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 |