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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Middlefield Canadian Income Pcc | LSE:MCT | London | Ordinary Share | GB00B15PV034 | RED PART PREF SHS NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 1.00 | 0.95% | 106.00 | 105.50 | 106.50 | 106.00 | 105.50 | 105.50 | 262,649 | 16:35:16 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Trust,ex Ed,religious,charty | 2.5M | -3.62M | - | N/A | 0 |
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Middlefield Canadian Income PCC
(the "Company")
ANNUAL FINANCIAL REPORT
The Board of the Company is pleased to announce its results for the year
ended 31 December, 2016.
To view the Company's Annual Financial Report please follow the link
below:
http://hugin.info/141790/R/2097713/794344.pdf
In addition, to comply with DTR 4.1 please find below the full text of
the annual financial report. The report will also shortly be available
on the Company's website, www.middlefield.com and on the National
Storage Mechanism, which is situated at www.morningstar.co.uk/uk/nsm.
Annual General Meeting
The Annual General Meeting of the shareholders of the Company will be
held at CBPE Capital LLP, 2 George Yard, London EC3V 9DH on Thursday 25
May, 2017 at 12.00 p.m.
For further information about this announcement contact:
Assistant Secretary
JTC Fund Solutions (Guernsey) Limited
Tel.: 01481 702400
Dean Orrico
President
Middlefield International Limited
Tel.: 01203 7094016
MIDDLEFIELD CANADIAN INCOME PCC (the "Company")
Including MIDDLEFIELD CANADIAN INCOME - GBP PC
(the "Fund"), a cell of the Company
ANNUAL FINANCIAL REPORT
For the year ended 31 December 2016
Table of Contents
Chairman's Report 3
Investment Manager's Report 7
Directors' Report 11
Directors' Responsibilities 22
Report of the Audit Committee 23
Viability Statement 26
Independent Auditor's Report on the Fund 28
Statement of Financial Position of the Fund 34
Statement of Comprehensive Income of the Fund 35
Statement of Changes in Redeemable Participating Preference
Shareholders'
Equity of the Fund 36
Statement of Cash Flow of the Fund 37
Notes to the Financial Statements of the Fund 38
Alternative Investment Fund Managers Directive 54
Independent Auditor's Report on the Company 55
Statement of Financial Position of the Company 56
Notes to the Financial Statements of the Company 57
Management and Administration 58
Chairman's Report
It is my pleasure to introduce the 2016 Annual Financial Report for
Middlefield Canadian Income PCC ("MCI" or the "Company"). MCI has
established one closed-end cell known as Middlefield Canadian Income -
GBP PC (the "Fund"). The Fund invests in a broadly diversified
portfolio comprised primarily of Canadian and U.S. equity income
securities with the objective of providing shareholders with high
dividends as well as capital growth over the longer term.
We continue to be pleased with the long-term performance of the Fund.
Since inception in 2006, the Fund has generated a cumulative return of
126.3%, outpacing its benchmark, the S&P TSX Composite High Dividend
Index, as well as the broader S&P/TSX Composite Index, which have
generated cumulative returns of 89.9% and 73.3%, respectively, over the
same period. In 2016, the Fund's NAV had a strong year with a total
return of 44.4% in GBP, benefiting from both underlying stock
performance as well as the appreciation in the Canadian dollar versus
the British Pound.
Performance to 31 December 2016
Source: Bloomberg, as at 31 December 2016
Notes:
1. Total net asset value returns (net of fees and including the reinvestment
of dividends).
2. The Fund's benchmark, the S&P/TSX High Dividend Index, has been currency
adjusted to reflect CAD$ returns from inception to October 2011 (while
the Fund was CAD$ hedged) and GBP returns thereafter.
The Fund continues to benefit from its exposure to U.S. markets,
especially in sectors that are underrepresented in Canada. Over time,
given the strength in the U.S. economy, we believe exposure to U.S.
equities will enhance total shareholder returns and provide greater
diversification. An average of 26% of the portfolio was invested in
U.S. listed securities in 2016.
Chairman's Report (continued)
MCI Sector Weights Compared to S&P/TSX Composite High Dividend Index
Source: Bloomberg, as at 31 December 2016
Over the course of the year, despite the recovery in commodities and in
the Canadian economy, the Fund's discount to NAV widened beyond normal
levels. As a result, MCI repurchased a total of 1,225,000 redeemable
participating preference shares in eleven separate transactions, at a
weighted average price of 80.37 pence. As a result of these
transactions, as of 31 December 2016, the number of shares with voting
rights in issue is approximately 106.9 million.
We continue to tactically manage the amount of gearing employed in the
Fund. In the first few months of the year when the market was the most
volatile, gearing bottomed at 5.6%. As markets recovered, gearing was
increased to a high of 17.5% by August and averaged 13.3% for the year.
Our approach to gearing involves monitoring market conditions to
determine the appropriate level for the Fund, effectively increasing
gearing to invest in securities that are attractively valued, and
reducing gearing with proceeds from positions that are overvalued.
The Fund remains focused on investing in income-oriented issuers with
proven management teams, good balance sheets and sustainable dividends
that are well positioned to benefit from the relative strength of the
North American economy. It is our belief that companies that
demonstrate consistent dividend growth will generate superior total
returns over time. In fact, nearly 70% of the companies in the
portfolio as at 31 December 2016 had increased their dividends over the
past three years, with an average annual increase of over 13%.
Chairman's Report (continued)
Focus on Companies that Grow their Dividends
Source: Bloomberg, as at 31 December 2016
Dividends
Since April 2009, the Fund has paid dividends on a quarterly basis at a
rate of 1.25p per quarter, equating to 5p per annum.
In light of the recovery in the Canadian economy over the past several
months and the Fund's focus on portfolio constituents anticipating an
increase in their level of dividends, the level of income generated by
the Fund in the first quarter of 2017 was higher in sterling terms than
it was for any quarter of 2016, resulting in a pro forma dividend cover
in excess of 120% for that period. In addition, the Fund has also
benefited from sterling weakness versus the Canadian dollar over the
past 12 months.
The Board has considered the level of income generated in the first
quarter of 2017 and the Investment Manager's view as to the
sustainability of such level of income over the remainder of the Fund's
current financial year (assuming that the Canadian dollar and US dollar
exchange rates do not demonstrate a significant weakening relative to
sterling over the period). Furthermore, to remain eligible for
investment trust status under section 1158 of the Corporation Tax Act
2010 with respect to its tax status, in any accounting period the Fund
may retain no more than 15 per cent. of its income.
In light of such factors, the Board is proposing a small increase in the
quarterly dividend payable, from 1.25p per share to 1.275p per share,
equating to 5.1p per annum. It is proposed that such increase will
commence with the quarterly dividend payable in July 2017.
Chairman's Report (continued)
Annual General Meeting
This year's Annual General Meeting will be held on 25 May 2017 at 12:00
p.m., at the offices of CBPE Capital LLP, 2 George Yard, London EC3V.
Outlook
Looking forward, we are bullish on Canadian equities but challenges to
the global macro outlook remain. Accelerating economic data in both
Canada and the United States should continue to provide support for
equity markets. We believe that Canada, in particular, will benefit
from the recovery in energy markets and the relative strength in the
U.S. economy. Despite the long-term outperformance of the Fund over
its benchmark, the shares currently trade at a discount to net asset
value, offering exceptional value for investors looking for exposure to
the Canadian economy.
We thank you for your continued support.
Nicholas Villiers
Chairman
Investment Manager's Report
After a volatile start to the year, equities recovered with major North
American indices finishing 2016 just below their all-time highs. Stock
markets were impacted by numerous macro events including currency
devaluation in China, a migrant crisis in Europe, a referendum in the
U.K on EU membership and a surprise presidential election result in the
United States. Ultimately, prospects for improving global growth, led
by the United States, pushed stocks higher. For the year, in local
currency, Canada was the best performing developed market in the world,
with the S&P/TSX Composite Index posting a total return of 21.1% as the
sentiment toward Canadian equities improved throughout 2016. We expect
this to continue as a result of the economic recovery currently underway
in Canada and the instability, both economic and political, being
experienced in other developed markets such as Europe and the United
Kingdom.
In the United States, contrary to pre-election expectations, investors
have embraced President Trump due to his pro-growth policies of lower
taxes, increased infrastructure spending and reduced regulation. As a
result, investors have been rotating into pro-cyclical sectors such as
industrials, financials and materials since early November. Further
supporting equity markets is the recent string of positive economic data,
allowing the Federal Open Market Committee to raise the overnight
lending rate by 25 basis points on December 14th and March 15th, with
another two rate hikes anticipated before the end of the year. In
addition, U.S. labour markets finished 2016 with their 75th consecutive
month of job gains, the longest streak on record. Wages grew by 2.9%,
the fastest pace since 2009, and consumer confidence reached its highest
level in nine years. Corporate earnings grew in Q3 and Q4, reversing
the trend of five straight quarterly declines. With current valuation
multiples above historical averages, we are confident that the recent
acceleration in earnings will support the next move higher in stock
prices.
After an oil-price induced slowdown, Canadian economic data points have
been increasingly positive. In their most recent monetary policy report,
the Bank of Canada is forecasting GDP growth of 2.1% in 2017, up
significantly from 0.9% in 2015 and 1.3% last year. This forecast is
supported by a broad recovery in commodity prices as well as the
improved economic outlook for the United States since over 70% of
Canada's exports are purchased by the U.S. The increasing economic
momentum was also evidenced by Canada posting its second consecutive
trade surplus in December after more than two years of lacklustre
numbers. In addition, the November jobs report exhibited the biggest
monthly gain since 2012.
Although oil prices averaged US$43 per barrel in 2016, they pushed
through US$50 after OPEC agreed to cut production by 1.2 million barrels
per day in late November. Over the past 30 years, OPEC has never agreed
to fewer than two consecutive production cuts with an aggregate
reduction of approximately three million barrels per day, further
supporting strength in oil prices in the coming months. The Canadian
economy will also benefit from the expected approval of the Keystone XL
pipeline, providing an outlet for increasing Canadian oil production
over the next several years. The Fund's energy exposure is balanced
between producers and pipeline companies.
Investment Manager's Report (continued)
Yields on 10-year U.S. treasury bonds have risen by over 100 basis
points since hitting their all-time lows in July. Immediately following
the presidential election, bond yields moved sharply higher on the
prospects of economic growth due to expected lower taxes and reduced
government regulation. The steepening of the yield curve also served to
push U.S. financials higher by nearly 20% in the last two months of the
year. Looking ahead, we expect U.S. banks will continue to demonstrate
growth in earnings, making current valuations increasingly compelling.
In light of the slower growth in Canadian banks versus their U.S. peers,
we are more cautious on Canadian financials, even though the long-term
view for the Canadian
banking sector remains positive. Financials are the second largest
sector weight in the fund and our exposure remains biased to U.S.
issuers.
Real estate is the largest weighting in the Fund at approximately 21%.
Real estate investment trusts continue to be attractive as commercial
real estate offers stable income and potential for considerable capital
appreciation. Fundamentals in the sector are stable and REITs have
inflation linked revenues with low correlation to broader equity
markets. As users of financial leverage, REITs will experience higher
levels of volatility with the movement in interest rates, as seen in the
last few months of the year. Given our focus on companies run by strong
management teams with a track record of prudent capital allocation, we
will take advantage of any short-term corrections to add to our
favourite names. Valuations look attractive with Canadian REITs
currently trading at discounts to NAV.
In Canadian dollars, MCI's net asset value was up 16.8% for the year.
The weakness in the British Pound was a significant contributor to the
Fund's total return, as the Pound depreciated by 18.7% against the
dollar. The U.S. dollar depreciated by 2.9% against the Canadian dollar
in 2016 and finished the year at 14-year highs against a broad basket of
currencies.
Investment Manager's Report (continued)
Top Holdings:
The table below shows the largest ten positions held within the Fund's
portfolio as at 31 December 2016:
% of
Company Sector Portfolio
JPMorgan Chase & Co.
JPMorgan Chase & Co. is a leading global financial
services firm headquartered in New York, NY, and is
the largest banking institution in the U.S. with $2.4
trillion in assets, approximately 5,413 branches nationwide
and operations in more than 60 countries. Financials 3.8%
Vermilion Energy
Vermilion Energy's production base is internationally
diversified and almost two-thirds oil weighted. With
a strategy focused on the execution of full cycle
growth via acquisition, exploration, development and
optimization of producing properties, Vermilion's
production flows from western Canada, France, Australia,
Germany and the Netherlands. Vermilion is the only
high yield Canadian producer that has never cut its
dividend since its inception in 2003. Energy 3.7%
CF Industries Holdings Inc.
CF Industries is North America's largest nitrogen
producer, operating seven world-scale nitrogen production
facilities near the US Corn Belt along with a significant
sales and distribution network and two facilities
in the UK. Materials 3.5%
National Bank of Canada
National Bank is a Montreal-based, fully integrated
financial services company, which is the smallest
of the Big Six Canadian banks. Earnings are typically
split between personal and commercial (50%), wealth
management (15%) and capital markets (35%). Financials 3.4%
H&R REIT
Canada's second largest REIT, with interests in over
500 high quality assets including office, industrial,
retail and industrial properties. Conservatively managed
with a strong balance sheet and an average remaining
lease term of 10 years, the longest in Canada. Real Estate 3.2%
Microsoft Corporation
Microsoft is the world's largest software maker and
a leading provider of operating systems and productivity
suites for PCs. Microsoft develops licenses and supports
a variety of software products and services, as well
as a variety of hardware products. Technology 3.1%
Gibson Energy Inc.
Gibson Energy is a midstream energy company that is
engaged in the movement, storage, blending, processing,
marketing and distribution of crude oil, condensate,
natural gas liquids and refined products along with
environmental services for oil and gas producing customers. Pipelines 2.9%
AltaGas Ltd.
AltaGas is an energy infrastructure company with operations
that include natural gas gathering and processing,
extraction of ethane and natural gas liquids, transmission,
power generation and rate-regulated utilities. The
company's operations are primarily based in Western
Canada with select businesses throughout North America. Pipelines 2.8%
Pembina Pipeline Corporation
Pembina Pipeline is a pipeline and midstream company
that operates oil and NGL pipelines, gas gathering
and processing facilities and oil and NGL infrastructure
and logistics businesses. Pipelines 2.8%
Brookfield Property Partners L.P.
Brookfield Property Partners L.P. is a global commercial
property company that owns, operates and invests in
best-in-class office, retail, multifamily and industrial
assets. Real Estate 2.7%
Top Ten Investments 31.9%
Investment Manager's Report (continued)
Outlook:
Looking forward, we are bullish on North American equities but
challenges to the global macro outlook remain. While Chinese economic
data appears to have turned the corner, Europe still faces a number of
headwinds including the possibility of a 'hard' Brexit as well as
pivotal elections in France and Germany later this year. President Trump
appears adamant on renegotiating trade deals to the benefit of the U.S.,
potentially impacting global trade or inciting currency wars. While
there is talk of renegotiating NAFTA, recent commentary suggests that
Canada is not the primary focus of any trade reform and we do not
believe there will be any adverse impact on the Canadian economy.
We will continue to actively manage the sector exposure in the Fund,
taking advantage of any short-term dislocations in valuations to add to
our favourite holdings. Although global yields have risen over the past
few months, they are still at historically low levels, thereby
supporting demand for stable, income-earning investments such as MCI.
As stated previously, we believe that consistent dividend growth will
enhance the Fund's ability to provide attractive long-term returns, on
both a relative and absolute basis. Given the fundamentals described
previously, the Fund maintains a relative overweight position in sectors
including real estate, financials, and energy while remaining focused on
investing in issuers with proven management teams, good balance sheets
and sustainable dividends.
Middlefield Limited
Date: 20 April 2017
Directors' Report
The directors present their annual financial report for the year ended
31 December, 2016 with comparatives for the year ended 31 December 2015.
The directors confirm that the annual financial report, taken as a whole,
is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's performance, business
model and strategy.
Status and Activities
Middlefield Canadian Income - GBP PC (the "Fund") is a closed-ended
protected cell of Middlefield Canadian Income PCC (the "Company"), a
Jersey-incorporated protected cell company.
The Fund is a closed-ended fund which has been admitted to the premium
segment of the Official List of the UK Listing Authority and to trading
on the London Stock Exchange's Main Market for listed securities.
JTC Fund Solutions (Jersey) Limited (previously known as Kleinwort
Benson (Channel Islands) Corporate Services Limited) acts as the
Company's secretary and administrator. JTC Fund Solutions (Guernsey)
Limited was appointed as assistant secretary with effect from 1 December,
2016. The Fund's net asset value ("NAV") is calculated using the closing
prices of the securities held within its portfolio. The Company
publishes the NAV of a share in the Fund on a daily basis.
An amendment of the Fund's investment policy was approved by
shareholders at the extraordinary general meeting held on 18 February
2015, which increased the percentage of the value of total portfolio
assets which may be invested in securities listed on a recognised stock
exchange outside of Canada from 20 per cent. to 40 per cent. and which
limited the amount which may be invested in securities listed on any
recognised stock exchange outside of Canada and the U.S. to 10 per cent.
of the value of the Company's portfolio. The Fund's investment
objective and policy are described in further detail below.
Investment Objective and Dividend Policy
The Fund seeks to provide shareholders with a high level of dividends as
well as capital growth over the longer term. The Fund intends to pay
dividends on a quarterly basis each year. Subject to unforeseen
circumstances, the Fund intends to maintain its current dividend rate of
at least five pence per share per annum payable on a quarterly basis in
equal instalments. The current dividend rate is expected to be
supported by an increase in dividend and interest income earned by the
Fund as well as the expected increase in the value of the Canadian
dollar versus GBP over time. We believe that Canada will benefit from
the recovery in energy markets and the relative strength in the U.S.
economy, while Europe still faces a number of headwinds including the
possibility of a 'hard' Brexit as well as pivotal elections in France
and Germany. The relative stability of Canada's economy should provide
ongoing support for the Canadian dollar relative to most other developed
currencies.
Investment Portfolio
The Fund seeks to achieve its investment objective by investing
predominantly in the securities of companies and REITs domiciled in
Canada as well as the U.S. that the Investment Manager believes will
provide an attractive level of distributions, together with the prospect
for capital growth. It is expected that the Fund's portfolio will
generally comprise between 40-70 investments.
The Fund may also hold cash or cash equivalents.
The Fund may utilise derivative instruments including index-linked notes,
contracts for differences, covered options and other equity-related
derivative instruments for the purposes of efficient portfolio
management.
The Fund will at all times invest and manage its assets in a manner
which is consistent with the objective of spreading investment risk.
Investment restrictions
The Fund will not at the time of making an investment:
(a) have more than 10 per cent. of the value of its portfolio assets
invested in the securities of any single issuer; or
(b) have more than 50 per cent. of the value of its portfolio assets
comprised of its ten largest security investments by value; or
(c) have more than 40 per cent. of the value of its portfolio assets
invested in securities listed on a recognised stock exchange outside
Canada; or
(d) have more than 10 per cent. of the value of its portfolio assets
invested in securities listed on a recognised stock exchange outside
Canada and the United States; or
(e) have more than 10 per cent. of the value of its portfolio assets
invested in unquoted securities; or
(f) purchase securities on margin or make short sales of securities or
maintain short positions in excess of 10 per cent. of the Fund's net
asset value.
Directors' Report (continued)
Investment Objective and Dividend Policy (continued)
Hedging
The Board reserves the right to employ currency hedging but, other than
in exceptional circumstances, does not intend to hedge.
Gearing
The Fund has the power to borrow up to 25 per cent. of the value of its
total assets at the time of drawdown. In the normal course of events,
and subject to Board oversight, the Fund is expected to employ gearing
in the range of 0 to 20 per cent. of the value of its total assets in
order to enhance returns. At year end, the Fund's gross borrowings were
equal to 19 per cent. of its total assets.
Key Performance Indicators
The Board reviews performance by reference to a number of key
performance indicators, which include the following:
-- portfolio performance;
-- net asset value (NAV);
-- share price;
-- premium/discount;
-- dividends; and
-- ongoing charges.
Authorised and Issued Share Capital as at 31 December 2016
The Fund has the power to issue an unlimited number of shares of no par
value which may be issued as redeemable participating preference shares
or otherwise and which may be denominated in Sterling or any other
currency.
There are currently 2 Management Shares of no par value in the Company
(issued on incorporation) and 2 Management Shares and 124,682,250
redeemable participating preference shares of no par value ("Fund
Shares") in the Fund in issue. As at 31 December 2016, 17,745,000 Fund
Shares were held in treasury. Since the financial year end and up to
the date of this report, the Fund has not sold any Fund Shares from
treasury and has repurchased 450,000 Fund Shares, so there are now
18,195,000 Fund Shares held in treasury, which may in future be sold out
of treasury to satisfy market demand. Accordingly, the number of Fund
Shares in issue and with voting rights attached is currently 106,487,250
and this figure may be used by shareholders as the denominator for
calculations by which they will determine if they are required to notify
their interest in, or a change to their interest in, the Company under
FCA's Disclosure Guidance and Transparency Rules.
Further issues of Fund Shares
The Fund's Articles of Association provide the Board of directors with
authority to issue further Fund Shares without seeking shareholders'
approval although, unless otherwise authorised by shareholders, such
Fund Shares must be issued on a pre-emptive basis. However, at the Cell
Annual General Meeting (the "Cell AGM") held on 26 May 2016, the Fund's
shareholders authorised the issue or sale out of treasury of Fund Shares
representing up to 10 per cent. of the Fund's issued share capital as at
the date of the Cell AGM. Such issues or sales will only be effected in
the event of investor demand which cannot be met through the market and
will only be conducted at a price equal to or above the prevailing NAV.
The aforementioned authority expires on the earlier of 30 September 2017
or the conclusion of the next Cell AGM. At the next Cell AGM, the notice
of which is included at the end of this annual financial report, the
Board will be seeking renewal of their authority to issue or sell out
of treasury additional Fund Shares and to make market acquisitions of
Fund Shares. If the proposed special resolutions are approved, such
authorities will remain valid until the earlier of 30 September 2018 or
the conclusion of the next Cell AGM.
The full text of the proposed special resolutions is included in the
notice of the Cell AGM. The Board considers that each of the proposed
special resolutions is in the interests of the Company, the Fund and its
shareholders as a whole. The authority to issue additional shares or
sell shares out of treasury will permit the directors to grow the
Company, thereby reducing the total expense ratio, as costs will be
spread across a larger number of issued shares, and will also enable
further diversification of the Company's portfolio. Accordingly, the
directors unanimously recommend that you vote in favour of the proposed
special resolutions, as they intend to do in respect of their own
beneficial holdings.
Future Trends
Details of the main trends and factors likely to affect the future
development, performance and position of the Company's business can be
found in the Investment Managers' Report on pages 7 to 10. Further
details as to the risks affecting the Company are set out on pages 15 -
16.
Directors' Report (continued)
Substantial shareholding in the Fund
As at the year end, the following shareholders had declared a notifiable
interest of 5 per cent. or more in the Fund's voting rights:
Redeemable Participating Preference Shares Redeemable Participating Preference Shares Redeemable Participating Preference Shares
Name 31 December 2016* 31 December 2016 31 March 2017*
Number of Shares % of Shares in issue Number of Shares
Brewin
Nominees
Limited 14,271,007 13.35% 13,074,708
Rock
(Nominees)
Limited 12,352,038 11.55% 12,459,382
State
Street
Nominees
Limited 12,012,347 11.23% 11,995,170
Vidacos
Nominees
Limited 9,754,725 9.12% 9,735,263
* As at the year end and as at 31 March, 2017, being the most recent
practicable date prior to the publication of this report, the following
shareholders were recorded on the Company's share register as holding 5
per cent. or more of the Fund's issued share capital with voting rights
attached or had otherwise notified the Company of such notifiable
interests.
Shareholder Relations
Shareholder relations are given a high priority by the Board, Investment
Manager and Secretary. The primary medium through which the Company
communicates with its shareholders is through the annual and half-yearly
financial reports, which aim to provide shareholders with a full
understanding of the Company's activities and results. The information
is supplemented by the daily publication of the NAV of the Fund Shares,
monthly factsheets and information on the Company's website operated by
the Investment Manager. Shareholders have the opportunity to address
questions to the Chairman and the Committees of the Board at the AGMs
and all shareholders are encouraged to attend the AGMs.
There is regular dialogue between the Investment Manager and major
shareholders to discuss aspects of investment performance, governance
and strategy and to listen to shareholders' views, in order to help
develop a balanced understanding of their issues and concerns. General
presentations to both shareholders and analysts follow the publication
of the annual financial results. All meetings between the Investment
Manager and shareholders are reported to the Board.
Ongoing charges
The below table shows the annualised ongoing charges that relate to the
management of the Fund as a single percentage of the average NAV over
the same year. Ongoing charges are those expenses of a type which are
likely to recur in the foreseeable future, whether charged to capital or
revenue, and which relate to the operation of the Fund as a collective
investment fund, excluding the costs of acquisition/disposal of
investments, financing charges and gains/losses arising on investments.
Ongoing charges are based on actual costs incurred in the year as being
the best estimate of future costs.
Ongoing
charges (%)
31 December 2016 1.02
31 December 2015 1.06
Results and dividends
The results for the year are shown in the Statement of Comprehensive
Income on page 35 and related notes on pages 38 to 53. During the year,
dividends were paid on a quarterly basis (see note 11). Although there
is no guarantee, dividends are expected to be paid on a quarterly basis
and paid at the end of that month as follows:
Payment Month Gross amount per Share
April 2017 1.25p expected
July 2017 1.275p expected
October 2017 1.275p expected
January 2018 1.275p expected
This is not a profit forecast, nor should it be construed as such. This
is a target only and should not be treated as an assurance or guarantee
of performance.
Going concern and Viability
The performance of the investments held by the Fund over the reporting
year is described in the Statement of Comprehensive Income and in note 9
to the financial statements and the outlook for the future is described
in the Chairman's Report and the Investment Manager's Report. The
Company's financial position, its cash flows and liquidity position are
set out in the financial statements and the Company's financial risk
management objectives and policies, details of its financial instruments
and its exposures to market price risk, credit risk, liquidity risk,
interest rate risk, currency risk and country risk are set out at
Directors' Report (continued)
Going concern and Viability (continued)
note 16 to the financial statements. The Company's long term viability
and assessment of longer term risks to which the Company is exposed are
also reported upon in the Company's long term viability statement
included at the end of this report.
The financial statements have been prepared on a going concern basis,
supported by the directors' current assessment of the Company's position,
including the factors set out on page 12 above and:
-- ongoing shareholder interest in the continuation of the Fund;
-- the Company has sufficient liquidity to meet all on-going expenses;
-- should the need arise, the directors have the option to reduce dividend
payments in order to positively affect the Fund's cash flows; and
-- the Fund's investments in Canadian and U.S. securities are readily
realisable to meet liquidity requirements if necessary.
Based on the above, in the opinion of the directors, there is a
reasonable expectation that the Company has adequate resources to
continue in operational existence for the foreseeable future.
The directors have also considered the application of the Statement of
Recommended Practice for Financial Statements of Investment Trust
Companies and Venture Capital Trusts, whereby the going concern basis of
preparation of the financial statements is considered appropriate until
a vote is passed to discontinue the Fund or Company. At the Fund's Cell
AGM held on 16 May, 2013 a continuation vote was proposed and passed
unanimously by those shareholders voting at the meeting. There is no
requirement under the Company's and Fund's articles of association to
propose any future continuation vote in respect of either the Company as
a whole or the Fund itself and the directors have no intention of
proposing any continuation vote in the foreseeable future, subject to
unforeseen future events.
For these reasons, the financial statements have been prepared using the
going concern basis.
Corporate Governance
The Board is committed to achieving and demonstrating high standards of
corporate governance.
As an overseas company with a premium listing, the Company is required
to include a statement in its annual report as to whether it has
complied throughout the accounting period with all relevant provisions
set out in the UK Financial Reporting Council's (the "FRC") UK Corporate
Governance Code (the "UK Code") or, if not, setting out those provisions
with which it has not complied and the reasons for non-compliance.
The Association of Investment Companies (the "AIC"), of which the
Company is a member, has published its Code of Corporate Governance for
Investment Companies (the "AIC Code") and the Corporate Governance Guide
for Investment Companies dated February 2015 (the "AIC Guide"), which
incorporates the UK Code, the AIC Code and paragraph 9.8.6 of the FCA's
Listing Rules. The FRC has confirmed that "it remains the FRC's view
that by following the AIC Corporate Governance Guide, investment company
boards should fully meet their obligations in relation to the UK
Corporate Governance Code and paragraph LR 9.8.6 of the Listing Rules."
The Board has considered the principles and recommendations of the AIC
Guide. The AIC Code, as explained by the AIC Guide, addresses all the
principles set out in the UK Code, as well as setting out additional
principles and recommendations on issues that are of specific relevance
to the Company. The Board considers that reporting against the
principles and recommendations of the AIC Code provides better
information to shareholders.
The directors believe that the Company has complied with the provisions
of the AIC Code, where appropriate, and that it has complied throughout
the year with the provisions where the requirements are of a continuing
nature. Following the publication of the revised AIC Code dated February
2015, the directors put in place further measures designed to ensure
compliance with the revised AIC Code and report against the 2015 AIC
Code in this year's annual financial report.
The UK Code is available for download from the FRC's web-site
www.frc.org.uk and the AIC Code and AIC Guide are available for download
from the AIC's website www.theaic.co.uk. All of these documents can
also be provided by the Secretary by e-mail upon request.
The directors believe that the Company has complied with the provisions
of the AIC Code except as set out in the paragraph below, and that it
has complied throughout the year with the provisions where the
requirements are of a continuing nature.
Directors' Report (continued)
Corporate Governance (continued)
The AIC Code includes provisions relating to the role of chief executive
management. As all of the directors are non-executives, the Board
considers that these provisions are not relevant to the Company, which
is an externally managed investment company. In accordance with UKLA
Listing Rule LR 15.6.6, a closed-ended investment fund does not need to
comply with the provisions regarding remuneration in the UK Corporate
Governance Code. The Company has therefore not reported further in
respect of these provisions. The Company continues to operate a comply
or explain approach with shareholders.
The Board is responsible for setting the Company's investment policy,
subject to shareholders' approval in general meeting of any proposed
material changes, and has a schedule of investment matters reserved for
the directors' resolution. The Board has contractually delegated to
external agencies the management of the investment portfolio, the
custodial services and the day to day accounting and secretarial
requirements. Each of these contracts is only entered into after proper
consideration by the Board of the quality of services being offered. The
Company's risk assessment and the way in which significant risks are
managed is a key area for the Board. Work here was driven by the Board's
assessment of the risks arising in the Company's operations and
identification of the controls exercised by the Board and its delegates,
the Investment Manager and other service providers. These are recorded
in the Company's business risk matrix, which continues to serve as an
effective tool to highlight and monitor the principal risks. The Board
also received and considered, together with representatives of the
Investment Manager, reports in relation to the operational controls of
the Investment Manager, Administrator, Custodian and Registrar. These
reviews identified no issues of significance.
Principal Risks and Uncertainties
Investment Policy (incorporating the Investment Objective)
There is no guarantee that the Company's investment objective will be
achieved or provide the returns sought by shareholders. The Board has
established guidelines to ensure that the investment policy that has
been approved is pursued by the Investment Manager. The Board reviews
the Investment Manager's compliance with the agreed investment
restrictions, investment performance and risk against investment
objectives and strategy; the portfolio's risk profile; and appropriate
strategies employed to mitigate any negative impact of substantial
changes in markets. In addition, the Board also performs an annual
review of the ongoing suitability of the Investment Manager.
Market Value of Fund Shares
The market value of the Fund Shares will be affected by a number of
factors, including the dividend yield from time to time of the Fund
Shares, prevailing interest rates and supply of and demand for those
Fund Shares, along with wider economic factors and changes in applicable
law, including tax law, and political factors. The market value of, and
the income derived from, the Fund Shares can fluctuate and may go down
as well as up. The market value of the Fund Shares may not always
correlate closely with the NAV per Fund Share. While it is the intention
of directors to pay dividends to shareholders on a quarterly basis, the
ability to do so will largely depend on the amount of income the Company
receives on its investments, the timing of such receipts and costs. Any
reduction in income receivable by the Company, or increase in the cost
of financing, will lead to a reduction in earnings per share and
therefore in the Company's ability to pay dividends. Accordingly, the
amount of dividends payable by the Company may fluctuate. The Board
monitors the income received on investments and available for
distribution prior to the declaration of each dividend.
The directors have the power to issue and buy back the Company's shares
during the year, which can be used to help manage the level of premium
or discount. The Board, the Investment Manager and the Company's Broker
monitor the share price and level of premium or discount on a regular
basis.
Reliance on External Service Providers
The Company has no employees and the directors have all been appointed
on a non-executive basis. The Company is reliant upon the performance of
third party service providers for its executive function. The Company's
most significant contract is with the Investment Manager, to whom the
responsibility for the day-to-day management of the Company's portfolio
has been delegated. The Company has other contractual arrangements with
third parties to act as administrator, secretary, auditor, registrar,
custodian and broker. Failure by any service provider to carry out its
obligations to the Company in accordance with the terms of its
appointment could have a materially detrimental impact on the operations
of the Company and could affect the ability of the Company to
successfully pursue its investment policy and expose the Company to
reputational and financial risk.
The Investment Manager is exposed to the risk that litigation,
misconduct, operational failures, negative publicity and press
speculation, whether or not valid, may harm its reputation. Any damage
to the reputation of the Investment Manager could result in
counterparties and other third parties being unwilling to deal with the
Investment Manager and by extension the Company. This could have an
adverse impact on the ability of the Company to pursue its investment
policy.
Directors' Report (continued)
Principal Risks and Uncertainties (continued)
Reliance on External Service Providers (continued)
The Board seeks to manage these risks, and others, in a number of ways:
-- The Management Engagement Committee monitors the performance of all third
party providers in relation to agreed service standards on a regular
basis, and any issues and concerns are dealt with and reported to the
Board. The Management Engagement Committee formally reviews the
performance of all third party providers and reports to the Board on an
annual basis.
-- The Board monitors the performance of the Investment Manager at every
board meeting and otherwise as appropriate. The Board has the power to
replace the Investment Manager.
-- The Board has adopted guidelines within which the Investment Manager is
permitted discretion. Any proposed variation outside these guidelines is
referred to the Board.
Directors
As at 31 December 2016 and as at the date of this report, the Board of
directors comprised five non-executive directors, four of whom were
independent of the Investment Manager and its affiliates.
The present members of the Board are listed on pages 58 and 16 to 17. In
accordance with the provisions of the AIC Code, all directors should
submit themselves for re-election at least every three years. In
addition, as Mr Orrico is not independent of the Investment Manager, he
is required by the FCA's Listing Rules to submit himself for re-election
annually. However, in accordance with PIRC's published guidance in
relation to the continued appointment of directors, at the forthcoming
Company and Cell AGM to be held on 25 May 2017, each of the directors
will resign and stand for re-election.
As the Fund is a Jersey-regulated entity, any change of director is
subject to the consent of the Jersey Financial Services Commission
("JFSC") and the resignation of each director will be conditional upon
the JFSC's consent to their resignation being obtained. This consent
will only be sought if any director is not re-elected at the Company and
Cell AGM. Any director whose re-election is not approved at the Company
and Cell AGM will therefore remain in office until such time as the JFSC
consents to their resignation (and this consent may itself be
conditional upon the appointment of a replacement director acceptable to
the JFSC). Any such resigning director will not take part in the
management of the Fund pending receipt of such regulatory consent (save
as may be required to preserve and protect the Fund's assets and
interests or as may be required to comply with applicable regulation or
legal obligation).
The interests as at 31 December 2016 and 2015 of the directors who
served on the Board and their connected persons during the year were as
follows:
2016 2015
Fund
Shares Fund Shares
Raymond Apsey 75,000 50,000
Philip Bisson 845,125 635,826
Philean Trust Company Limited (a company connected
with Philip Bisson) 691,381 714,381
Thomas Grose 62,000 50,000
Dean Orrico 100,000 100,000
Nicholas Villiers (Chairman) 35,000 10,000
The current directors are:
Nicholas Villiers (Chairman)
Mr Villiers was Vice Chairman of Royal Bank of Canada Europe Limited and
Managing Director of RBC Capital Markets (previously RBC Dominion
Securities). Mr Villiers joined the Royal Bank of Canada Group in 1983
as a director and Head of Mergers and Acquisitions at Orion Royal Bank,
London (a subsidiary of Royal Bank of Canada). During his 19-year
career with the RBC Group, Mr Villiers led the international mergers and
acquisitions team based in London and was also responsible for the Royal
Bank of Canada Group's successful participation in international
privatisations. Prior to joining the Royal Bank of Canada Group, Mr
Villiers served from 1977 to 1983 as joint Managing Director of Delcon
Financial Corporation.
Directors' Report (continued)
Directors (continued)
Raymond Apsey
Mr Apsey is a Fellow of the Institute of Chartered Secretaries and
Administrators with extensive experience at management level of the
offshore finance industry in the Bahamas, the Channel Islands and the
Cayman Islands. He joined the Morgan Grenfell Offshore Group in 1975 to
head the Corporate and Trust Division and held various senior
appointments including Deputy Managing Director of Jersey, Managing
Director of Cayman and Group director before retiring in December 1995.
Mr Apsey resides in Jersey and is currently Chairman or director of a
number of investment companies listed on the London, Irish and Channel
Islands stock exchanges.
Philip Bisson
Mr Bisson is a Fellow Member of the Chartered Institute of Bankers, and
is or has been a member of various Jersey committees including the
Jersey Association of Trust Companies of which he is also treasurer.
From 1979 to 1986 Mr Bisson was Trust Manager and Company Secretary of
Chase Bank and Trust Company (CI) Limited and from 1986 to 1994 was a
Director of BT Trustees (Jersey) Limited. Mr Bisson is domiciled in
Jersey and is currently the Managing Director of Philean Trust Company
Limited.
Thomas Grose
Following service with the United States Army, Mr Grose began his career
in finance with Citibank in New York, where he rose to become an
Assistant Vice President. After a spell as Vice President - Finance and
Chief Financial Officer with Great American Industries, Inc., he joined
Bankers Trust Company, where he spent 18 years variously in New York,
London and Tunisia. Since 1991, Mr Grose has worked for Stock Market
Index International, a company that he established in the UK, which
provides proprietary research to asset managers, hedge funds and other
financial institutions.
Dean Orrico
Mr Orrico is President, Chief Executive Officer and Chief Investment
Officer of Middlefield Capital Corporation and has been employed by the
firm since 1996. Prior to joining Middlefield, Mr Orrico was a
commercial account manager with the Toronto-Dominion Bank. Mr Orrico is
currently responsible for overseeing the creation and ongoing management
of all of Middlefield's investment funds including mutual funds, Toronto
and London Stock Exchange-listed funds and flow-through funds. He
graduated with a Bachelor of Commerce degree from the Rotman School of
Management (University of Toronto) and holds an MBA from the Schulich
School of Business (York University). Mr Orrico is a registered
Portfolio Manager.
Mr Orrico oversees approximately $4 billion in assets under management
at Middlefield and has developed expertise in both equity and fixed
income securities. Having spent many years managing equity portfolios
and meeting with international companies and investors, Mr Orrico has
overseen the diversification of Middlefield's portfolios into global
equity income securities.
The Company and Fund do not have any executive directors or employees.
The structure of the Board is such that it is considered unnecessary to
identify a senior independent non-executive director other than the
Chairman because the Board currently has a majority of independent
directors and is expected to continue to have a majority of independent
directors after the forthcoming Company and Cell AGM. As such, it
complies with the FCA's Listing Rules and the AIC Code. On 26 May 2010,
a Nomination and Remuneration Committee was established and comprised of
all the directors of the Company and Fund. In accordance with PIRC's
published guidance, all directors will continue to offer themselves for
annual re-election for the foreseeable future.
Although no formal training in corporate governance is given to
directors, the directors are kept apprised of corporate governance
issues through bulletins and training materials provided from time to
time by the Secretary and the AIC.
The Board meets at least quarterly to review the overall business of the
Company and to consider matters specifically reserved for its review.
At these meetings, the Board monitors the investment performance of the
Fund. The directors also review the Fund's activities every quarter to
ensure that it adheres to the Fund's investment objective and policy or,
if appropriate, to consider changes to that policy. Additional ad hoc
reports are received as required and directors have access at all times
to the advice and services of the Secretary, which is responsible for
guiding the Board on procedures and applicable rules and regulations.
Conflicts of Interest
A director must avoid a situation where he has or might have a direct or
indirect interest that either conflicts or has the potential to conflict
with the Company's interests. The Company's and Fund's Articles of
Association give the directors
Directors' Report (continued)
Conflicts of Interest (continued)
authority to authorise potential conflicts of interest and there are
safeguards in place which will apply whenever the directors decide that
such are necessary or desirable.
Firstly, only directors who have no interest in the matter being
considered are able to vote upon the relevant decision, and secondly, in
voting on the decision, the directors must act in a way they consider,
in good faith, will be in the best interests of the Company. The
directors can impose limits or conditions when giving authorisation if
they consider this to be appropriate.
The directors declare any potential conflicts of interest to the Board
at each Board meeting. Any actual or potential conflicts of interest are
entered into the Company's register of such conflicts, which register is
reviewed regularly by the Board. The register of conflicts of interest
is kept at the Company's registered office. The directors advise the
Secretary as soon as they become aware of any new actual or potential
conflicts of interest or any material changes to an existing conflict.
Directors' and Officers' Liability Insurance
The Company purchases directors' and officers' liability insurance cover
at a level which is considered appropriate for the Company.
Directors' Remuneration
No director has a service contract with the Company or Fund and details
of the directors' fees are disclosed in note 13.
Directors' fees are recommended by the full Board. The non-executive
directors were each paid the following in the 2016 and 2015 financial
years:
Director 2016 Fees 2015 Fees
Raymond Apsey GBP20,000 GBP20,000
Philip Bisson GBP20,000 GBP20,000
Thomas Grose GBP20,000 GBP20,000
Dean Orrico - -
Nicholas Villiers GBP25,000 GBP25,000
The figures above represent emoluments earned as directors during the
relevant financial year, which are paid quarterly in arrears. Mr Orrico
has waived his entitlement for remuneration for acting as a director,
because of his employment by the Investment Manager. The directors
receive no other remuneration or benefits from the Company other than
the fees stated above. The directors are paid out of pocket expenses for
attendance at Board meetings and for any other expenditure they incur
when acting on the Company's behalf.
Board, Committee and Directors' Performance Evaluation
The directors recognise the importance of the AIC Code in terms of
evaluating the performance of the Board as a whole, its respective
Committees and individual directors. During the year, the performance of
the Board, Committees of the Board and individual directors was assessed
in terms of:
-- attendance at Board and Committee Meetings;
-- the independence of individual directors;
-- the ability of individual directors to make an effective contribution to
the Board and Committees of the Board, together with the diversity of
skills and experience each director brings to meetings; and
-- the Board's ability to effectively challenge the Investment Manager's
recommendations, suggest areas of debate and fix timetables for debates
on the future strategy of the Company.
The directors concluded that the performance evaluation process had
proven successful, with the Board, the Committees of the Board and the
individual directors scoring well in all areas. The Board and the
Committees of the Board continued to be effective and the individual
directors continued to demonstrate commitment to their respective roles
and responsibilities.
Directors' Attendance
The table below summarises the directors' attendance at each type of
meeting held during the year.
Directors' Report (continued)
Board, Committee and Directors' Performance Evaluation (continued)
Directors' Attendance (continued)
Ad Management
Quarterly hoc Audit Nomination and Dividend Engagement
Board Board Committee Remuneration Committee Committee Committee
No. of
meetings
in the
year 4 0 2 1 4 1
Raymond
Apsey 4 0 2 1 1 1
Philip
Bisson 4 0 2 1 2 1
Thomas
Grose 4 0 2 1 3 1
Dean
Orrico 4 0 N/A 1 0 1
Nicholas
Villiers 4 0 1 1 3 1
Independence of Directors
During the year, the Board consisted of five members, all of whom are
non-executive. Mr Orrico is a director of Middlefield Capital
Corporation, an affiliate of the Investment Manager. All the directors,
apart from Mr Orrico, are considered to be independent of the Investment
Manager and free of any business or other relationship that could
influence their ability to exercise independent judgement. The Board
believes that Mr Orrico's investment management experience adds
considerable value to the Company. The entire Board are members of the
Nomination & Remuneration and Management Engagement Committees, while Mr
Orrico does not take part in discussing any contractual arrangements
between the Company and the Investment Manager.
The Board believes that Mr Villiers, Mr Grose, Mr Bisson and Mr Apsey
are independent in character and judgement and that their experience and
knowledge of the specialised sector in which the Company operates adds
significant strength to the Board. The directors believe that the Board
has a balance of skills and experience which enable it to provide
effective strategic leadership and proper governance of the Company.
Information about the directors including their relevant experience can
be found on pages 16 to 17. The Board is of the view that length of
service does not automatically compromise the independence or
contribution of directors of an investment company, where continuity and
experience can be a benefit to the Board. Furthermore, the Board agrees
with the view expressed in the AIC Code of Governance that long serving
directors should not be prevented from forming part of an independent
majority or from acting as Chairman. Consequently, no limit has been
imposed on the directors' overall length of service.
Internal Controls
The directors are responsible for overseeing the effectiveness of the
Company's internal financial control systems, which are designed to
ensure that proper accounting records are maintained, that the financial
information on which business decisions are made and which is issued for
publication is reliable, and that the assets of the Company are
safeguarded. However, such system can only be designed to manage rather
than eliminate the risk of failure to achieve business objectives and
therefore can only provide reasonable and not absolute assurance against
material misstatement or loss.
The Company receives reports from the Administrator relating to its
administration activities. Documented contractual arrangements are in
place with the Administrator, which define the areas where the Company
has delegated authority to them.
Audit Committee
On 26 May, 2010 an Audit Committee was established. The current members
are Thomas Grose (Chairman), Raymond Apsey, Nicholas Villiers and Philip
Bisson. A separate report from the Audit Committee is included at pages
23 to 25.
Nomination and Remuneration Committee
The Board has also established a Nomination and Remuneration Committee,
which meets when necessary. The current members are all the directors of
the Company, whose summary biographical details are set out on pages 16
to 17. Its key terms of reference are set out below.
-- The Committee considers and monitors the level and structure of
remuneration of the directors of the Company and the Fund.
-- The Committee is authorised, in consultation with the Secretary, where
necessary to fulfil its duties, to obtain outside legal or other
professional advice, including the advice of independent remuneration
consultants, to secure the attendance of external advisors at its
meetings, if it considers this necessary, and to obtain reliable
up-to-date information about remuneration in other companies, all at the
expense of the Fund.
-- The Committee considers the overall levels of insurance cover for the
Company, including directors' and officers' liability insurance.
-- The Committee conducts a process annually to evaluate the performance of
the Board and its individual directors.
Directors' Report (continued)
Nomination and Remuneration Committee (continued)
-- The Committee considers such other topics as directed by the Board.
The Board believes that, subject to any exception explained above and
the nature of the Company as an investment fund, it has complied with
the applicable provisions of the AIC Code and AIC Guide throughout the
year. The Board has noted the recommendations of the AIC relating to
Board diversity. The Board, advised by the Nomination and Remuneration
Committee, considers diversity, including the balance of skills,
knowledge, diversity (including gender) and experience amongst other
factors when reviewing the composition of the Board and appointing new
directors, but does not consider it appropriate to establish targets or
quotas in this regard. Board diversity is carefully considered and will
continue to be considered in the future.
Management Engagement Committee
The Board established a Management Engagement Committee (the "M.E.
Committee") at its meeting held on 20 November 2013. The principal
function of the M.E. Committee is to monitor the performance and terms
of engagement of the Company's key service providers. The M.E.
Committee's current members are all the directors of the Company. The
Chairman of the M.E. Committee is Thomas Grose or, failing him, any
UK-resident member of the M.E. Committee other than the Chairman of the
Company. For the purposes of transacting business, a quorum of the M.E.
Committee is not less than two members of the M.E. Committee and all
meetings must take place in the UK.
Duties
The M.E. Committee's key duty is to review the performance by delegates
of their duties and the terms of the following agreements:
1. the Administration and Secretarial Agreement;
2. agreements for the provision of legal advice;
3. the Investment Management and Advisory Services Agreement, as amended
and novated; and
4. any other agreements for the provision of services the Company has
entered into or will in future enter into.
The M.E. Committee meets at least annually to specifically consider the
ongoing administrative and secretarial and investment management
requirements of the Company. The quality and timeliness of reports to
the Board are also taken into account and the overall management of the
Company's affairs by the Investment Manager is considered. Based on its
recent review of activities, and taking into account the performance of
the portfolio, the other services provided by the key service providers,
and the risk and governance environment in which the Company operates,
the Board believes that the retention of the current key service
providers on the current terms of their appointment remains in the best
interests of the Company and its shareholders.
The Board regularly reviews the performance of the services provided by
these companies. A summary of the terms of the agreements with JTC Fund
Solutions (Jersey) Limited ("JTCFSL") and with ML and MIL are set out in
note 2 to the financial statements. After due consideration of the
resources and reputations of JTCFSL, ML and MIL, the Board believes it
is in the interests of shareholders to retain the services of all three
providers for the foreseeable future. Having reviewed the investment
management and advisory services provided by ML and MIL and having
regard to the Fund's investment performance since the Fund's launch in
May 2006, the directors are of the view that the portfolio should remain
managed by the Investment Manager for the foreseeable future.
The FCA's Listing Rules also require the following additional
information:
During the year under review and up to the date of this report,
Middlefield Limited ("ML") has acted as the Company's discretionary
investment manager. Middlefield International Limited ("MIL") provides
investment advisory services to the Company and the Investment Manager.
The Company pays an annual fee of 0.70 per cent. of NAV to the Manager
and the agreement can be terminated by either party on 90 days' written
notice.
For the purposes of the Alternative Investment Fund Managers Directive
(the "AIFMD"), which was implemented into UK law with effect from 22
July 2013, the Company has been classified as a non-EU Alternative
Investment Fund (an "AIF") managed by a non-EU Alternative Investment
Fund Manager (an "AIFM"). As such, the Company is not subject to the
full scope of the Directive and therefore does not incur the additional
costs, such as those incurred in having to appoint a depositary, that
would have been applicable had it been deemed to be managed by an EU
AIFM. Note 19 lists all investments in the Fund's investment portfolio.
The Terms of Reference of the Audit Committee, the Nomination and
Remuneration Committee and the Management Engagement Committee are all
available for inspection at the Company's registered office during
normal business hours.
Directors' Report (continued)
Social, Community, Environmental and Human Rights
The Investment Manager believes that companies should act in a socially
responsible manner. Although the Investment Manager's priority at all
times is the best economic interests of its clients, it recognises that,
increasingly, non-financial issues such as social and environmental
factors have the potential to impact the share price, as well as the
reputation of companies. Specialists at the Investment Manager are
tasked with assessing how companies deal with and report on social and
environmental risks and issues specific to the industry. Their aim is to
incorporate environmental, social and governance ("ESG") criteria into
the Investment Manager's processes when making stock selection decisions
and promoting ESG disclosure. The Investment manager is mindful of the
impact which it can have upon shaping the consideration given to ESG
matters by the Fund's investee companies. In addition to taking into
account ESG matters in portfolio construction decisions, the Investment
Manager conducts ongoing investee company monitoring, and this
engagement process may include voting and communication with management
and company board members.
Independent Auditor
Deloitte LLP has expressed its willingness to continue in office as
auditor and a resolution to re-appoint it will be proposed at the
Company's and Cell's forthcoming annual general meetings.
Meetings of Shareholders
The notices of the next AGMs are included at the end of this annual
financial report.
Directors' Responsibilities
The directors are responsible for preparing the annual financial report
in accordance with applicable law and regulations.
The Companies (Jersey) Law 1991, as amended (the "Companies Law")
requires the directors to prepare financial statements for each
financial year which gives a true and fair view of the state of affairs
of the Company as at the end of the financial year and of the profit or
loss for that year. The directors have elected to prepare the financial
statements under International Financial Reporting Standards ("IFRS") as
adopted by the European Union.
International Accounting Standard 1 requires that financial statements
present fairly for each financial period the Company's financial
position, financial performance and cash flows. This requires the
faithful representation of the effects of transactions, other events and
conditions in accordance with the definitions and recognition criteria
for assets, liabilities, income and expenses set out in the
International Accounting Standards Board's 'Framework for the
preparation and presentation of financial statements'. In virtually all
circumstances, a fair presentation will be achieved by compliance with
all applicable IFRS. However, directors are also required to:
-- properly select and apply accounting policies;
-- present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
-- provide additional disclosures when compliance with the specific
requirements in IFRS are insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the
Company's financial position and performance; and
-- make an assessment on the Company's ability to continue as a going
concern.
The directors are responsible for keeping proper accounting records that
disclose with reasonable accuracy at any time the financial position of
the Company and enable them to ensure that the financial statements
comply with the Companies Law. They are also responsible for
safeguarding the assets of the Company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
The directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in Jersey and the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in
other jurisdictions. Having taken advice from the Audit Committee, the
Board considers the report and accounts, taken as a whole, as fair,
balanced and understandable and that it provides the information
necessary for shareholders to assess the Company's performance, business
model and strategy.
Directors' responsibility statement
We confirm that to the best of our knowledge:
1. the financial statements, prepared in accordance with International
Financial Reporting Standards as adopted by the European Union, give a
true and fair view of the assets, liabilities, financial position and
profit or loss of the Company; and
2. the Chairman's Report, Investment Manager's Report and Notes to the
Financial Statements incorporated herein by reference include a fair
review of the development, performance and position of the Company,
together with a description of the principal risks and uncertainties that
it faces.
By order of the Board:
Director Director
Date:
Report of the Audit Committee
This is the report of the Audit Committee and it has been prepared with
reference to the AIC Code. The Company has an established Audit
Committee which has operated since 2010 and which reports formally at
least twice each year to the main Board. It has formally delegated
duties and responsibilities within written terms of reference which are
reviewed and reapproved annually. The function of the Audit Committee is
to ensure that the Company maintains high standards of integrity,
financial reporting and internal controls.
The Audit Committee is chaired by Thomas Grose, a non-executive
independent director and its other members are Nicholas Villiers,
Raymond Apsey and Philip Bisson who are also independent non-executive
directors. Their summary biographical details are set out on pages 16 to
17.
The members do not have any links with the Company's external auditor.
They are also independent of the management teams of the Investment
Manager, the Administrator and all other service providers. The Audit
Committee meets formally no less than twice a year in London and on an
ad hoc basis if required. The membership of the Audit Committee and its
terms of reference are kept under review.
The Audit Committee considers the financial reporting by the Company and
the Fund, the internal controls, and relations with the Company's and
the Fund's external auditor. In addition, the Audit Committee reviews
the independence and objectivity of the auditor. The Committee meets at
least twice a year to review the internal financial and non-financial
controls, to approve the contents of the half-yearly and annual
financial reports to shareholders and to review accounting policies.
Representatives of Deloitte LLP, the Company's auditor, attend the
Committee meeting at which the draft annual financial report is reviewed
and can speak to Committee members without the presence of
representatives of the Investment Manager. The audit programme and
timetable are drawn up and agreed with the Company's auditor in advance
of the financial year end. Items for audit focus are discussed, agreed
and given particular attention during the audit process. The auditor
reports to the Committee on these items, among other matters. This
report is considered by the Committee and discussed with the auditor and
the Investment Manager prior to approval and signature of the annual
financial report.
The Audit Committee is authorised by the Board to investigate any
activity within its terms of reference and to consult with outside legal
or other independent professional advisers when deemed necessary in
order to adequately discharge their duties and responsibilities, which
include:
-- Considering the appointment, resignation or dismissal of the external
auditor and their independence and objectivity, particularly in
circumstances where non-audit services have been provided.
-- Reviewing the cost effectiveness of the external audit from time to time.
-- Reviewing and challenging the half-yearly and annual financial reports,
focusing particularly on changes in accounting policies and practice,
areas of accounting judgement and estimation, significant adjustments
arising from audit or other review and the going concern assumption.
-- Reviewing compliance with accounting standards and law and regulations
including the Companies (Jersey) Law, 1991, as amended and the UKLA's
Listing and Disclosure Guidance and Transparency Rules.
-- Completing regular risk management reviews of internal controls, which
include the review of the Fund's Risk Register.
-- Reviewing the effectiveness of the Company's system of internal controls,
including financial, operating, compliance, fraud and risk management
controls and to make and report to the Board any recommendations that may
arise.
-- Considering the major findings of internal investigations and make
recommendations to the Board on appropriate action.
-- Ensuring that arrangements exist whereby service providers and management
may raise concerns over irregularities in financial reporting or other
matters in confidence and that such concerns are independently
investigated and remediated with appropriate action.
The Audit Committee, having reviewed the effectiveness of the internal
control systems of the Administrator on a quarterly basis, and having
regard to the role of its external auditor, does not consider that there
is a need for the Company or Fund to establish its own internal audit
function.
Report of the Audit Committee (continued)
Some of the principal duties of the Audit Committee are to consider the
appointment of the external auditor, to discuss and agree with the
external auditor the nature and scope of the audit, to review the scope
of and to discuss the results and the effectiveness of the audit and the
independence and objectivity of the auditor, to review the external
auditor`s letter of engagement and management letter and to analyse the
key procedures adopted by the Company`s outsourced service providers
including the Administrator and Custodian. The Audit Committee is
responsible for monitoring the financial reporting process and the
effectiveness of the Company's and its service provider's internal
control and risk management systems. The Company's risk assessment focus
and the way in which significant risks are managed is a key area for the
Committee. Work here was driven by the Committee's assessment of the
risks arising in the Company's operations and identification of the
controls exercised by the Board and its delegates, the Investment
Manager and other service providers. These are recorded in the Company's
business risk matrix which continues to serve as an effective tool to
highlight and monitor the principal risks.
The Board also received and considered, together with representatives of
the Investment Manager, reports in relation to the operational controls
of the Investment Manager, Administrator, Custodian and Registrar. These
reviews identified no issues of significance. The risks relating to the
Company are discussed by the directors and documented in detail in the
minutes of each meeting. The Audit Committee is also responsible for
overseeing the Company's relationship with the external auditor,
including making recommendations to the Board on the appointment of the
external auditor and its remuneration. The current auditor was appointed
in 2006 following an audit tender process and has therefore served the
Company for ten years. The independence of the external auditor is
evidenced through its challenge to management. Its independence and
objectivity are assured through the rotation of audit partner on a
regular basis. The present audit Partner's permitted fifth and final
year is the year ended 31 December 2016. Accordingly the Committee has
not considered it necessary to date to undertake another tender process
for the audit work, although it has considered Deloitte's tenure and
appointment on an annual basis. Since the beginning of the financial
year, the Audit Committee has undertaken an assessment of the
qualifications, expertise and resources, and independence of the
external auditor and the effectiveness of the audit process. This
included consideration of a report on the audit firm`s own quality
control procedures and transparency report.
Significant Risks
During the year, the significant risks that were subject to specific
consideration by the Committee and consultation with the auditor where
necessary were as follows:
Valuation and ownership of securities
There is a risk that the securities are incorrectly valued due to
factors including low volume traded securities and errors in third party
prices.
Valuation of securities - at each valuation point, a price tolerance
check is run. A comparison is done between the prices per two different
financial data vendors, namely, Bloomberg and Interactive Data Services.
The following exceptions require further investigation:
-- Prices outside the stated tolerance levels: Price movements need to be
justified to underlying support.
-- Static prices: These need to be traced and agreed to support to ensure
prices are not static. Static prices are escalated as per the pricing
policy after being static for more than 7 days.
-- Zero prices: Prices for these securities need to be investigated and
added if applicable.
-- >1% difference between Bloomberg and Interactive Data Services price:
Both prices need to be supported to ensure they are correct. Support and
justification needs to be provided in respect of the price selected.
There is also the risk that the securities are not directly owned by the
Fund, which may be caused by errors in the recording of trade
transactions.
Ownership of securities - at each valuation point a stock reconciliation
is performed, which entails tracing and agreeing the stock holding at
valuation point to the Custodian records.
Any differences are investigated and commented on.
All new trades are traced and agreed to the contract note.
Accuracy of Investment Manager's fees
There is a risk that the fees are not calculated in line with the
relevant agreements due to errors in calculations as well as in the
rates used.
Report of the Audit Committee (continued)
The calculation of variable expenses forms part of the procedures
performed in the daily valuation process. The fees are calculated using
the variable expense calculator which is automated. The setup of the
calculator is done utilising the rates per the relevant agreements.
Accuracy and cut-off is checked using the variable fee check. The
accuracy of variable fees is also reviewed as part of the valuation
procedures.
Auditor and Audit
The Audit Committee considers the nature, scope and results of the
auditor's work and monitors the independence of the external auditor.
Formal reports are received at Board meetings from the auditor on an
interim and annual basis relating to the extent of their work. The work
of the auditor in respect of any significant audit issues and
consideration of the adequacy of that work is discussed.
The Audit Committee assesses the effectiveness of the audit process. The
Audit Committee received a report from the auditors which covers the
principal matters that have arisen from the audit.
The Chairman of the Audit Committee meets with the Investment Manager
and Administrator to discuss the extent of audit work completed to
ensure all matters of risk are covered while the Committee assesses the
quality of the draft financial statements prepared by the Administrator
and examines the interaction between the Investment Manager and auditor
to resolve any potential audit issues. It also reviews, develops and
implements policy on the supply of non-audit services. All non-audit
services, if any, which are sourced from the audit firm would need to be
pre-approved by the Audit Committee after they have been satisfied that
the relevant safeguards are in place to protect the auditor`s
objectivity and independence.
The Audit Committee has an active involvement and oversight of the
preparation of both half yearly and annual financial reports and
recommends for the purposes of the production of these financial reports
that valuations are prepared by the management team of the
Administrator. These valuations are a critical element in the Company's
financial reporting and the Audit Committee questions them thoroughly.
Ultimate responsibility for reviewing and approving the annual financial
report remains with the Board.
Chairman of the Audit Committee
Date:
Viability Statement
As stated above, C.2.1 and C.2.2 of the Code recommends that companies
publish a long term viability statement and this statement is intended
to meet that requirement.
The Board of Directors regularly assesses the viability of the Company
for at least the three years following the date of that review. In
considering the Company's viability, the Board considers the Company's
current position and the principal risks to which it is exposed
including, but not necessarily limited to, the viability of its
investment objective and policy, its exposure to the Canadian and North
American economy, foreign exchange risk, gearing risk, hedging risk,
interest rate risk, investor demand for equity securities, portfolio
performance, liquidity, stability of income generation, taxation risk,
dependence on the investment manager, conflicts of interest, and entity
/ legal risk, such as changes in applicable laws and regulations.
The Directors have made a robust assessment of these principal risks and,
together with the Company's Investment Manager, have adopted procedures
and strategies to mitigate these risks. The Fund has an established
investment management policy and set of procedures, which have been
approved and monitored by the Directors, that the Company's Investment
Manager has to comply with, which limits the various elements of
portfolio risk, including exposure to any one particular security,
sector, asset class or geographical area. The Investment Manager
regularly updates the Directors on the Company's portfolio and the
overall status of the market. The Directors perform a solvency and
investment trust test (for compliance with the requirement for
distribution of more than 85% of income received) before any dividend is
declared. In performing its viability analysis, the Board has made the
assumption that global growth will show steady improvement over the
foreseeable future and, accordingly, interest rates in most developed
economies may begin to rise, but will remain relatively low.
The Board also monitors cash flow and liquidity at each regular meeting,
as well as the Company's total expense ratio, to ensure that its
operating costs are reasonable in the current market environment and do
not materially exceed those of its competitors. The Company is invested
in large, liquid issuers, so that it can always realise investments to
raise cash, if required, and meet its expenses when they fall due. The
Investment Manager maintains the ability to use hedging as a portfolio
management tool, if deemed necessary. The Fund uses gearing tactically,
which helps to augment returns or reduce portfolio risk as the case may
be. The Fund has not been required to pay any U.K. corporate taxes in
recent years and does not anticipate paying such taxes in the
foreseeable future. The Investment Manager constantly monitors the
portfolio and its ratings. The Investment Manager and the Investment
Advisor are continuously reviewing the impact of potential changes of
various factors including interest rates, energy prices and foreign
exchange rates. As a result, the Directors are confident that the
Company will be able to continue to operate and has sufficient assets to
meet its liabilities as they fall due over the next three years.
It is the Board's opinion that interest rates are expected to remain
relatively low for the foreseeable future and equity income should
continue to be in demand by both individual and institutional investors.
On the advice of the Investment Manager and as suggested by recent
economic data, the Board believes that the North American economy will
continue to improve over the next three years. Commodity prices,
including oil, have recovered from their lows last year and will now act
as a tailwind for economic growth, especially in Canada. As a result,
the Board believes that the Company's investment strategy of investing
in North American companies that offer high and growing levels of
dividends remains viable.
Being cognisant of the Company's concentrated exposure to the Canadian
and U.S. economy and foreign exchange rates, the Company's investment
objective and policy is regularly reviewed and, at the extraordinary
general meeting in February 2015, the Company's investment restrictions
were changed to permit greater geographical diversification. The Board
believes this change is in the best interests of the Company and its
members and has resulted in reduced volatility in the Company's net
asset value.
The Board also has regular communications with the Company's broker to
understand local market dynamics and changes in the share register. The
Board monitors the discount to their prevailing net asset value at which
the Company's shares trade and, when considered necessary or desirable,
repurchases its own shares in the market to hold in treasury, which
supports the share price and is accretive to the net asset value of the
remaining shares in issue.
The Company has appointed an experienced corporate secretary, which
advises the Board on relevant changes to applicable laws and regulations,
and the Board may take legal advice on any matter and at any time as it
considers to be necessary or desirable. Although the Company can
neither anticipate nor control future changes in law or regulation, the
Board is confident that its directors and advisors are suitably
qualified and experienced and that the Company is unlikely to commit any
material offence, whether by action or omission.
Viability Statement (continued)
Although the Company cannot provide taxation advice and all shareholders
are responsible for their own taxation affairs, the Company does monitor
relevant developments and takes all necessary action to ensure
compliance, including registration under FATCA and the appointment of
Capita Asset Services as its agent to collate and report relevant data
under FATCA and the OECD's Common Reporting Standard.
In light of the above and following careful consideration and analysis
of all material risk factors, the Board therefore confirms its belief
that the Company will remain viable as a closed-ended investment company
for the three years following the date of that review.
Opinion on financial statements of Middlefield Canadian
Income - GBP PC
In our opinion the financial statements:
-- give a true and fair view of the state of the Fund's
affairs as at 31 December 2016 and of its profit for
the year then ended;
-- have been properly prepared in accordance with
International Financial Reporting Standards (IFRSs)
as adopted by the European Union; and
-- have been properly prepared in accordance with the
Companies (Jersey) Law 1991.
The financial statements that we have audited comprise:
-- the Statement of Financial Position;
-- the Statement of Comprehensive Income;
-- the Statement of Changes in Redeemable Participating
Preference Shareholders' Equity;
-- the Statement of Cash Flow;
-- the Accounting Policies; and
-- the related notes 1 to 19.
The financial reporting framework that has been applied
in their preparation is applicable law and IFRSs as
adopted by the European Union.
Summary of our audit approach
Key risks The key risks that we identified in the current year
were:
-- Valuation of investments;
-- Ownership of investments; and
-- Accuracy of investment management fees.
Within this report, identified risks are the same
as the prior year.
Materiality The materiality that we used in the current year was
GBP1.71m which was determined on the basis of approximately
1% (2015: 1%) of the Net Asset Value of the Fund.
The reason for using Net Asset Value is that this
is the key performance indicator for investments in
the Fund.
Scoping All audit work for the Fund was performed directly
by the audit engagement team.
Going concern and the directors' assessment of the
principal risks that would threaten the solvency or
liquidity of the Fund
We have reviewed the directors' statement regarding We confirm that we have nothing material to add or
the appropriateness of the going concern basis of draw attention to in respect of these matters.
accounting contained within note 2(n) to the financial We agreed with the directors' adoption of the going
statements and the directors' statement on the longer-term concern basis of accounting and we did not identify
viability of the Fund contained within the strategic any such material uncertainties. However, because
report, on page 26. not all future events or conditions can be predicted,
We are required to state whether we have anything this statement is not a guarantee as to the Fund's
material to add or draw attention to in relation to: ability to continue as a going concern.
-- the directors' confirmation on pages 15 and 16 that
they have carried out a robust assessment of the
principal risks facing the Fund, including those that
would threaten its business model, future performance,
solvency or liquidity;
-- the disclosures on pages 45 to 50 that describe those
risks and explain how they are being managed or
mitigated;
-- the directors' statement in 2(n) to the financial
statements about whether they considered it
appropriate to adopt the going concern basis of
accounting in preparing them and their identification
of any material uncertainties to the Fund's ability
to continue to do so over a period of at least twelve
months from the date of approval of the financial
statements; and
-- the directors' explanation on page 26 as to how they
have assessed the prospects of the Fund, over what
period they have done so and why they consider that
period to be appropriate, and their statement as to
whether they have a reasonable expectation that the
Fund will be able to continue in operation and meet
its liabilities as they fall due over the period of
their assessment, including any related disclosures
drawing attention to any necessary qualifications or
assumptions.
Independence
We are required to comply with the Financial Reporting We confirm that we are independent of the Fund and
Council's Ethical Standards for Auditors and confirm we have fulfilled our other ethical responsibilities
that we are independent of the Fund and we have fulfilled in accordance with those standards. We also confirm
our other ethical responsibilities in accordance with we have not provided any of the prohibited non-audit
those standards. services referred to in those standards.
Our assessment of risks of material misstatement
The assessed risks of material misstatement described
below are those that had the greatest effect on our
audit strategy, the allocation of resources in the
audit and directing the efforts of the engagement
team.
Valuation of investments
Risk description As detailed on pages 51 to 53, the schedule of investments
at the year-end comprised of investments of GBP146,332,071
(2015: GBP109,893,936) which are measured at fair
value and fair value is determined based on market
prices and accounting policies.
Although the schedule of investments is made up of
listed securities which are traded on recognised markets,
Investments represent the most significant number
on the balance sheet and have a significant impact
on the Net Assets Value (NAV) which is the key performance
indicator of the Fund.
Refer to page 24 (Report of the Audit Committee) and
pages 39 and 40 (Accounting Policies).
How the scope of Our procedures on the valuation of investments included;
our audit
responded to the -- evaluation of the design and implementation of key
risk controls around valuations;
-- testing 100% of the valuations of investments by
agreeing the prices directly to independent third
party sources.
Key observations No differences were identified by our testing which
required reporting to those charged with governance.
Ownership of investments
Risk description There is a risk that securities, a record of which
is maintained by a third party custodian, are not
directly owned by the Fund.
Investments are held with the custodian. Ensuring
that the custodian records all the investments correctly
under the Fund's name is critical since the investment
portfolio represents the principal element of the
financial statements being the single largest asset
on the balance sheet.
How the scope of Our procedures on ownership of investments included;
our audit
responded to the -- evaluation of the design and implementation of key
risk controls around custody of investments;
-- testing 100% ownership of the investments by
confirming the holdings at year end with the
independent custodian.
Key observations No differences were identified by our testing which
required reporting to those charged with governance.
Accuracy of investment management fees
Risk description The investment management fee is the single largest
administrative expense in the Statement of Comprehensive
Income constituting GBP743,275 (2015: GBP727,106)
and forms part the daily valuation process. It is
also a related party transaction, therefore we have
identified it as a key risk.
We have identified a potential risk in the calculation
of these fees in that the calculation methodology
may not be in line with the written agreement as described
on page 41 and incorrect inputs (NAV and rates) may
be used in the calculation. Refer to pages 24 and
25 (Report of the Audit Committee) and page 41 (Accounting
Policies).
How the scope of Our procedures on accuracy of investment management
our audit fees included;
responded to the -- Obtaining the fee agreement relating to the
risk investment management fee, recalculating the fees for
the year ended 31 December 2016 in accordance with
the agreement and comparing to the recorded amounts.
-- reviewing the accuracy of the inputs (NAV) used in
the calculation and evaluation of the design and
implementation of controls relating to the inputs
into the calculation and over the accuracy of the
calculation in relation to the written agreement.
Key observations No differences were identified by our testing which
required reporting to those charged with governance.
These matters were addressed in the context of our
audit of the financial statements as a whole, and
in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial
statements that makes it probable that the economic decisions of a
reasonably knowledgeable person would be changed or influenced. We use
materiality both in planning the scope of our audit work and in
evaluating the results of our work.
Based on our professional judgement, we determined materiality for the
financial statements as a whole as follows:
Materiality GBP1,171,000 (2015: GBP936,000)
Basis for We determined materiality for the Fund, which is approximately
determining 1% (2015: 1%) of the Net Asset Value of the Fund.
materiality
Rationale for The reason for using Net Asset Value is that this
the benchmark is the key performance indicator for investments in
applied the Fund.
We agreed with the Audit Committee that we would report to the Committee
all audit differences in excess of GBP23,000 (2015: GBP18,000), as well
as differences below that threshold that, in our view, warranted
reporting on qualitative grounds. We also report to the Audit Committee
on disclosure matters that we identified when assessing the overall
presentation of the financial statements.
An overview of the scope of our audit
Our audit was scoped by obtaining an understanding
of the entity and its environment, including internal
control, and assessing the risks of material misstatement.
Our audit scope included the assessment of design
and implementation of accounting processes and controls
in place at third party accounting service provider.
Audit work to respond to the risks of material misstatement
was performed directly by the audit engagement team.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies (Jersey) Law 1991 we are required We have nothing to report in respect of these matters.
to report to you if, in our opinion:
-- we have not received all the information and
explanations we require for our audit; or
-- adequate accounting records have not been kept by the
Fund; or
-- the financial statements are not in agreement with
the accounting records.
Corporate Governance Statement
Under the Listing Rules we are also required to review We have nothing to report arising from our review.
part of the Corporate Governance Statement relating
to the Fund's compliance with certain provisions of
the UK Corporate Governance Code.
Our duty to read other information in the Annual Report
Under International Standards on Auditing (UK and We confirm that we have not identified any such inconsistencies
Ireland), we are required to report to you if, in or misleading statements.
our opinion, information in the annual report is:
-- materially inconsistent with the information in the
audited financial statements; or
-- apparently materially incorrect based on, or
materially inconsistent with, our knowledge of the
Fund acquired in the course of performing our audit;
or
-- otherwise misleading.
In particular, we are required to consider whether
we have identified any inconsistencies between our
knowledge acquired during the audit and the directors'
statement that they consider the annual report is
fair, balanced and understandable and whether the
annual report appropriately discloses those matters
that we communicated to the audit committee which
we consider should have been disclosed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors' Responsibilities
Statement, the directors are responsible for the preparation
of the financial statements and for being satisfied
that they give a true and fair view. Our responsibility
is to audit and express an opinion on the financial
statements in accordance with applicable law and International
Standards on Auditing (UK and Ireland). We also comply
with International Standard on Quality Control 1 (UK
and Ireland). Our audit methodology and tools aim
to ensure that our quality control procedures are
effective, understood and applied. Our quality controls
and systems include our dedicated professional standards
review team and independent partner reviews.
This report is made solely to the Fund's members,
as a body, in accordance with Article 113A of the
Companies (Jersey) Law 1991. Our audit work has been
undertaken so that we might state to the Fund's members
those matters we are required to state to them in
an auditor's report and for no other purpose. To the
fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the
Fund and the Fund's members as a body, for our audit
work, for this report, or for the opinions we have
formed.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient
to give reasonable assurance that the financial statements
are free from material misstatement, whether caused
by fraud or error. This includes an assessment of:
whether the accounting policies are appropriate to
the Fund's circumstances and have been consistently
applied and adequately disclosed; the reasonableness
of significant accounting estimates made by the directors;
and the overall presentation of the financial statements.
In addition, we read all the financial and non-financial
information in the annual report to identify material
inconsistencies with the audited financial statements
and to identify any information that is apparently
materially incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course of
performing the audit. If we become aware of any apparent
material misstatements or inconsistencies we consider
the implications for our report.
Helen Gale, B.Sc., FCA
for and on behalf of Deloitte LLP
Chartered Accountants and Recognized Auditor
St. Helier
Jersey, UK
20 April 2017
Statement of Financial Position of the Fund
As at 31 December 2016
Notes 2016 2015
GBP GBP
Current assets
Securities (at fair value through profit or loss) 3 & 19 146,332,071 109,893,936
Accrued bond interest 92,472 57,494
Accrued bank interest 1,421 983
Accrued dividend income 373,488 237,508
Other receivables 6 2 2
Prepayments 34,383 30,549
Cash and cash equivalents 4 10,338,576 7,883,230
157,172,413 118,103,702
Current liabilities
Other payables and accruals 5 (359,108) (290,681)
Interest payable (46,920) (1,951)
Loan payable 14 (30,061,412) (24,363,649)
(30,467,440) (24,656,281)
Net assets 126,704,973 93,447,421
Equity attributable to equity holders
Stated capital 6 50,174,414 51,158,937
Retained earnings 76,530,559 42,288,484
Total Shareholders' equity 126,704,973 93,447,421
Net asset value per redeemable participating preference
share 7 118.49 86.40p
The financial statements and notes on pages 34 to 53 were approved by
the directors on 20 April 2017 and signed on behalf of the Board by:
Director Director
The accompanying notes on pages 38 to 53 form an integral part of these
financial statements.
Statement of Comprehensive Income of the Fund
For the year ended 31 December 2016
2016 2015
Notes Revenue Capital Total Total
GBP GBP GBP GBP
Revenue
Dividend income 8 4,689,372 - 4,689,372 4,058,329
Interest Income 506,682 - 506,682 665,182
Net movement in the fair value of securities (at fair
value through profit or loss) 9 - 40,039,753 40,039,753 (18,101,131)
Net movement on foreign exchange - (3,213,670) (3,213,670) 2,652,953
Total revenue 5,196,054 36,826,083 42,022,137 (10,724,667)
Expenditure
Investment management fees 2 o 297,310 445,965 743,275 727,106
Custodian fees 2 l 14,446 - 14,446 12,052
Sponsor's fees 2 m 212,364 - 212,364 207,745
Directors' fees and expenses 117,051 - 117,051 116,737
Legal and professional fees 4,243 - 4,243 8,546
Audit fees 27,928 - 27,928 26,000
Tax fees 5,800 - 5,800 5,800
Registrar's fees 47,739 - 47,739 39,769
Administration and secretarial fees 2 k 106,182 - 106,182 103,872
General expenses 69,988 - 69,988 57,909
Operating expenses 903,051 445,965 1,349,016 1,305,536
Net operating profit/loss before finance costs 4,293,003 36,380,118 40,673,121 (12,030,203)
Finance costs 2 r (165,256) (247,885) (413,141) (418,609)
Profit/(loss) before tax 4,127,747 36,132,233 40,259,980 (12,448,812)
Withholding tax expense 12 (640,730) - (640,730) (445,103)
Net Profit/(loss) after taxation 3,487,017 36,132,233 39,619,250 (12,893,915)
Profit/(loss) per redeemable participating preference
share - basic and diluted 10 3.25 33.64 36.89 (11.87)
The total column of this statement represents the Fund's statement of
comprehensive income, prepared in accordance with International
Financial Reporting Standards. The profit/(loss) after taxation is the
total comprehensive income. The supplementary revenue and capital
columns are both prepared in accordance with the Statement of
Recommended Practice issued by the Association of Investment Companies.
All items in the above statement derive from continuing operations. No
operations were acquired or discontinued in the year.
There are GBP nil (2015: GBP nil) earnings attributable to the
management shares.
The accompanying notes on pages 38 to 53 form an integral part of these
financial statements.
Statement of Changes in Redeemable Participating Preference
Shareholders' Equity of the Fund
For the year ended 31 December 2016
Stated Capital Retained
Account Income Total
Notes GBP GBP GBP
At 1 January 2015 51,778,312 60,617,886 112,396,198
Loss for the year - (12,893,915) (12,893,915)
Repurchase of shares (619,375) - (619,375)
Dividends 11 - (5,435,487) (5,435,487)
At 31 December 2015 51,158,937 42,288,484 93,447,421
Profit for the year - 39,619,250 39,619,250
Repurchase of shares (984,523) - (984,523)
Dividends 11 - (5,377,175) (5,377,175)
At 31 December 2016 50,174,414 76,530,559 126,704,973
The accompanying notes on pages 38 to 53 form an integral part of these
financial statements.
Statement of Cash Flow of the Fund
For the year ended 31 December 2016
Notes 2016 2015
GBP GBP
Cash flows from/(used in) operating activities
Net profit/(loss) 39,619,250 (12,893,915)
Adjustments for:
Net movement in the fair value of securities (at fair
value through profit or loss) 9 (40,039,753) 18,101,131
Realised loss/(gain) on foreign exchange 3,324,777 (1,896,393)
Unrealised gain on foreign exchange (111,107) (756,559)
Payment for purchases of securities (105,274,256) (63,036,244)
Proceeds from sale of securities 108,875,872 58,032,895
Operating cash flows before movements in working
capital 6,394,783 (2,449,085)
(Increase)/decrease in receivables (175,230) 114,700
Increase/(decrease) in payables and accruals 113,396 (204,828)
Net cash from/(used in) operating activities 6,332,949 (2,539,213)
Cash flows used in financing activities
Repayments of borrowings (120,649,278) (163,118,873)
New bank loans raised 126,347,043 157,204,369
Payments for repurchase of shares (984,523) (619,375)
Dividends paid 11 (5,377,175) (5,435,487)
Net cash used in financing activities (663,933) (11,969,366)
Net increase/(decrease) in cash and cash equivalents 5,669,016 (14,508,579)
Cash and cash equivalents at the beginning of the
year 7,883,230 19,738,857
Effect of foreign exchange rate changes (3,213,670) 2,652,952
Cash and cash equivalents at the end of the year 10,338,576 7,883,230
Cash and cash equivalents made up of:
Cash at bank 4 10,338,576 7,883,230
The accompanying notes on pages 38 to 53 form an integral part of these
financial statements.
Notes to the Financial Statements of the Fund
For the year ended 31 December 2016
1. General Information
The Company is a closed-ended investment company incorporated in Jersey
on 24 May 2006. The Company has one closed-ended cell, Middlefield
Canadian Income - GBP PC, also referred to as the "Fund". The Fund
seeks to provide shareholders with a high level of dividends as well as
capital growth over the longer term. The Fund intends to pay dividends
on a quarterly basis each year. The Fund seeks to achieve its
investment objective by investing predominantly in the securities of
companies and REITs domiciled in Canada and the U.S. that the Investment
Manager believes will provide an attractive level of distributions,
together with the prospect for capital growth. In 2015, shareholders
also approved an amendment to the investment policy to increase the
percentage of the value of portfolio assets which may be invested in
securities listed in recognized stock exchange outside Canada to up to
40 per cent.
The address of the Company's registered office is Elizabeth House, 9
Castle Street, St. Helier, Jersey JE2 3RT, Channel Islands.
The Fund's shares have been admitted to the Official List of the FCA and
to trading on the London Stock Exchange's Main Market for listed
securities.
The Company and Fund have no employees.
The functional and presentational currency of the Company and the Fund
is Sterling ("GBP").
2. Principal Accounting Policies
a. Basis of preparation
The financial statements of the Company and the Fund (the "Financial
Statements") have been prepared on the historical cost basis, except for
the measurement at fair value of investments and derivatives, and in
accordance with the applicable International Financial Reporting
Standards (IFRS) as adopted by the European Union (the "EU") and
interpretations issued by the International Financial Reporting
Interpretation Committee (IFRIC). The preparation of the Financial
Statements in conformity with IFRS requires the directors to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the Financial Statements and the reported amounts of revenues
and expenses during the reporting year. Although these estimates are
based on management's best knowledge of current events and actions,
actual results may ultimately differ from those estimates.
Where presentational guidance set out in the Statement of Recommended
Practice (SORP) 'Financial Statements of Investment Trust Companies and
Venture Capital Trusts', issued by the Association of Investment
Companies is consistent with the requirements of IFRS, the Directors
have prepared the Financial Statements on a basis compliant with the
recommendations of the SORP. The supplementary information which
analyses the statement of comprehensive income between items of a
revenue and a capital nature is presented in accordance with the SORP.
Critical accounting estimates and judgements
The preparation of the Financial Statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process of applying
the accounting policies.
The following are the critical judgements that the directors have made
in the process of applying the accounting policies that have the most
significant effect on the amounts recognised in the financial
statements.
Expenses have been charged to the Statement of Comprehensive Income and
shown in the revenue column. Management fees and finance costs have
been allocated 60% to capital and 40% to revenue. This is in accordance
with the Board's expected long-term split of returns, in the form of
capital gains and income respectively, from the investment portfolio.
Fair value of investments require judgement to apply, however all
investments are quoted. Therefore no judgement is involved.
Notes to the Financial Statements of the Fund (continued)
For the year ended 31 December 2016
2. Principal Accounting Policies (continued)
a. Basis of preparation (continued)
Adoption of new and revised Standards
The following relevant Standards and Interpretations have been issued by
the International Accounting Standards Board (IASB) and are approved by
the EU and therefore have been adopted by the Company and the Fund:
-- Amendments to IAS 1: Presentation of Financial Statements (effective 1
January 2016)
Disclosure Initiative (Amendments to IAS 1) was issued on 18 December
2014. The amendments aim at clarifying IAS 1 to address perceived
impediments to preparers exercising their judgement in presenting their
financial reports. They are effective for annual periods beginning on
or after 1 January 2016, with earlier application being permitted. There
are no material changes to the Financial Statements as a result of the
amendments of IAS 1.
At the date of authorisation of these Financial Statements, the
following Standards and Interpretations which have not been applied in
these Financial Statements were in issue but not yet effective:
-- IFRS 9 Financial Instruments (Effective date for periods beginning on or
after 1 January 2018)
IFRS 9 deals with classification and measurement of financial assets and
its requirements represent a significant change from the existing
requirements in IAS 39 in respect of financial assets: amortised cost
and fair value. Financial assets are measured at amortised cost when the
business model is to hold assets in order to collect contractual cash
flows. All other financial assets are measured at fair value with
changes recognised in profit or loss. For an investment in an equity
instrument that is not held for trading, an entity may on initial
recognition elect to present all fair value changes from the investment
in other comprehensive income. Once adopted, IFRS 9 will be applied
retrospectively, subject to certain transitional provisions. The
standard is not expected to have a significant impact on the Financial
Statements since all of the Company's financial assets are designated at
fair value through profit and loss.
The adoption of some of these Standards and Interpretations may require
additional disclosure in future Financial Statements. None are expected
to affect the financial position of the Company and the Fund in future
periods.
The Statement of Financial Position, Statement of Comprehensive Income,
Statement of Changes in Redeemable Participating Preference
Shareholders' Equity and Cash Flow Statement refer solely to the Fund.
The non-cellular assets comprise two management shares. However, there
has been no trading activity with regards to the non-cellular assets.
b. Financial instruments
Financial instruments carried on the Statement of Financial Position
include securities, trade and other receivables, cash at bank and trade
and other payables. The particular recognition methods adopted are
disclosed in the individual policy statements associated with each item.
Derivatives are initially recognised at fair value at the date the
derivative contracts are entered into and are subsequently remeasured to
their fair value based on stock exchange quoted bid prices quoted at the
Statement of Financial Position date. The resulting gain or loss is
recognised in the Statement of Comprehensive Income as a capital gain or
loss immediately unless the derivative is designated and effective as a
hedging instrument, in which event the timing of the recognition in the
Statement of Comprehensive Income depends on the nature of the hedge
relationship. The Fund had no derivatives outstanding at 31 December
2016 and 2015.
Disclosures about financial instruments to which the Fund is a party are
provided in Note 16.
c. Securities
Investments in listed securities have been classified as fair value
through profit or loss securities and are those securities intended to
be held for a short period of time but which may be sold in response to
needs for liquidity or changes in interest rates. These are held at fair
value through profit or loss, as they are managed and the performance
evaluated on a fair value basis.
Fair value through profit or loss securities are initially recognised at
fair value, which is taken to be the cost. The securities are
subsequently re-measured at fair value based on stock exchange quoted
bid prices quoted at the Statement of Financial Position date. Gains
and losses arising from changes in the fair value of these securities
are recognised in the Statement of Comprehensive Income as they arise.
Notes to the Financial Statements of the Fund (continued)
For the year ended 31 December 2016
2. Principal Accounting Policies (continued)
c. Securities (continued)
All purchases and sales of investments and trading securities that
require delivery within the time frame established by regulation or
market convention ("regular way" purchases and sales) are recognised at
the trade date, which is the date on which the Fund commits to purchase
or sell the asset. In cases which are not within the time frame
established by regulation or market convention, such transactions are
recognised on the settlement date. Any change in fair value of the
asset to be received is recognised between the trade date and the
settlement date.
Transaction costs are included in the costs of the investment.
d. Receivables
Receivables are carried at anticipated realisable value. Anticipated
realisable value is the amount that the Fund expects to receive less
impairment.
e. Prepayments
Prepayments comprise amounts paid in advance including, but not limited
to, payments for insurance, listing fees and AIC membership fees.
Payments are expensed to the Statement of Comprehensive Income over the
period for which the Fund is receiving the benefit of these
expenditures.
f. Cash and cash equivalents
Cash includes amounts held in interest bearing accounts. Cash and cash
equivalents comprise bank balances and cash held by the Fund. The
carrying value of these assets approximates their fair value.
g. Provisions
A provision is recognised when the Fund has a legal or constructive
obligation as a result of a past event and it is probable that an
outflow of economic benefits will be required to settle the obligations.
h. Share capital
Redeemable participating preference shares are only redeemable at the
sole option of the directors, participate in the net income of the Fund
during its life and are classified as equity in line with IAS 32 (see
Note 6).
i. Net asset value per redeemable participating preference share
The net asset value per redeemable participating preference share is
calculated by dividing the net assets attributable to redeemable
participating preference shareholders included in the Statement of
Financial Position by the number of redeemable participating preference
shares in issue at the year end.
j. Issue costs
The expenditure directly attributable to the launch of the Fund's shares
and all other costs incurred on the launch and subsequent issues of the
Fund's shares are written-off immediately against proceeds raised.
k. Administration and secretarial fees
Under the provisions of the Administration Agreement dated 18 August
2011 between the Fund and JTC Fund Solutions (Jersey) Limited
("JTCFSJL") as Administrator, the Administrator is entitled to a fee for
administrative and secretarial services payable by the Fund quarterly in
arrears at a rate of 0.10 per cent. per annum of the average net asset
value ("NAV") of the Fund calculated over the relevant quarterly period.
With effect from 1 December, 2016 JTCFSJL has ceded its fees to JTC Fund
Solutions (Guernsey) Limited as assistant secretary.
l. Custodian fees
RBC Investor Services Trust (the "Custodian") was appointed as Custodian
of the Fund's assets on 6 October 2011. The Fund pays the Custodian 0.01
per cent. per annum of the Fund's NAV, accrued for at each valuation
date.
m. Sponsor's fees
Canaccord Genuity Limited, the corporate broker, is entitled to ongoing
sponsor's fees payable by the Fund quarterly in arrears at a rate of
0.20 per cent. per annum of the average NAV of the Fund calculated over
the relevant quarterly period.
n. Going concern
In the opinion of the directors, the Company and the Fund have adequate
resources to continue in operational existence for the foreseeable
future. For this reason, the Financial Statements have been prepared
using the going concern basis.
Notes to the Financial Statements of the Fund (continued)
For the year ended 31 December 2016
2. Principal Accounting Policies (continued)
n. Going concern (continued)
The directors considered, inter alia, the following factors:
-- the Fund has sufficient liquidity to meet all on-going expenses and
repayment of external borrowings; and
-- the portfolio of investments held by the Fund materially consists of
listed investments which are readily realisable and therefore the Fund
will have sufficient resources to meet its liquidity requirements.
o. Investment management fees
Middlefield Limited, the Investment Manager, is entitled to a management
fee payable by the Fund quarterly in arrears at a rate of 0.70 per cent.
per annum of the average NAV of the Fund calculated over the relevant
quarterly period. Prior to 28 June 2013, the management fee was at a
rate of 0.867 per cent. per annum of the average NAV of the Fund
calculated over
the relevant quarterly period and prior to 9 July 2014, the investment
manager was Middlefield Capital Corporation.
Investment management fees for the year ended 31 December 2016 total
GBP743,275 (31 December 2015: GBP727,106). The fee is split between ML
and MIL at a ratio of 0.60: 0.10.
Management fees have been split 60% to capital and 40% to revenue.
p. Foreign currency translation
Monetary assets and liabilities denominated in foreign currencies are
translated into Sterling at exchange rates in effect at the date of the
Financial Statements. Realised and unrealised gains and losses on
foreign currency transactions are charged or credited to the Statement
of Comprehensive Income as foreign currency gains and losses. The cost
of investments, and income and expenditure are translated into Sterling
based on exchange rates on the date of the transaction. Realised loss on
foreign exchange currency transactions totalled GBP3,520,578 for the
year (2015: gain of GBP1,929,284). Realised gain on forward exchange
contracts totalled GBP195,801 (2015: loss of GBP32,891). Unrealised
gains on foreign currency transactions totalled GBP111,108 (2015: gain
of GBP756,559).
q. Revenue recognition
Interest income arises from cash and cash equivalents and quoted Bonds
and is recognised in the Statement of Comprehensive Income using the
effective interest method. Dividend income arises from equity
investments held and is recognised on the date investments are marked
'ex-dividend'. Where the Company elects to receive dividends in the form
of additional shares rather than cash, the equivalent to the cash
dividend is recognised as income in revenue and any excess in value of
the shares received over this is recognised in capital. Dividend income
is shown gross of withholding tax.
Special dividends are reviewed on a case by case basis in determining
whether the dividend is to be treated as revenue or capital. Amounts
recognised as revenue will form part of the distributable revenue.
Amounts recognised as capital are included in realised gains. The tax
accounting treatment follows the treatment of the principal amount.
r. Loan payable and finance costs
Loan payable is initially measured at fair value and is subsequently
measured at amortised cost using the effective interest rate method. The
effective interest rate method is a method of calculating the amortised
cost of a financial liability and of allocating interest expense over
the relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash payments through the expected
life of the financial liability or, where appropriate, a shorter period,
to the net carrying amount on initial recognition.
s. Related parties
Related parties are individuals and companies where the individuals or
companies have the ability, directly or indirectly, to control the other
party or exercise significant influence over the other party in making
financial and operating decisions.
t. Business and geographical segments
The directors are of the opinion that the Fund is engaged in a single
segment of business investing predominantly in securities and REITs
domiciled in Canada as well as U.S. to which the Fund is solely exposed
and therefore no segmental reporting is provided.
Notes to the Financial Statements of the Fund (continued)
For the year ended 31 December 2016
1. Securities (at fair value through profit or loss)
2016 2015
GBP GBP
Quoted/listed Equities 138,878,770 102,969,575
Quoted/listed Bonds 7,453,301 6,924,361
146,332,071 109,893,936
Please refer to Note 19 for the Schedule of
Investments.
1. Cash and cash equivalents
2016 2015
GBP GBP
Cash at bank 10,338,576 7,883,230
Cash and cash equivalents comprise cash held by the Fund and bank
balances with an original maturity of three months or less. The carrying
value of these assets approximates their fair value.
1. Other payables and accruals
2016 2015
GBP GBP
Investment management fees 212,389 167,034
Sponsor's fees 60,683 47,724
Audit fees 26,926 26,000
Administration fees 30,341 23,862
General expenses 15,867 17,535
Registrar's fees 9,901 6,695
Custodian fees 3,001 1,831
359,108 290,681
6. Stated capital account
The authorised share capital of the Fund is split into two management
shares of no par value and an unlimited number of redeemable
participating preference shares of no par value, the latter of which are
attributable solely to the Fund.
No. of
shares GBP
Management shares issued
At 24 May 2006 - -
2 management shares of no par value issued at 100.00
pence each 2 2
At 31 December 2016 and 2015 2 2
Redeemable participating preference shares issued
At 31 December 2015 108,162,250 51,158,935
19 February 2016 100,000 shares of no par value repurchased
at 71.25 pence each (100,000) (71,250)
1 March 2016 100,000 shares of no par value repurchased
at 73.00 pence each (100,000) (73,000)
8 March 2016 100,000 shares of no par value repurchased
at 74.50 pence each (100,000) (74,500)
28 April 2016 250,000 shares of no par value repurchased
at 80.00 pence each (250,000) (200,000)
13 May 2016 100,000 shares of no par value repurchased
at 80.25 pence each (100,000) (80,250)
20 May 2016 100,0000 shares of no par value repurchased
at 78.75 pence each (100,000) (78,750)
26 May 2016 100,000 shares of no par value repurchased
at 78.50 pence each (100,000) (78,500)
1 June 2016 100,000 shares of no par value repurchased
at 78.25 pence each (100,000) (78,250)
10 June 2016 100,000 shares of no par value repurchased
at 81.46 pence each (100,000) (81,460)
Notes to the Financial Statements of the Fund (continued)
For the year ended 31 December 2016
6. Stated capital account (continued)
1 September 2016 75,000 shares of no par value repurchased
at 92.75 pence each (75,000) (69,563) (81,460)
29 November 2016 100,000 shares of no par value repurchased
at 99.00 pence each (100,000) (99,000)
At 31 December 2016 106,937,250 50,174,412
Total 50,174,414
The holders of redeemable participating preference shares are entitled
to receive in proportion to their holdings, all of the revenue profits
of the Fund (including accumulated revenue reserves).
Each redeemable participating preference shareholder is entitled to one
vote for each share held, provided all amounts payable in respect of
that share have been paid.
Management shares are non-redeemable, have no right in respect of the
accrued entitlement, and have no right to participate in the assets of
the Fund on a winding-up. In all other respects, the management shares
have the same rights and restrictions as redeemable participating
preference shares. Each management share entitles the holder to one
vote for each share held.
Redeemable participating preference shares are redeemed at the absolute
discretion of the directors. Since redemption is at the discretion of
the directors, in accordance with the provisions of IAS 32, the
redeemable participating preference shares are classified as equity.
The Fund will not give effect to redemption requests in respect of more
than 25 per cent. of the shares then in issue, or such lesser percentage
as the directors may decide.
At the year end, there were 17,745,000 (31 December 2015: 16,520,000)
treasury shares in issue. Treasury shares have no value and no voting
rights.
FCA regulation of 'non-mainstream pooled investments'
On 1 January 2014, the UK's Financial Conduct Authority (the "FCA")
introduced rules relating to the restrictions on the retail distribution
of unregulated collective investment schemes and close substitutes
(non-mainstream pooled investments). UK investment trusts are excluded
from these restrictions, as are other "excluded securities" as defined
by the FCA.
As reported in last year's annual report, the Board believes that the
Company's shares are "excluded securities" under the FCA's definitions
of such and, as a result, the FCA's restrictions on retail distribution
do not apply. This status is reviewed regularly and the Board intends
to conduct the Company's affairs to retain such status for the
foreseeable future.
7. Net asset value per redeemable participating preference share
The NAV per share of 118.49p (31 December 2015: 86.40p) is based on the
net assets at the year end of GBP126,704,973 (31 December 2015:
GBP93,447,421) and on 106,937,250 redeemable participating preference
shares, being the number of redeemable participating preference share in
issue at the year end (31 December 2015: 108,162,250 shares).
8. Dividend and interest income
2016 2015
Revenue Capital
GBP GBP TotalGBP GBP
Bond and debenture interest 436,079 - 436,079 599,852
Bank and loan interest 70,603 - 70,603 65,330
Dividend income 4,689,372 - 4,689,372 4,058,329
5,196,054 - 5,196,054 4,723,511
Notes to the Financial Statements of the Fund (continued)
For the year ended 31 December 2016
9. Net movement in the fair value of securities
2016 2015
Revenue Capital
GBP GBP TotalGBP GBP
Gains/(losses) on sale of securities - 9,912,290 9,912,290 (8,534,602)
Gains/(losses) on the revaluation of securities at
year end - 30,127,463 30,127,463 (9,566,529)
Net movement in the fair value of securities (at fair
value through profit or loss) - 40,039,753 40,039,753 (18,101,131)
10. Profit per redeemable participating preference share - basic and
diluted
Basic profit per redeemable participating preference share is calculated
by dividing the net gains attributable to redeemable participating
preference shares of GBP39,619,250 (31 December 2015: Loss
GBP12,893,915) by the weighted average number of redeemable
participating preference shares outstanding during the year of
107,410,269 shares (31 December 2015: 108,662,798 shares).
11. Dividends
Dividends of 1.25 pence per share and totalling GBP5,377,175 (31
December 2015: GBP5,435,487) were paid on a quarterly basis during the
year in the months of January, April, July and October. On 31 January
2017 a dividend of GBP1,335,466 was paid. In accordance with the
requirements of IFRS, as this was approved on 5 January 2017, being
after the Statement of Financial Position date, no accrual was reflected
in the 2016 Financial Statements for this amount of GBP1,335,466 (31
December 2015: GBP1,352,028).
12. Taxation
The Fund is subject to UK Corporation tax at a rate of 20% (2015:
20.25%). The Company adopted UK tax residency on 11 October 2011. Since
that date the Company has been managed in such a way as to be able to
meet the conditions for approval as an investment trust under Section
1158 of the Corporation Tax Act 2010. As an investment trust, all
capital gains are exempt from UK Corporation tax. On 7 December 2012,
the Company received approval from HM Revenue & Customs to be treated as
an investment trust in accordance with Section 1158 of the Corporation
Tax Act 2010 and will seek to remain so approved.
The Fund suffered GBP640,730 (2015: GBP445,103) of withholding tax on
foreign dividends during the year and this expense has been included in
the Statement of Comprehensive Income.
13. Related party transactions
The directors are regarded as related parties. Total directors' fees
paid during the year amounted to GBP85,000 of which zero was due at year
end (2015: GBP85,000 of which GBPNil was due at the year end). Each
non-executive director, other than Mr. Orrico, was paid a fee of
GBP20,000 in respect of the financial year and the Chairman was paid a
fee of GBP25,000 (2015: GBP25,000). Mr Orrico waived his fee in 2016.
The Investment Manager is also regarded as a related party due to common
ownership. Total management fees paid during the year amounted to
GBP743,275 (2015: GBP727,106).
The fees for the above are all arm's length transactions.
14. Loan payable
The Fund has a Credit Facility Agreement with Royal Bank of Canada
("RBC") whereby RBC provides an on Demand Credit Facility (the "Credit
Facility"), with a maximum principal amount of the lesser of CAD
65,000,000 and 25 per cent. of the total asset value of the Fund.
At 31 December 2016, the Bankers' Acceptance drawn under the Credit
Facility totals CAD 50,000,000 (GBP equivalent at amortised cost of
GBP30,061,412) (31 December 2015: CAD 50,000,000 (GBP equivalent at
amortised cost of GBP24,363,649)). The loan was renewed on 22 November
2016 with a maturity date of 21 February 2017.
Notes to the Financial Statements of the Fund (continued)
For the year ended 31 December 2016
14. Loan payable (continued)
As at 31 December 2016, pre-paid interest and stamping fees of GBP63,822
(31 December 2015: GBP55,653) were paid on the Bankers' Acceptance and
these costs are being amortised over 91 days (31 December 2015: 59
days). Interest paid on the Bankers' Acceptance totalled GBP263,417 (31
December 2015: GBP246,118).
Interest is calculated at an annual percentage equal to, in the case of
Prime Loans, the Prime Rate minus 0.35 per cent. In the case of a
Bankers' Acceptance, a stamping fee of 0.60 per cent. per annum is
payable.
15. Security Agreement
In connection with entry into the Credit Facility, the Fund has entered
into a General Security Agreement with RBC, pursuant to which the Fund
has granted RBC interests in respect of collateral, being all present
and future personal property, including the securities portfolio, as
security for the Fund's obligations under the Credit Facility.
16. Financial instruments
Fair values
The carrying amounts of the investments, accrued income, other
receivables, cash and cash equivalents and other payables approximate
their fair values. In 2015, the percentage of the value of portfolio
assets which may be invested in securities listed on a recognized stock
exchange outside Canada was increased to up to 40 percent.
Management of Capital
The investment Manager manages the capital of the Fund in accordance
with the Fund's investment objectives and policies.
The capital structure of the Fund consists of proceeds from the issue of
preference shares, loans and reserve accounts. The Investment Manager
manages and adjusts its capital in response to general economic
conditions, the risk characteristics of the underlying assets and
working capital requirements. Generally speaking, the Fund will reduce
leverage when investments are likely to decrease in value and will
increase leverage when investment appreciation is anticipated. In order
to maintain or adjust its capital structure, the Fund may borrow or
repay debt under its Credit Facility or undertake other activities
deemed appropriate under the specific circumstances. The Fund and the
Company do not have any externally imposed capital requirements.
However, the Fund is subject to bank covenants in respect of leverage
and complied with those covenants for the whole of both 2016 and 2015.
Investment and trading activities
It is intended that the Fund will continue throughout its life to be
primarily invested in Canadian and U.S. equities portfolio.
The Fund's investing activities expose it to various types of risk that
are associated with the financial instruments and markets in which it
invests. The most important types of financial risk to which the Fund is
exposed are market price risk, interest rate risk and currency risk.
Credit risk
Credit risk is the risk that an issuer or counterparty may be unable or
unwilling to meet a commitment that it has entered into with the Fund.
The Fund's principal financial assets are bank balances and cash, other
receivables and investments as set out in the Statement of Financial
Position which represents the Fund's maximum exposure to credit risk in
relation to the financial assets. The credit risk on bank balances is
limited because the counterparties are banks with high credit ratings of
AA- and A+ assigned by Standard and Poor's rating agency. All
transactions in listed securities are settled upon delivery using
approved brokers. The risk of default is considered minimal as delivery
of securities sold is only made once the broker has received payment.
Payment is made on a purchase once the securities have been received by
the broker. The trade will fail if either party fails to meet its
obligations. Where the Investment Manager makes an investment in debt
or corporate securities, the credit rating of the issuer is taken into
account to manage the Company's exposure to risk of default.
Investments in debt or corporate securities are across a variety of
sectors and geographical markets, to avoid concentration of credit risk.
The Fund's maximum exposure to credit risk is the carry value of the
assets on the Statement of Financial Position.
Notes to the Financial Statements of the Fund (continued)
For the year ended 31 December 2016
16. Financial instruments (continued)
Market price risk
Market price risk is the risk that the fair value or future cash flows
of a financial instrument will fluctuate because of changes in market
prices (other than those arising from interest rate risk or currency
risk), whether those changes are caused by factors specific to the
individual financial instrument or its issuer, or factors affecting
similar financial instruments traded in the market. The Fund's exposure
to market price risk is comprised mainly of movements in the value of
the Fund's investments.
It is the business of the Investment Manager to manage the portfolio and
borrowings to achieve the best returns. The Directors manage the risk
inherent in the portfolio by monitoring, on a formal basis, the
Investment Manager's compliance with the Company's stated investment
policy and reviewing investment performance.
Country risk
On 17 January 2012, the Financial Reporting Council (the "FRC") released
"Responding to the increased country and currency risk in financial
reports". This update from the FRC included guidance on responding to
the increased country and currency risk as a result of funding pressures
on certain European countries, the curtailment of capital spending
programmes (austerity measures) and regime changes in the Middle East.
The Fund invests primarily in Canadian and U.S. securities. The
Investment Manager monitors the Company's exposure to foreign currencies
on a daily basis. The Board has reviewed the disclosures and believes
that no additional disclosures are required because the Canadian and
U.S. economies are stable.
Fair value measurements
IFRS 13 establishes a fair value hierarchy that prioritises the inputs
to valuation techniques used to measure fair value. The hierarchy gives
the highest priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1 measurements) and the lowest
priority to unobservable inputs (Level 3 measurements). The three levels
of the fair value hierarchy under IFRS 13 are as follows:
-- Level 1 fair value measurements are those derived from quoted prices
(unadjusted) in active markets for identical assets or liabilities; or
-- Level 2 fair value measurements are those derived from inputs other than
quoted prices included within Level 1 that are observable for the asset
or liability, either directly (that is, as prices) or indirectly (that is,
derived from prices); or
-- Level 3 fair value measurements are those derived from valuation
techniques that include inputs for the asset or liability that are not
based on observable market data (that is, unobservable inputs).
The level in the fair value hierarchy within which the fair value
measurement is categorised in its entirety is determined on the basis of
the lowest level input that is significant to the fair value measurement
in its entirety. For this purpose, the significance of an input is
assessed against the fair value measurement in its entirety. If a fair
value measurement uses observable inputs that require significant
adjustment based on unobservable inputs, that measurement is a level 3
measurement. Assessing the significance of a particular input to the
fair value measurement in its entirety requires judgment, considering
factors specific to the asset or liability.
The determination of what constitutes 'observable' requires significant
judgment by the Fund. The Fund considers observable data to be that
market data that is readily available, regularly distributed or updated,
reliable and verifiable, not proprietary, and provided by independent
sources that are actively involved in the relevant market.
Notes to the Financial Statements of the Fund (continued)
For the year ended 31 December 2016
16. Financial instruments (continued)
Fair value measurements (continued)
The following tables present the Fund's financial assets and liabilities
by level within the valuation hierarchy as of 31 December 2016 and 2015:
Level Level
Level 1 2 3 Total
31 December 2016 GBP GBP GBP GBP
Financial assets
Securities
(at fair value through profit or loss) 146,332,071 - - 146,332,071
Level Level
31 December 2015 Level 1 2 3 Total
GBP GBP GBP GBP
Financial assets
Securities
(at fair value through profit or loss) 109,893,936 - - 109,893,936
The Fund holds securities that are traded in active markets. Such
financial instruments are classified as Level 1 of the IFRS 13 fair
value hierarchy. There were no transfers between Level 1 and 2 in the
year.
Price sensitivity
At 31 December 2016, if the market prices of the securities had been 30%
higher with all other variables held constant, the increase in net
assets attributable to holders of redeemable participating preference
shares for the year would have been GBP43,899,621 (2015: GBP32,968,180)
higher, arising due to the increase in the fair value of financial
assets at fair value through profit or loss by GBP43,899,621 (2015:
GBP32,968,180).
At 31 December 2016, if the market prices of the securities had been 30%
lower with all other variables held constant, the decrease in net assets
attributable to holders of redeemable shares for the year would have
been equal, but opposite, to the figures stated above.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows
of a financial instrument will fluctuate because of changes in market
interest rates.
The Fund's interest rate sensitive assets and liabilities mainly
comprise cash and cash equivalents, debt securities and loan payable.
The cash and cash equivalents are subject to floating rates and are
considered to be part of the investment strategy of the Fund. No other
hedging is undertaken in respect of this interest rate risk.
The following table details the Fund's exposure to interest rate risk at
31 December:
Floating rate assets
2016 2015
GBP GBP
Assets
Debt securities 7,453,301 6,924,361
Cash and cash equivalents 10,338,576 7,883,230
17,791,877 14,807,591
Liabilities
Loan payable 30,061,412 24,363,649
30,061,412 24,363,649
The above analysis excludes short term debtors and creditors as all
material amounts are non interest-bearing.
Notes to the Financial Statements of the Fund (continued)
For the year ended 31 December 2016
16. Financial instruments (continued)
Interest rate sensitivity analysis
At 31 December 2016, had interest rates been 50 basis points higher and
all other variables were held constant, the Company's net assets
attributable to redeemable shares for the year would have decreased by
GBP245,372 (31 December 2015: 190,340) due to the decrease in market
value of listed debt securities, an increase in interest payable on the
loan and to a lesser extent an increase in interest earnings on cash and
cash equivalents.
Liquidity risk
Liquidity risk is the risk that the Fund cannot meet its liabilities as
they fall due. The Fund's primary source of liquidity consists of cash
and cash equivalents, securities at fair value through profit or loss
and the Credit Facility.
The Fund's investments are considered to be readily realisable,
predominantly issued by Canadian and U.S. companies and REITs listed on
a Canadian Stock Exchange and are actively traded.
As at 31 December 2016, the Fund's ability to manage liquidity risk was
as follows:
3 months
Less than 1 to 1 More than
month 1-3 months year 1 year Total
GBP GBP GBP GBP GBP
Assets
Securities (at
fair value
through profit
or loss) 146,332,071 - - - 146,332,071
Accrued bond
interest 92,472 - - - 92,472
Accrued dividend
income 373,488 - - - 373,488
Accrued bank
interest 1,421 - - - 1,421
Other
receivables 2 - - - 2
Prepayments 34,383 - - - 34,383
Cash and cash
equivalents 10,338,576 - - - 10,338,576
157,172,413 - - - 157,172,413
Liabilities
Other payables and accruals (359,108) - -- (359,108)
Interest payable (46,920) - -- (46,920)
Loan payable - (30,061,412) --(30,061,412)
(406,028) (30,061,412) --(30,467,440)
156,766,385 (30,061,412) -- 126,704,973
Notes to the Financial Statements of the Fund (continued)
For the year ended 31 December 2016
16. Financial instruments (continued)
Liquidity risk (continued)
As at 31 December 2015, the Fund's ability to manage liquidity risk was
as follows:
3
months More
Less than 1 to 1 than 1
month 1-3 months year year Total
GBP GBP GBP GBP GBP
Assets
Securities (at
fair value
through profit
or loss) 109,893,936 - - - 109,893,936
Accrued bond
interest 57,494 - - - 57,494
Accrued dividend
income 237,508 - - - 237,508
Accrued bank
interest 983 - - - 983
Other
receivables 2 - - - 2
Prepayments 30,549 - - - 30,549
Cash and cash
equivalents 7,883,230 - - - 7,883,230
118,103,702 - - - 118,103,702
Liabilities
Other payables
and accruals (290,681) - - - (290,681)
Interest payable (1,951) - - - (1,951)
Loan payable - (24,363,649) - - (24,363,649)
(292,632) (24,363,649) - - (24,656,281)
117,811,070 (24,363,649) - - 93,447,421
Currency risk
The Fund is denominated in GBP, whereas the Fund's principal investments
are denominated in CAD and USD. Consequently, the Fund is exposed to
currency risk. The Fund's policy is therefore to actively monitor
exposure to currency risk. The Board reserves the right to employ
currency hedging but, other than in exceptional circumstances, does not
intend to hedge. The Board considers that exposure was significant at
the year end.
The Fund's net exposure to CAD currency at the year end was as follows:
2016 2015
GBP GBP
Assets
Cash and cash equivalents 1,557,425 1,332,963
Canadian equities 106,270,008 60,605,094
Canadian debt 7,453,301 6,924,361
Accrued income 467,381 251,072
115,748,115 69,113,490
2016 2015
GBP GBP
Liabilities
Loan payable 30,061,412 24,363,649
Interest payable 46,920 1,951
30,108,332 24,365,600
Notes to the Financial Statements of the Fund (continued)
For the year ended 31 December 2016
16. Financial instruments (continued)
Currency risk (continued)
The Fund's net exposure to USD currency at the year end was as follows:
2016 2015
GBP GBP
Assets
Cash and cash equivalents 8,438,759 4,315,117
United States equities 32,608,762 35,455,081
Accrued income - 44,911
41,047,521 39,815,109
Sensitivity analysis
At 31 December 2016, had GBP strengthened against the CAD by 5%, with
all other variables held constant, the decrease in net assets
attributable to shareholders would amount to approximately GBP4,281,989
(31 December 2015: GBP2,237,394). Had GBP weakened against the CAD by
5%, this would amount to an increase in net assets attributable to
shareholders of approximately GBP4,281,989 (31 December 2015:
GBP2,237,394).
At 31 December 2016, had GBP strengthened against the USD by 5%, with
all other variables held constant, the decrease in net assets
attributable to shareholders would amount to approximately GBP2,052,376
(31 December 2015: GBP1,990,755). Had GBP weakened against the USD by 5%,
this would amount to an increase in net assets attributable to
shareholders of approximately GBP2,052,376 (31 December 2015:
GBP1,990,755).
17. Post year end events
On 5 January 2017, the Company declared a quarterly dividend of 1.25
pence per share. The ex-dividend date was 12 January 2017 and the record
date was 13 January 2017. On 31 January 2017, the dividend of
GBP1,335,466 was paid.
On 6 January 2017, the Company purchased 50,000 redeemable participating
preference shares at a price of 105.50 pence a share. The shares will be
held in treasury.
On 11 January 2017, the Company purchased 50,000 redeemable
participating preference shares at a price of 107.00 pence a share. The
shares will be held in treasury.
On 17 January 2017, the Company purchased 50,000 redeemable
participating preference shares at a price of 106.00 pence a share. The
shares will be held in treasury.
On 19 January 2017, the Company purchased 100,000 redeemable
participating preference shares at a price of 104.75 pence a share. The
shares will be held in treasury.
On 20 January 2017, the Company purchased 100,000 redeemable
participating preference shares at a price of 103.50 pence a share. The
shares will be held in treasury.
On 7 February 2017, the Company purchased 100,000 redeemable
participating preference shares at a price of 102.50 pence a share. The
shares will be held in treasury.
The RBC Loan of CAD 50,000,000 was renewed on 22 November 2016 with a
maturity date of 21 February in early 2017 as described in note 14.
This loan was subsequently renewed on 21 February 2017 with a maturity
date of 23 May 2017.
A additional RBC Loan of CAD 5,000,000 was issued on 10 February 2017
with a maturity date of 13 March 2017. This loan was subsequently
renewed on 13 March 2017 and later on 13 April 2017 with a maturity date
of 15 May 2017. Another RBC Loan of CAD 5,000,000 was issued on 29 March
2017 with a maturity date of 28 April 2017.
18. Controlling party
There is no ultimate controlling party.
Notes to the Financial Statements of the Fund (continued)
For the year ended 31 December 2016
19. Schedule of Investments - Securities (at fair value through
profit or loss)
As at 31 December 2016
% of
Shares or Bid-Market Net % of
Description Par Value Book Cost Value Assets Portfolio
GBP GBP
Equities
Bermuda - Quoted Investments 4.93% (2015: 5.80%)
Power and Utilities:
Brookfield Infrastructure Partners LP 120,000 1,743,330 3,244,285 2.56% 2.22%
Real Estate:
Brookfield Property Partners LP 225,000 2,564,219 3,971,624 3.14% 2.71%
Canada - Quoted Investments 67.71% (2015: 49.33%)
Consumer Discretionary:
EnerCare Inc. 350,000 1,663,856 3,763,878 2.97% 2.57%
Energy:
ARC Resources Ltd 130,000 1,425,025 1,812,237 1.43% 1.24%
Birchcliff Energy - Preferred Shares 40,000 636,779 607,096 0.48% 0.41%
Birchcliff Energy Ltd 85,000 1,300,141 1,295,210 1.02% 0.89%
Canadian Natural Resources Limited 90,000 2,063,471 2,323,502 1.83% 1.59%
Crescent Point Energy Corp. 250,000 2,618,106 2,753,358 2.17% 1.88%
Freehold Royalties Ltd. 260,000 1,786,134 2,209,204 1.74% 1.51%
Peyto Exploration & Development Corp. 175,000 3,163,445 3,498,801 2.76% 2.39%
Suncor Energy Inc. 110,000 2,091,379 2,914,184 2.30% 1.99%
Torc Oil & Gas Ltd. 350,000 1,313,227 1,744,648 1.38% 1.19%
Vermilion Energy Inc. 160,000 4,008,864 5,451,557 4.30% 3.73%
Financials:
Canadian Imperial Bank of Commerce 40,000 2,691,045 2,644,672 2.09% 1.81%
National Bank of Canada 150,000 4,168,974 4,930,698 3.89% 3.37%
Royal Bank of Canada 35,000 1,172,417 1,919,324 1.52% 1.31%
Industrials:
Cargojet Inc. 120,000 1,650,330 3,309,460 2.61% 2.26%
Morneau Shepell Inc. 150,000 1,791,708 1,727,147 1.36% 1.18%
Parkland Fuel Corporation 200,000 2,261,642 3,389,119 2.68% 2.32%
Materials:
Chemtrade Logistics Income Fund 150,000 1,401,074 1,712,664 1.35% 1.17%
Notes to the Financial Statements of the Fund (continued)For
the year ended 31 December 2016 19. Schedule of Investments
- Securities (at fair value through profit or loss)
As at 31 December 2016
Shares or % of
Par Bid-Market Net % of
Description Value Book Cost Value Assets Portfolio
Pipelines:
AltaGas Ltd. 200,000 4,191,478 4,091,565 3.23% 2.80%
Gibson Energy Inc. 375,000 3,489,924 4,281,660 3.38% 2.93%
Pembina Pipeline Corporation 160,000 3,199,688 4,044,735 3.19% 2.76%
Transcanada Corporation 75,000 2,584,356 2,738,723 2.16% 1.87%
Veresen Inc. 350,000 2,066,369 2,764,824 2.18% 1.89%
Power and Utilities:
Capital Power Corporation 200,000 2,868,375 2,795,299 2.21% 1.91%
Northland Power Inc. 255,000 2,554,483 3,577,856 2.82% 2.45%
Real Estate:American Hotel Income Properties REIT
LP 400,000 2,433,235 2,524,942 1.99% 1.73%
Chartwell Retirement Residences 450,000 2,876,233 3,959,404 3.13% 2.71%
Crombie Real Estate Investment Trust 350,000 2,742,883 2,857,759 2.26% 1.95%
CT Real Estate Investment Trust 200,000 1,557,288 1,798,357 1.42% 1.23%
Extendicare Inc. 465,000 2,388,054 2,772,488 2.19% 1.89%
First Capital Realty Inc. 150,000 1,866,146 1,865,645 1.47% 1.27%
H&R Real Estate Investment Trust 350,000 4,280,865 4,722,800 3.73% 3.23%
Pure Industrial Real Estate Trust 950,000 2,528,057 3,199,024 2.53% 2.19%
RioCan Real Estate Investment Trust 190,000 3,031,341 3,052,259 2.41% 2.09%
Netherlands - Quoted Investments 1.19% (2015: 2.41%)
Materials:
Lyondellbasell Industries N.V. Class A 25,000 977,927 1,735,525 1.37% 1.19%
United States - Quoted Investments 21.09% (2015: 29.86%)
Financials:
Bank of America Corporation 150,000 2,226,785 2,687,655 2.12% 1.84%
Capital One Financial Corporation 40,000 1,528,537 2,824,102 2.23% 1.93%
Discover Financial Services, Inc. 50,000 1,426,454 2,917,089 2.30% 1.99%
JP Morgan Chase & Co. 80,000 2,459,642 5,589,287 4.41% 3.82%
Healthcare:
Bristol-Myers Squibb Company 45,000 2,161,098 2,128,273 1.68% 1.45%
Johnson & Johnson 35,000 2,203,400 3,264,194 2.58% 2.23%
Pfizer Inc. 70,000 1,875,683 1,840,571 1.45% 1.26%
Materials:
CF Industries Holdings, Inc. 200,000 3,663,014 5,095,296 4.02% 3.48%
Notes to the Financial Statements of the Fund (continued)For
the year ended 31 December 2016
19. Schedule of Investments - Securities (at fair
value through profit or loss)
As at 31 December 2016
Shares or % of
Par Bid-Market Net % of
Description Value Book Cost Value Assets Portfolio
Technology:
Microsoft Corporation 90,000 2,556,329 4,526,770 3.57% 3.09%
Total equities: 107,252,810 138,878,770 109.61% 94.92%
Debt:
Canada - Quoted Investments 5.08% (2015: 6.32%)
Chemtrade Logistics Income Fund 5.75% due 31 December
2018 2,000,000 1,163,631 1,267,299 1.00% 0.86%
Great Canadian Gaming Corp 6.625% due 25 July 2022 2,000,000 1,272,795 1,262,773 1.00% 0.86%
Kelt Exploration Ltd. 5% 31 May 2021 2,000,000 1,072,226 1,701,801 1.34% 1.16%
Quebecor Inc 6.625% due 15 January 2023 3,500,000 2,355,635 2,225,693 1.76% 1.52%
Tricon Capital Group 5.6% due 31 March 2020 1,500,000 961,477 995,735 0.78% 0.68%
Total debt: 6,825,764 7,453,301 5.88% 5.08%
Total investments (2016) 114,078,574 146,332,071 115.49% 100.00%
Total investments (2015) 107,767,902 109,893,936 117.56% 100.00%
ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE (UNAUDITED)
In accordance with the Alternative Investment Fund Managers Directive
(the 'AIFMD'), Middlefield Limited in its capacity as Alternative
Investment Fund Manager ('AIFM') is required to disclose specific
information in relation to the following aspects of the Company's
management:
Leverage and borrowing
Leverage is defined as any method by which the Company increases its
exposure through borrowing or the use of derivatives. 'Exposure' is
defined in two ways - 'gross method' and 'commitment method' - and the
Company must not exceed maximum exposures under both methods. 'Gross
method' exposure is calculated as the sum of all positions of the
Company (both positive and negative), that is, all eligible assets,
liabilities and derivatives, including derivatives held for risk
reduction purposes. 'Commitment method' exposure is also calculated as
the sum of all positions of the Company (both positive and negative),
but after netting off derivative and security positions as specified by
the Directive.
For the Gross method, the following has been excluded:
-- the value of any cash and cash equivalents which are highly liquid
investments held in the base currency of the AIF that are readily
convertible to a known amount of cash, subject to an insignificant risk
of changes in value;
-- cash borrowings that remain in cash or cash equivalent as defined
above and where the amounts of that payable are known. The total amount
of leverage calculated as at 31 December 2016 is as follows:
Gross method: 139% (31 December 2015: 144%)
Commitment method: 139% (31 December 2015: 144%)
Liquidity
The Investment Manager's policy is that the Company should normally be
close to fully invested (i.e. with liquidity of 5% or less) but this is
subject to the need to retain liquidity for the purpose of effecting the
cancellation of Units, and the efficient management of the Company in
accordance with its objectives. There may therefore be occasions when
there will be higher levels of liquidity, for example following the
issue of shares or the realisation of investments. This policy has been
applied consistently throughout the review period and as a result the
Investment Manager has not introduced any new arrangements for managing
the Company's liquidity.
Risk management policy note
Please refer to Note 16, Risk management policies, in the Notes to the
financial statements on pages 45 to 50, where the current risk profile
of the Company and the risk management systems employed by the
Investment Manager to manage those risks, are set out.
Remuneration
The total remuneration paid for the management of the AIFM amounted to
approximately GBP110,000 for the year ended 31 December 2016. This
amount was paid to a total of five beneficiaries including senior
management and other staff.
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF MIDDLEFIELD CANADIAN
INCOME PCC (THE "COMPANY")
We have audited the Company financial statements (the "financial
statements") of Middlefield Canadian Income PCC for the year ended 31
December 2016 which comprise the Statement of Financial Position and
Notes 1 to 3 to the financial statements. The financial reporting
framework that has been applied in their preparation is applicable law
and International Financial Reporting Standards (IFRSs) as adopted by
the European Union.
This report is made solely to the Company's members, as a body, in
accordance with Article 113A of the Companies (Jersey) Law 1991. Our
audit work has been undertaken so that we might state to the Company's
members those matters we are required to state to them in an auditor's
report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the
Company and the Company's members as a body, for our audit work, for
this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Statement of Directors' Responsibilities,
the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial
statements in accordance with applicable law and International Standards
on Auditing (UK and Ireland). Those standards require us to comply with
the Auditing Practices Board's (APB's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures
in the financial statements sufficient to give reasonable assurance that
the financial statements are free from material misstatement, whether
caused by fraud or error. This includes an assessment of: whether the
accounting policies are appropriate to the group's circumstances and
have been consistently applied and adequately disclosed; the
reasonableness of significant accounting estimates made by the
directors; and the overall presentation of the financial statements. In
addition, we read all the financial and non-financial information in the
annual report to identify material inconsistencies with the audited
financial statements and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with, the
knowledge acquired by us in the course of performing the audit. If we
become aware of any apparent material misstatements or inconsistencies,
we consider the implications for our report.
Opinion on financial statements
In our opinion the financial statements:
-- give a true and fair view of the state of the Company's affairs as at 31
December 2016;
-- have been properly prepared in accordance with IFRSs as adopted by the
European Union; and
-- have been properly prepared in accordance with the Companies (Jersey) Law
1991.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the
Companies (Jersey) Law 1991 requires us to report to you if, in our
opinion:
-- proper accounting records have not been kept; or
-- the financial statements are not in agreement with the accounting records
and returns; or
-- we have not received all the information and explanations we require for
our audit.
Helen Gale, BSc, FCA
for and on behalf of Deloitte LLP Chartered Accountants
Jersey, UK
20 April 2017
Statement of Financial Position of the Company
As at 31 December 2016
Notes 2016 2015
GBP GBP
Current assets
Other receivables 2 2
Net assets 2 2
Equity attributable to equity holders
Stated capital 2 2 2
Total Shareholders' equity 2 2
The financial statements and notes on page 57 were approved by the
directors on 20 April 2017 and signed on behalf of the Board by:
Director Director
Notes to the Financial Statements of the Company
For the year ended 31 December 2016
1. Basis of accounting
The separate financial statements of the Company have been prepared
showing results of the Company only. They have been prepared in
accordance with International Financial Reporting Standards ("IFRS") as
adopted by the European Union in accordance with the accounting policies
set out in note 2 to the financial statements of the Fund.
A separate Statement of Comprehensive Income, Statement of Changes in
Equity and Cash Flow Statement have not been prepared as there have been
no results or cash flows for the Company for this year or the preceding
year.
There are no standards and interpretations in issue but not effective
that the directors believe would or might have a material impact on the
financial statements of the Company.
Judgements and estimates used by the directors
The preparation of financial statements in compliance with IFRS requires
the directors to make judgements, estimates and assumptions that affect
the application of policies and reported amount of assets and
liabilities, income and expenses. The estimates and associated
liabilities are based on historical experience and various other factors
that are believed to be reasonable under the circumstances, the results
of which form the basis of making the judgements about carrying values
of assets and liabilities that are not readily apparent. For the
purposes of these financial statements, there were no specific areas in
which judgement was exercised or any estimation was required by the
directors.
2. The Company's stated capital
The authorised share capital of the Company is split into two management
shares of no par value.
No. of shares GBP
Management shares issued
At 31 December 2016 and 2015 2 2
3. Taxation
The Company adopted UK tax residency on 11 October 2011. Since that date,
the Company has been managed in such a way as to be able to meet the
conditions for approval as an investment trust under Section 1158 of the
Corporation Tax Act 2010. Accordingly, no UK tax has been provided for.
On 7 December 2012, the Company received approval from HM Revenue &
Customs to be treated as an investment trust in accordance with Section
1158 of the Corporation Tax Act 2010 and will seek to remain so
approved.
Management and Administration
Directors Nicholas Villiers (Chairman)
Raymond Apsey
Philip Bisson
Thomas Grose
Dean Orrico
Administrator and Secretary JTC Fund Solutions (Jersey) Limited
1-5 Castle Street
St. Helier
Jersey, JE2 3RT
Registered Office Elizabeth House
9 Castle Street
St. Helier
Jersey, JE2 3RT
Assistant Secretary JTC Fund Solutions (Guernsey) Limited
(since 1 December, 2016) Ground Floor, Dorey Court
Admiral Park
St Peter Port
Guernsey, GY1 2HT
Investment Advisor Middlefield International Limited
288 Bishopsgate
London, EC2M 4QP
Investment Manager Middlefield Limited
812 Memorial Drive NW
Calgary, Alberta
Canada, T2N 3C8
Legal Advisers: In England
Norton Rose Fulbright LLP
3 More London Riverside
London, SE1 2AQ
Ashurst
Broadwalk House
5 Appold Street
London, EC2A 2HA
In Jersey
Carey Olsen
47 Esplanade
St. Helier
Jersey, JE1 0BD
Management and Administration (continued)
Legal Advisers (continued): In Canada
Fasken Martineau DuMoulin LLP
Bay Adelaide Centre
Box 20, Suite 2400
333 Bay Street
Toronto, Ontario
Canada, M5H 2T6
Broker and Adviser Canaccord Genuity Limited
9(th) Floor
88 Wood Street
London, EC2V 7QR
Custodian RBC Investor Services Trust
335 - 8th Avenue SW
23rd Floor
Calgary, Alberta
Canada, T2P 1C9
Registrar Capita Registrars (Jersey) Limited
3 Castle Street
St. Helier
Jersey, JE2 3RT
Auditor Deloitte LLP
P O Box 403
Gaspè House
66-72 Esplanade
St. Helier
Jersey, JE4 8WA
CREST Agent, UK Paying Agent and Transfer Agent Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent, BR3 4TU
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. IF YOU
ARE IN ANY DOUBT AS TO WHAT ACTION TO TAKE, YOU SHOULD IMMEDIATELY
CONSULT YOUR STOCKBROKER, SOLICITOR, ACCOUNTANT OR OTHER INDEPENT
ADVISER AUTHORISED UNDER THE FINANCIAL SERVICES AND MARKETS ACT 2000.
If you have sold or transferred all of your management shares you should
pass this document, together with the accompanying form of proxy, to the
person through whom the sale or transfer was made for transmission to
the purchaser or transferee.
Notice of Cell Annual General Meeting
Notice is hereby given that the Cell Annual General Meeting will be held
at the offices of CBPE Capital LLP, 2 George Yard, London EC3V 9DH on 25
May, 2017 at 12.00 p.m. for the following purposes:
SPECIAL BUSINESS
To consider and, if thought fit, pass each of the following resolutions
as Special Resolutions:
1. THAT in accordance with Article 2.25 of the Cell's Articles of
Association (the "Articles") dated 16 May 2013, the Directors be
authorised to issue and allot redeemable participating preference shares
("Shares") and to sell Shares out of treasury, in each case for cash,
pursuant to Article 2.22 of the Articles up to an amount representing 10
per cent of the issued share capital of the Cell as at the date of the
Cell Annual General Meeting, as if Article 2.25 did not apply to the
allotment or sale out of treasury, provided that such shares shall be
allotted or sold for cash at a price which is not less than the net asset
value per Share at the time of the issue or sale. This authority shall
expire on the earlier of 30 September, 2018 or the conclusion of the next
annual general meeting of the Cell, save that the Directors shall be
entitled to make offers or agreements before the expiry of such power
which would or might require equity securities to be allotted or sold out
of treasury after such expiry pursuant to any such offer or agreement as
if the power conferred hereby had not expired;
2. THAT the Directors of the Company be generally and unconditionally
authorised:
1. Pursuant to Article 57 of the Companies (Jersey) Law (the "Law")
to make market purchases of Shares, provided that;
1. The maximum number of Shares authorised to be purchased
shall be up to an aggregate of 15,962,438 or such number as
shall represent 14.99 per cent of the issued share capital
of the Cell as at the date of the Cell Annual General
Meeting, whichever is less (in each case excluding Shares
held in treasury);
2. The minimum price, exclusive of any expenses which may be
paid for a Share is GBP0.01; and
3. The maximum price, exclusive of any expenses, which may be
paid for a Share shall be the higher of;
An amount equal to 105 per cent of the average middle market quotation
for Shares (as taken from the Daily Official List of London Stock
Exchange plc) for the five business days immediately preceding the day
on which such Shares are contracted to be purchased; and the higher of
(i) the price of the last independent trade and (ii) the highest current
independent bid on the London Stock Exchange at the time the purchase is
carried out, provided that the Company shall not be authorised to
acquire Shares at a price above the prevailing net asset value per Share
on the date of purchase; and
1. The authority hereby conferred shall expire on the earlier of 30
September 2018 or the conclusion of the next annual general meeting of
the Cell, save that the Directors shall be entitled to make offers or
agreements before the expiry of such power which would or might require
the market purchase of Shares after such expiry pursuant to any such
offer or agreement as if the power conferred hereby had not expired; and
2. Pursuant to Article 58A of the Law to, if the Directors determine in
their absolute discretion that it be appropriate or desirable, hold as
treasury shares and Shares purchased pursuant to the authority conferred
in paragraph (a) of this resolution.
ORDINARY BUSINESS
To consider and, if thought fit, pass each of the following resolutions
as Ordinary Resolutions:
1. To receive and adopt the Directors' Report, Auditor's Report and
Financial Statements for the year ended 31 December 2016.
2. To re-appoint Deloitte LLP as Auditor of the Cell.
3. To authorise the Directors to determine the Auditor's remuneration.
4. To approve the Directors' remuneration as set out on page 18 of the
Annual Audited Financial Report for the year ended 31 December 2016.
1. To approve the dividend policy of the Company as set out on page 11 of
the Annual Audited Financial Report for the year ended 31 December 2016.
By order of the Board
JTC Fund Solutions (Guernsey) Limited
as Assistant Secretary
20 April 2017
Notes:
1. A holder of redeemable participating preference shares of no par value in
the capital of the Cell ("Shares") entitled to attend and vote at the
Meeting is entitled to appoint one or more proxies to attend and vote
instead of him. A proxy need not be a holder of Shares. For the
convenience of Shareholders who may be unable to attend the Meeting, a
form of proxy accompanies this document. To be valid, the form of proxy
should be completed in accordance with the instructions printed on it and
sent, so as to reach Capita Registrars, PXS, The Registry, 34 Beckenham
Road, Beckenham, Kent BR3 4TU by no later than 48 hours before the time
fixed for the Meeting. The fact that holders of Shares may have completed
forms of proxy will not prevent them from attending and voting in person
at the Meeting should they subsequently decide to do so.
2. The quorum for the Meeting is at least two Shareholders present in person
or by proxy or by attorney. The majority required for the passing of the
Cell ordinary resolutions is a simple majority (or more) and for the Cell
special resolutions is two thirds (or more) of the total number of votes
cast for and against the resolution.
3. If, within half an hour from the appointed time for the Meeting, a quorum
is not present, then the Meeting will be adjourned to the same day at the
same time and address in the next week or if that date is a public
holiday in the UK to the next working day thereafter at the same time and
address. At that adjourned meeting, if a quorum is not present within
half an hour from the time appointed for the holding of the meeting,
those Shareholders present in person or by proxy or by attorney will form
a quorum whatever their number and the number of Shares held by them.
Again, the majority required for the passing of the Cell ordinary
resolutions is a simple majority (or more) and for the Cell special
resolutions two thirds (or more) of the total number of votes cast for
and against the resolution.
4. In the event that a form of proxy is returned without an indication as to
how the proxy shall vote on the resolutions, the proxy will exercise his
discretion as to whether, and if so how, he votes.
5. CREST members who wish to appoint a proxy or proxies through the CREST
electronic proxy appointment service may do so for the Meeting and any
adjournment(s) thereof by using the procedures described in the CREST
Manual. CREST Personal Members or other CREST sponsored members, and
those CREST members who have appointed a voting service provider(s),
should refer to their CREST sponsor or voting service provider(s), who
will be able to take the appropriate action on their behalf.
6. In order for a proxy appointment or instruction made using the CREST
service to be valid, the appropriate CREST message (a CREST Proxy
Instruction) must be properly authenticated in accordance with Euroclear
UK & Ireland Limited's specifications and must contain the information
required for such instruction, as described in the CREST Manual
(available via www.euroclear.com/CREST). The message, regardless of
whether it constitutes the appointment of a proxy or is an amendment to
the instruction given to a previously appointed proxy must, in order to
be valid, be transmitted so as to be received by Capita Registrars by the
latest time(s) for receipt of proxy appointments specified in note (2)
above. For this purpose, the time of receipt will be taken to be the
time (as determined by the time stamp applied to the message by the CREST
Application Host) from which the issuer's agent is able to retrieve the
message by enquiry to CREST in the manner prescribed by CREST. After
this time, any change of instructions to proxies appointed through CREST
should be communicated to the appointee through other means.
7. CREST members and, where applicable, their CREST sponsors or voting
service providers should note that Euroclear UK & Ireland Limited does
not make available special procedures in CREST for any particular
messages. Normal system timings and limitations will therefore apply in
relation to the input of CREST Proxy Instructions. It is the
responsibility of the CREST member concerned to take (or, if the CREST
member is a CREST personal member or sponsored member or has appointed a
voting service provider(s), to procure that his CREST sponsor or voting
service provider(s) take(s)) such action as shall be necessary to ensure
that a message is transmitted by means of the CREST system by any
particular time. In this connection, CREST members and, where applicable,
their CREST sponsors or voting service providers are referred, in
particular, to those sections of the CREST Manual concerning practical
limitations of the CREST system and timings.
8. The Cell may treat as invalid a CREST Proxy Instruction in the
circumstances set out in Article 34 of the Companies (Uncertificated
Securities) (Jersey) Order 1999.
9. The Cell, pursuant to regulation 40 of the (Companies Uncertificated
Securities) (Jersey) Order 1999 (as amended), specifies that only holders
of Shares registered in the register of members of the Cell on the close
of business on 23 May 2017 shall be entitled to attend or vote at the
Meeting in respect of the number of Shares registered in their name at
that time or in the event that the Meeting is adjourned, in the register
of members at the close of business two days before the date of the
adjourned Meeting. Changes to entries on the register of members after
such time or, in the event that the Meeting is adjourned, to entries in
the register of members after the close of business two days before the
date of the adjourned Meeting, shall be disregarded in determining the
rights of any person to attend or vote at the Meeting.
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. IF YOU
ARE IN ANY DOUBT AS TO WHAT ACTION TO TAKE, YOU SHOULD IMMEDIATELY
CONSULT YOUR STOCKBROKER, SOLICITOR, ACCOUNTANT OR OTHER INDEPENT
ADVISER AUTHORISED UNDER THE FINANCIAL SERVICES AND MARKETS ACT 2000.
If you have sold or transferred all of your management shares you should
pass this document, together with the accompanying form of proxy, to the
person through whom the sale or transfer was made for transmission to
the purchaser or transferee.
Notice of Annual General Meeting of the Company
Notice is hereby given that the Annual General Meeting of the Company
will be held at the offices of CBPE Capital LLP, 2 George Yard, London
EC3V 9DH on 25 May, 2017 at 12.45 p.m. for the following purposes:
ORDINARY BUSINESS
To consider and, if thought fit, pass each of the following resolutions
as Ordinary Resolutions:
1. To receive and adopt the Company's annual financial report for the year
ended 31 December, 2016.
2. To re-appoint Deloitte LLP as Auditor of the Company.
3. To authorise the Directors to determine the Auditor's remuneration.
4. To approve the Directors' remuneration as set out on page 18 of the
Annual Audited Financial Report for the year ended 31 December, 2016.
1. To approve the dividend policy of the Company as set out on page 11 of
the Annual Audited Financial Report for the year ended 31 December, 2016.
By order of the Board
JTC Fund Solutions (Guernsey) Limited
as Assistant Secretary
20 April, 2017
Notes:
1. Only holders of management shares are entitled to attend and vote at the
Company Annual General Meeting. A holder of management shares is entitled
to appoint one or more proxies to attend and vote at the Company Annual
General Meeting instead of him. A proxy need not be a holder of
management shares.
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. IF YOU
ARE IN ANY DOUBT AS TO WHAT ACTION TO TAKE, YOU SHOULD IMMEDIATELY
CONSULT YOUR STOCKBROKER, SOLICITOR, ACCOUNTANT OR OTHER INDEPENT
ADVISER AUTHORISED UNDER THE FINANCIAL SERVICES AND MARKETS ACT 2000.
If you have sold or transferred all of your shares you should pass this
document, together with the accompanying form of proxy, to the person
through whom the sale or transfer was made for transmission to the
purchaser or transferee.
Notice of Company and Cell Meeting
Notice is hereby given that a Company and Cell Meeting will be held at
the offices of CBPE Capital LLP, 2 George Yard, London EC3V 9DH on
Thursday 25 May, 2017 at 12.30 p.m. for the following purposes:
ORDINARY BUSINESS
To consider and, if thought fit, pass each of the following resolutions
as Company and Cell Ordinary Resolutions:
1. To re-elect Philip Bisson as a Director of the Company and the Cell.
1. To re-elect Thomas Grose as a Director of the Company and the Cell.
1. To re-elect Nicholas Villiers as a Director of the Company and the Cell.
1. To re-elect Raymond Apsey as a Director of the Company and the Cell.
1. To re-elect Dean Orrico as a Director of the Company and the Cell.
JTC Fund Solutions (Guernsey) Limited
as Assistant Secretary
20 April 2017
NOTES:
1. A holder of management shares in the capital of the Company and/or of
redeemable participating preference shares of no par value in the capital
of the Cell ("Shares") entitled to attend and vote at the Meeting is
entitled to appoint one or more proxies to attend and vote instead of
him. A proxy need not be a holder of Shares.
2. For the convenience of Shareholders who may be unable to attend the
Meeting, a form of proxy accompanies this document. To be valid, the form
of proxy should be completed in accordance with the instructions printed
on it and sent, so as to reach Capita Registrars, PXS, The Registry, 34
Beckenham Road, Beckenham, Kent BR3 4TU by no later than 48 hours before
the time fixed for the Meeting. The fact that holders of Shares may have
completed forms of proxy will not prevent them from attending and voting
in person at the Meeting should they subsequently decide to do so.
3. The quorum for the Meeting is at least two Shareholders present in person
or by proxy or by attorney. The majority required for the passing of the
Company and Cell ordinary resolutions is a simple majority (or more) of
the total number of votes cast for and against the resolution.
4. If, within half an hour from the appointed time for the Meeting, a quorum
is not present, then the Meeting will be adjourned to the same day at the
same time and address in the next week or if that date is a public
holiday in the UK to the next working day thereafter at the same time and
address. At that adjourned meeting, if a quorum is not present within
half an hour from the time appointed for the holding of the meeting,
those Shareholders present in person or by proxy or by attorney will form
a quorum whatever their number and the number of shares held by them.
Again, a simple majority of the total number of votes cast is required to
pass the Company and Cell ordinary resolutions.
5. In the event that a form of proxy is returned without an indication as to
how the proxy shall vote on the resolutions, the proxy will exercise his
discretion as to whether, and if so how, he votes.
6. CREST members who wish to appoint a proxy or proxies through the CREST
electronic proxy appointment service may do so for the Meeting and any
adjournment(s) thereof by using the procedures described in the CREST
Manual. CREST Personal Members or other CREST sponsored members, and
those CREST members who have appointed a voting service provider(s),
should refer to their CREST sponsor or voting service provider(s), who
will be able to take the appropriate action on their behalf.
7. In order for a proxy appointment or instruction made using the CREST
service to be valid, the appropriate CREST message (a CREST Proxy
Instruction) must be properly authenticated in accordance with Euroclear
UK & Ireland Limited's specifications and must contain the information
required for such instruction, as described in the CREST Manual
(available via www.euroclear.com/CREST). The message, regardless of
whether it constitutes the appointment of a proxy or is an amendment to
the instruction given to a previously appointed proxy must, in order to
be valid, be transmitted so as to be received by Capita Registrars by the
latest time(s) for receipt of proxy appointments specified in note (2)
above. For this purpose, the time of receipt will be taken to be the
time (as determined by the time stamp applied to the message by the CREST
Application Host) from which the issuer's agent is able to retrieve the
message by enquiry to CREST in the manner prescribed by CREST. After
this time, any change of instructions to proxies appointed through CREST
should be communicated to the appointee through other means.
8. CREST members and, where applicable, their CREST sponsors or voting
service providers should note that Euroclear UK & Ireland Limited does
not make available special procedures in CREST for any particular
messages. Normal system timings and limitations will therefore apply in
relation to the input of CREST Proxy Instructions. It is the
responsibility of the CREST member concerned to take (or, if the CREST
member is a CREST personal member or sponsored member or has appointed a
voting service provider(s), to procure that his CREST sponsor or voting
service provider(s) take(s)) such action as shall be necessary to ensure
that a message is transmitted by means of the CREST system by any
particular time. In this connection, CREST members and, where applicable,
their CREST sponsors or voting service providers are referred, in
particular, to those sections of the CREST Manual concerning practical
limitations of the CREST system and timings.
9. The Cell may treat as invalid a CREST Proxy Instruction in the
circumstances set out in Article 34 of the Companies (Uncertificated
Securities) (Jersey) Order 1999.
10. The Cell, pursuant to regulation 40 of the (Companies Uncertificated
Securities) (Jersey) Order 1999 (as amended), specifies that only holders
of redeemable participating preference shares of no par value in the
capital of the Cell registered in the register of members of the Cell on
the close of business on 23 May, 2017 shall be entitled to attend or vote
at the Meeting in respect of the number of such shares registered in
their name at that time or in the event that the Meeting is adjourned, in
the register of members at the close of business two days before the date
of the adjourned Meeting. Changes to entries on the register of members
of the Cell after such time or, in the event that the Meeting is
adjourned, to entries in the register of members of the Cell after the
close of business two days before the date of the adjourned Meeting,
shall be disregarded in determining the rights of any person to attend or
vote at the Meeting.
END OF ANNOUNCEMENT
E&OE - in transmission
Annual Financial Report: http://hugin.info/141790/R/2097713/794344.pdf
This announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the information
contained therein.
Source: Middlefield Canadian Income PCC via Globenewswire
http://www.middlefield.co.uk/
(END) Dow Jones Newswires
April 21, 2017 10:30 ET (14:30 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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