Middlefield Canadian Income PCC - Half-Yearly Financial Results

Middlefield Canadian Income PCC - Half-Yearly Financial Results



*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 2021 (the "*HYFR*").

The HYFR is expected to be printed and posted to all shareholders within September, 2021. 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


Hilary Jones
*JTC Fund Solutions (Jersey) Limited*
Tel.: 01534 700 000

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


*a** cell of the Company *

*Half Yearly Report **a**nd **Interim **Condensed Financial Statements (Unaudited)*

*For the period 1 January **20**2**1** to 30 June **202**1*

*TABLE OF CONTENTS**        **        **        **        **        **        **        **        **        *

Responsibility Statement 3  
*Strategic Report*    
Performance Record 4  
Chairman’s Report 5  
Investment Manager’s Interim Report (Unaudited) 9  
Middlefield ESG Policy 12  
Management and Administration 17  
*Interim Condensed Financial Statements of the Fund (Unaudited)*    
Condensed Statement of Financial Position of the Fund (Unaudited) 19  
Condensed Statement of Comprehensive Income/(Loss) of the Fund (Unaudited) 20  
Condensed Statement of Changes in Redeemable Participating Preference  
Shareholders’ Equity of the Fund (Unaudited) 21  
Condensed Cash Flow Statement of the Fund (Unaudited) 22  
Notes to the Interim Condensed Financial Statements of the Fund (Unaudited) 23  
*Interim Financial Statements of the Company (Unaudited)*    
Statement of Financial Position of the Company (Unaudited) 37  
Notes to the Interim Financial Statements of the Company (Unaudited) 38  
Definitions 39  


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 16 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

Michael Phair Richard Hughes
Director Director

Date: 16 September 2021


*Historical Performance*

*Performance **since i**nception to 30 June 2021*


1. Net asset value total returns (in Sterling, net of fees and including the reinvestment of dividends).
2. The Fund’s benchmark, the S&P/TSX High Dividend Index, has been currency adjusted to reflect the Canadian Dollar (“*CAD*”) returns from inception to October 2011 (while the Fund was CAD hedged) and Sterling (“*GBP*”) returns thereafter.

*Past performance is not a guide to the future. The price of investments and the income from them may fall as well as rise and investors may not get back the full amount invested. All price information is indicative only.*

1. *Total returns including the reinvestment of dividends for all returns. Fund returns are net of fees.*
2. *Composite of monthly total returns for the S&P/TSX Income Trust Index from inception to 31 December 2010 and the S&P/TSX Composite High Dividend Index (formerly named the S&P TSX Equity Income Index) thereafter*
3. *Currency adjusted to reflect CAD$ returns from inception of MC**T** to Oct 2011 and GBP returns thereafter since MC**T** was CAD$ hedged from inception to Oct 2011*
*STRATEGIC REPORT** (continued)*



It is my pleasure to present the Half Yearly Report for the period ended 30 June 2021 for Middlefield Canadian Income PCC (“MCT” or the “Company”) and its closed-end cell, Middlefield Canadian Income – GBP PC (the “Fund”). The Fund invests in a broadly diversified portfolio, primarily comprised 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.


Global equity markets performed well during the first half of the year, supported by vaccine rollouts and the reopening of the global economy. The Fund generated a total return of 26.5% while its share price returned 23.3% and reached a record high in June (all figures in Sterling with dividends reinvested). Since inception in 2006, the Fund has generated a cumulative return of 200%, which compares favourably to the Benchmark’s return of 158.7% and the Canadian S&P/TSX Composite Index’s return of 154.3%.

The Fund’s investment strategy is well-suited for long-term investors seeking cash flows from a diversified portfolio of stable, profitable businesses. The Board has regular contact with the Investment Manager, Middlefield Limited, to discuss broad strategy and review investment policies, gearing and sector allocations. We remain satisfied that the Investment Manager is applying the strategy consistently and professionally and will continue to deliver good performance.


The portfolio is actively managed, giving the Investment Manager the ability to tactically shift the Fund’s composition as market dynamics change. In response to optimism related to economic reopening, underpinned by highly effective vaccines, portfolio changes were made in late 2020 and early 2021 to position the Fund to participate in the market’s recovery. Specifically, the Fund increased its exposure to Financials and Real Estate, two cyclical sectors which are highly leveraged to a recovery in economic activity. In addition, the Fund further increased its exposure to Canada in light of its attractive valuations relative to U.S.-listed securities.

*STRATEGIC REPORT (continued)*

*CHAIRMAN**’**S REPORT (continued)*


The Fund’s performance is explained in some detail by Mr Dean Orrico in the Investment Manager’s accompanying report.


The Fund’s share register remained stable throughout the year, supported by long-term institutional shareholders and a growing base of retail investors. As mentioned in the 2020 Annual Report, the Fund’s Senior Independent Director, Richard Hughes and I met with several of our largest investors to receive direct feedback on the Fund and the Investment Manager in January of 2021. We received positive feedback in those meetings and believe our investment focus on income generating companies within Canada remains both relevant and attractive to U.K. investors. We once again engaged our major shareholders at the end of June 2021 during a webinar hosted by our corporate broker, Investec. At that meeting, we focused on our market outlook and corresponding portfolio positioning as well as our plan to address our share price discount.

One of our top priorities has been to grow our investor relations initiatives with the goal of generating more demand for the stock, thereby narrowing our trading discount. The Fund continues to receive positive feedback from shareholders on these initiatives including an improved web-site, webinars, thought leadership articles and our new CEO interview series on YouTube. We believe these actions are enhancing MCT’s profile across the U.K., resulting in greater investor awareness and profile within the retail investor community. In fact, we witnessed an uptick in retail trading for our shares in the second quarter and continue to add investors from new trading platforms. You can find our content in the Media section of MCT’s website http://www.middlefield.co.uk/mcitmedia.htm.


The amount of gearing employed by the Fund has been tactically managed and can be a useful tool to enhance returns and control risk. Contrary to the first half of 2020 when gearing was reduced to a net cash position to dampen volatility, the Fund has utilised a fairly consistent amount of gearing throughout 2021 due to our ongoing constructive outlook on equity markets. Year-to-date, the Fund’s net borrowings have averaged 18% of net assets and have contributed positively to the Fund’s 26.5% total return.


Two quarterly interim dividends of 1.275p per share were paid on 29 January 2021 and 30 April 2021. This is in line with the payments made in the previous financial year. The Company’s earnings per share totalled 2.36p for the six months ended 30 June 2021 compared with 1.82p for the corresponding period in 2020. As discussed in our most recent annual report, the Fund adopted a more defensive posture in 2020, resulting in lower-than-typical earnings generation for the year. For 2021, we are happy to report that our revenue from dividends has recovered and our dividend payments were 93% covered for the first half of the year. We expect Canadian earnings levels to increase in 2022 relative to 2021. We are also confident that the dividend should be fully covered when the economy reverts to pre-pandemic levels of output as long as the current level of gearing is maintained. As a result, the Board considers it appropriate to maintain the current dividend for the new financial year and may consider future increases in the event our revenue exceeds our payout level.


As stated in the Remuneration Report in the Company’s annual financial report for the year ended 31 December, 2020, the Company’s remuneration policy is designed to ensure that the remuneration of its directors is set at a reasonable level commensurate with the duties and responsibilities of each director and the time commitment required to carry out their roles effectively.

For the period under review, the directors’ remuneration was set at £28,000 per annum for the chairman of the Board, £24,000 per annum for the chairman of the audit committee and £22,000 for all other directors bar Mr Orrico, who has waived his entitlement to remuneration for acting as a director.  The fees have remained at this level since 1 July, 2018. Since then the workload of the directors has increased considerably due to both market conditions and increased corporate governance obligations. At the most recent meeting of the Nomination and Remuneration Committee (the “NRC”) held in September, 2021, the NRC reviewed the directors’ remuneration, benchmarking the fees against other listed companies of a similar size to the Company in its peer group, and agreed that a modest increase to the directors’ remuneration would be appropriate.  It was therefore agreed that with effect from 1 January, 2022, the directors’ fees would be increased to £31,000 per annum for the chairman of the Board, £27,000 per annum for the chairman of the audit committee and £25,000 for all other directors bar Mr

*STRATEGIC REPORT (continued)*

*CHAIRMAN’S REPORT (continued)*


Orrico. Shareholders should note that, whilst the aggregate annual remuneration of the current directors will increase by £12,000, the total directors’ fees payable for the 2022 financial year will be lower than those paid in previous years due to the net reduction
in the number of directors since 2020. This is in line with the Board’s refreshment and appointments policies executed since 2019 to ensure stability and appropriate resource availability.


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 2020 Annual Financial Report.


The Board is not aware of any significant event or transaction which has occurred between 1 July 2021 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 17 June 2021, all resolutions, relating to both ordinary business and special business, were duly passed on a poll.

In relation to the Company and Fund AGM, the Board notes the votes which were cast against the re-election of Mr Philip Bisson as a director of the Company and of the Fund (resolution 3). Of the total votes cast (which represented voting rights over 47.42% of the Fund’s issued share capital), 22.47% of such votes were cast against Mr Bisson’s re-election. The Board understands that the votes received against Mr Bisson’s re-election resulted, in large part, from a recommendation set out in a report from one proxy voting agency which highlighted that Mr Bisson’s shareholding and those of his connected persons (1.72% in aggregate) could compromise Mr Bisson’s independence as a director and, as such, that he should not form part of the Audit Committee of the Company. In addition, Mr Bisson, a Jersey resident non-executive director, has been on the board of the Company and of the Fund since launch. The Jersey Financial Services Commission requires any Jersey-incorporated company to have a minimum of two Jersey resident directors on the board at all times, and Mr Bisson has served as one of the two Jersey resident directors of the Company and Fund for 15 years. This tenure exceeds the nine year term stipulated by the FRC’s UK Corporate Governance Code and the AIC’s Code of Corporate Governance following which a non-executive director’s independence may be deemed to be impaired.

The Board regularly reviews the Board’s composition and the independence of all directors and is satisfied that, notwithstanding the shareholding and tenure described above, Mr Bisson is independently minded in his approach in his role as a director of the Company and of the Fund. His shareholding and those of his connected persons (to the extent actually controlled by Mr Bisson) demonstrate a significant personal financial commitment by Mr Bisson, and also serve to directly align his interests with those of other shareholders. In terms of Mr Bisson’s tenure and justification for his ongoing role as a non-executive director of the Company and the Fund, Mr Bisson provides invaluable experience as a Jersey non-executive director and Jersey investment professional, and adds significant value in his non-executive role.

The Board frequently reviews its plans for future succession and has taken a number of steps over recent years to refresh its composition in order to continue to ensure the highest standards of good corporate governance. These steps have included the retirement of three long-standing non-executive directors, Mr Nicholas Villiers (on 30 September 2020) and Mr Ray Apsey and Mr Thomas Grose (on 17 June 2021), and the appointment of three new non-executive directors, Mr Richard Hughes (on 1 July 2018), Mr Michael Phair (on 13 June 2019) and Ms Kate Anderson (on 12 April 2021). In addition, a new board apprentice, Mrs Janine Fraser, a Jersey resident, was appointed on 25 March 2021.

Following the three planned retirements explained above, at the present time the Board does not intend to further refresh its composition with the retirement of Mr Bisson. The Board remains mindful, however, of the requirement to identify a suitable Jersey-resident replacement for Mr Bisson at such time as he does retire from the Board in a phased manner, and has taken steps to ensure an orderly succession in due course. In addition, in order to command continued shareholder support, Mr Bisson retired from the Audit Committee of the Board with effect from the commencement of the Audit Committee meeting on 16 September 2021. Details of any further changes which may be implemented will be included in the Company’s Annual Financial Report for the year ending 31 December 2021.

*STRATEGIC REPORT (continued)*

*CHAIRMAN’S REPORT (continued)*


Shareholders can write to the Company at its registered office or by email to the Secretary at middlefield.cosec@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 28 to 30 of the 2020 Annual Report and in Note 16 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 2020 annual report and financial statements and are expected to remain relevant to the Company for the next six months of its financial year.


We remain positive on the outlook for the global economy in the second half of 2021. Vaccination rates continue to climb, which should support an ongoing recovery in economic activity and consumer spending. While we are cognizant of the ongoing risks presented by COVID-19, including the delta variant and future potential strains, we believe the likelihood of widespread lockdowns is low and that economies will continue to gradually reopen.

The Fund is primarily focused on Canadian dividend-paying and dividend-growing equities, an attractive asset class for U.K. investors seeking stable income and diversification. The Canadian Prime Minister, Justin Trudeau, has called a snap election that will take place on 20 September, 2021. As investors, we recognize that market reactions to elections tend to be modest and temporary and thus should not have a dramatic or lasting effect on the high-quality businesses included in this portfolio.

We are confident in the Investment Manager’s ability to continue delivering attractive risk-adjusted returns within this asset class and to build upon its established track record. In light of our positive outlook on the investment landscape, together with the Fund’s increased marketing efforts, shareholder engagement and board composition initiatives, we believe the Fund’s current trading price represents a compelling value for current and prospective shareholders.

The Board joins me in thanking you for your continued support.

Michael Phair
Date: 16 September 2021

*STRATEGIC REPORT** (continued)*

*Six months to 30 June 202**1** (Unaudited)*

Global equities performed very well during the first half of 2021, with most major indices closing at all-time highs. The S&P 500, TSX Composite and Euro Stoxx 50 generated total returns of 15.2%, 17.3% and 16.6%, respectively. Inflows into global equity funds during the first half of the year totalled $580 billion, the largest on record by a significant margin. If the current pace of inflows continues throughout the second half of the year, equity funds will take in more money in 2021 than in the previous twenty years combined.

Markets have been supported by the economic reopening, led by cyclical and value sectors. This began in November 2020 when initial positive vaccine data from Pfizer, Moderna and AstraZeneca provided a pathway to resolving the pandemic. Vaccine rollouts progressed swiftly once they were approved, allowing restrictions to be lifted at a gradual pace throughout the world. As of August 2021, over 82% of Canadians aged 12 years or older had received at least one dose and 73% were fully vaccinated – among the highest vaccine adoption rates in the world.

Economic reopening has contributed to rising inflation, with Core CPI, PPI and PCE inflation statistics spiking during the second quarter of 2021. As a result, global central banks, including the Bank of Canada and the Federal Reserve, are now adopting a more hawkish tone when guiding on future monetary policy. A certain amount of tightening is now being priced in but this should not have a major impact on markets as long as it happens gradually and is appropriately signalled. This is reflected in markets reaching new highs notwithstanding U.S. 10-Year Treasury yields and Canadian Government 10-Year Bond yields increasing by 55 bps and 71 bps during the first half, respectively.

Commodity prices increased significantly during the first half. WTI crude oil prices have risen more than 50% this year while North American natural gas prices are at their highest levels in seven years. Against this backdrop, we anticipate significant free cash flow generation from the Canadian energy sector which can be used for strategic investments in renewables, carbon capture and storage, hydrogen infrastructure and other initiatives aligned with ESG principles. Enbridge, a top 10 holding in the Fund, continues to stand out as an ESG leader among its peers, with the company providing another comprehensive Sustainability Report as well as a framework for issuing sustainability-linked bonds that link interest rates to ESG performance, further aligning the interests of shareholders and company management. In addition, the Fund recently initiated positions in other ESG-focused energy companies including Topaz Energy, a midstream and royalty company levered to natural gas which will play an instrumental role in the global energy transition for decades.

The real estate sector has performed well this year in Canada, generating a total return of 21.7%. Cyclical asset classes that are positively correlated with the economic reopening, such as retail and seniors housing, were the biggest contributors to Fund performance. Looking ahead to the second half of 2021, we are bullish on industrial REITs, which have lagged the sector by more than 4% in Canada. E-Commerce activity increased as a result of the pandemic and continues to drive demand for industrial properties. Availability rates in Vancouver, Toronto and Montreal are at 1.1%, 1.2% and 1.4%, respectively as new supply is unable to keep pace with the rate of absorption, thereby leading to rapid growth in rents. In 2021 to date, more than 26 million square feet of industrial space has been absorbed in Canada relative to a more modest 8.8 million square feet of completions. The Fund has been invested in several high-quality Canadian industrial REITs including Granite REIT, Dream Industrial REIT and WPT Industrial REIT.

As at 30 June 2021, Financials accounted for over 30% of the Fund’s investment portfolio and were its top sector weighting. Canadian-listed issuers account for almost 90% of this exposure and have been positive contributors to performance year-to-date. Canadian banks are consistent dividend growers and possess high capital levels and low dividend payout ratios. They also continue to trade at attractive valuations relative to their U.S. peers. These qualities give them a lower relative risk profile than other cyclical sectors, making them a compelling investment for exposure to a pick-up in economic activity. Canada’s banks have been able to generate rapid earnings growth this year, mostly driven by reduced provisions on credit losses and elevated activity in capital markets transactions. Looking forward, we remain positive on the sector given the outlook for consumer spending, commercial lending and continued fiscal support from the Canadian federal government.

The backdrop for sustainable infrastructure, specifically renewables, strengthened during the first half of the year. We are witnessing a seismic shift in the way society consumes and produces energy. In April 2021, the U.S. pledged to slash its greenhouse gas emissions by at least 50% by 2030 and to achieve net-zero emissions by 2050, joining the world’s largest economies in setting aggressive long-term climate targets. The private sector generally, and the world’s largest companies in particular, are also providing major support for net zero investments. For example, Apple has committed to being 100% carbon neutral from its supply chain to its products by 2030 and Microsoft has pledged by 2050 to remove all the carbon it has emitted since it was founded in 1975. A first half sell-off driven by an increase in longer term interest rates has led to attractive valuations and compelling entry points for many renewable-focused companies. We believe the market is ascribing little value for future growth to several of our key portfolio positions including Capital Power, Brookfield Renewables and Northland Power.

*STRATEGIC REPORT (continued)*

*Six months to 30 June 2021 (Unaudited)*

The Fund’s core allocations to Financials, Real Estate and Utilities are complemented by high-conviction positions in sectors that are not well-represented in the benchmark. For example, the Fund has a 2.9% weight in Information Technology and a 1.5% weight in Healthcare. Tech demonstrated market leadership throughout most of 2020 but lagged during the majority of the first half of 2021 as the reopening trade drove market performance. Even so, we maintain a very optimistic long-term outlook on the technology sector as the pandemic has accelerated certain secular trends including 5G, datacentres, E-commerce, work from home and cloud storage. Healthcare also lagged the broader market by over 3% during the first half and we see potential for a catch-up given its combination of high quality companies and attractive valuations. The Fund has exposure to these sectors through positions in Broadcom and AbbVie.

*Top Holdings*

The table below shows the largest ten positions held within the Fund’s portfolio as at 30 June 2021:

*Company* *Sector* *% of NAV*
*Canadian Imperial Bank of Commerce*
CIBC is one of Canada’s largest banks, offering asset management, retail brokerage and private wealth management services across Canada and the United States. CIBC is trading at a valuation discount relative to its Canadian Bank peers which we believe could narrow as the firm approaches its goal of generating 25% of earnings from the United States, up from 17% in 2020. Financials 4.9%
*Bank of Montreal*
BMO is the fourth-biggest bank in Canada by assets and the eighth largest in North America. It is pursuing commercial banking growth in the US, mostly in the Midwest, which could drive an expansion in earnings as the economy recovers. It has the lowest relative exposure to Canadian mortgages and is uniquely focused on the mid-cap market niche, supporting faster growth than its peers. Financials 4.9%
*TD Bank *
TD’s retail operations are larger relative to its peers at about 90% of total income. The company has more than 2,300 branches throughout Canada and the Eastern US. As a result, it is the most sensitive to shifts in interest rates among the big Canadian banks and is expected to outperform during periods of a steepening yield curve.
*Bank of Nova Scotia*
Scotia provides retail, corporate and investment banking services primarily in Canada and Latin America. Its main operating arm, Scotiabank, has nearly 1,000 Canadian branches and over 1,800 additional offices throughout the world. We believe Scotiabank has the best operating leverage in its peer group due to its focus on strict cost controls.
*RioCan** REIT*
RioCan owns and operates premier retail real estate properties throughout Canada. More than 90% of its assets are located in Canada’s six largest markets, making for one of the highest-quality portfolios of urban real estate in the country. The company has a robust mixed-use development program which is supported by its formidable balance sheet.
Real Estate
AltaGas is an energy infrastructure company with a focus on regulated Utilities and Midstream operations, including a focus on clean energy. We believe AltaGas’ WGL utility business is under-appreciated in light of its 8% expected rate base growth per annum through 2025 and the discount at which the company trades relative to its regulated utility peers.
*Capital Power*
Capital Power is an independent power producer with approximately 6,400 MW of power generation capacity across North America. The company is on a path to net carbon neutrality by 2050, highlighted by the recent closing of its $1 billion sustainability-linked credit facility which is tied to a 65% reduction in GHC intensity by 2030.

*STRATEGIC REPORT (continued)*

*Six months to 30 June 202**1** (Unaudited)*

*Top 10 Holdings (continued)*

*Company* *Sector* *% of NAV*
*SmartCentres** REIT*
SmartCentres owns open-air shopping centres throughout Canada totalling more than 34 million square feet of leasable space with an additional 28 million square feet in various stages of development. Approximately 70% of its centres are anchored by Walmart, which drives foot traffic and supports neighbouring businesses.
Real Estate
Keyera provides natural gas and natural gas liquids midstream services in Western Canada. Operations include gathering, processing, fractionation, storage, transportation and marketing. Keyera is well positioned to self-fund growth given its strong balance sheet and increasingly ability to process gas more efficiently.
Enbridge operates an extensive network of oil, liquids and natural gas pipelines, gas distribution utilities and renewable power generation facilities. The company pays a safe and robust quarterly dividend which has grown at a compound annual growth rate of 14% since 2012, including a 10% hike in 2020.


The outlook for North American equity income remains very attractive. Interest rates are near historical lows and support current market multiples, particularly for Canadian issuers which trade at a discount to their U.S. counterparts. Corporate earnings are expected to continue to recover from depressed levels over the next several quarters and into 2022 as consumer demand and supply chain challenges recover from the pandemic.

Canada is well-positioned to navigate the delta variant in the autumn months as children return to school due to its high level of vaccination and unique rollout strategy. Millions of Canadians received mixed doses of approved vaccines at delayed intervals which studies show could provide greater longevity of the immune response and provide better overall protection. The upcoming Canadian federal election, which will take place on 20 September, 2021, does not in any way impact our views on the outlook for our Canadian portfolio companies. Barring any new setbacks, Canada’s economy will revert to pre-pandemic activity levels in 2022. As a result, our chosen geographic allocation still favours Canadian equities over U.S. stocks and emphasizes cyclical and value sectors. Canada is better positioned to benefit from a rebound in global growth and there is still an unprecedented valuation gap between equities in the two countries.

Our diversified portfolio of dividend-paying and dividend-growing equities should generate attractive risk-adjusted returns relative to other asset classes in the current investment environment. Our focus on companies with predictable cash flows and sustainable business models will help mitigate future volatility.

*Middlefield Limited*
*Date: 16 September 2021*

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

*STRATEGIC REPORT (continued)*


*Environmental, Social and Governance (**“**ESG**”**) Considerations*

*Middlefield ESG Policy*It is Middlefield’s responsibility to employ a disciplined investment process that seeks to identify attractive investment opportunities and evaluate material risks that could impact portfolio returns. Consistent with these objectives, Middlefield integrates ESG considerations into its investment process because Middlefield believes that ESG factors have become an important component of a thorough investment analysis and that the integration of ESG factors will result in a more fulsome understanding of a company’s strategy, culture and sustainability.

In addition to Middlefield's integration of ESG considerations into its investment process, its affiliate Middlefield Limited (a registered Canadian investment fund manager) has adopted Stewardship Principles in order to effectively steward the assets it manages for its clients. The Stewardship Principles below and its stewardship activities carried out pursuant to the principles are complementary to its ESG integration process.

ESG considerations are integral to Middlefield’s investment decision-making, as well as its ongoing portfolio monitoring process. Its current ESG integration process includes the following:

1. Middlefield incorporates ESG scores and other ESG data in its multi-disciplined investment process to evaluate investments. Its methodology includes a qualitative review and assignment of ESG scores to individual holdings. Each company is analysed on an absolute basis and measured relative to its peers. The ESG scores and other ESG data are not the sole factors that govern its investment decisions, however, but rather constitute part of the information it reviews and consider alongside its fundamental, quantitative and qualitative research.

2. Its ESG scoring framework considers the average ESG scores from several reputable third-party data providers. In addition, it cross-references potential investments with the constituents of relevant ESG indexes to assess their eligibility in ESG-focused mandates. The data providers it has chosen to incorporate into its ESG analysis currently are Sustainalytics, S&P, Bloomberg and Refinitiv.

3. Negative screening is implemented in ESG-focused mandates to exclude companies that operate in ethically-contentious industries (e.g. tobacco products and military weapons) as well as those involved in severe business controversies.

4. Positive screening is used to select companies that possess positive ESG characteristics. This process involves analysing sustainability data provided by reputable third-parties to determine how companies are ESG-rated and ranked relative to peers.

5. ESG considerations also are integrated into its investment process by, among other things:

· reviewing companies’ public disclosure, including annual reports, proxy circulars, and, if available, sustainability or ESG reports
· conducting research and analysis on companies’ ESG policies and practices
· obtaining third party research on companies
· engaging with companies, including from time to time having discussions with management teams (both before purchasing shares for the portfolios and while its portfolios own such shares) on topics such as what initiatives and strategies have been put in place by the companies to deal with ESG considerations material to such companies
· monitoring shareholder meetings and voting proxies
Many countries have established or are in the process of establishing standardized ESG disclosure requirements for corporate issuers. When enacted, these are expected to enhance the efficiency of its ongoing review and monitoring of a company’s ESG practices.

Middlefield’s approach to ESG integration may evolve over time as more ESG and sustainability research and data become available.

*STRATEGIC REPORT (continued)*


*Middlefield’s Stewardship Principles*

Middlefield Limited (“Middlefield”), as a Canadian asset manager, understands it has the responsibility to be an effective steward of the assets it manages for its clients in order to enhance the value of those assets for the benefit of its clients. The Canadian Coalition for Good Governance (“CCGG”) has published a set of seven stewardship principles which have become recognized as Canada’s stewardship code for institutional asset owners and asset managers. Middlefield believes that CCGG’s stewardship principles should be tailored for asset managers depending on various factors, such as the size of the asset manager and the type of assets managed.  Set out below are CCGG’s seven stewardship principles and a description of how Middlefield, as an independent Canadian asset manager whose predominant assets are public and private investment funds that invest in Canadian and international equities, carries out or intends to carry out such principles.

Principle 1. Develop an approach to stewardship: Institutional investors should develop, implement and disclose their approach to stewardship and how they meet their stewardship responsibilities.

Middlefield integrates stewardship into its investment process. Such integration includes:

· a procedure for voting proxies (see Principle 3 below)
· monitoring companies (see Principle 2 below) 
· engaging with companies (see Principle 4 below) 
· outsourcing stewardship activities (by among other things utilizing a proxy advisory firm to assist in monitoring companies and voting proxies)
· reporting to its clients (as required by law) 
· managing potential conflicts of interest (via Middlefield’s Independent Review Committee mandated by National Instrument 81-107 as well as Middlefield’s Code of Conduct)

Principle 2. Monitor companies: Institutional Investors should monitor the companies in which they invest.

Middlefield monitors the companies in which it invests, including as follows:

· it reviews companies’ public disclosures, including annual reports and proxy circulars
· it conducts research and analysis on companies
· it obtains third party research on companies
· it engages with companies (see Principle 4 below)
· it monitors formal shareholder meetings and, if there is a particularly important matter and it believes it is practical and appropriate to do so, it attends formal shareholder meetings
Principle 3. Report on voting activities: Institutional investors should adopt and publicly disclose their proxy voting guidelines and how they exercise voting rights.

*STRATEGIC** REPORT (continued)*


*Middlefield’s Stewardship Principles** (continued)*

Middlefield exercises voting rights attached to the securities held by the funds it manages as follows:

· Middlefield uses the following proxy voting guidelines:

· proxies will be voted in a manner that seeks to enhance the long-term sustainable value of the funds it manages 
· proxies will be voted in a manner consistent with leading Canadian and international corporate governance practices

· on routine matters, Middlefield generally supports management and the board unless there are unusual circumstances
· Middlefield uses the services of a proxy advisory firm to assist in voting proxies. Middlefield assesses the voting recommendations of the proxy advisory firm but Middlefield also monitors leading Canadian and international corporate governance practices. Middlefield does not automatically follow the recommendations of the proxy advisory firm, but in most cases it votes as recommended. Middlefield retains ultimate responsibility for all proxy voting decisions. 
In addition, the public funds managed by Middlefield follow the proxy voting requirements of Part 10 of National Instrument 81-106 in regard to establishing policies and procedures for proxy voting and in regard to preparing and disclosing their proxy voting records.

Principle 4. Engage with companies: Institutional investors should engage with portfolio companies.

Middlefield engages with portfolio companies as follows:

· Middlefield engages with management of portfolio companies regularly, both before shares are purchased for the funds it manages and also while its funds own shares of the portfolio companies
· when Middlefield believes it is warranted, it may escalate engagement activities by engaging with directors, by voting against or withholding votes from directors or by voting against companies’ say on pay resolutions

Principle 5. Collaborate with other institutional investors: Institutional investors should collaborate with other institutional investors where appropriate.

· Middlefield collaborates with other institutional investors through investor associations to which Middlefield belongs such as the Responsible Investment Association (RIA)
Principle 6. Work with policy makers: Institutional investors should engage with regulators and other policy makers where appropriate.

· Middlefield’s professional advisors, such as the law firms and accounting firms it retains, assist to keep us up to date on developments that are material to us as an asset manager. It utilizes its professional advisors, and it also relies on the organizations to which it belongs, to engage on its behalf with regulators and policy makers where appropriate.
Principle 7. Focus on long-term sustainable value: Institutional investors should focus on promoting the creation of long-term sustainable value.

· Middlefield focuses on a portfolio company’s long-term success and sustainable value creation, including as follows:
· Middlefield focuses on a company’s management and strategy, as well as its risks (both company specific and systemic)
· Middlefield considers environmental, social and governance factors that are relevant to a company and integrates such factors into its investment activities
*STRATEGIC REPORT (continued)*


*ESG Case Studies*

*Scotiabank (Top 3% ESG ranking and 4.5% of **the portfolio* *as at 30 June 2021)*

*Summary: *One of Canada's Big Five banks, it is the third largest Canadian bank by deposits and market capitalization and serves over 25 million customers. Scotiabank’s approach to Environmental, Social, and Governance (ESG) focuses on four pillars: Environmental Action, Economic Resilience, Inclusive Society and Leadership & Governance. Scotiabank achieves top scores in Corporate Governance among financial institutions globally and commits large donations and sponsorships to its local communities. Their business model possesses low ESG risk.


· Has deployed over $28 billion of the $100 billion committed to reduce the impacts of climate change by 2025 through lending, financing and investing toward climate reduction initiatives
· Surpassed a 30% target of women on its Board of Directors with 42% of its nominated directors as women

*Top ESG Issues:*

· Increasing support for small and medium-sized enterprises, women entrepreneurs and other underrepresented sectors of the economy
· ESG disclosure score is in line with peers

*ESG Rank Relative to the Fund’s Benchmark (TSX High Dividend Index)*

Sources: S&P, Sustainalytics, Bloomberg.

ESG materials: https://www.scotiabank.com/ca/en/about/responsibility-impact/esg-strategy.html and https://www.scotiabank.com/content/dam/scotiabank/canada/en/documents/about/Scotiabank_2020_ESG_Report_Final.pdf

*STRATEGIC REPORT (continued)*


*ESG Case Studies (continued)*

*Enbridge (Top 12% ESG ranking and 3.5% of equities as at 30 June 2021)*

*Summary: *Enbridge is a leading North American energy infrastructure company that is making significant strides implementing its sustainability goals while investing in clean technologies as the company adapts to the energy transition that will occur for decades to come. ENB is competitively ranked for its ESG performance and is progressing well towards its goal of being net zero of greenhouse gases (GHG) by 2050. The company recently closed its inaugural Sustainability-Linked Bond issuance for $1 billion USD, incorporating emissions and inclusion goals into the financing terms. Their business model possesses medium ESG risk but management’s understanding of key ESG issues is robust. Enbridge leads their peers for ESG programs, practices and policies.


· Currently using hydrogen technology to reduce natural gas emissions and they have achieved a 25% reduction in GHG emissions since 2018
· Current targets of 40% women and 20% of all board members having an ethnic racial background have been set for 2025

*Top ESG Issues:*

· Enbridge is exposed to high ESG controversy due to its industry group and own emissions
· Inclusion, diversity, equity, and accessibility are still below targets but are progressing

*ESG Rank Relative to the Fund’s Benchmark (TSX High Dividend Index)*

Sources: S&P, Sustainalytics, Bloomberg.

ESG materials: https://www.enbridge.com/about-us/our-values/sustainability and https://www.enbridge.com/~/media/Enb/Documents/Reports/Sustainability%20Report%202020/Enbridge_SR_2020.pdf


*Registered Office*

28 Esplanade
St Helier
Jersey JE2 3QA


Directors Michael Phair (Chairman) Philip Bisson Thomas Grose (resigned 17 June 2021) Dean Orrico Richard Hughes Raymond Apsey (resigned 17 June 2021) Kate Anderson (appointed 12 April 2021)  
Administrator and Secretary JTC Fund Solutions (Jersey) Limited 28 Esplanade St. Helier Jersey, JE2 3QA  
Assistant Secretary JTC Fund Solutions (Guernsey) Limited (ceased to act 30 June 2021) Ground Floor, Dorey Court Admiral Park St. Peter Port Guernsey, GY1 2HT  
Investment Advisor Middlefield International Limited 288 Bishopsgate London, EC2M 4QP  
Investment Manager Middlefield Limited Suite 5855 100 King St W Toronto ON Canada, M5X 1A6  
Legal Advisers: *In England* Ashurst LLP London Fruit & Wool Exchange
1 Duval Square
London, E1 6PW   *In Jersey* Carey Olsen Jersey LLP 47 Esplanade St. Helier Jersey, JE1 0BD   *In Canada* Fasken Martineau DuMoulin LLP Bay Adelaide Centre Box 20, Suite 2400 333 Bay Street Toronto, Ontario Canada, M5H 2T6    
Broker and Corporate Advisor Investec Bank plc 30 Gresham Street London EC2V 7QP  
Custodian RBC Investor Services Trust 335 – 8^th Avenue SW 23^rd Floor Calgary, Alberta Canada, T2P 1C9  
Registrar Link Market Services (Jersey) Limited 12 Castle Street St. Helier Jersey, JE2 3RT  
CREST Agent, UK Paying Agent and Transfer Agent Link Market Services Limited  The Registry 34 Beckenham Road Beckenham Kent, BR3 4TU   
Independent Auditor RSM Channel Islands (Audit) Limited 40 Esplanade St Helier Jersey JE4 9RJ              
*Financial Calendar*

Annual Results Announced 16 April 2021
Dividend Payment Dates Last Business Day of January, April, July and October
Annual General Meetings 17 June 2021
Half-Yearly Results Announced September 2021

*Information Sources*

For more information about the Company and Fund, visit the website www.middlefield.co.uk/mcit.htm.

*CONDENSED **STATEMENT OF FINANC**IAL POSITION OF THE FUND (Unaudited)**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             * *                           *

*As at 30 June **202**1*
*with unaudited comparatives as at 30 June **20**20*
*and audited comparatives as at 31 December **20**20*
Notes   *30.06.2021*   *30.06.20**20*   *31.12.20**20*     *GBP*   *GBP*   *GBP*              
*Current assets*              
(at fair value through profit or loss)

3 & 18   167,714,894   109,221,611  

Accrued bond interest     -   17,402   -
Accrued bank interest     -   -   -
Accrued dividend income     519,594   434,555   419,004
Other receivables     2   2   2,125
Prepayments     11,486   2,323   20,124
Cash and cash equivalents 4   1,994,433   7,429,262   5,621,538     170,240,409   117,105,155   135,627,610              
*Current liabilities*              
Other payables and accruals 5   (424,194)   (359,305)   (318,742)
Interest payable     (35,064)   (7,081)   (21,776)
Loan payable 14   (34,316,372)   (14,812,456)   (25,775,293)     (34,775,630)   (15,178,842)   (26,115,811)              
*Net assets*     135,464,779   101,926,313   109,511,799                            
*Equity attributable to equity holders*              
Stated capital 6   49,704,414   49,704,414   49,704,414
Retained earnings     85,760,365   52,221,899   59,807,385
*Total Shareholders’ equity*     135,464,779   101,926,313   109,511,799                            
*Net asset value per redeemable participating preference share (pence)*

7   *127.21*   *95.72*   *102.84*

The interim financial statements and notes on pages 19 to 36 were approved by the Directors on 16 September 2021 and signed on behalf of the Board by:

Michael Phair

Richard Hughes
Director Director

The accompanying notes on pages 23 to 36 form an integral part of these interim financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

*For the period 1 January **2021** to 30 June **2021* *with unaudited comparatives for the period 1 January **2020** to 30 June **2020*
*and audited comparatives for the year ended 31 **December **2020*
    *Six months ended 30 June **2021*

  *Six months ended*   *Year ended*       *30 June **2020*   *31 December **20**20* Notes   *Revenue* *Capital* *Total*   *Total*   *Total*     *GBP* *GBP* *GBP*   *GBP*   *GBP*
Dividend and interest income 8   3,631,288 - 3,631,288   2,850,304   5,684,265
Net movement in the fair value of securities (at fair value through profit or loss)

9   - 26,944,501 26,944,501  

(21,950,317)   (13,554,835)
Net movement on foreign exchange     - (437,422) (437,422)   639,869   917,328
*Total **revenue**/(loss)*     3,631,288 26,507,079 30,138,367   (18,460,144)   (6,953,242)                  
Investment management fees     171,556 257,333 428,889   377,880   744,032
Custodian fees     6,752 - 6,752   6,025   11,381
Sponsor’s fees     30,636 - 30,636   26,993   53,146
Other expenses     309,567 - 309,567   273,575   582,497
*Operating expenses*     518,511 257,333 775,844   684,473   1,391,056                  
*Net operating **profit/(loss)** before finance costs*     3,112,777 26,249,746 29,362,523   (19,144,617)   (8,344,298)
Finance cost     (61,052) (91,580) (152,632)   (222,468)   (319,565)                  
*Profit/(loss)** before tax*     3,051,725 26,158,166 29,209,891   (19,367,085)   (8,663,863)
Withholding tax expense     (541,486) - (541,486)   (367,127)   (769,438)
*Net* *profit/(loss)*     2,510,239 26,158,166 28,668,405   (19,734,212)   (9,433,301)                  
*Profit/(loss) **per redeemable participating preference share - basic and diluted (pence)* 10   2.36 24.56 26.92   (18.53)   (8.86)                  

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 23 to 36 form an integral part of these unaudited interim condensed financial statements.

*For the period 1 January **2021** to 30 June **2021* *with unaudited comparatives for the period 1 January **2020** to 30 June **2020*
*and audited comparatives for the year ended 31 December **20**20*
*Notes* *Stated capital account*
*GBP* *Retained income*
*GBP* *Total*
*At 1 January 2020*   *49,704,414* *74,671,536* *124,375,950*
Loss for the period   - (19,734,212) (19,734,212)
Dividends paid 12 - (2,715,425) (2,715,425)
*At 30 June 2020*   *49,704,414* *52,221,899* *101,926,313*                
Profit for the period   - 10,300,911 10,300,911
Dividends paid   - (2,715,425) (2,715,425)
*At 31 December 2020*   *49,704,414* *59,807,385* *109,511,799*                
Profit for the period   - 28,668,405 28,668,405
Dividends paid 12 - (2,715,425) (2,715,425)
*At 30 June 2021*   *49,704,414* *85,760,36**5* *135,464,779*        
     The accompanying notes on pages 23 to 36 form an integral part of these unaudited interim condensed financial statements.

*For the period 1 January **2021** to 30 June **2021*
*with unaudited comparatives for the period 1 January **2020** to 30 June **2020*
*and audited comparatives for the year ended 31 December **20**20*
*Notes* *Six months*
*ended 30 June*   *Year **e**nded*
*31 December *   *2021*   *2020*   *20**20*   *GBP*   *GBP*   *GBP*
*Cash flows **from**/(used in)** operating activities*            
Net profit / (loss)   28,668,405   (19,734,212)   (9,433,301)
Adjustments for:            
Net movement in the fair value of securities (at fair value through profit or loss) 9

21,950,317   13,554,835
Realised gain on foreign exchange   (51,206)   (391,175)   (863,673)
Unrealised loss/(gain) on foreign exchange   488,628   (248,694)   (53,655)
Payment for purchases of securities   (31,635,051)   (69,425,325)   (157,086,351)
Proceeds from sale of securities   20,429,479   82,329,326   158,042,626
*Operating cash flows before movements in *
*working capital*   *(**9,044,24**6**)*  


(Increase)/decrease in receivables   (89,829)   111,632   124,661
Increase/(decrease) in payables and accruals   118,740   (71,704)   (97,572)
*Net cash from**/**(used in)* *operating activities*   *(9,015,33**5**)*   *14,520,165*   *4,187,570*            
*Cash flows (used in)/from financing activities*            
Repayment of borrowings   (54,359,536)   (40,624,864)   (69,877,236)
New bank loans raised   62,900,613   29,410,518   69,625,727
Dividends paid 12 (2,715,425)   (2,715,425)   (5,430,850)
*Net cash* *(used in)**/from** financing activities*   *5,825,652*   *(13,929,771)*   *(5,682,359)*            
Net (decrease)/increase in cash and cash equivalents   (3,189,683)  


Cash and ca

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