Trading update

T2 Income Fund Limited
14 March 2006

T2 Income Fund - year-end report



March 14, 2006. T2 Income Fund Limited ('T2' or the 'Company') announced today
updated information regarding its first fiscal period of operations. T2 was
admitted to trading on AIM on August 5, 2005. For the period from inception
through December 31, 2005, the Company earned net investment income of
approximately £218,000 and unrealized gains on investments (related to currency
fluctuations) of approximately £30,000. As of the end of the year, the net asset
value per share was £0.97. This information is unaudited.



During the last quarter of the year, the Company made its first two investments.
On December 15, 2005 the Company invested £1,156,430 in senior second lien debt
of Corel Corporation, a Canadian-based software company, specializing in office
productivity software and graphic and imaging applications. The note bears
interest at LIBOR (the tenor selected by the borrower from time to time) plus
800 basis points and matures August 16, 2010.



On December 30, 2005, the Company closed its second investment, consisting of
£4.7 million senior secured first lien notes with warrants, in Peer 1 Network,
Inc., a Canadian-based provider of outsourced Internet infrastructure and
services. The notes mature on September 1, 2008, and may be extended at
borrower's option for an additional two years; the notes bear interest at LIBOR
(the tenor selected by the borrower from time to time) plus 650 basis points. T2
also received warrants to purchase 475,000 common shares (0.4%) of Peer 1
Network Enterprises, Inc., the parent company, at a strike price of US$0.23 per
share.



The Company earned approximately £649,000 in interest income through December
31, 2005, primarily from short-term deposits; during the quarter cash deposits
were bearing interest at rates of approximately 4.3% - 4.5%. The Company also
earned closing fees of approximately £47,000 from the Peer 1 transaction
described above. Expenses from inception to December 31, 2005 were consistent
with budget, and totaled approximately £478,000, excluding formation expenses.



While the Company remains pleased with the quality and number of investment
opportunities available to it since its listing, it has, for a variety of
reasons, chosen to not yet consummate many of those transactions thus far. The
reasons include transaction-specific due-diligence issues, pricing and equity
terms that were unacceptable, and the Company's ability to achieve what it
considers to be an appropriate risk/reward relationship in its investments. T2's
Investment Adviser has since admission seen a significant number of investment
opportunities in profitable and growing technology companies. However, the
Company believes that a limiting factor in progressing certain of those
transactions has been a more deliberate approach towards debt financing on the
part of some potential portfolio companies, which has led to
slower-than-expected progress in the negotiation and completion of certain
transactions.



At the same time, T2 has seen a range of technology companies (including
companies in the enterprise software, IT services and Internet sectors) for
which debt financing represents an attractive and efficient alternative to
traditional equity capital investment, and the Company remains focused on
opportunities to make investments consistent with its mandate.  Since the time
of its admission to trading on AIM in August 2005, the Company has reviewed more
than 30 transactions involving the debt securities of technology companies. The
Company is currently involved in due diligence processes for 8 transactions,
with a total value in excess of £20.0 million, although the Company continues to
note that there can be no guarantee that it will make these or similar
investments.



The Company has also been active in the syndicated loan market, in addition to
individually negotiated transactions.  It is expected that over time, additional
investments will be identified in this market.



In view of the above, it does not appear at this time that the Company will
achieve the original projected yield of 7.2% for the four quarters ending June
2006, reflecting the slower pace of investment. The Company's ability to pay
dividends will ultimately be based upon the pace of investment activity.



The Company will make its financial statements available after the completion of
the annual audit.



The contents of this announcement include statements that are, or may be deemed
to be 'forward looking statements'.  These forward-looking statements can be
identified by the use of forward-looking terminology, including the terms '
believes', 'estimates', 'anticipates', 'expects', 'intends', 'may', 'will' or '
should'.  They include the statement regarding the projected yield.  By their
nature, forward looking statements involve risks and uncertainties and readers
are cautioned that any such forward-looking statements are not guarantees of
future performance.  The Company's actual results and performance may differ
materially from the impression created by the forward-looking statements.  These
forward-looking statements speak only as at the date of this announcement and
the Company undertakes no obligation to publicly update or revise
forward-looking statements, except as may be required by applicable law and
regulation (including the AIM Rules).  No statement in this announcement is
intended to be a profit forecast.




                      This information is provided by RNS
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