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

 
 
 

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