SEMI-ANNUAL REPORT 1998
For the period ending June 30, 1998

Press Release


MINT ANNOUNCES SECOND QUARTER RESULTS

Message to Unitholders

Middlefield High Income Trust ("MINT") is pleased to announce its unaudited financial results for the second quarter ended June 30, 1998, the details of which are attached.

For the first six months of 1998, the Trust generated net investment income of $3,224,093 and a net realized gain from securities transactions of $544,929. On July 15, 1998, MINT made a distribution of $0.22 per unit bringing year-to-date distributions to $0.44 per unit. It is anticipated that distributions will continue at approximately this level for the remainder of 1998.

As evidenced by increased volatility, equity and debt markets in North America and Europe began showing signs of nervousness during the second quarter of 1998 caused in particular by continuing economic instability in Asia. These conditions contrast with the strength of these markets at the outset of this year. The Canadian market, in particular, has also suffered from the effect of a weakening currency, which increases the probability of rising interest rates and softer consumer spending.

The income trust sector has also come under pressure in recent months reflecting generally poor equity markets and a large overhang of second instalments which come due this year. Primarily as a result of these factors, MINT's total return declined 4.6% during the first six months of the year compared with a 5.7% decline in the SCM Income Units Index over the same period.

The high yield debt market has recently experienced a widening of spreads both in the U.S. and Canada. The Canadian market has not seen much new high yield issuance whereas in the U.S., new issues are being priced at wider spreads and even postponed due to the oversupply imbalance.

We believe the volatility in equity and debt markets will persist for the near term. However, the securities in which MINT is invested should continue to show less volatility than the broader markets in part due to their high quality and relatively stable cash flows. With respect to the income trust sector in particular, we anticipate firming conditions as the second instalment situation is resolved. Diversification across industries and issuers also contributes to the stability of the portfolio.

MINT trades on the Toronto Stock Exchange under the symbol "MID.UN".

For further information, contact:
Mr. W. Garth Jestley
Director

August 19, 1998

STATEMENT OF NET ASSETS
As at June 30, 1998
     
Unaudited 1998 1997

ASSETS:
   Investments at Market Value $ 98,498,275 $ 71,083,568
   Cash and Short-term Investments 880,635 953,209
   Subscriptions Receivable - 39,200,000
   Income Receivable 1,763,002 1,276,109

101,141,912 112,512,886

LIABILITIES:
   Accounts Payable and Accrued Liabilities 761,264 2,427,044
   Unitholder Distributions 1,862,475 1,274,000
   Loan Payable 27,666,995 11,349,514

30,290,734 15,050,558

Net Assets $ 70,851,178 $ 97,462,328

Number of Units Issued and Outstanding 8,124,798 9,800,000

Net Asset Value per Unit $ 8.72 $ 9.95

 
 

STATEMENT OF OPERATIONS
For the three months ended June 30, 1998
     
Unaudited 1998 1997

INVESTMENT INCOME:
   Income from Investments $ 2,774,916 $ 1,124,205
   Interest 1,814,749 437,589

4,589,665 1,561,794

EXPENSES:
   Interest and Bank Charges 810,932 23,461
   Management Fee 467,542 289,553
   Custodian and Trustee Fee 29,532 14,126
   Office 29,146 22,569
   Network Fee 13,920 6,878
   Audit 10,000 12,000
   Transfer Agent Fee 4,500 2,800

1,365,572 371,387

   Net Investment Income $ 3,224,093 $ 1,190,407

     
     
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
   Net Realized Gain From Securities Transactions $ 544,929 $ 5,004
   Change in Net Unrealized Appreciation (Depreciation) of Investments (8,488,446) 5,514,821

   Net Gain (Loss) on Investments (7,943,517) 5,519,825

   Net Increase (Decrease) in Net Assets Resulting from Operations $ (4,719,424) $ 6,710,232

     

Net Income per Unit $ 0.46 $ 0.13

 
 

STATEMENTS OF CHANGES IN NET ASSETS

For the three months ended March 31, 1998
and the six months ended June 30, 1998
Unaudited Three Months Ended March 31, 1998 Six Months Ended June 30, 1998 Period Ended June 30, 1997

OPERATIONS:
   Net Investment Income $ 1,580,559 $ 3,224,093 $ 1,190,407
   Net Realized Gain from Securities Transactions 233,873 544,929 5,004
   Change in Net Unrealized Appreciation (Depreciation) of Investments (3,610,880) (8,488,446) 5,514,821

Net Increase (Decrease) in Net Assets Resulting from Operations (1,796,448) (4,719,424) 6,710,232

Distributions to Unitholders (2,016,756) (3,829,904) (1,274,000)

       
UNITHOLDER TRANSACTIONS:
   Proceeds from Issue of Units - - 58,800,000
   Subscriptions Receivable - - 39,200,000
   Agent's Fees - - (5,145,000)
   Issue Costs - - (828,904)
   Repurchase of Units (6,131,000) (16,553,730) -
   Repurchase and Issuer Bid-surplus 692,960 2,161,127 -
   Reinvested Distributions 119,064 119,029 -

Net Increase (Decrease) from Unitholder Transactions (5,318,976) (14,273,574) 92,026,096

Net Assets, Beginning of Period 93,674,080 93,674,080 -

Net Assets, End of Period $ 84,541,900 $ 70,851,178 $ 97,462,328

       
INVESTMENT TRANSACTIONS:
   Proceeds on Sale of Securities $ 14,396,369 $ 25,911,044 $ 189,756

   Less: Cost of Securities Sold
      Owned, Beginning of Period 89,143,475 89,143,475 -
      Purchased 17,153,978 41,154,391 65,753,498
      Owned, End of Period (92,134,958) (104,931,751) (65,568,746)

Securities Sold 14,162,495 25,366,115 184,752

Realized Gain on Sale of Securities $ 233,874 $ 544,929 $ 5,004

       

Distribution per Unit $ 0.22 $ 0.44 $ 0.13

 
 

Portfolio Holdings as at June 30, 1998
Business % Weight
High Yield Equity
AEC Pipelines, L.P. oil pipeline 7.7
H&R Real Estate Investment Trust office and industrial buildings 7.4
Realfund Real Estate Investment Trust shopping centres 5.1
Morrison Facilities Income Fund gas plant, oil pipeline 4.9
Westshore Terminals Income Fund coal handling facility 4.7
Northland Power Income Fund cogeneration, electricity and steam 4.6
Associated Freezers Income Fund public refrigeration warehousing 4.6
ARC Energy Trust oil and gas production 3.3
Luscar Coal Income Fund coal production 3.2
Halterm Income Fund container handling facility 3.0
Avista Real Estate Investment Trust retail, industrial, office buildings 2.4
Transalta Power L.P. cogeneration, electricity and steam 2.1
Koch Pipelines Canada L.P. oil pipeline 1.8
KMS Power Income Fund electricity generation 1.5
Morguard Real Estate Investment Trust office, industrial, retail properties 0.9
Manalta Coal Income Fund coal production 0.6
Pembina Pipelines Income Fund oil pipeline 0.4
     
High Yield Debt
Scott Paper Limited paper products 7.8
Algoma Steel Inc. steel production 6.9
Kmart Corporation retailing 4.5
Call-Net Enterprises Inc. telecommunications 4.2
Ainsworth Lumber Co. Ltd. forest products 3.2
Anchor Lamina Inc. tool and die manufacturing 3.0
Finlay Enterprises Inc. jewelry retail 3.0
Miller Western Forest Products Ltd. forest products 3.0
Paperboard Industries International Inc. paperboard, packaging 2.7
Greenstone Resources Ltd. gold mining 2.4
TrizecHahn Corporation office buildings, shopping centres 1.1

 
 
 

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