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
*HALF-YEARLY **FINANCIAL **RESULTS*
The information set out in this announcement is the Company’s full unedited half-yearly financial results (unaudited) for the period ended 30 June 2023 (the "*HYFR*").
The HYFR is expected to be printed and posted to all shareholders within September, 2023. The Company will also make the HYFR available in the ‘Trust Documents’ section of the Company’s website at https://middlefield.com/funds/uk-funds/middlefield-canadian-income-trust/ 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
Enquiries:
Hilary Jones
*JTC Fund Solutions (**Jersey**) Limited*
Secretary
Tel.: 01534 700 000
Dean Orrico
President
*Middlefield International Limited*
Tel.: 01203 7094016
*END OF ANNOUNCEMENT*
*Middlefield Canadian Income Trust*
Half Yearly Report
*30 June 2023*
*LON: MCT*
Targeting high levels of stable income and capital growth, this Fund invests in high quality, Canadian large capitalisation businesses. Middlefield Limited, the Fund’s investment manager, is a private and independent firm located in Toronto, Canada, a member of Canada’s Responsible Investment Association and regulated by the Ontario Securities Commission.
*RiA - A Responsible Investment Association Member*
Further details about the Responsible Investment Association are available on the website at www.riacanada.ca
*Financial Highlights*
*2023 DIVIDEND*
*5.2p*^*1** per share*
*2023 Dividend Guidance*
*YIELD*
*5.0%*
*SHARE PRICE*
*103.50p*
*NAV PER SHARE*
*121.63p*
*NET ASSETS*
*£130.0m*
1. Annualized, 1.30p quarterly. This is a target only and does not constitute, nor should it be interpreted as a profit forecast.
*Why Middlefield Canadian Income PCC?*
*Who is this fund for?*
This Fund is for long-term investors seeking dividends and capital appreciation from a diversified portfolio of stable, profitable businesses domiciled primarily in Canada.
*Reasons to buy*
*Unique* *Proven* *Diversification*
The UK’s only listed Canadian equity fund focused on high income – admitted to the FTSE UK All-Share Index in 2011. Outperformance over the period since inception in 2006, delivered by a private and independent investment manager based in Toronto, Canada. UK investors are underexposed to Canadian equities – Canada is one of the largest investable economies in the developed world.
*High Income* *Stability* *Governance*
Canadian equities offer a higher yield compared to other developed markets and MCT has consistently paid dividends in excess of 5p per annum since 2017. Canada is a member of the G7 and offers one of the most stable political and financial systems in the world. Independent Board of Directors re-elected annually by shareholders to protect their interests.
*A member of the Association of Investment Companies*
Further details about the Company, including the latest annual and half yearly financial reports, fact sheets and stock exchange announcements, are available on the website at www.middlefield.co.uk/mcit.htm
*Key **Information*
This Fund invests in larger capitalisation Canadian and U.S. high yield equities with a focus on companies that pay and grow dividends.
*Exposure to Key Canadian Themes & Industries*
Canadian companies are amongst the world leaders across the real estate, financial and energy and renewables sectors.
*Real Estate* *Financials* *Energy and Renewables*
Canada’s real estate market is underpinned by a stable economy and a relatively low unemployment rate. Immigration and a highly educated workforce support ongoing demand and growth in foreign investment. Historically, real estate has performed well as a proven hedge against inflation. One of the world’s most sophisticated and well-capitalised banking systems, Canada’s banks consistently paid dividends without cuts or suspensions through the global financial crisis and the COVID-19 pandemic. Canada is a global leader in the production of energy and electricity from renewables, oil and natural gas. Canadian companies that focus on wind and solar are benefiting from increasing demand for clean power while Canadian energy companies are benefiting from growing demand and constrained supply of oil and natural gas.
*Historical **Performance*
*Performance Since Inception to 30 June 2023*
*Recent Performance * *1 Mth * *3 Mth * *6 Mth * *YTD * *1 Year*
Share Price 0.0% -3.1% -10.9% -10.9% -8.4%
NAV 1.5% -2.1% -3.3% -3.3% -9.1%
Benchmark 2.0% -0.9% 0.4% 0.4% -4.5%
S&P/TSX Composite Index 3.6% 0.4% 2.9% 2.9% 3.0% *3 Year* *5 year* *7 Year* *10 year* *Since Inception*
*Long-term Performance* *annualised* *annualised* *annualised* *annualised* *annualised*
Share Price 13.6% 7.0% 8.3% 4.8% 6.3%
NAV 12.9% 6.3% 7.3% 6.1% 6.9%
Benchmark 18.6% 9.1% 8.9% 6.8% 6.6%
S&P/TSX Composite Index 12.6% 8.3% 8.9% 7.9% 6.2% *3 Year* *5 year* *7 Year* *10 year* *Since Inception*
*Long-term Performance* *cumulative* *cumulative* *cumulative* *cumulative* *cumulative*
Share Price 46.5% 40.5% 74.6% 59.6% 180.5%
NAV 43.9% 35.6% 63.4% 80.5% 209.4%
Benchmark 66.6% 54.5% 81.4% 93.4% 196.3%
S&P/TSX Composite Index 42.7% 49.2% 81.6% 113.9% 176.0%
Sources: Middlefield, Bloomberg. As at 30 June 2023
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.
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 MCT to October 2011 and GBP returns thereafter since MCT was CAD$ hedged from inception to October 2011.
*Responsibility **Statement*
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 13 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* *Andrew Zychowski*
Director Director
Date: 14 September 2023
*Chairman’s **Report*
*It is my pleasure to present the Half-Yearly Financial Report for the period ended 30 June, 2023 for Middlefield Canadian Income PCC (“MCT” or the “Company”) and its closed-ended cell, Middlefield Canadian Income – GBP PC (the “Fund”). The Fund invests* *in a broadly diversified portfolio, comprised of primarily Canadian equity income securities, with the objective* *of providing shareholders with high dividends as well as capital growth over the longer term.*
*Investment Performance*
Equity markets experienced a wide divergence of returns during the first half of 2023 (H1) with the sharp recovery in tech stocks being the biggest driver of relative performance. The TSX Composite, which has more exposure to cyclical sectors, lagged the S&P 500 by more than 8% during H1 in British Pounds. The Fund had total returns of -10.9 per cent on its share price and -3.3 per cent on net assets, which are less than the Benchmark total return of 0.4 per cent. The Fund’s underweight exposure to the materials sector, together with selection effects within utilities and financials, were the biggest negative contributors to performance. The performance of the Fund’s share price relative to net assets resulted in a widening of its discount, ranging from 7.7 per cent to 15.2 per cent throughout the first half of the year, representing an attractive entry point for investors. Notwithstanding short-term performance, the Fund’s annualised total return since inception in 2006 of 6.9% compares favourably to the Benchmark’s return of 6.6% and the TSX Composite Index’s return of 6.2 per cent.
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 are confident that the Investment Manager’s outlook and the Fund’s corresponding positioning will deliver good performance over time.
*Investment Management*
Middlefield Limited, the Fund’s Investment Manager, has over 40 years of investing experience in Canadian Equities. The Investment Manager uses an actively managed strategy, allowing it to take advantage of dislocations in the market. The Fund increased its Canadian equity exposure to 100% in the first half of the year with a view that Canadian stocks offer better risk-adjusted return potential than US securities. The Fund’s overweight position in real estate reflects the Investment Manager’s current view that valuations do not reflect the healthy fundamentals across most of the sector. Notably, the Fund remained underweight financials, the largest component of the Benchmark, due to an increasingly challenging operating environment for banks. The ability to tactically overweight or underweight certain sectors as market dynamics evolve demonstrates a key advantage of the Fund’s active management strategy.
*Fund Sector Weights Compared to Benchmark as at 30 June 2023*
*Sector Allocation* *MCT* *Benchmark* *Over/ *
*Underweight*
Real Estate 24.0% 6.0% 18.0%
Financials 21.4% 30.8% -9.4%
Utilities 16.5% 16.7% -0.2%
Energy 16.3% 15.2% 1.1%
Pipelines 16.0% 14.3% 1.7%
Communication Services 4.6% 11.1% -6.5%
Industrials 1.2% 1.1% 0.1%
Materials 0.0% 2.6% -2.6%
Consumer Discretionary 0.0% 1.6% -1.6%
Healthcare 0.0% 0.5% -0.5%
Consumer Staples 0.0% 0.2% -0.2%
*Total* *100.0%* *100.0%*
Source: Middlefield, Bloomberg
The background to the Fund’s performance is explained in depth by Mr Dean Orrico in the Investment Manager’s accompanying report.
*Shareholder Engagement*
The Fund’s share register remained stable throughout the period, supported by long-term institutional shareholders and a growing base of retail investors. The Board has been focused on enhancing the Fund’s profile to increase investor demand for the stock. Towards this aim, the Investment Manager launched a new website in December 2022 which includes a more user-friendly interface and improved functionality. The website has facilitated more seamless sharing of content generated by Middlefield on the MCT webpage and has increased touchpoints with investors. Publications from Shares and an IGTV interview featuring Dean Orrico were among the content on our website that generated positive interest from prospective investors. In addition to digital initiatives, both of the Fund’s lead portfolio managers, Dean Orrico and Rob Lauzon, met with many existing and prospective investors throughout the U.K. in May 2023 on a roadshow organized by Kepler Partners.
*Gearing*
Beginning in May 2023, the Fund reported both gross gearing and net gearing on its monthly fact sheet. Gross gearing was relatively consistent throughout the period under review, ranging between 16.1 per cent and 16.8 per cent. The Fund has the power to borrow up to 25 per cent of total assets on a gross gearing basis. Net gearing, which represents borrowings as a percentage of net assets, is the AIC standard measure of gearing. Net gearing ranged between 19.4 per cent and 20.4 per cent throughout the first half of the year.
While borrowing costs have increased with higher interest rates over the past twelve months, the Board believes that the use of gearing at prevailing interest rates is warranted due to an expected total return that exceeds total borrowing costs, the positive impact on dividend coverage and the expectation that short term interest rates are likely near their peak for the current tightening cycle.
*Earnings and Dividends*
In light of the excess revenue earnings generated by the Fund in 2022, together with the prospect of dividend growth from the underlying portfolio, the Board approved a 0.1p increase to the annual dividend target in early 2023. Two quarterly interim dividends each of 1.30p per share were paid on 31 January 2023 and 28 April, 2023, representing a 2% increase to quarterly payments made in the previous financial year. Consistent dividend growth is a core consideration for the Fund’s security selection process and factored into the Board’s decision to increase the dividend. The Company’s earnings per share totalled 2.84p for the six months ended 30 June 2023, reflecting a dividend coverage ratio of 1.09. This compares to dividend coverage ratios of 1.16 in 2022 and 0.95 in 2021. These figures are targets only and do not constitute, nor should they be interpreted as, a profit forecast. The Board regularly reviews the Fund’s dividend coverage and, subject to market conditions as well as the Fund’s earnings, it will continue to consider whether further dividend increases are warranted in the future.
*Related Party Transactions*
The Company’s related parties are its directors and the Investment Manager. There were no related party transactions (as defined in the Listing Rules) during the year under review, nor up to the date of this report. Details of the remuneration paid to the directors and the Investment Manager during the period under review are shown in note 13.
*Material Events*
The Board is not aware of any significant event or transaction which occurred between 1 January 2023 and the date of publication of this statement which could have a material impact on the financial position of the Fund.
*Company and Fund Annual General Meetings*
At each of the Company and Fund Annual General Meetings held on 1 June 2023, all resolutions, relating to both ordinary business and special business, were duly passed on a poll.
*Board Composition and* *Succession Planning*
In order to ensure the high standards of corporate governance, the Board regularly considers future succession. In recent years, we have experienced significant Board refreshment, with several retirements and new appointments.
During the period under review, as a result of the retirements of Messrs Bisson and Hughes, the Board was pleased to announce the appointment of Mr Andrew Zychowski as a non- executive director of the Company, as well as the Chair of the Company’s Audit Committee. Mr Zychowski comes to MCT with significant experience in the investment companies sector, including over 30 years of providing corporate advisory services to investment company boards on M&A, corporate restructurings, IPOs and secondary financings.
The Board now comprises five non- executive directors, of whom four are independent and 40% are female, including the senior independent director.
*Contact*
Shareholders can write to the Company at its registered office or by email to the Secretary at *middlefield.cosec@jtcgroup.com.*
*Principal Risks and Uncertainties*
Geopolitical tensions remain high in Eastern Europe as the war in Ukraine drags on. Although the situation has become increasingly untenable for both sides, it is difficult to identify an exit ramp from the conflict in the near-term. The global community has been steadfast in its commitment to punitive sanctions against Russia and its willingness to arm the Ukrainian military with weapons. Until the war is resolved, the risks of dampened economic growth prospects, disruption to trade relations and the flow of capital remain elevated. Global commodities such as oil, fertilizer, grain and metals are particularly vulnerable to disruptions related to the war.
Decades-high inflation has come down in recent months but remains above central bank targets. While goods inflation is trending lower as global supply chains recover from pandemic-related disruptions and inventory levels normalise, services inflation, which is more influenced by the rate of unemployment and wages, is proving to be stickier and represents a bigger risk. From a profit perspective, faster wage growth is also likely to result in margin pressure, particularly for labour intensive businesses.
Global central banks have embarked upon the most aggressive rate hiking cycle in modern history to address inflation. Since March 2022, the Bank of Canada has raised the overnight rate from 0.25% to 5.0% due to high inflation and consistently strong employment. We recognise that higher interest rates can limit a business’ access to capital, which could result in less economic activity and innovation. Higher rates also put additional strain on consumers that have utilised credit to fund their asset purchases and ongoing expenses. If monetary policy remains restrictive for an extended period and central banks continue to raise short-term borrowing rates, the risk of a global recession taking place will continue to rise.
*Managing Risks*
The Company’s risk assessment and the way in which significant risks are managed is a key area for the Board. Work here is driven by the Board’s assessment of the risks arising in the Company’s operations and identification and oversight of the controls exercised by the Board and its delegates, the Investment Manager and other service providers. These are recorded in the Company’s business risk matrix, which continues to serve as an effective tool to highlight and monitor the principal risks.
The directors consider the principal risks of the Company to be those risks, or a combination thereof, that may materially threaten the Company’s ability to meet its investment objectives, its solvency, liquidity or viability. In assessing the principal risks, the directors considered the Company’s exposure to and likelihood of factors that they believe would result in significant erosion of value such as the impact of climate risk on investee companies, a global recession, a war in Ukraine, higher interest rates, persistent inflation, tightening credit conditions, fluctuating commodity prices and sharp moves in foreign exchange rates.
At the time of this report, inflation, higher interest rates and tightening credit conditions are having an impact at both micro and macro levels. While the long-term severity and impact on the Company’s principal risks on its viability cannot currently be predicted with any accuracy, it is expected that an extended period of restrictive monetary policy would have detrimental lagged effects.
*Outlook*
Our outlook for the Fund’s core sectors is constructive for the second half of 2023. CPI has trended to approximately 3% in Canada and recession risks are receding. Moreover, the labour market and overall business fundamentals remain resilient. While interest rates are expected to be elevated for some time, it is expected that central banks in both Canada and the United States are nearing completion of their current tightening cycles. Accordingly, we have noted a growing list of individual stocks that are starting to break out of recent trends which supports our view that market breadth is improving. We expect a rotation into more reasonably priced value names will occur over the coming months, which bodes well for the Fund’s attractively priced dividend-paying holdings. Moreover, a significant amount of capital that made its way into money market funds during 2022 and early 2023 is now starting to flow back into equities.
Canada remains an attractive country for U.K. investors. It is a secure net exporter of oil and natural gas and should benefit from Europe’s ongoing focus on energy independence. The Federal government is targeting 465,000 new permanent residents in 2023, resulting in the highest population growth of any nation in the G7. Moreover, Canada is attracting many immigrants who can immediately contribute to economic activity. More specifically, the recent campaign to incentivise highly skilled H1B Visa holders in the U.S. to emigrate to Canada has been well very received with the Canadian government receiving 10,000 applications within a few days of launching the program. In addition, immigration will continue to support stable consumer demand and benefit cyclical sectors such as financials, real estate and energy. Considering our positive outlook on the Canadian market, together with the Fund’s ongoing marketing initiatives, as well as the near end to the interest rate hiking cycle, we believe the current discount to net assets will narrow over time.
The Board joins me in thanking you for your continued support.
*Michael Phair*
Chairman
14 September 2023
*Middlefield Group is a private and independent asset manager focused on equity income investment strategies. Located in Toronto, Canada, the company* *oversees a suite of funds, many of which have been recognised for excellence in various investment categories. Middlefield specialises in managing diversified equity income strategies for UK and Canadian investors with a particular focus on delivering stable distributions and capital appreciation over the long term.*
*Investment Manager’s Interim Report*
Equity market returns were widely dispersed during the first half of 2023 (H1). The sharp recovery in tech stocks has been the biggest driver of relative performance, leading to the best first half of a year for the Nasdaq 100 in history (with data going back to 1985). The hype around artificial intelligence (AI) has fuelled this rally and resulted in narrow market leadership. Conversely, many core sectors of the market, including energy, utilities, financials and real estate, lagged in H1.
The underlying fundamentals for cyclical sectors that underperformed in H1 have improved in recent months. The most notable change to the economic landscape has been a significant drop in inflation. In Canada, the year-over-year rate of inflation was 2.8% in June, 2023, well below 6.3% at the end of 2022 and its peak of 8.1% a year prior. Falling inflation has contributed to lowered expectations of a recession and boosted consumer confidence. The University of Michigan’s monthly Consumer Sentiment Index hit 72.6 in July, the highest reading since September, 2021 and the biggest one-month gain since 2006. The labour market has also proven to be extremely resilient, with the unemployment rate near all-time lows in both Canada and the U.S. Real hourly earnings are increasing for the first time in two years which further supports consumer demand. Although most economists had been forecasting a recession since 2022, the broad strength of the consumer and the tightness of the labour market may be enough to support a much better economic outcome.
Even though inflation has been trending lower, it remains above most central banks’ long-term targets and monetary policy is in restrictive territory. While services inflation, which is influenced by the rate of unemployment and wages, represents a bigger risk to overall inflation statistics, we believe we are near the end of the interest rate hiking cycle. Although economic data steadily improved throughout the first half of the year, real yields have risen and this should temper further multiple expansion for growth stocks in particular.
We prefer attractively priced Canadian equities relative to the U.S. in the second half of 2023. As at June 30 2023, the TSX Composite traded at a blended forward price to earnings multiple of 13.2x – more than a six point-multiple discount to the S&P 500 multiple of 19.4x. In addition to attractive valuations, the total payout yield (dividends plus share buybacks) for the TSX is more attractive than the S&P 500, meaning investors are receiving more free cash flow from their investments in Canada. Companies in the TSX paid out a record $170 billion in total shareholder returns over the past twelve months, representing a payout yield of 5.5 per cent. $100 billion of this figure comes from dividend payments, supported by strong earnings and free cash flow growth.
Real estate remains our highest conviction sector exposure for the remainder of the year. As at 30 June 2023, the Fund had 24% of its portfolio allocated to Canadian REITs, representing an 18% overweight position relative to the Benchmark. This reflects our view that real estate trading prices do not accurately represent the healthy fundamentals across most of the sector. REITs continue to act as an effective hedge against inflation as companies can raise rents on expiring leases, particularly in undersupplied asset classes such as industrial, multi-family and retail. Moreover, REITs have historically outperformed the TSX twelve to twenty-four months after the first Bank of Canada rate hike, which occurred in March 2022. In British Pounds, Canadian REITs generated a total return of 0.1% in H1, trailing the TSX Composite return of 2.9 per cent. We are optimistic that sentiment is starting to shift and the sector is positioned for a catch-up trade during the second half of the year.
We maintain a positive outlook on Canadian energy. As at 30 June, 2023, the Fund had 16.3% of its portfolio allocated to Canadian energy producers, 1.1% above the Benchmark weighting. Energy producers should benefit from stronger commodity prices in H2, supported by supply/demand fundamentals and geopolitical tailwinds. The economic growth outlook has improved since the beginning of the year, a positive read through for global oil demand. Meanwhile, OPEC+ has stayed firm in its commitment to supporting higher oil prices through production cuts totalling 3.66 million bpd, or c.3.6% of global demand. Regarding natural gas, Canadian storage is at a five-year low with wildfires impacting supply and higher than average U.S. power consumption driving demand. Seasonality has a significant impact on commodity prices and historical data supports positive natural gas price momentum for the latter half of the year with average increases of 18% over the past decade. Canadian Natural Resources is our preferred oil-weighted producer and Tourmaline is our favourite company for natural gas exposure.
We hold an equally positive view on Canadian energy infrastructure companies (i.e., pipelines) and are overweight the Benchmark by 1.7 per cent. North American LNG is expected to play a key role in replacing Russian supply that Europe had previously relied on. LNG Canada, the nation’s largest private infrastructure project in history, is expected to come online in 2025 and add approximately 4 Bcf/d of gas supply to the global market, providing our Canadian producers with greater exposure to higher international natural gas prices. Equally as impressive is the buildout of LNG in the United States. The current US export capacity of 13 Bcf/d is expected to more than double to 30 Bcf/d by the end of the decade. Pipeline companies will play a critical role in gathering, processing and transporting natural gas volumes throughout North America to LNG export terminals. Enbridge, TC Energy and Pembina Pipeline are three core holdings that have exposure to both Canadian and US energy basins and are well-positioned for the upcoming capital expenditure cycle.
The Fund remains committed to owning Canadian financials but has reduced its exposure to the sector to 21.4% - 9.4% below the Benchmark weight. Canada’s banking system, which functions as a high-barrier oligopoly, supports one of the safest regions to invest in the world. Compared to the US, Canada’s banks have stricter regulatory standards and reserve requirements, less commercial real estate exposure and better expense management.
Notwithstanding these attractive characteristics, an expected slowdown in economic growth and a regulatory requirement to maintain higher capital ratios has created a more challenging environment for Canadian banks. At a forward price to earnings ratio of approximately 9x, we believe Canada’s banks are properly reflecting near- term headwinds and we may increase our exposure to the sector during the second half of the year.
The Fund had 16.5% exposure to the utilities sector at the end of H1, in-line with the Benchmark. Canada has a clean, stable and profitable utilities sector, underpinned by an abundance of natural resources. Hydroelectricity represents approximately 60% of the country’s overall power mix, with fossil fuels accounting for just 18 per cent. The sector’s clean emissions profile positions it to benefit from the ongoing global energy transition and should attract environmentally conscious investors over the long-term. We are bullish on the sector’s long-term growth prospects but are mindful of higher interest costs to finance new projects, keeping us neutral on the sector.
*Top **Holdings*
*Top Holdings as at 30 June, 2023*
*Company* *Sector* *% of *
*Equities**TD Bank*
The Toronto-Dominion Bank is one of the top 10 banks in North America, serving more than 25 million customers worldwide. In Canada, it operates more than 1,060 branches and over 3,300 ATMs. Its Canadian Retail division, which generates 60% of revenue, provides a full range of financial services including commercial banking, wealth management and insurance. *Financials* *4.8%**BCE Inc.*
BCE Inc. is Canada’s largest provider of telecommunications services. It provides a full suite of wireless and wireline services in addition to owning Bell Media, Canada’s leading content creation company. Canada’s telecom industry functions as an oligopoly, resulting in high barriers to entry, stable earnings, and consistent dividend growth. *Communication* *Services* *4.6%**Bank of Nova Scotia*
Scotiabank provides retail, corporate and investment banking services in Canada, Central and Latin America, and Asia. Its international footprint, which is unique among Canada’s Big 6 banks, is benefitting from an improving global economic growth outlook. Exposure to higher-return Pacific Alliance nations such as Mexico, Chile, Peru, and Colombia are its biggest growth differentiators. *Financials* *4.5%**Canadian Natural Resources*
Canadian Natural Resources (CNQ) is an independent energy producer with operations focused in Western Canada, the UK and offshore Africa. We view CNQ as a premier global E&P with a differentiated asset base, low corporate declines & breakeven costs, and leading ESG performance. Through the Pathways Alliance, CNQ is a global leader in carbon capture and is developing other critical technologies for reducing emissions. *Energy* *4.5%**AltaGas*
AltaGas is a North American energy infrastructure company that operates a regulated gas distribution business in the United States and a fast-growing midstream business in Western Canada. The company is actively investing in technologies for efficient leak detection and management, and better operational efficiency. It has consistently generated cash flow growth which has supported recent dividend increases. *Utilities* *4.2%**Capital Power Corporation*
Capital Power is a Canadian power generation and energy transition company. It owns approximately 7,500 megawatts of power generation capacity at 29 facilities across Canada and the US. It is currently implementing a $1.3 billion growth plan through 2024 which includes investments in natural gas and renewable assets. It is also investing in carbon capture technologies which is in line with its target of eliminating 7 million tons of carbon annually from its portfolio. *Utilities* *4.2%*
*Company* *Sector* *% of *
*Equities**Enbridge*
Enbridge is one of the largest energy infrastructure companies in North America with an extensive delivery network of crude oil, natural gas, natural gas liquids and renewable energy. ENB also provides gas utility services in Ontario, Quebec, and New Brunswick. It is actively investing in low carbon technologies such as solar, wind and hydro power generation facilities. ENB’s goal is to achieve net-zero emissions by 2050 and reduce its greenhouse gas emissions by 30% by 2025. *Pipelines* *4.1%**Bank of Montreal*
BMO, which was founded in 1817, has grown to be Canada’s fourth largest bank. For over two centuries, BMO has maintained a consistent record of dividend payments. It has a well-established commercial banking business that it plans to grow through new product offerings and superior customer experience. BMO conducts its business in the US through its subsidiary, BMO Harris Bank, which has over 500 branches. *Financials* *3.6%**Pembina Pipeline*
Pembina is an established and reputable transportation and midstream provider with over 65 years of operational history. Its assets are diversified across the hydrocarbon value chain, including pipelines, gathering & processing, and NGL midstream operations in Canada and the US. The company is actively investing in low-carbon and sustainability solutions such as carbon capture and storage to offset greenhouse gas emissions. *Pipelines* *3.5%**Royal Bank of Canada*
RBC is Canada’s largest bank by market capitalisation, with over a trillion dollars in assets. It serves Middlefield, as well as more than 17 million customers in Canada, the US and approximately 30 other countries. RBC benefits from scale advantages in the Canadian market where it is committed to gaining market share in both retail and wholesale businesses through investments in technology and brand recognition. *Financials* *3.4%*
*Outlook*
We believe cyclical value sectors are poised to outperform in H2 and that Canadian equities are uniquely positioned to benefit from this setup. The recent strength in commodity prices supports our view that the Canadian dollar should appreciate relative to the British Pound in H2 after depreciating 3.3% in H1. Our highest conviction sectors are real estate and energy, as reflected by the Fund’s current asset allocation. Both sectors have historically acted as effective hedges against inflation which is expected to remain elevated over the medium-term. Growth stocks that demonstrated market leadership during H1 are starting to screen as expensive, especially with monetary policy expected to remain restrictive for longer. The relative value that Canadian cyclicals currently offer further strengthens our conviction. Canadian companies have returned record amounts of capital to shareholders recently in the form of dividends and share buybacks. This is a trend we expect to continue in H2 as earnings outlooks improve due to better-than- feared economic conditions. The Fund is focused on high-quality companies with visibility into free cash flow and dividend growth. MCT’s entire portfolio is invested in high dividend paying stocks, many of which have a long track record of consistently increasing dividends. Over the past five years, the Fund’s portfolio has increased dividends received by 8.9% per annum, exceeding the 7.9% per annum growth rate for the Benchmark.
*Middlefield Limited*
*ESG*
*Environment, Social and Governance (“ESG”) Policy and Stewardship Principles:*
*ESG **Policy*
As Investment Manager, Middlefield Limited (“Middlefield”) has a duty to maximise investment returns for the shareholders of the Fund, without undue risk of loss. Middlefield does this within the investment limits of the Fund’s investment mandate. Although the Fund is not an ESG-focused or sustainable fund, Middlefield is increasingly incorporating ESG considerations into its investment process to aid decision making, identify potential risks and opportunities and to enhance long-term, risk-adjusted returns. In September 2021, Middlefield appointed Stephen Erlichman, one of the foremost experts on governance and ESG in Canada, as Chair, ESG to augment its ESG capabilities and processes.
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. 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 comprehensive understanding of a company’s strategy, culture, and sustainability. Consistent with these objectives, Middlefield integrates ESG considerations into its investment process and these considerations are significant factors in selecting portfolio companies for its ESG-focused mandates.
Middlefield has adopted Stewardship Principles in order to effectively steward the assets it manages for its clients. The Stewardship Principles and its stewardship activities are set out below and 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 considers alongside its fundamental, quantitative and qualitative research.2. The 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. ESG considerations also are integrated into our 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 our 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; and · monitoring shareholder meetings and voting proxies.
Many countries have established or are in the process of establishing standardised ESG disclosure requirements for corporate issuers. When enacted, these are expected to enhance the efficiency of the ongoing review and monitoring of a company’s ESG.
Middlefield’s approach to ESG integration may evolve over time as more ESG and sustainability research and data become available.
*Middlefield’s Stewardship* *Principles*
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 CCGG has published a set of seven stewardship principles, which have become recognised 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, inter alia, utilising a proxy advisory firm to assist in monitoring companies and voting proxies);· reporting to its clients (as required by law); and· 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); and· 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.
Middlefield exercises voting rights attached to the securities held by the funds it manages as follows:
· Middlefield uses the following proxy voting guidelines:
1. proxies will be voted in a manner that seeks to enhance the long-term sustainable value of the funds it manages; and 2. 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; and· 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; and· 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 it up to date on developments that are material to it as an asset manager. It utilises its professional advisors, and it also relies on the organisations 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); and· Middlefield considers environmental, social and governance factors that are relevant to a company and integrates such factors into its investment activities.
*ESG Case Studies*
*TC Energy (Top 22% ESG ranking and 3.2% of the portfolio as at 30 June 2023)*
*Summary:*
TC Energy (formerly TransCanada) is a North American energy infrastructure company, delivering the energy that millions of people rely on each day to power their lives in a sustainable way. It owns over 55,000 miles of natural gas pipelines and has 535 billion cubic feet of natural gas storage assets. It also owns, operates or controls seven power plants with 4,260 MW of power generation capacity.
*Highlights:*
· $75 million committed to venture funds developing clean energy· Positive, long-term relationships with close to 100,000 landowners· In 2022, TC linked ESG performance to compensation, joined UN Global Compact and formed the Indigenous Advisory Council
*Top ESG Issues:*
· Safely delivering energy the world needs in an economically, environmentally and socially responsible manner· Advancing indigenous reconciliation by building stronger and mutually beneficial relationships with Indigenous Peoples. TC published its inaugural Reconciliation Action Plan in 2021 to respect the spirit and intent of the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP)
*Choice Properties (Top 26% ESG ranking and 3.1% of the portfolio as at 30 June 2023*
*Summary:*
Choice is the largest REIT in Canada with over 700 properties across three strategic asset classes. Choice has a strategic relationship with Canada’s largest grocer, Loblaws, to provide food, medication, and other necessity-based products to Canadians. Choice’s 18 million square foot development pipeline includes over 70 sites with future development potential for mixed use living spaces.
*Highlights:*
· One of first REITs in Canada to have net zero targets validated by Science Based Targets initiative (SBTi)· Donated over $1.65 million to Canadian charities and 5,000+ hours of colleague time donated· Released its Supplier Code of Conduct which sets out minimum ethical and business standards that its suppliers must meet in order to enter contracts with the company
*Top ESG Issues:*
· Reduce greenhouse gas emissions through energy efficiency, the use of renewable power and low-carbon building designs· Safeguarding the personal information of tenants and employees by continuing to advance its cybersecurity program and through physical, procedural and technical controls
*Corporate **Information*
*Registered Office*
28 Esplanade
St Helier
Jersey JE2 3QA
*Directors*
Michael Phair (Chairman)
Kate Anderson
Philip Bisson (resigned 1 June 2023)
Janine Fraser
Richard Hughes (resigned 1 June 2023)
Dean Orrico
Andrew Zychowski (appointed 30 June 2023)
*Service Providers*
*Administrator and Secretary*
JTC Fund Solutions (Jersey) Limited
28 Esplanade
St. Helier Jersey, JE2 3QA
*Investment Advisor *
Middlefield International Limited
288 Bishopsgate
London, EC2M 4QP
*Investment Manager *
Middlefield Limited
Suite 3100
8 Spadina Ave
Toronto, Ontario
Canada, M5V 0S8
*Legal Advisers*
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
155 Wellington Street West
2nd Floor
Toronto, Ontario
Canada, M5V 3L3
*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
Central Square
29 Wellington Street
Leeds, LS1 4DL
*Independent Auditor*
RSM Channel Islands (Audit) Limited
40 Esplanade
St Helier
Jersey, JE4 9RJ
*Financial Calendar *
*Annual Results *
Announced April 2023
*Dividend Payment Dates*
Last Business Day of January, April, July and October
*Annual General Meetings*
1 June 2023
*Half Yearly Results*
Announced September 2023
*Information Sources*
For more information about the Company and Fund, visit the website
*https://middlefield.com/funds/uk-funds/ middlefield-canadian-income-trust/*
*Interim Condensed Financial Statements of **the Fund (Unaudited)*
*Condensed Statement of Financial Position of the Fund (Unaudited)*
*As at 30 June 2023 with unaudited comparatives as at 30 June 2022 and audited comparatives as at 31 December 2022*
*30.06.2023* *30.06.2022* *31.12.2022* *Notes* *GBP* *GBP* *GBP*
*Current assets*
Securities (at fair value through profit or loss) 3 & 18 *155,698,731* 176,334,263 162,972,393
Accrued dividend income 605,786 603,125
Prepayments *651,901* 10,734 26,622
Cash and cash equivalents 4 *8,385* 3,318,554 1,523,392 *158,320,594* 180,269,337 165,125,532
*Current liabilities*
Other payables and accruals 5 *(385,738)* (505,129) (459,482)
Interest payable *(126,321)* (111,628) (152,371)
Loan payable 14 *(28,286,013)* (31,667,987) (27,877,663) *(28,798,072)* (32,284,744) (28,489,516)
*Net assets* *129,522,522* 147,984,593 136,636,016
*Equity attributable to equity holders*
Stated capital 6 *49,704,414* 49,704,414 49,704,414
Retained earnings *79,818,108* 98,280,179 86,931,602
*Total Shareholders’ equity* *129,522,522* 147,984,593 136,636,016
*Net asset value per redeemable participating preference share (pence)* 7 *121.63* 138.97 128.31
The financial statements and notes on pages 26 to 41 were approved by the directors on 14 September 2023 and signed on behalf of the Board by:
Michael Phair Andrew Zychowski
*Director* *Director*
The accompanying notes on pages 30 to 41 form an integral part of these financial statements.
*Condensed Statement of Comprehensive Income of the Fund (Unaudited)*
*For the period 1 January 2023 to 30 June 2023 with unaudited comparatives for the period 1 January 2022 to 30 June 2022 and audited comparatives for the year ended 31 December 2022*
*Six months ended 30 June 2023* *Six months ended *
*30 June *
*2022* *Year *
*ended *
*31 December 2022* *Revenue* *Capital* *Total* *Total* *Total* *Notes* *GBP* *GBP* *GBP* *GBP* *GBP*
*Revenue*
Dividend income and Interest income 8 *4,630,578* *–* *4,630,578* 4,453,419 9,432,850
Net movement in the fair value of securities (at fair value through profit or loss) 9 *–* *(7,286,215)* *(7,286,215)* 5,439,241 (6,931,619)
Net movement on foreign exchange *–* *669,496* *669,496* (2,956,333) (1,797,920)
*Total (loss)/revenue* *4,630,578* *(6,616,719)* *(1,986,141)* 6,936,327 703,311
*Expenditure*
Investment management fees *189,014* *283,521* *472,535* 539,732 1,063,089
Custodian fees *7,297* *–* *7,297* 11,296 19,778
Corporate Broker’s fees *33,753* *–* *33,753* 38,552 75,936
Other expenses *378,453* *–* *378,453* 382,784 816,022
*Operating expenses* *608,517* *283,521* *892,038* 972,364 1,974,825
*Net operating (loss)/profit before finance costs* *4,022,061* *(6,900,240)* *(2,878,179)* 5,963,963 (1,271,514)
Finance costs *(313,126)* *(469,689)* *(782,815)* (300,241) (964,531)
*(Loss)/profit before tax* *3,708,935* *(7,369,929)* *(3,660,994)* 5,663,722 (2,236,045)
Withholding tax expense *(683,831)* *–* *(683,831)* (652,140) (1,385,525)
*Net (loss)/profit after taxation* *3,025,104* *(7,369,929)* *(4,344,825)* 5,011,582 (3,621,570)
*(Loss)/profit per redeemable participating* *preference share – basic and diluted (pence)* 10 *2.84* *(6.92)* *(4.08)* 4.71 (3.40)
The total column of this statement represents the Fund’s Statement of Comprehensive Income, prepared in accordance with UK-adopted IFRS and IFRS as adopted by the European Union. There are no items of other comprehensive income, therefore profit/(loss) after taxation is the total comprehensive income. The supplementary revenue and capital columns are both prepared in accordance with the Statement of Recommended Practice issued by the AIC as disclosed in note 2a. All items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year.
There are £nil (2022: £nil) earnings attributable to the management shares.
The accompanying notes on pages 30 to 41 form an integral part of these financial statements.
*Condensed Statement of Changes in Redeemable Participating Preference Shareholders’ Equity* *of the Fund **(Unaudited)*
*For the period 1 January 2023 to 30 June 2023 with unaudited comparatives for the period 1 January 2022 to 30 June 2022 and audited comparatives for the year ended 31 December 2022*
*Stated Capital* *Retained* *Account* *Income* *Total* *Notes* *GBP* *GBP* *GBP*
*At 1 January 2022* *49,704,414* *95,984,022* *145,688,436*
Profit for the period – 5,011,582 5,011,582
Dividends 11 – (2,715,425) (2,715,425)
*At 30 June 2022* *49,704,414* *98,280,179* *147,984,593*
Loss for the period – (8,633,152) (8,633,152)
Dividends 11 – (2,715,425) (2,715,425)
*At 31 December 2022* *49,704,414* *86,931,602* *136,636,016*
Loss for the period – (4,344,824) (4,344,824)
Dividends 11 – (2,768,669) (2,768,669)
*At 30 June 2023* *49,704,414* *79,818,109* *129,522,523*
The accompanying notes on pages 30 to 41 form an integral part of these financial statements.
*Condensed Statement of Cash Flows of **the Fund (Unaudited)*
*For the period 1 January 2023 to 30 June 2023 with unaudited comparatives for the period 1 January 2022 to 30 June 2022 and audited comparatives for the year ended 31 December 2022*
*Six months ended *
*30 June* *Year ended 31 December* *2023* *2022* *2022* *Notes* *GBP* *GBP* *GBP*
*Cash* *flows* *generated* *(used* *in)/from* *operating** activities*
Net (loss)/profit after taxation *(4,344,824)* 5,011,582 (3,621,570)
Adjustments for:
Net movement in the fair value of securities (at fair value through profit or loss) 9 *7,286,215* (5,439,241) 6,931,619
Realised (losses)/gains on foreign exchange *(1,185,979)* 2,189,593 1,945,060
Unrealised gains/(losses) on foreign exchange *516,483* 766,740 (147,140)
Payment for purchases of securities *(28,736,999)* (24,659,077) (53,195,612)
Proceeds from sale of securities *28,724,444* 34,345,914 63,873,458
*Operating* *cash* *flows* *before* *movements* *in* *working* *capital* *2,259,340* 12,215,511 15,785,815
(Increase)/decrease in receivables *(30,539)* 13,363 136
(Decrease)/Increase in payables and accruals *(99,793)* 162,224 157,320
*Net* *cash* *flows* *generated* *from* *operating** activities* *2,129,009* 12,391,098 15,943,271
*Cash* *flows* *generated* *used* *in* *financing* *activities*
Repayments of borrowings *(117,631,656)* (102,287,072) (251,471,496)
New bank loans raised *118,810,394* 95,981,267 239,229,825
Dividends paid 11 *(2,768,669)* (2,715,425) (5,430,850)
*Net cash used in financing **activities* *(1,589,931)* (9,021,230) (17,672,521)
Net increase/(decrease) in cash and cash equivalents *539,077* 3,369,868 (1,729,250)
Cash and cash equivalents at the beginning of the year *1,523,392* 2,905,019 2,905,019
Effect of foreign exchange rate changes *(100,892)* (2,956,333) 347,623
*Cash* *and* *cash* *equivalents* *at* *the* *end* *of* *the* *year* *1,961,577* 3,318,554 1,523,392
*Cash* *and* *cash* *equivalents* *made* *up* *of:*
Cash at bank 4 *1,961,577* 3,318,554 1,523,392
The accompanying notes on pages 30 to 41 form an integral part of these financial statements.
*Notes to the Financial Statements of the Fund (Unaudited)*
*For the period 1 January 2023 to 30 June 2023 with unaudited comparatives for the* *period 1 January 2022 to 30 June 2022 and audited comparatives for the year ended 31 December 2022*
*1. **General Information*The Company is a closed-ended investment company incorporated in Jersey on 24 May 2006 and is regulated for Financial Services Business by the JFSC. 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 U.S. 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 (“LSE”) Main Market for listed securities. The Company and Fund have no employees.
The functional and presentational currency of the Company and the Fund is Pounds Sterling GBP.
The half-yearly report and interim condensed financial statements have not been audited or reviewed by the auditor, RSM Channel Islands (Audit) Limited, pursuant to the Auditing Practices Board guidance on ‘Review of Interim Financial Information’.
The information presented for the year ended 31 December 2022 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. **Principal Accounting Policies**a. **Basis of preparation*The interim condensed financial information for the period ended 30 June 2023 has been prepared in accordance with IAS 34 ‘Interim Financial Reporting’ as adopted by the United Kingdom. The interim condensed financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2022, which have been prepared in accordance with UK-adopted IFRS as required by the UK Listing and Disclosure Guidance and Transparency Rules.
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.
Adoption of new standards and interpretations
There are no standards, interpretations or amendments to existing standards that are effective for the first time for the financial period beginning 1 January 2023 that have had a material impact on the Company.
New standards and interpretations not yet effective and have not been adopted early by the Company
· IAS 1, ‘Presentation of financial statements on classification of liabilities’ (effective periods commencing on or after 1 January 2023 for IFRS as adopted by the European Union and 1 January 2024 for UK-adopted IFRS).· IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and Errors’ (effective periods commencing on or after 1 January 2023).
There are no other standards, interpretations or amendments to existing standards that are not yet effective that would be expected to have a significant impact on the Company.
*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:
· Ongoing shareholder interest in the continuation of the Fund;· the Fund has sufficient liquidity in the form of cash assets to meet all on-going expenses;· Should th