Middlefield Canadian Income PCC: Half-year report

Middlefield Canadian Income PCC: Half-year report



*Middlefield Canadian Income PCC (the "Company")*
*Including Middlefield Canadian Income – GBP PC (the “Fund”), a cell of the Company*
Registered No:  93546
Legal Entity Identifier: 2138007ENW3JEJXC8658


The information set out in this announcement is the Company’s full unedited half-yearly financial results (unaudited) for the period ended 30 June 2020 (the "*HYFR*").

The HYFR is expected to be printed and posted to all shareholders within September, 2020.  The Company will also make the HYFR available in the ‘Reports and Filings’ section of the Company’s website at http://www.middlefield.co.uk/mcit.htm in the coming days and the Company will make a further announcement once the HYFR has been uploaded to the Company’s website and to the National Storage Mechanism at https://data.fca.org.uk/#/nsm/nationalstoragemechanism


Chris Bougourd
*JTC Fund Solutions (Guernsey) Limited*
Assistant Secretary
Tel.: 01481 702400

Dean Orrico
*Middlefield International Limited*
Tel.: 01203 7094016


*a cell of the Company  *

*Half Yearly Report and Interim Condensed Financial Statements (Unaudited)*

*For the period 1 January 2020 to 30 June 2020*


The Fund is a closed-ended investment company incorporated on 24 May 2006. The Fund was admitted to the FTSE UK All-Share Index effective 20 June 2011.

The Fund seeks to provide shareholders with a high level of dividends as well as capital growth over the longer term. The Fund intends to pay dividends on a quarterly basis each year. 

The Fund has the power to borrow up to 25 percent of its total assets and is expected to employ gearing in the range of 0 to 20 percent in the normal course of events.

The Fund currently targets a dividend of 5.1 pence per share per annum payable quarterly.


Founded in 1979, Middlefield Group is licensed by the FCA with an office in the U.K. Middlefield is a specialty investment manager focused on global equity income. The Fund has significantly outperformed its benchmark since the Fund’s inception in July 2006.

Active management allows the Manager to strategically and tactically shift the portfolio’s composition to achieve greater investment results compared to the overall market.

The Fund’s robust investment process utilises top down / bottom up analysis that combines unique thematic overviews with comprehensive company-level research for stock selection.

The Fund invests in North American equity income securities, with a particular focus in Canada, providing U.K. investors with diversification into sectors underrepresented in the U.K.

With $4 billion in assets under management, Middlefield Group has developed a specialized expertise in equity strategies emphasising both current income and total return over many years.

The Fund offers an attractive dividend yield of 6.3% using the last traded share price at the end of the period.

*TABLE OF CONTENTS                                                                                                 *

Responsibility Statement                                                                                                                                         4

Performance Record                                                                                                                                                5

Chairman’s Report                                                                                                                                                   6

Investment Manager’s Interim Report (Unaudited)                                                                                                     8

Middlefield ESG Policy                                                                                                                                             13

Distribution of Investments                                                                                                                                     14

*Interim Condensed Financial Statements of the Fund (Unaudited)*

Condensed Statement of Financial Position of the Fund (Unaudited)                                                                            15

Condensed Statement of Comprehensive Income/(Loss) of the Fund (Unaudited)                                                         16

Condensed Statement of Changes in Redeemable Participating Preference
Shareholders’ Equity of the Fund (Unaudited)                                                                                                            17

Condensed Cash Flow Statement of the Fund (Unaudited)                                                                                           18

Notes to the Interim Condensed Financial Statements of the Fund (Unaudited)                                                             19

*Interim Financial Statements of the Company (Unaudited)*

Statement of Financial Position of the Company (Unaudited)                                                                                        32                                        

Notes to the Interim Financial Statements of the Company (Unaudited)                                                                        33

Definitions                                                                                                                                                               34

Management and Administration                                                                                                                               IBC


We confirm that to the best of our knowledge:

· The interim report and financial statements have been prepared in accordance with International Accounting Standard 34 “Interim Financial Reporting” and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company.
· The Chairman’s Report and Investment Manager’s Interim Report include a fair review of the development, performance and position of the Company and a description of the risks and uncertainties as disclosed in note 17 to the interim financial statements, that it faces for the next six months as required by DTR 4.2.7.R of the disclosure Guidance and Transparency Rules.
· The Investment Manager’s Interim Report and note 11 to the interim financial statements include a fair review of related party transactions and changes therein, as required by DTR 4.2.8.R of the Disclosure Guidance and Transparency Rules.

By order of the Board

Nicholas Villiers                                                                                       Richard Hughes                                                                                                                                                  
Director                                                                                                  Director

Date: 17 September 2020

* *


*NAV* *NAV per Share* *Share Price* *Market Capitalisation* *Net Gearing*
*£102.24m* *96.02p* *81.50p* *£86.79m* *6.3%*  
*Dividends* *Dividend Yield* *Share Price Return^¹* *NAV Return¹* *Benchmark Return¹*
*5.1p* *6.3%* *-16.3%* *-15.9%* *-19.6%*

Date: As at 30 June 2020
¹Year-to-date Total Return            

Date: As at 30 June 2020


It is my pleasure to present the Half Yearly Report for the period ended 30 June 2020. The Fund generated a total return of -15.9%, outperforming the Benchmark return of -19.6%. The Fund’s share price returned -16.3% during the first half of the year. The global pandemic whipsawed markets during the period, widening the discount to NAV to 15.1% at June’s conclusion. Two dividends of 1.275p per redeemable participating preference share were paid during the period. Since inception in 2006, the Fund’s NAV has generated a cumulative return of 114.9%, outpacing the cumulative returns of both the Benchmark and the TSX of 77.8% and 93.0%, respectively.

Global markets were overwhelmed by the spread of COVID-19 in the first half of 2020. Economies around the world slumped dramatically as government-imposed lockdowns shuttered businesses and caused a deep contraction in consumer activity. During that period, the Company transitioned to a new digital working arrangement without any impact on operations.  In March, sovereign-bond yields fell to record lows as investors flocked to safe haven assets and central banks ramped up bond buying. The Fund implemented a series of measures to de-risk the portfolio with an emphasis on capital preservation, resulting in the Fund’s NAV outperforming the benchmark by 9% by the time U.S. equity markets bottomed on 23rd March 2020. The Fund’s NAV outperformed the benchmark by 3.7% over the six-month period. The action to preserve capital was principally responsible for a fall in EPS from 2.17p to 1.82p. The Board has maintained the quarterly dividend as it expects earnings to increase in the absence of unforeseen circumstances’ as the income benefits from the deployment of additional capital feeds through. With a focus on higher quality, more defensive issuers, the Fund increased its exposure to Utilities based on the view that the sector will benefit from sustained low interest rates as well as widespread political support for renewable power. On the other hand, the Fund reduced its exposure to sectors facing adversity related to the pandemic and weak energy prices. Exposure to Financials was lowered from 20.6% at the end of 2019 to 11.4% of NAV at the end of February, significantly below the Benchmark weight of 29.2% at the time. While positions in Energy producers were reduced to zero, the Fund has maintained exposure to select Pipelines, which are less exposed to swings in commodity prices due to their long-term contractual revenues. Of special note, only one position in the Fund, Chorus Aviation, reduced its dividend in the first half 2020. 

Investor panic began to subside in early April as a result of unprecedented monetary and fiscal policy measures implemented by governments and central banks around the world. The massive stimulus programs provided relief to households and businesses and also supported the proper functioning of financial markets. These actions together with increasing optimism surrounding vaccines and therapies drove a rapid and significant appreciation in equities from their March lows with the S&P 500 Index recovering nearly all of its losses by the end of June, led by growth stocks and companies with stable and predictable earnings. The Fund participated in the bounce back by selectively increasing its exposure to U.S. issuers from 24% to 32% of the portfolio by 30 June, 2020, primarily through investments in Information Technology and Healthcare companies. These two sectors are uniquely positioned to capitalize on both near and long-term opportunities that have emerged or accelerated as a result of the pandemic.

The Manager tactically manages the Fund’s gearing, which, on a net basis, ranged from 10% to -14.7% (i.e. net cash) over the first half of the year. In response to deeply discounted valuations and more recent signs of a pick-up in economic activity, the Manager gradually deployed capital throughout the second quarter, resulting in net gearing of approximately 6.3% as at 30 June 2020.

Although the Fund has been significantly underweight Financials, our exposure to select Canadian and U.S. banks was still a drag on performance. The Manager believes the North American banking sector remains well diversified and relatively well capitalized. However, the prospect of lower for longer interest rates and uncertainty surrounding the pace of the economic recovery remain headwinds. The Fund is focused on select insurance and banking companies that trade at attractive valuations and possess above average levels of capitalization and liquidity.

*Board Transition*

Mrs Joanna Dentskevich resigned from her position on the Board effective 30 June 2020. In her stead, the Board of the Company has appointed Mr Raymond Apsey as a non-executive director of the Company with effect from 3 September, 2020. Mr Apsey’s appointment is being made on an interim basis in order to satisfy the Jersey Financial Services Commission’s requirement for the Company to have at least two Jersey-resident directors.  In light of travel restrictions related to COVID-19, the Nomination and Remuneration Committee’s search will be greatly assisted by Mr Apsey’s local knowledge.

Mr Apsey previously served as a non-executive director of the Company from its incorporation on 24 May, 2006 until 13 June, 2019. Mr Apsey is a Fellow of the Institute of Chartered Secretaries and Administrators with extensive experience at management level of the offshore finance industry in the Bahamas, the Channel Islands and the Cayman Islands. He joined the Morgan Grenfell Offshore Group in 1975 to head the Corporate and Trust Division and held various senior appointments, including Deputy Managing Director of Jersey, Managing Director of Cayman and Group Director, before retiring in December, 1995. Mr Apsey resides in Jersey.

*CHAIRMAN’S REPORT (continued)*

*Board Transition (continued)*

We are pleased that Mr Apsey has accepted a position on our Board. His financial services expertise, previous tenure, experience and local knowledge make him the ideal candidate for this interim role.


We believe the outlook for equity income remains attractive. The Fund’s actively managed, diversified portfolio of dividend paying and dividend growing equities is well-positioned against the backdrop of a slower global economy and near-zero interest rates. We remain focused on companies with predictable cash flows and sustainable business models to mitigate volatility, especially in light of the upcoming U.S. general election and the ongoing economic uncertainty from the COVID-19 pandemic.

We thank you for your continued support.

Nicholas Villiers
Date: 17 September 2020

*Six months to 30 June 2020 (Unaudited)*

On the invitation of the Directors of the Company, this investment manager’s interim report is provided by Middlefield Limited, which acts as the investment manager of the Fund.

This statement has been prepared to provide additional information to Shareholders to meet the relevant requirements of the FCA’s Disclosure Guidance and Transparency Rules. It should not be relied upon by any party for any purpose other than as stated above.


The Fund invests in a broadly diversified portfolio comprised primarily of Canadian and U.S. equity income securities with the objective of providing shareholders with high dividends as well as capital growth over the longer term. The Fund intends to pay dividends on a quarterly basis each year. The current distribution is set at 5.1 pence per annum, paid quarterly.

The Fund will seek to achieve its investment objective by primarily investing in the securities of companies and Real Estate Investment Trusts (“REITs”), domiciled in Canada and the United States and listed on Canadian and U.S. stock exchanges, which the investment manager believes will provide an attractive level of distributions and growth over time.


Global markets sold-off sharply in Q1 2020 as the COVID-19 pandemic began to spread throughout the world. Economic activity came to an abrupt halt as governments imposed measures aimed at reducing the rate of infection. In response to the pandemic, central banks and governments around the world were quick to act in lowering short-term borrowing rates and implementing unprecedented levels of fiscal stimulus. These efforts helped equities recover nearly all of their losses during the second quarter, with many stocks currently trading at or near all-time highs. Despite having been down almost 30% at its lows, the S&P TSX Composite returned -5.3% while the S&P 500 Index returned +3.6% during the first half of 2020 (in GBP).

The U.S. Federal Reserve has enacted a broad array of measures to stem the economic damage from the pandemic, including a $2.3 trillion lending program and reduction in the federal funds rate from 1.5% to 0%. U.S. monetary policy was matched by significant fiscal stimulus in the form of the USD$2.2 trillion Coronavirus Aid Relief and Economic Security Act with an expectation of additional stimulus from Congress before the end of September. In Canada, fiscal stimulus has exceeded CAD$900 billion to provide economic support to both consumers and businesses impacted by the pandemic while the Bank of Canada has reduced the overnight rate from 1.75% in March to 0.25% currently. North American stock prices reacted favourably to the unprecedented stimulus measures and rebounded sharply at the end of March. The vast majority of Canadian and U.S. dividend payers maintained their payout levels as their share prices continued to clawback losses throughout Q2 2020.

Dividends cuts as at 30 June, 2020

*As at 31 December, 2019

The recovery in equities has been led by the Information Technology sector, best represented by the NASDAQ Composite which returned 20.5% in GBP for the six months ended 30 June, 2020. The pandemic has accelerated the trend of employees working from home, thereby driving demand for data-reliant services such as streaming, cloud storage and virtual communication. Against this backdrop, the Fund initiated positions in dividend-paying technology stocks during the first half of the year, with the sector representing over 9% of the Fund’s assets as at 30 June, 2020. Of note, since being added to the portfolio, Microsoft Corp. has generated a total return of 27% and we expect the company to continue to capture a growing share of corporate and government IT budgets for the foreseeable future.

*Six months to 30 June 2020 (Unaudited)*

The Fund also initiated several positions in the Healthcare sector, which trades at a discount to the broader market despite generating strong cash flow from needs-based products, healthy dividends and sector-specific government stimulus. With the COVID-19 vaccine market expected to be worth over $20 billion globally by 2025, the Fund added exposure to Pfizer, Johnson & Johnson and Abbot Laboratories. Pfizer, with its partner BioNTech, have released encouraging data and received fast-track approval from the U.S. Food and Drug Administration for two of their mRNA-based COVID-19 vaccine candidates. Johnson & Johnson, one of the world’s largest healthcare companies diversified across biopharma and medical equipment, is also developing a lead COVID-19 vaccine candidate for clinical trials and has accelerated its initial timeline by several months, with data expected later this year. Finally, Abbott Laboratories, the diversified medical equipment and devices company, has a suite of COVID-19 testing kits which we expect to drive meaningful revenue growth over the next several years.

Driven by Office and Retail REITs that have been adversely affected by the pandemic due to work from home and e-commerce trends, Real Estate underperformed the broader market. Given our concerns about these subgroups, however, the Fund’s Real Estate portfolio has minimal exposure to them. Its largest weighting is Industrial REITs, whose fundamentals continue to strengthen as a result of the accelerated adoption of on-line shopping and the corresponding increase in demand for logistics and distribution services. Granite REIT and WPT Industrial REIT are two of the Fund’s core positions and are significantly leveraged to tenants in e-commerce. These companies generated total returns of 11.1% and 3.2% in GBP, respectively, in the first half of the year, significantly outperforming the S&P/TSX Capped REIT Index total return of -19.4% over the same period.

Utilities surpassed Real Estate as the Fund’s largest sector weight as at 30 June 2020. In light of a slowing global economy and surging unemployment, it is increasingly likely that infrastructure spending will become a cornerstone of expansionary fiscal policy. Moreover, accommodative monetary policy in the form of low or zero interest rates and a relaxed lending environment are expected to persist, supporting the valuations for the Utilities sector. In particular, companies focused on renewable power generation and the decarbonization of the electric grid are the most compelling at this time. Ongoing support for “net zero” climate policies around the world could lay the foundation for multi-decade tailwinds for renewable power projects. Following recent announcements related to the Green Deal in Europe, Democratic presidential candidate Joe Biden announced a $2 trillion climate plan with the longer-term goal of achieving a 100% clean electricity standard by 2035. With the substantial reduction in the cost of producing energy from solar and wind, the renewables sector is well-positioned for continued growth in market share and profitability. Portfolio holdings such as Northland Power and Brookfield Renewable Power, which represent the two largest Utilities issuers in the Fund, are well positioned to benefit from this trend.

The Fund was very active in managing its exposure to the Financials sector during the first half of 2020. Financials accounted for over 20% of the Fund’s NAV at the beginning of the year and was the Fund’s second largest sector weight. Due to the pandemic, our view on the sector shifted with the flattening of the yield curve and increase in bad debt provisions for corporate and consumer lending books. By 28 February, Financials represented only 11.4% of the Fund’s NAV. Due to unprecedented levels of fiscal stimulus as well as deeply discounted valuations, the Fund began to gradually add to high-quality banks and life insurers during May and June, bringing its exposure back up to 16.2% as at 30 June, 2020.

The Canadian dollar appreciated by 2.3% relative to GBP in the first half of the year. Much of its strength can be attributed to the price of gold, which appreciated by over 17% during the first half of the year, lifting the Canadian Materials sector by 15% over this period. The U.S. dollar exhibited its usual strength during times of financial stress, as measured by the U.S. Dollar Index appreciating by 6.7% against a basket of foreign currencies between 31 December 2019 and 20 March 2020. Unlike gold, which is trading near all-time highs, the U.S. dollar depreciated during the second quarter as the Federal Reserve re-initiated quantitative easing in addition to new lending facilities to support businesses and avoid layoffs. The Fund’s exposure to both the Canadian and U.S. Dollars is unhedged.


The Fund paid quarterly dividends of 1.275 pence per share in each of January and April 2020, equivalent to dividends of 5.1p per annum.


Related party transactions are disclosed in greater detail in Note 11 of the Notes to the Interim Condensed Financial Statements of the Fund (unaudited).

There have been no material changes in the related party transactions from those described in the 2019 Annual Financial Report.

*Six months to 30 June 2020 (Unaudited)*


The Board is not aware of any significant event or transaction which has occurred between 1 July 2020 and the date of publication of this statement which could have a material impact on the financial position of the Fund.


At each of the Company and Fund Annual General Meetings held on 18 June 2020, all resolutions, relating to both ordinary business and special business, were duly passed on a poll. 


Shareholders can write to the Company at its registered office or by email to the Assistant Secretary at fundservicesgsy@jtcgroup.com.


There are a number of potential risks and uncertainties, which could have a material impact on the Fund’s performance over the remaining six months of the year and could cause actual results to differ materially from expected and historical results.  Further information on the principal risks and uncertainties are included on pages 21 to 24 of the 2019 Annual Report and in Note 17 of the Notes to the Interim Condensed Financial Statements of the Fund (unaudited).

The Directors consider that the principal risks and uncertainties facing the Company, including the uncertainty relating to the impact of the pandemic and Brexit, remain substantially unchanged since the publication of the Company’s 2019 annual report and financial statements and are expected to remain relevant to the Company for the next six months of its financial year.


Looking ahead to the second half of 2020, we believe the long-term outlook for North American equities is positive. In the short term, however, there are various risks we are monitoring in addition to the ongoing effects of the pandemic. The U.S. election in November, a pending Brexit deadline and the deterioration of U.S.-China relations could all serve as catalysts for heightened equity market volatility in the latter half of the year. Notwithstanding, central bank policies are expected to remain accommodative and GDP growth is positive in most regions. Canada remains an attractive jurisdiction for investment and is emerging as a world-class incubator for innovation and technology. We expect the Fund’s strategic asset allocation towards sectors such as renewable power and industrial real estate to perform well in the current environment.

*Middlefield Limited*
*Date: 17 September 2020*

Past performance is not a guide to future performance.
This half-yearly financial report is available at:  www.middlefield.co.uk.

*Six months to 30 June 2020 (Unaudited)*

*Top 10 Holdings as at 30 June, 2020*

* *

* *

*Company* *Sector* *% of NAV*
*Northland Power*
Northland is an independent power producer with significant expertise in developing and operating clean energy generation facilities, particularly in offshore wind. Most recently, the company has been focused on developing offshore wind projects in Europe and Asia and expanding its footprint in Central and South America. Utilities  


CIBC is among Canada’s five largest banks, offering domestic retail banking, wealth management capital markets services. CIBC is under- valued relative to the other big bank and pays an attractive dividend which is well-covered by the bank’s strong capital position.  Financials 4.8%
*Brookfield Renewables*
Brookfield Renewable Partners is one of the world’s largest publicly traded, pure-play independent power producers focused on renewables. Due to its significant scale, diversification and global footprint, it is well-positioned to benefit from government initiatives to increase infrastructure spending on decarbonization projects. Utilities 4.5%
Enbridge is North America’s largest energy infrastructure company with business platforms that include a network of crude oil, liquids and natural gas pipelines, regulated gas distribution utilities and renewable power generation. Enbridge delivers over 60% of U.S.-bound Canadian crude oil production and transports c. 20% of all natural gas consumed in the U.S. Pipelines 4.4%
Microsoft was added to the portfolio in March due to the strength of Azure cloud serves as well as its integral work-from-home suite, which includes Teams and Office 365. The company delivered strong Q1 results and is well-positioned to outperform throughout the duration of the pandemic and over the long-term. Information Technology 4.3%

*Six months to 30 June 2020 (Unaudited)*

*Top 10 Holdings as at 30 June, 2020 (continued)*

* *

*Company* *Sector* *% of NAV*
*Sun Life Financial*
Sun Life is a leading Canadian financial services company focused on life insurance and wealth management with a solid capital position and low leverage. The company is growing its international operations, specifically in Asia, which supports the company’s long-term target of double-digit top and bottom line growth. Financials 4.3%
*BCE *
BCE is Canada’s largest media and communications company with more than 22 million consumer and business connections. The company launched Canada’s largest 5G wireless network during the summer of 2020, offering unprecedented mobile data speeds as well as Canada’s broadest selection of 5G-capable phones. BCE also owns premier media and entertainment assets in television, radio, digital media and sports. Communication Services 4.1%
McDonald’s is the world’s largest fast-food restaurant chain and one of the most recognized brands globally. The company generates consistent free cash flow, supporting the company’s steady dividend increases. McDonald’s has maintained its leadership position through constant innovation of its operations and menu offerings. Consumer Discretionary 3.7%
*WPT Industrial REIT*
WPT Industrial REIT owns a portfolio of premier warehouse and distribution centers in strategically located markets throughout the U.S. Its properties offer cash flow stability via high occupancy, tenant retention and contracted rent escalations. WPT is partnered with Canada’s largest institutional investor, CPPIB, in its private capital management business which targets value-add and development investments. Real Estate 3.6%
*Granite REIT*
Granite is a Canadian REIT focused on industrial properties, an asset class poised to benefit from the secular growth in E-commerce. Management has completed a number of strategic acquisitions in critical logistics hubs across Canada, the U.S. and Europe and has significantly diversified its tenant base in recent years. Granite has provided the Fund with attractive total returns and has grown its dividend for 8 consecutive years. Real Estate 3.5%

TOTAL                                                                                                                                                                                                                                       42.5%


*Our Philosophy*

The primary objective of Middlefield’s portfolio management team is to provide unitholders with competitive risk-adjusted returns over the long-term. It is our fiduciary responsibility to employ a disciplined investment process that seeks to identify attractive investment opportunities and evaluate all known and unknown risks that could impact portfolio returns. We do this by applying a consistent process to identify investment opportunities and by closely monitoring each of our holdings on an ongoing basis.

Consistent with these objectives, our process integrates Environmental, Social and Governance (ESG) related analysis. ESG has become an important component of a complete and thorough investment analysis. We believe the integration of ESG analysis will result in a more fulsome understanding of a company’s strategy, culture and sustainability.

*Our Process*

We incorporate ESG data/scores in our multi-disciplined investment process to evaluate investments. Our methodology includes a qualitative review and assignment of ESG scores to individual holdings. Each company is analyzed on an absolute basis and measured relative to its peers. The ESG data/scores do not govern investment decisions on their own. They are reviewed and considered alongside our fundamental, quantitative and qualitative research.

*The Scoring System*

Middlefield’s scoring system utilizes the average ESG scores from three reputable third-party data providers. In addition, we cross-reference potential investments with the constituents of leading ESG indexes to assess their eligibility in ESG-focused mandates. The data providers we have chosen to incorporate into our ESG analysis include:


A global leader in ESG and Corporate Governance research and ratings, Sustainalytics supports hundreds of the world’s leading investors to incorporate ESG and corporate governance insights into their investment processes. Its coverage spans 11,000 companies across 40 industry-specific metrics.


Robeco is an asset management firm focused exclusively on sustainable investing. The firm launched the Dow Jones Sustainability Indices in 1999 and has developed expertise in defining and measuring ESG information.


Bloomberg’s proprietary ESG disclosure score measures the amount of ESG data a company reports publicly that is relevant to its industry sector. Its coverage spans more than 11,500 companies in 83 countries. ESG data is fully integrated with all of Bloomberg’s analytics and can be compared alongside other key ratios and financial performance indicators.


Date: As at 30 June 2020

*CONDENSED STATEMENT OF FINANCIAL POSITION OF THE FUND (Unaudited)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        *

*As at 30 June 2020*
*with unaudited comparatives as at 30 June 2019*
*and audited comparatives as at 31 December 2019*
Notes   * * *30.06.2020*   *30.06.2019* * * *31.12.2019*   * * *GBP*   *GBP* * * *GBP*
* *              
*Current assets*              
Securities (at fair value through profit or loss)   

3 & 19        109,221,611    145,061,423    144,075,929
Accrued bond interest     17,402   20,354   27,940
Accrued bank interest     -     2,864   6,908
Accrued dividend income     434,555   636,968   513,405
Other receivables     2   2   2
Prepayments     2,323   8,263   17,659
Cash and cash equivalents 4   7,429,262   2,299,403   6,198,999
* *     117,105,155   148,029,277   150,840,842
* *             * *
*Current liabilities*             * *
Other payables and accruals 5   (359,305)   (329,938)   (413,763)
Interest payable     (7,081)   (20,965)   (24,327)
Loan payable 15   (14,812,456)   (26,886,356)   (26,026,802)
* *     (15,178,842)   (27,237,259)   (26,464,892)
* *              
*Net assets*     101,926,313   120,792,018   124,375,950
* *              
* *              
*Equity attributable to equity holders*              
Stated capital 6   49,704,414   49,704,414   49,704,414
Retained earnings     52,221,899   71,087,604   74,671,536
*Total Shareholders’ equity*     101,926,313   120,792,018   124,375,950
* *                           * *
*Net asset value per redeemable participating preference share (pence)*  

7   *95.72* * * *113.43* * * *116.80*

The interim financial statements and notes on pages 15 to 31 were approved by the Directors on 17 September 2020 and signed on behalf of the Board by:

Nicholas Villiers                                                                                                                     Richard Hughes                                                                                                                       

Director                                                                                                                                 Director

The accompanying notes on pages 19 to 31 form an integral part of these interim financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    


*For the period 1 January 2020 to 30 June 2020 with unaudited comparatives for the period 1 January 2019 to 30 June 2019 *
*and audited comparatives for the year ended 31 December 2019*
  * * *Six months ended 30 June 2020* * * *Six months ended* * * *Year ended*   * * * * *30 June 2019* * * *31 December 2019* Notes * * *Revenue* *Capital* *Total* * * *Total* * * *Total*   * * *GBP* *GBP* *GBP* * * *GBP* * * *GBP*
*Revenue*   * * * * * * * * * * * * * * * *
Dividend and interest income 8   2,850,304 - 2,850,304   3,483,329   6,952,021
Net movement in the fair value of securities (at fair value through profit or loss)  

9   - (21,950,317) (21,950,317)   20,832,358   25,084,009
Net movement on foreign exchange     - 639,869 639,869   (1,372,326)   (1,128,978)
*Total (loss)/revenue*     2,850,304 (21,310,448) (18,460,144)   22,943,361   30,907,052
* *                  
Investment management fees     151,152 226,728 377,880   400,861   837,344
Custodian fees     6,025 - 6,025   9,837   17,678
Sponsor’s fees     26,993 - 26,993   114,532   140,103
Other expenses     273,575 - 273,575   231,087   586,263
*Operating expenses*     457,745 226,728 684,473   756,317   1,581,388
* *                  
*Net operating (loss)/profit before finance costs*     2,392,559 (21,537,176) (19,144,617)   22,187,044   29,325,664
Finance cost     (88,987) (133,481) (222,468)   (312,465)   (662,327)
* *                  
*(Loss)/profit before tax*     2,303,572 (21,670,657) (19,367,085)   21,874,579   28,663,337
Withholding tax expense     (367,127) - (367,127)   (536,085)   (1,025,486)
*Net (loss)/profit*     1,936,445 (21,670,657) (19,734,212)   21,338,494   27,637,851
* *                  
*(Loss)/profit per redeemable participating preference share - basic and diluted (pence)* 10   1.82 (20.35) (18.53)   20.04   25.95
* *                  

The Company including the Fund has no other items of income or expense for the current and prior periods and accordingly the net profit/(loss) for the current and prior periods represent total comprehensive income/(loss).

There are zero earnings attributable to the management shares. All activities derive from continuing operations.

The accompanying notes on pages 19 to 31 form an integral part of these unaudited interim condensed financial statements.

* *


*For the period 1 January 2020 to 30 June 2020 with unaudited comparatives for the period 1 January 2019 to 30 June 2019*
*and audited comparatives for the year ended 31 December 2019*
*Notes* *Stated capital account*
*GBP* *Retained income*
*GBP* *Total*
*At 1 January 2019*   *49,704,414* *                          52,464,535* *102,168,949*
Profit for the period   - 21,338,494 21,338,494
Dividends paid 13 - (2,715,425) (2,715,425)
*At 30 June 2019*   *49,704,414* *71,087,604* *120,792,018*
* *        
* *        
Profit for the period   -                             6,299,357 6,299,357
Dividends paid   -                            (2,715,425)                            (2,715,425)
*At 31 December 2019*   *49,704,414* *                          74,671,536* *124,375,950*
* *        
* *        
Loss for the period   - (19,734,212) (19,734,212)
Dividends paid 13 - (2,715,425) (2,715,425)
*At 30 June 2020*   *49,704,414* *52,221,899* *101,926,313*
* *   * * * * * *
    The accompanying notes on pages 19 to 31 form an integral part of these unaudited interim condensed financial statements.


*For the period 1 January 2020 to 30 June 2020 *
*with unaudited comparatives for the period 1 January 2019 to 30 June 2019*
*and audited comparatives for the year ended 31 December 2019*
*Notes* *Six months*
*ended 30 June* * * *Year ended*
*31 December * * * *2020* * * *2019* * * *2019* * * *GBP* * * *GBP* * * *GBP*
*Cash flows from/(used in) operating activities* * * * * * * * * * * * *
*Net (loss)/profit*   (19,734,212)   21,338,494   27,637,851
Adjustments for:            
Net movement in the fair value of securities (at fair value through profit or loss) 9    21,950,317   (20,832,358)   (25,084,009)
Realised (gain)/loss on foreign exchange   (391,175)   799,280   598,158
Unrealised (gain)/loss on foreign exchange   (248,694)   573,046   530,820      Payment for purchases of securities   (69,425,325)   (21,721,821)   (47,861,535)      Proceeds from sale of securities   82,329,326   11,588,037   42,964,896
*Operating cash flows before movements in * *working capital*   *14,480,237*   *(8,255,322)* * * *(1,213,819)*            
Decrease/(increase) in receivables      111,632   (58,282)   44,255
(Decrease)/increase in payables and accruals   (71,704)   (49,991)   37,196
*Net cash from/(used in) operating activities*   *14,520,165*   *(8,363,595)* * * *(1,132,368)*            
*Cash flows (used in)/from financing activities*   * *   * *   * *
Repayment of borrowings   (40,624,864)   (65,818,568)   (172,251,640)
New bank loans raised   29,410,518   72,679,829   178,253,347
Dividends paid 13 (2,715,425)   (2,715,425)   (5,430,850)
*Net cash (used in)/from financing activities*   *(13,929,771)*   *4,145,836* * * *570,857*
* *           * *
Net increase/(decrease) in cash and cash equivalents   590,394   (4,217,759)   (561,511)
Cash and cash equivalents at the beginning of period   6,198,999   7,889,488   7,889,488
Effect of foreign exchange rate changes   639,869   (1,372,326)   (1,128,978)
* *           * *
*Cash and cash equivalents at the end of period* 4 *7,429,262*   *2,299,403* * * *6,198,999*
* *            
*Cash and cash equivalents made up of:* 4          
Cash at bank   *7,429,262*   *2,299,403*   *6,198,999*
* *            

*                *

The accompanying notes on pages 19 to 31 form an integral part of these unaudited interim condensed financial statements.

* *


*For the period 1 January 2020 to 30 June 2020 *
*with unaudited comparatives for the period 1 January 2019 to 30 June 2019*
*and audited comparatives for the year ended 31 December 2019*                                                                                                                               
*1.             General Information*

The Company is a closed-ended investment company incorporated in Jersey on 24 May 2006. The Company has one closed-ended cell: Middlefield Canadian Income - GBP PC, also referred to as the “Fund”. The Fund seeks to provide Shareholders with a high level of dividends as well as capital growth over the longer term. The Fund intends to pay dividends on a quarterly basis each year. The Fund seeks to achieve its investment objective by investing predominantly in the securities of companies and REITs domiciled in Canada and the United States that the Investment Manager believes will provide an attractive level of distributions, together with the prospect for capital growth. In 2015, shareholders also approved an amendment to the investment policy to increase the percentage of the value of portfolio assets which may be invested in securities listed in recognized stock exchange outside Canada to up to 40 per cent.

The address of the Company’s registered office is 28 Esplanade, St Helier, Jersey JE2 3QA, Channel Islands.

The Fund’s shares have been admitted to the Official List of the FCA and to trading on the London Stock Exchange’s Main Market for listed securities.

The functional and presentational currency of the Company and the Fund is Pound Sterling (“GBP”).

The Company and the Fund have no employees.

The half-yearly report and interim condensed financial statements have not been audited or reviewed by the auditor, Deloitte LLP, pursuant to the Auditing Practices Board guidance on ‘Review of Interim Financial Information’.

The information presented for the year ended 31 December 2019 does not constitute the statutory financial statements of the Company. Copies of the statutory financial statements for that year have been delivered to the Registrar of Companies in Jersey and to the UK Financial Conduct Authority’s National Storage Mechanism. Copies are also available from the Company’s website www.middlefield.co.uk. The Auditor’s report on those financial statements was unqualified.

*2.             Accounting Policies*

*a.             Basis of preparation*

The interim condensed financial information for the period ended 30 June 2020 has been prepared in accordance with IAS 34 ‘Interim Financial Reporting’ as adopted by the European Union. The interim condensed financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2019, which have been prepared in accordance with International Financial Reporting Standards (IFRS).

The interim condensed financial statements have been prepared on the historical cost basis, except for the revaluation of fair value through profit or loss investments, and in accordance with IFRS. The condensed statement of comprehensive income is presented in accordance with the Statement of Recommended Practice (SORP) ‘Financial Statements of Investment Trust Companies and Venture Capital Trusts’ issued in January 2009 by the Association of Investment Companies (“AIC”), to the extent that it does not conflict with IFRS.

The condensed statement of financial position, condensed statement of comprehensive income, condensed statement of changes in redeemable participating preference shareholders’ equity and condensed cash flow statement refer solely to the Fund. The non-cellular assets comprise two Management Shares. However, there has been no trading activity with regards to the non-cellular assets.

*For the period 1 January 2020 to 30 June 2020 *
*with unaudited comparatives for the period 1 January 2019 to 30 June 2019*
*and audited comparatives for the year ended 31 December 2019*

*2.             Accounting Policies (continued)*

*b.             Going concern*

In the opinion of the Directors, there is a reasonable expectation that the Company and the Fund have adequate resources to continue in operational existence for the foreseeable future. For this reason, the interim financial statements have been prepared on the going concern basis.

The Directors have arrived at this opinion by considering, inter alia, the following factors:

· the Fund has sufficient liquidity to meet all on-going expenses and repayment of external borrowings; and
· the portfolio of investments held by the Fund materially consists of listed investments which are readily realisable and therefore the Fund will have sufficient resources to meet its liquidity requirements.

*c.             Standards and Interpretations*

The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2019, as described in those financial statements.

Adoption of new and revised Standards
The following standards, amendments and interpretations which are effective for the financial year beginning 1 January 2020 are not material to the Company:
                 ·Amendments to IAS 1 ‘Presentation of Financial Statements’ and IAS 8 ‘Accounting Policies, Changes In Accounting Estimates and Errors’ on the definition of material effective for annual periods beginning on or after 1 January 2020.These amendments i) use a consistent definition of materiality throughout IFRSs and the Conceptual Framework for Financial Reporting; ii) clarify the explanation of the definition of material; and iii) incorporate some of the guidance in IAS 1 about immateriality information.

The directors have considered the above and are of the opinion that the above Standards and interpretations are not expected to have a material impact on the financial statements.

At the date of authorisation of these interim financial statements, there were no standards and interpretations in issue but not yet effective which are relevant to the Company and the Fund that have been applied to these interim financial statements.

*d.             Business and geographical segments*

The Directors are of the opinion that the Fund is engaged in a single segment of business investing predominantly in securities and REITs domiciled in Canada and the U.S. to which the Fund is solely exposed and therefore no segment reporting is provided.

*3.             Securities (at fair value through profit or loss)*
* *

*30.06.2020* * * * *

*30.06.2019* * * * *

*31.12.2019* *GBP* * * *GBP* * * *GBP* * * * * * * * * * *
Quoted/listed Equities 108,041,302 * * 141,394,048   140,523,906
Quoted/listed Bonds 1,180,309 * * 3,667,375   3,552,023 *109,221,611* * * *145,061,423* * * *144,075,929 *   * * * * * * * *
Please refer to Note 19 for the Schedule of Investments. * * * * * * * *

*For the period 1 January 2020 to 30 June 2020 *
*with unaudited comparatives for the period 1 January 2019 to 30 June 2019*
*and audited comparatives for the year ended 31 December 2019*

*4.             Cash and cash equivalents*
* *

*30.06.2020* * * * *

*30.06.2019* * * * *

*31.12.2019* *GBP* * * *GBP* * * *GBP*
* *          
Cash at bank *7,429,262* * * *2,299,403* * * *6,198,999*

Cash and cash equivalents comprise cash held by the Fund and bank balances with an original maturity of three months or less. The carrying value of these assets approximates to their fair value.

*5.             Other payables and accruals*

* *   *30.06.2020* * * *30.06.2019* * * *31.12.2019*
* * *GBP* * * *GBP* * * *GBP*
* *          
Investment management fees (Note 11) 172,696   211,379   217,204
Sponsor’s fees 12,336   60,394   15,515
Audit fees 14,918   14,712   30,000
Administration fees 24,671   29,533   31,029
General expenses 2,052   2,309   19,563
Directors’ fees 87,739   1,085   35,000
Registrar’s fees 7,429   7,573   7,371
Custodian fees 5,398   2,953   3,103
Tax fees -   -   5,800
Marketing fees -   -   7,500
Investor relations fee (Note 12) 32,066   -   41,678
* * *359,305*   *329,938*   *413,763*

*6.             Stated capital account*

The authorised share capital of the Fund is split into two Management Shares of no par value and an unlimited number of redeemable participating preference shares of no par value, the latter of which are attributable solely to the Fund.

* * *No. of shares* *GBP*
*Management shares issued* * * * *
*At 31 December 2019* 2 2
*At 30 June 2020* *2* *2*
* * *Redeemable participating preference shares issued*    
*At 31 December 2019* *106,487,250* *49,704,412*
* *    
Movement for the period - -
* *    
*At 30 June 2020* *106,487,250* *49,704,412*
* *    
* *    
*Total stated capital at 30 June 2020* * * *49,704,414*   * *   * *                
* * * * * *
* * * * * *

*For the period 1 January 2020 to 30 June 2020 *
*with unaudited comparatives for the period 1 January 2019 to 30 June 2019*
*and audited comparatives for the year ended 31 December 2019*

*6.           Stated capital account (continued)*

The holders of redeemable participating preference shares are entitled to receive in proportion to their holdings, all of the revenue profits of the Fund (including accumulated revenue reserves).

Each redeemable participating preference shareholder is entitled to one vote for each share held, provided all amounts payable in respect of that share have been paid.

Management shares are non-redeemable, have no right in respect of the accrued entitlement, and have no right to participate in the assets of the Fund on a winding-up. In all other respects, the management shares have the same rights and restrictions as redeemable participating preference shares. Each management share entitles the holder to one vote for each share held.

Redeemable participating preference shares are redeemed at the absolute discretion of the Directors. Since redemption is at the discretion of the Directors, in accordance with the provisions of IAS 32, the redeemable participating preference shares are classified as equity. The Fund will not give effect to redemption requests in respect of more than 25 per cent. of the shares then in issue, or such lesser percentage as the Directors may decide.

At the period end, there were 18,195,000 (30 June 2019: 18,195,000, 31 December 2019: 18,195,000) treasury shares in issue. Treasury shares have no value and no voting rights.

*7.             Net asset value per redeemable participating preference share*

The net asset value per share of 95.72p (30 June 2019: 113.43p, 31 December 2019: 116.80p) is based on the net assets at the period end of £101,926,313 (30 June 2019: £120,792,018, 31 December 2019: £124,375,950) and on 106,487,250 redeemable participating preference shares, being the number of redeemable participating preference shares in issue (excluding shares held in treasury) at the period end (30 June 2019: 106,487,250 shares, 31 December 2019: 106,487,250 shares).

*8.             Dividend and interest income *

* * *Period ended 3

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