.

Meetings

The table below, details the attendance at Board and Committee meetings during the year:

* 13 Board meetings have been held during the year ended 31 December 2012

** 1 Remuneration Committee meeting has been held during the year ended 31 December 2012

*** 3 Audit Committee meetings have been held during the year ended 31 December 2012

Internal Controls

The Directors are responsible for overseeing the effectiveness of the internal financial control systems of the Company, which are designed to ensure proper accounting records are maintained, that the financial information on which the business decisions are made and which is issued for publication is reliable, and that the assets of the Company are safeguarded. Such a system of internal financial controls can only provide reasonable and not absolute assurance against misstatement or loss.

In accordance with the guidance published in the Turnbull Report by the Financial Reporting Council (the "FRC"), the Board has reviewed the Company's internal control procedures. These internal controls are implemented by the Company's three main service providers, the Investment Manager, the Administrator and the Custodian. The Audit Committee contacts each service provider on an annual basis to seek confirmation that each service provider had effective controls in place to control the risks associated with the services that they are contracted to provide to the Group. The Board is satisfied with the internal controls of the Group.

The Directors meet on a quarterly basis ("Management" meetings per the table above) and at other unscheduled times ("other" meetings per the table above) when necessary to assess Company operations and the setting and monitoring of investment strategy and investment performance. At such meetings, the Board receives from the Administrator and Investment Manager a full report on the Company's holdings and performance. The Board gives directions to the Investment Manager as to the investment objectives and limitations, and receives reports in relation to the financial position of the Company and the custody of its assets.

The Board does not consider it appropriate to directly implement social, ethical and environmental policies in place within an investment company investing in financial instruments. However, the Board acknowledges that in addition to financial, legal and market due diligence, the Investment Manager's investment appraisal includes a rigorous assessment of a potential Investee Company's social, ethical and environmental policies, and therefore the Investment Manager monitors such policies and practices following any investment.

The Board has considered non-financial areas of risk such as disaster recovery and investment management, staffing levels and considers adequate arrangements to be in place.

Anti-bribery and Corruption

The Board acknowledge that the Company's international operations may give rise to possible claims of bribery and corruption. In consideration of the recently enacted UK Bribery Act, at the date of this report the Board had 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. The Board has adopted a zero tolerance policy towards bribery and has reiterated its commitment to carry out business fairly, honestly and openly.

Shareholder Views

The Board regularly monitors the shareholder profile of the Company. All shareholders have the opportunity, and are encouraged, to attend the Company AGM at which members of the Board are available in person to meet shareholders and answer questions. In addition, the Company's Investment Manager, Corporate Broker and Executive Director each maintain regular contact with major shareholders and report regularly to the Board on shareholder views.

Substantial Shareholdings

As at 18 March 2013, the Company was aware of the following substantial shareholders who held more than 3 per cent. of issued share capital of the Company:

* Based on the share register as at 18 March 2013

**For or on behalf of Philip J Milton & Company Plc or its discretionary clients

Directors Interests

As at 31 December 2012, the Directors had the following beneficial interests in the Ordinary Shares of the Company:

As at 31 December 2012, there were no unexercised share options for Ordinary Shares of the Company (31 December 2011: nil Ordinary Shares).

Statement of Directors' Responsibilities

The Directors are responsible for preparing the financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, and The Companies (Guernsey) Law, 2008 for each financial period which give a true and fair view of the state of affairs of the Company and the Group as at the end of the financial period and of the profit or loss for that period. International Accounting Standard 1 requires that financial statements present fairly for each financial period the Company's financial position, financial performance and cash flows. This requires faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International Accounting Standards Board's "Framework for the preparation and presentation of financial statements". In virtually all circumstances a fair presentation will be achieved by compliance with all IFRS. In preparing these financial statements, the Directors are required to:

·; ensure that the financial statements comply with the Memorandum and Articles of Association and IFRS, as published by the International Accounting Standards Board;

·; select suitable accounting policies and apply them consistently;

·; present information including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

·; make judgements and estimates that are reasonable and prudent;

·; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company and the Group will continue in business.

The Directors confirm that they have complied with the above requirements in preparing the financial statements.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and the Group and enable them to ensure that the financial statements have been properly prepared in accordance with The Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Directors Statement

In accordance with section 249 of The Companies (Guernsey) Law, 2008, the Directors who held office at the date of approval of this Directors' Report confirm that:

·; there is no relevant audit information of which the Company's auditors are unaware; and

·; the Directors have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.

Auditors

A resolution for the reappointment of Grant Thornton Limited will be proposed at the forthcoming Annual General Meeting.

Approved and signed on behalf of the Board of Directors on 2 April 2013.

Director: Patrick Firth

REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF

GREENWICH LOAN INCOME FUND LIMITED

We have audited the consolidated and Company financial statements (the "financial statements") of Greenwich Loan Income Fund Limited (the "Company") for the year ended 31 December 2012 which comprise Consolidated and Company Statements of Comprehensive Income, Consolidated and Company Statements of Financial Position, Consolidated and Company Statements of Changes in Equity, Consolidated and Company Statements of Cash Flows and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

This report is made solely to the Company's members, as a body, in accordance with Section 262 of The Companies (Guernsey) Law, 2008. 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 auditors' 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.

Respective responsibilities of Directors and auditors

As described in the Statement of Directors' Responsibilities on page 15 the Company's Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable legal and regulatory requirements and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

Scope of the audit of the financial statements

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements.

In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on the financial statements

In our opinion the financial statements:

·; give a true and fair view of the state of the Company's and Group's affairs as at 31 December 2012 and of the Company's and Group's loss for the year then ended;

·; have been properly prepared in accordance with IFRS as adopted by the European Union; and

·; have been prepared in accordance with the requirements The Companies (Guernsey) Law, 2008.

Matters on which we are required to report by exception

We have nothing to report in respect of the following where The Companies (Guernsey) Law, 2008 requires us to report to you, if in our opinion:

·; the Company has not kept proper accounting records; or

·; the financial statements are not in agreement with the accounting records and returns; or

·; we have not received all the information and explanations, which to the best of our knowledge and belief, are necessary for the purposes of our audit.

Grant Thornton Limited

Chartered Accountants

St Peter Port, Guernsey, Channel Islands

Date: 2 April 2013

Greenwich Loan Income Fund Limited

For the year ended 31 December 2012

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

The accompanying notes on pages 25 to 49 form an integral part of these financial statements.

Greenwich Loan Income Fund Limited

For the year ended 31 December 2012

COMPANY STATEMENT OF COMPREHENSIVE INCOME

All of the (loss)/profit for the current and prior year are attributable to the equity holders of the parent.

The accompanying notes on pages 25 to 49 form an integral part of these financial statements.

Greenwich Loan Income Fund Limited

As at 31 December 2012

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

The financial statements were approved by the Board of Directors on 2 April 2013 and were signed on its behalf by:

Director: James Carthew

Director: Patrick Firth

The accompanying notes on pages 25 to 49 form an integral part of these financial statements.

Greenwich Loan Income Fund Limited

As at 31 December 2012

COMPANY STATEMENT OF FINANCIAL POSITION

The financial statements were approved by the Board of Directors on 2 April 2013 and were signed on its behalf by:

Director: James Carthew

Director: Patrick Firth

The accompanying notes on pages 25 to 49 form an integral part of these financial statements.

Greenwich Loan Income Fund Limited

For the year ended 31 December 2012

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

*During the year ended 31 December 2012, the Company made four dividend payments, totalling 4.7 pence per Ordinary Share

**During the year ended 31 December 2011, the Company made four dividend payments, totalling 4 pence per Ordinary Share

The accompanying notes on pages 25 to 49 form an integral part of these financial statements.

Greenwich Loan Income Fund Limited

For the year ended 31 December 2012

COMPANY STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

*During the year ended 31 December 2012, the Company made four dividend payments, totalling 4.7 pence per Ordinary Share

**During the year ended 31 December 2011, the Company made four dividend payments, totalling 4 pence per Ordinary Share

The accompanying notes on pages 25 to 49 form an integral part of these financial statements.

Greenwich Loan Income Fund Limited

For the year ended 31 December 2012

CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes on pages 25 to 49 form an integral part of these financial statements.

Greenwich Loan Income Fund Limited

For the year ended 31 December 2012

COMPANY STATEMENTS OF CASH FLOWS