THIRD QUARTER REPORT 1998
For the
period ending September 30, 1998
MINT ANNOUNCES THIRD QUARTER RESULTS
Message to Unitholders
Middlefield High Income Trust ("MINT") is pleased to announce its unaudited financial results for the third quarter ended September 30, 1998 which are attached.
For the nine months ended September 30, 1998, the Trust generated net investment income of $6,027,930 and a net realized gain from securities transactions of $1,584,868. On October 29, 1998, MINT made a distribution of $0.22 per unit which is consistent with the $0.22 per unit distribution made in both the first and second quarter of this year. Year-to-date MINT has made a cumulative distribution of $0.66 per unit. Based on distributions for the previous four quarters totaling $0.86 per unit and a price of $6.70 per unit as at November 11, 1998, the annualized yield is approximately 12.8%.
The Canadian equity market had a poor third quarter characterized by volatility with the TSE 300 declining by more than 23%. Canada's economic growth rate slowed considerably during the quarter due to the GM and Ontario construction strikes as well as a slight slowing of growth in the US, Canada's largest trading partner. Declining commodity prices impacted exports and business investment such as in the oil and gas sector, and continued to place downward pressure on the Canadian dollar. To defend the ailing dollar, the Bank of Canada raised interest rates in late August, which took its toll on domestic household spending. The Bank of Canada has since matched both 25 basis point rate cuts by the US Federal Reserve Board and will be compelled to continue do so to prevent any further weakening in consumer spending.
The high yield debt market did not fare any better than the equity markets in the US and Canada during the third quarter. The same turmoil experienced by the equity markets led to a lack of liquidity in BBB and lower rated corporate debt, causing spreads to widen to levels not seen since the early 1990s.
Although there may be more near-term uncertainty in both the equity and debt markets, we believe current values have discounted such uncertainty and the worst may be past us. The companies in the Trust's portfolio have been "oversold" but have maintained their solid fundamentals. Therefore, they should lead the trend of recovering prices with a resultant positive impact on MINT's net asset value.
MINT trades on the Toronto Stock Exchange under the symbol "MID.UN".
For further information, contact:
Mr. James S.
Parsons
Director
November 12, 1998.
| STATEMENT OF NET ASSETS | ||||
| As at September 30, 1998 | ||||
| Unaudited | 1998 | 1997 | ||
| ASSETS: | ||||
| Investments at Market Value | $ | 74,451,743 | $ | 97,098,758 |
| Cash and Short-term Investments | 5,158,624 | 855,478 | ||
| Subscriptions Receivable | - | 39,200,000 | ||
| Income Receivable | 2,626,914 | 1,714,930 | ||
| 82,237,281 | 138,869,166 | |||
| LIABILITIES: | ||||
| Accounts Payable and Accrued Liabilities | 183,034 | 485,637 | ||
| Unitholder Distributions | 1,690,611 | 1,667,455 | ||
| Loan Payable | 23,829,552 | 35,767,436 | ||
| 25,703,197 | 37,920,528 | |||
| Net Assets | $ | 56,534,084 | $ | 100,948,638 |
| Number of Units Issued and Outstanding | 7,684,395 | 9,808,557 | ||
| Net Asset Value per Unit | $ | 7.36 | $ | 10.29 |
| STATEMENT OF OPERATIONS | ||||
| For the nine months ended September
30, 1998 and the period March 13, 1997 (date of inception) to September 30, 1997 |
||||
| Unaudited | Nine
Months Ended Sept. 30, 1998 |
Period Ended Sept. 30, 1997 |
||
| INVESTMENT INCOME: | ||||
| Income from Investments | $ | 5,224,116 | $ | 2,549,467 |
| Interest | 2,742,059 | 1,179,271 | ||
| 7,966,175 | 3,728,738 | |||
| EXPENSES: | ||||
| Interest and Bank Charges | 1,172,128 | 356,579 | ||
| Management Fee | 637,852 | 558,726 | ||
| Custodian and Trustee Fee | 44,270 | 26,549 | ||
| Office | 39,111 | 54,315 | ||
| Network Fee | 24,259 | 12,218 | ||
| Audit | 15,000 | 8,801 | ||
| Transfer Agent Fee | 5,625 | 7,753 | ||
| 1,938,245 | 1,024,941 | |||
| Net Investment Income | 6,027,930 | 2,703,797 | ||
| NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: | ||||
| Net Realized Gain From Securities Transactions | 1,584,868 | 147,203 | ||
| Change in Net Unrealized Appreciation (Depreciation) of Investments | (2,054,970) | 8,968,714 | ||
| Net Gain (Loss) on Investments | (470,102) | 9,115,917 | ||
| Net Increase in Net Assets Resulting from Operations | $ | 5,557,828 | $ | 11,819,714 |
| Net Income per Unit | $ | .88 | $ | .30 |
| STATEMENTS OF CHANGES IN NET ASSETS | ||||
| For the nine months ended September
30, 1998 and the period March 13, 1997 (date of inception) to September 30, 1997 |
||||
| Unaudited | Nine
Months Ended Sept. 30, 1998 |
Period Ended Sept. 30, 1997 |
||
| OPERATIONS: | ||||
| Net Investment Income | $ | 6,027,930 | $ | 2,703,797 |
| Net Realized Gain from Securities Transactions | 1,584,868 | 147,203 | ||
| Change in Net Unrealized Appreciation (Depreciation) of Investments | (21,614,651) | 8,968,714 | ||
| Net Increase (Decrease) in Net Assets Resulting from Operations | (14,001,853) | 11,819,714 | ||
| Distributions to Unitholders | (5,521,111) | (2,941,455) | ||
| UNITHOLDER TRANSACTIONS: | ||||
| Proceeds from Issue of Units | - | 58,800,000 | ||
| Subscriptions Receivable | - | 39,200,000 | ||
| Agents' Fees | - | (5,145,000) | ||
| Issue Costs | - | (871,105) | ||
| Repurchase of Units | (20,957,730) | - | ||
| Repurchase and Issuer Bid-surplus | 3,221,672 | - | ||
| Reinvested Distributions | 119,026 | 86,484 | ||
| Net Increase (Decrease) from Unitholder Transactions | (17,617,032) | 92,070,379 | ||
| Net Assets, Beginning of Period | 93,674,080 | - | ||
| Net Assets, End of Period | $ | 56,534,084 | $ | 100,948,638 |
| INVESTMENT TRANSACTIONS: | ||||
| Proceeds on Sale of Securities | $ | 48,557,891 | $ | 4,208,928 |
| Less: Cost of Securities Sold | ||||
| Owned, Beginning of Period | 89,143,475 | - | ||
| Purchased | 51,840,973 | 92,191,769 | ||
| Owned, End of Period | (94,011,425) | (88,130,044) | ||
| Securities Sold | 46,973,023 | 4,061,725 | ||
| Realized Gain on Sale of Securities | $ | 1,584,868 | $ | 147,203 |
| Distribution per Unit | $ | .66 | $ | .30 |
| Portfolio Holdings | ||
| as at September 30, 1998 | ||
| Business | % Weight | |
| High Yield Equity | ||
| AEC Pipelines, L.P. | oil pipeline | 8.4 |
| H&R Real Estate Investment Trust | office and industrial buildings | 8.4 |
| Morrison Facilities Income Fund | gas plant, oil pipeline | 5.9 |
| Westshore Terminals Income Fund | coal handling facility | 5.5 |
| Realfund Real Estate Investment Trust | shopping centres | 5.5 |
| Associated Freezers Income Fund | public refrigeration warehousing | 5.3 |
| Northland Power Income Fund | cogeneration, electricity and steam | 4.9 |
| Avista Real Estate Investment Trust | retail, industrial, office buildings | 4.5 |
| ARC Energy Trust | oil and gas production | 4.3 |
| Luscar Coal Income Fund | coal production | 4.2 |
| Halterm Income Fund | container handling facility | 3.2 |
| Transalta Power L.P. | cogeneration, electricity and steam | 2.1 |
| KMS Power Income Fund | electricity generation | 1.9 |
| Koch Pipelines Canada L.P. | oil pipeline | 1.6 |
| Morguard Real Estate Investment Trust | office, industrial, retail properties | 1.1 |
| Pembina Pipelines Income Fund | oil pipeline | 0.4 |
| High Yield Debt | ||
| Scott Paper Limited | paper products | 7.3 |
| Ainsworth Lumber Co. Ltd. | forest products | 4.1 |
| Finlay Enterprises Inc. | jewelry retail | 4.0 |
| Anchor Lamina Inc. | tool and die manufacturing | 3.7 |
| Algoma Steel Inc. | steel production | 3.6 |
| Paperboard Industries International | paperboard, packaging | 3.4 |
| Millar Western Forest Products Ltd. | forest products | 2.8 |
| Greenstone Resources Ltd. | gold mining | 2.4 |
| Tesoro Petroleum Corporation | oil refining and distribution | 1.5 |