SECOND QUARTER REPORT 2005
For the period ended June 30, 2005
TORONTO, Aug. 29 /CNW/ - Middlefield Group is pleased to present the
unaudited financial results for MINT Income Fund (the "Fund") for the period
ended June 30, 2005, the details of which are attached.
On February 24, 2005, MINT made a proposal to SAGE Income Fund ("SAGE")
to merge the two funds. The merger was approved by unitholders and on April
18, 2005 the two funds were combined, with MINT as the continuing entity. The
primary benefits to MINT unitholders are a reduction in Fund operating costs
on a per unit basis and an opportunity to participate in a larger fund with
greater liquidity.
On April 19, 2005, MINT announced that a distribution of $0.10 per unit
would be payable on May 13, 2005 to the Fund's unitholders of record on April
30, 2005. This represented a significant increase over the distributions paid
previously and reflects in part the benefits of the merger. As a result,
during the second quarter of 2005, MINT declared monthly distributions
totalling $0.30 per unit.
As at June 30, 2005, the asset class weightings for MINT's portfolio
were:
<<
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Asset Class Portfolio Weighting
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Business Trusts 37%
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Oil and Gas Royalty Trusts 32%
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Real Estate Investment Trusts 22%
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Power and Pipeline Trusts 7%
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Common Shares 2%
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The Fund invests in a diversified portfolio of income trusts and may also
invest in common shares, high-yield debt, convertible debt and various debt-
like securities with returns linked to movements in equity prices, commodity
prices or currencies. MINT invests selectively in the income trust sector with
a bias toward economically sensitive trusts with lower capital expenditure
requirements, stable cash flows and dominant market positions. Business
trusts, represented by 115 issuers across a broad range of industries,
comprise the largest weighting within MINT's portfolio, supplemented by REITs
and oil and gas royalty trusts. This strategy provides unitholders with a
balance of high, stable, tax-efficient income and potential for capital
appreciation.
MINT trades on the Toronto Stock Exchange under the symbol "MID.UN".
This press release contains forward-looking information. Actual future
results may differ materially. The risks, uncertainties and other factors that
could influence actual results are described in the MINT annual report and
other documents filed with regulatory authorities.
MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2005 AND 2004 (UNAUDITED)
The following discussion and analysis should be read in conjunction with
the attached unaudited interim financial statements. Readers should also refer
to Management's Discussion and Analysis in the Fund's 2004 Annual Report.
Management is responsible for the existence of appropriate information
systems, procedures and controls to ensure that information used internally
and disclosed externally is complete and reliable.
SECTOR ANALYSIS
The business trust sector continues to expand, offering both attractive
returns and broad industry diversification. In the second quarter, MINT
initiated positions in Lakeport Brewing Income Fund and Spinrite Income Fund.
Lakeport is an Ontario-based, diversified brewing company focused on producing
quality beer for the value segment of the take-home market. Sales recently hit
a single week record of more than 167,000 cases purchased at Ontario beer
stores and it currently enjoys about a 10% share of the Ontario take-home
market. Spinrite researches, develops, manufactures and markets a broad
variety of consumer craft yarns. Spinrite is the largest marketer of craft
yarn in Canada and one of the largest and fastest growing in the United
States. The yarn market remains strong and Spinrite intends to capitalize on
its increasing market share in the U.S.
During the quarter, crude oil prices continued to climb higher due to a
lack of spare productive capacity and no signs of a reduction in demand in
response to higher prices. Natural gas prices likewise continued to rise
reflecting higher crude prices and tight North American supply. MINT initiated
positions in several royalty trusts during the quarter, including Esprit
Energy Trust and Vault Energy Trust. Both trusts are characterized by long-
life, gas-weighted assets and are focused on maintaining production and
reserves while providing investors with sustainable distributions.
REITs rebounded in the second quarter of 2005 with the S&P/TSX Capped
REIT Index posting a total return of approximately 9.3%. During the quarter,
MINT established a position in Allied Properties REIT. Allied Properties owns
a portfolio of predominantly redeveloped industrial space office properties in
downtown Toronto and Montreal and recently expanded into Winnipeg.
The Fund continued to maintain an underweight position in power and
pipeline trusts in light of the Advisor's expectation of continued growth in
the North American economy and increasing interest rates over the next
12 months.
DISTRIBUTIONS TO UNITHOLDERS
During the second quarter of 2005, MINT declared monthly distributions
totaling $0.30 per unit. This represents an increase of $0.10 per unit or 50%
over the $0.20 per unit distribution paid to unitholders in the second quarter
of 2004. On April 19, 2005, MINT announced that a distribution of $0.10 per
unit would be payable on May 13, 2005 to MINT unitholders of record on April
30, 2005. This represents a 43% increase over the distributions paid
previously and reflects in part benefits of the merger with SAGE.
FINANCIAL PERFORMANCE
The net asset value per unit increased by 5.4% during the quarter from
$12.06 at March 31, 2005 to $12.71 at June 30, 2005 and together with
distributions paid resulted in an 8% total return. Net investment income was
$0.32 per unit in the second quarter of 2005 compared to $0.24 per unit during
the second quarter of 2004 primarily due to the merger with SAGE. The ratio of
management fees and other operating expenses (excluding interest expense and
bank charges) to average net asset value ("MER") was 1.69% for the three
months ended June 30, 2005, compared to 1.43% in the second quarter of 2004
due to service fees being paid to investment dealers commencing in 2005.
OUTLOOK
Looking forward, we expect income trusts will continue to generate
attractive returns over the next 12 to 18 months. This is supported by two key
factors. Firstly, the economic environment will likely be characterized by
modest growth, low interest rates, benign inflation and strong energy prices.
Secondly, income trusts will be added to Canada's primary equity index, the
S&P/TSX Composite Index (the "Index"), which is expected to result in
incremental demand from institutional and index investors totalling several
billion dollars. Demand from foreign investors, particularly from the United
States, is also expected to support current valuations in the income trust
sector. Today, U.S. ownership of Canadian royalty trusts is estimated to be
between 25% and 35% and U.S. investors are now turning their attention to the
broader income trust sector in search of high levels of stable income. As a
result, income trusts should continue to offer attractive returns comprised of
cash distributions and modest capital appreciation, particularly in those
issuers expected to be included in the Index.
FINANCIAL HIGHLIGHTS
FOR THE PERIODS ENDED JUNE 30
Three Months Ended Six Months Ended
June 30 June 30
2005 2004 2005 2004
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DATA PER UNIT
Net Asset Value at
Beginning of
Period $ 12.06 $ 10.52 $ 11.86 $ 9.79
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INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net Investment
Income 0.32 0.24 0.55 0.43
Net Realized and
Unrealized Gain
(Loss) on
Investments 0.63 (0.90) 0.81 (0.16)
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0.95 (0.66) 1.36 0.27
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DISTRIBUTIONS TO
UNITHOLDERS 0.30 0.20 0.51 0.40
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Net Asset Value at
End of Period $ 12.71 $ 9.66 $ 12.71 $ 9.66
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Market Price at
End of Period $ 12.40 $ 9.42 $ 12.40 $ 9.42
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RATIOS/SUPPLEMENTAL DATA
Total Assets at
End of Period $ 79,625,780 $ 57,921,946 $ 79,625,780 $ 57,921,946
Net Assets at
End of Period $ 55,909,631 $ 43,663,662 $ 55,909,631 $ 43,663,662
Weighted Average
Net Assets $ 50,700,717 $ 43,543,072 $ 48,973,513 $ 45,525,020
Market Capitalization
at End of Period $ 54,531,480 $ 42,582,714 $ 54,531,480 $ 42,582,714
Management Expense
Ratio(1) 1.69% 1.43% 1.66% 1.87%
Total Rate of
Return for the
Period(2) 7.98% (6.31)% 11.79% 2.79%
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(1) Ratio of expenses to average net assets, based on annualized expenses
for the stated period, excluding interest expense and bank charges.
(2) Historical total return of an investment for the period, assuming
reinvestment of all distributions.
STATEMENT OF NET ASSETS
AS AT JUNE 30, 2005 AND DECEMBER 31, 2004
Unaudited 2005 2004
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ASSETS:
Investments at Fair Value $ 77,629,500 $ 67,162,950
Cash 1,392,699 1,298,073
Income and Interest Receivable 546,356 437,651
Accounts Receivable 57,225 7,954
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79,625,780 68,906,628
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LIABILITIES:
Loan Payable 22,908,798 15,957,337
Unitholder Distributions Payable 440,040 310,026
Accounts Payable and Accrued Liabilities 367,311 123,904
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23,716,149 16,391,267
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Net Assets $ 55,909,631 $ 52,515,361
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Units Issued and Outstanding 4,397,700 4,428,449
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Net Asset Value per Unit $ 12.71 $ 11.86
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The accompanying notes to financial statements are an integral part of
these financial statements.
STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED JUNE 30
Three Months Ended Six Months Ended
June 30 June 30
Unaudited 2005 2004 2005 2004
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INVESTMENT INCOME:
Income from
Investments $ 1,660,648 $ 1,317,867 $ 2,861,608 $ 2,650,463
Interest 10,391 5,003 27,533 10,430
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1,671,039 1,322,870 2,889,141 2,660,893
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EXPENSES:
Interest and Bank
Charges 156,234 91,149 289,703 204,515
Management Fee 136,668 114,874 250,918 243,395
Service Fee to
Investment Dealers 41,675 - 68,440 -
General and
Administrative 35,719 40,111 82,603 255,183
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370,296 246,134 691,664 703,093
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Net Investment
Income 1,300,743 1,076,736 2,197,477 1,957,800
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NET REALIZED AND
UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net Realized Gain
from Investment
Transactions 1,737,666 1,241,139 8,288,779 1,788,908
Change in Net
Unrealized Gain
(Loss) on
Investments 1,557,074 (5,457,556) (3,953,326) (2,567,454)
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Net Gain (Loss) on
Investments 3,294,740 (4,216,417) 4,335,453 (778,546)
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Net Increase
(Decrease) in Net
Assets Resulting
from Operations $ 4,595,483 $ (3,139,681) $ 6,532,930 $ 1,179,254
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Earnings (Loss)
per Unit $ 1.13 $ (0.67) $ 1.63 $ 0.26
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STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIODS ENDED JUNE 30
Three Months Ended Six Months Ended
June 30 June 30
Unaudited 2005 2004 2005 2004
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Net Assets at
Beginning of
Period $ 36,198,889 $ 48,844,141 $ 52,515,361 $ 45,504,919
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OPERATIONS:
Net Increase
(Decrease) in
Net Assets
Resulting from
Operations 4,595,483 (3,139,681) 6,532,930 1,179,254
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DISTRIBUTIONS TO
UNITHOLDERS (1,324,489) (904,092) (2,058,853) (1,832,396)
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UNITHOLDER TRANSACTIONS:
Issue (Purchase)
of Trust Units,
Net 16,439,748 (1,136,706) (1,079,807) (1,188,115)
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Net Increase
(Decrease) in
Net Assets 19,710,742 (5,180,479) 3,394,270 (1,841,257)
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Net Assets at
End of Period $ 55,909,631 $ 43,663,662 $ 55,909,631 $ 43,663,662
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Distributions
per Unit $ 0.30 $ 0.20 $ 0.51 $ 0.40
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The accompanying notes to financial statements are an integral part of
these financial statements.
STATEMENT OF INVESTMENT PORTFOLIO
AS AT JUNE 30, 2005
Unaudited
Description No. of Securities Cost Fair Value
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AG Growth Income Fund 50,000 $ 665,950 $ 775,000
Bell Nordiq Income Fund 110,000 1,346,018 2,002,000
BFI Canada Income Fund 65,000 1,078,354 1,774,500
CCS Income Trust 65,000 1,005,062 1,885,000
Connors Bros. Income Fund 85,000 1,473,842 1,283,500
Davis + Henderson Income Fund 60,000 847,324 1,255,200
Hardwoods Distribution Income Fund 70,000 822,747 815,500
P Income Fund 110,000 1,132,176 1,260,600
Lakeport Brewing Income Fund 50,000 500,000 536,500
Livingston International Income
Fund 50,000 714,125 1,064,000
Medical Facilities Corporation 80,000 1,059,887 1,047,200
Newalta Income Fund 50,000 643,750 1,105,500
Noranda Income Fund 130,000 1,355,563 1,618,500
Parkland Income Fund 75,000 1,498,708 1,492,500
PBB Global Logistics Income Fund 85,000 1,123,120 1,181,500
Spinrite Income Fund 100,000 1,106,727 1,244,000
Student Transportation of
America Ltd. 75,000 832,650 1,012,500
Superior Plus Income Fund 60,000 1,218,441 1,911,000
The Consumers' Waterheater Income
Fund 120,000 1,360,510 1,953,600
Tree Island Wire Income Fund 100,000 1,504,354 1,574,000
UE Waterheater Income Fund 100,000 1,142,758 1,370,000
Westshore Terminals Income Fund 75,000 544,750 889,500
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BUSINESS TRUSTS: 36.8% 22,976,816 29,051,600
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Acclaim Energy Trust 115,000 1,564,724 1,764,100
ARC Energy Trust 100,000 1,474,428 1,994,000
Bonavista Energy Trust 60,000 1,296,192 1,862,400
Canadian Oil Sands Trust 25,000 1,432,443 2,252,500
Chamaelo Exploration Ltd. 18,000 167,143 136,800
Crescent Point Energy Trust 60,000 1,042,237 1,108,800
Enerplus Resources Fund 30,000 989,513 1,404,000
Esprit Energy Trust 100,000 1,147,210 1,194,000
Fairborne Energy Trust 100,000 1,085,865 1,080,000
Focus Energy Trust 85,000 1,100,040 1,836,000
Ketch Resources Trust 110,000 1,462,000 1,254,000
NAL Oil & Gas Trust 100,000 1,062,406 1,425,000
Penn West Energy Trust 50,000 1,439,740 1,449,000
Progress Energy Trust 100,000 1,218,000 1,303,000
StarPoint Energy Trust 100,000 1,848,247 1,885,000
Vault Energy Trust 50,000 472,157 522,500
Vermilion Energy Trust 75,000 1,122,603 1,752,000
Viking Energy Royalty Trust 175,000 1,205,956 1,239,000
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OIL AND GAS ROYALTY TRUSTS: 32.2% 21,130,904 25,462,100
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Allied Properties Real Estate
Investment Trust 45,000 663,475 702,000
Calloway Real Estate Investment
Trust 100,000 1,408,105 2,143,000
Canadian Real Estate Investment
Trust 75,000 1,052,500 1,448,250
Chartwell Seniors Housing Real
Estate Investment Trust 75,000 888,471 1,077,000
Cominar Real Estate Investment Trust 55,000 780,772 1,037,850
H&R Real Estate Investment Trust 80,000 1,135,539 1,561,600
Huntington Real Estate Investment
Trust 300,000 825,000 951,000
IPC US Income Commercial Real
Estate Investment Trust 125,000 1,267,879 1,373,750
O&Y Real Estate Investment Trust 55,000 776,745 825,000
Primaris Retail Real Estate
Investment Trust 100,000 1,091,165 1,415,000
Retirement Residences Real Estate
Investment Trust 130,000 1,354,363 1,181,700
RioCan Real Estate Investment Trust 95,000 1,281,914 1,900,000
Summit Real Estate Investment Trust 95,000 1,370,128 1,948,450
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REAL ESTATE INVESTMENT TRUSTS: 22.2% 13,896,056 17,564,600
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AltaGas Income Trust 65,000 1,376,250 1,639,950
Calpine Power Income Fund 70,000 692,734 728,000
Enbridge Income Fund 50,000 604,000 706,500
Keyera Facilities Income Fund 50,000 588,022 817,000
Macquarie Power Income Fund 85,000 895,305 964,750
Pembina Pipeline Income Fund 50,000 574,944 695,000
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POWER AND PIPELINE TRUSTS: 7.0% 4,731,255 5,551,200
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CASH: 1.8% 1,392,699 1,392,699
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Total Investment Portfolio,
including Cash $ 64,127,730 $ 79,022,199
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The accompanying notes to financial statements are an integral part of
this financial statement.
STATEMENTS OF NET REALIZED GAIN FROM INVESTMENT TRANSACTIONS
FOR THE PERIODS ENDED JUNE 30
Three Months Ended Six Months Ended
June 30 June 30
Unaudited 2005 2004 2005 2004
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Proceeds from Sale
of Investments $ 16,554,311 $ 6,278,905 $ 44,714,037 $ 12,735,359
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Less: Cost of
Investments
Sold:
Owned at
Beginning of
Period 36,133,655 47,710,194 48,315,155 46,979,186
Purchased
During
Period 41,418,021 4,533,192 50,845,134 11,172,885
Owned at End
of Period (62,735,031) (47,205,620) (62,735,031) (47,205,620)
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14,816,645 5,037,766 36,425,258 10,946,451
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Net Realized Gain
from Investment
Transactions $ 1,737,666 $ 1,241,139 $ 8,288,779 $ 1,788,908
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NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005 AND 2004 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The interim financial statements of MINT Income Fund (the "Fund") have
been prepared in accordance with Canadian generally accepted accounting
principles. They follow the same accounting policies and methods of
application as the Fund's financial statements for the year ended
December 31, 2004. The Fund's interim financial statements do not include
all disclosures as required by GAAP for annual financial statements and
accordingly, should be read in conjunction with the financial statements
for the year ended December 31, 2004 as set out on pages 61 to 63 and
78 to 82 of the Middlefield Income Funds 2004 Annual Report.
2. DISTRIBUTIONS
For the six months ended June 30, 2005, distributions amounted to $0.51
per unit (2004 - $0.40). Distributions of the Fund, at the discretion of
the unitholder, are reinvested in additional units of the Fund, under the
Distribution Reinvestment Plan without sales charge. For the six months
ended June 30, 2005, 5,663 units (2004 - 4,986) were issued under the
Plan of which no units (2004 - 2,536) were issued from treasury.
3. MERGER WITH SAGE INCOME FUND
The Fund merged with SAGE Income Fund ("SAGE") on April 18, 2005, with
MINT as the continuing entity. The Fund issued 1,461,336 units in
exchange for the net assets of SAGE using an exchange ratio based on the
relative net asset values of MINT and SAGE as at the close of trading on
April 15, 2005.
DISTRIBUTION REINVESTMENT PLAN
The Fund's Distribution Reinvestment Plan allows unitholders to
automatically reinvest monthly distributions in additional units of the
Fund. This feature provides unitholders with an excellent opportunity to
benefit from compounding by investing distributions at a high
reinvestment rate. Please contact your investment advisor to enroll in
the Plan or contact Angela Wanniappa at (888) 890-1868.
FUND PROFILE
The primary objectives of MINT are to produce a high level of sustainable
income and to minimize the risk of investing in high yield securities on
a cost effective basis. MINT is comprised of the following asset classes:
business trusts, oil and gas royalty trusts, real estate investment
trusts and power and pipeline trusts. MINT is fully RRSP eligible. MINT
trades on the Toronto Stock Exchange under the symbol "MID.UN".
DIRECTORS AND OFFICERS OF THE MANAGER
W. Garth Jestley, Chairman and Director
Dean C. Orrico, President and Director
Sylvia V. Stinson, Executive Vice President and Director
Nancy Tham, Vice President
Angela V. Wanniappa, Senior Vice President and Secretary-Treasurer
THE ADVISOR
Middlefield Capital Corporation
Darren N. Cabral, Executive Director, Research
Richard L. Faiella, Managing Director, Corporate Finance
W. Garth Jestley, President and C.E.O.
Robert F. Lauzon, Executive Director, Trading
Dean C. Orrico, Managing Director
Scott A. Roberts, Director, Trading
HEAD OFFICE
Middlefield Group
One First Canadian Place
58th Floor
P.O. Box 192
Toronto, Canada M5X 1A6
Telephone (416) 362-0714
Fax (416) 362-7925
Email invest(at)middlefield.com
Web Site www.middlefield.com
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