MIDDLEFIELD CANADIAN INCOME PCC

Including MIDDLEFIELD CANADIAN INCOME - GBP PC

(the "Fund"), a cell of the Company

Announcement of Results

For the period ended 30 June 2013

In accordance with the UK Financial Conduct Authority's Disclosure and Transparency Rule DTR 6.3.5 the Company announces its interim results for the period ended 30 June 2013.  The full unaudited report and financial statements will be available at the end of August 2013 at www.middlefield.co.uk. The publication of the interim financial report will be announced via a regulated information service.

 

Responsibility statement

We confirm that to the best of our knowledge:

• the interim report and financial statements have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" and give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the Fund. 

• the Interim Management report includes a fair review of the development, performance and position of the Company and the Fund and a description of the principal risks and uncertainties as disclosed in note 16 to the financial statements, that it faces for the next six months as required by DTR 4.2.7.R of the Disclosure and Transparency Rules. 

• the Interim Management report includes a fair review of related party transactions and changes therein, as required by DTR 4.2.8.R of the Disclosure and Transparency Rules. 

By order of the Board

Nicholas Villiers             Thomas Grose
Director                            Director

Date: 16 August 2013

INTERIM MANAGEMENT REPORT

Six months to 30 June 2013 (unaudited)

On the invitation of the Directors of the Company, this interim management report is provided by Middlefield International Limited, which acts as the investment manager of the Fund.

This statement has been prepared to provide additional information to Shareholders as a body to meet the relevant requirements of the UK Listing Authority's Disclosure and Transparency Rules. It should not be relied upon by any party for any purpose other than as stated above.

Middlefield Canadian Income PCC is a closed-ended investment company incorporated in Jersey on 24 May 2006.  The Company has initially established one closed-ended Cell known as Middlefield Canadian Income - GBP PC (referred to as the "Fund" which term includes, where the context permits, the Company acting in respect of Middlefield Canadian Income - GBP PC). Admission to the Official List of the UK Listing Authority and dealings in redeemable participating preference shares commenced on 6 July 2006.  The Fund was admitted to FTSE UK All-Share Index effective 20 June 2011.

Investment Objective

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 will seek to achieve its investment objective by investing predominantly in the securities of companies and REITs domiciled in Canada and listed on a Canadian Stock Exchange, which the investment manager believes will provide an attractive level of distributions, together with the prospect for capital growth.

Performance Summary

North American equity markets rallied over the first half of 2013.  Over this period, U.S. economic growth has been supported largely by improvements in employment, household balance sheets and consumer spending, along with an on-going recovery in the housing market.  These improving trends have, in turn, provided significant stimulus for Canadian export growth.  Historically, Canadian output growth, which marginally outperformed gains in the U.S. over the past half century, has been closely linked to the economic prosperity of America - the world's largest economy and Canada's largest trading partner.  As a result, improving trends in U.S. consumption are expected to support continued Canadian economic expansion over the next several months.  

During the first half of the year, the Fund generated a total return of 8.9%, outperforming on a currency-adjusted basis both its benchmark S&P/TSX Equity Income Index as well as the broader S&P/TSX Composite Index by 3.7% and 8.7%, respectively.  The Fund's positive returns were primarily attributable to the strong performance of securities held within the industrial, financial and energy sectors over this period.  In addition, over the first half of the year, MCI benefited from increased diversification and a broadening of its portfolio asset allocation.  Changes included a further reduction in the Fund's energy weighting, particularly with respect to its allocation to those producers focused on oil production, and an increase in the Fund's exposure to U.S. financials, which has been a top performing sector year-to-date.

We believe that the recent sell-off in 'interest sensitive' issuers provides investors with an attractive opportunity to purchase dividend paying stocks that offer capital appreciation potential and very attractive, tax efficient yields that are significantly higher than the interest income that can be earned from a government bond. Our focus remains on global dividend paying issuers with relatively low leverage, good organic growth potential and strong management teams that have demonstrated an ability to prudently allocate capital.

We remain positive on the long-term outlook for oil and natural gas and maintain the view that North American natural gas and global oil production have peaked. We believe that long-term oil prices will be in the range of US$80 to US$100 per barrel during the next five to ten years as new supply remains expensive to develop. We expect the spread between WTI and Brent oil prices to continue to narrow in 2013 as several energy infrastructure projects will eventually alleviate the bottleneck at the Cushing terminus in Oklahoma.  Furthermore, prices realized by Canadian producers are expected to continue to improve as access to U.S. refineries should cause heavy oil differentials to narrow and benefit the Canadian energy sector.  With respect to natural gas, prices are expected to appreciate to over $5.00/mcf during the next 12-18 months as colder weather during the first half of the year led to large withdrawals and inventories are now below the five year average. Many gas producers have announced production cuts and slowed drilling activity as shale wells continue to demonstrate sharp production declines.  Moreover, the number of U.S. natural gas rigs in operation is near a thirteen year low, which usually presages much higher prices. Demand and pricing should also be supported by rising industrial production and consumption by utilities that are switching from coal to gas fired power generation. Longer term, the development of LNG export facilities should enable producers to access European and Asian markets, where gas sells for more than four times more than it does in North America.

We continue to believe that the real estate sector offers good total return potential. Real estate issuers should be able to increase rents significantly as employment and occupancy increase. Moreover, the replacement value of buildings should escalate as land, construction costs and inflation edge higher. While we expect volatility to persist as investors adjust their expectations to reflect a normalized cost of capital and higher interest rates, valuations are very compelling and should be supported by strong balance sheets, low payout ratios and dividend growth. Canadian REITs are trading at a substantial discount to net asset value versus a historical premium of 6%. Our focus remains on global real estate issuers that: 1) have good organic growth potential with low leverage; 2) demonstrate above average cash flow growth; 3) possess strong management teams with a track record of prudent capital allocation; and 4) have shorter lease-terms or an ability to quickly capture rental growth/inflation as the economy improves.

The asset class weightings for the Fund as at 30 June 2013 were:

Asset Class                                      Portfolio Weighting

Dividends

The Fund paid quarterly dividends of 1.25 pence per share in each of January, April and July 2013.  

Related Party Transactions

Related party transactions are disclosed in note 13 to the condensed set of financial statements of the Fund.

There have been no material changes in the related party transactions from those described in the 2012 Annual Report.

Material Events

Further to the announcements issued in February, March and April of this year, the Company has issued for cash a total of 3,350,000 shares of the Fund out of treasury.  Each such issue has been at a premium to the Fund's prevailing net asset value.

The Board of Middlefield Canadian Income PCC is not aware of any significant event or transaction which has occurred between 1 July 2013 and the date of publication of this statement which could have a material impact on the financial position of the Fund.

Principal Risks and Uncertainties

There are a number of potential risks and uncertainties, which could have a material impact on the Fund's performance over the remaining six months of the year and could cause actual results to differ materially from expected and historical results.  Further information on the principal risks and uncertainties of the Fund are included in the 2012 Annual Report and in note 17 to the condensed set of financial statements.

 

Outlook

We believe the global economy will continue to grow at a modest pace in the near-term, with Europe struggling to emerge from recession and developing economies growing at a reduced rate, largely as a result of decreased export demand from western nations.  It remains our view that sustainable long-term global growth will take time to achieve and will require structural reforms to: (i) facilitate debt repayment in Europe, the United States and other developed economies; and (ii) finance socio-economic improvements that will stimulate domestic demand in emerging markets.

With respect to North America, we expect continued U.S. economic growth, supported by on-going improvements in employment, consumption and the housing sector.  The Fed has indicted that it expects short-term interest rates to remain at very low levels until the unemployment rate falls to at least 6.5%, which we do not anticipate to occur for several months.  Following which, we expect the removal of monetary stimulus to occur only at a measured pace. Given this backdrop, together with a low inflationary environment, we anticipate that low interest rates in the U.S. and Canada will prevail for the foreseeable future.  This, in turn, is expected to further support growth in the U.S. economy and corresponding Canadian export demand and economic growth.

The Fund remains focused on investing in income-oriented issuers with strong management teams, good balance sheets and sustainable dividends that are well-positioned to benefit from the relative strength of the North American economy. We continue to believe that the high dividend-paying equity income sector will benefit from anticipated improvements in global growth and an ongoing demand for income.

Middlefield International Limited
Date: 16 August 2013

Past performance is not a guide to future performance.
This interim management report is available at:  www.middlefield.co.uk.

 

CONDENSED STATEMENT OF FINANCIAL POSITION OF THE FUND (unaudited)

As at 30 June 2013

with unaudited comparatives as at 30 June 2012
and audited comparatives as at 31 December 2012

The financial statements were approved by the Directors on 16 August 2013 and signed on behalf of the Board by:

Nicholas Villiers   Thomas Grose
Director                  Director

 

 

 

The accompanying notes form an integral part of these financial statements.

CONDENSED STATEMENT OF COMPREHENSIVE INCOME OF THE FUND (unaudited)

For the period 1 January 2013 to 30 June 2013 with unaudited comparatives for the period 1 January 2012 to 30 June 2012 and audited comparatives for the year ended 31 December 2012

The Company including the Fund has no other items of income or expense for the current and prior period and accordingly the net profit (loss) for the current and prior periods represent total comprehensive income (loss).
There are zero earnings attributable to the management shares. All activities derive from continuing operations.

The accompanying notes form an integral part of these financial statements.

CONDENSED STATEMENT OF CHANGES IN REDEEMABLE PARTICIPATING PREFERENCE SHAREHOLDERS' EQUITY OF THE FUND (unaudited)

For the period 1 January 2013 to 30 June 2013 with unaudited comparatives for the period 1 January 2012 to 30 June 2012
and audited comparatives for the year ended 31 December 2012

     The accompanying notes on form an integral part of these financial statements.

CONDENSED CASH FLOW STATEMENT OF THE FUND (unaudited)

For the period 1 January 2013 to 30 June 2013
with unaudited comparatives for the period 1 January 2012 to 30 June 2012
and audited comparatives for the year ended 31 December 2012

The accompanying notes form an integral part of these financial statements.

NOTES TO THE CONDENSED FINANCIAL STATEMENTS OF THE FUND (unaudited)

For the period 1 January 2013 to 30 June 2013
with unaudited comparatives for the period 1 January 2012 to 30 June 2012
and audited comparatives for the year ended 31 December 2012

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 listed on a Canadian Stock Exchange that the Investment Manager believes will provide an attractive level of distributions, together with the prospect for capital growth.

The address of the Company's registered office is Wests Centre, St. Helier, Jersey, JE4 8PQ, Channel Islands.

The Fund's shares are listed on the London Stock Exchange.

The Company and the Fund have no employees.

The functional and presentational currency of the Company and the Fund is Sterling ("£").

The half-yearly report has not been audited or reviewed by the auditors Deloitte LLP pursuant to the Auditing Practices Board guidance on 'Review of Interim Financial Information'.

The information presented for the year ended 31 December 2012 does not constitute the statutory financial statements of the Company and the Fund. Copies of the statutory financial statements for that year have been delivered to the Registrar of Companies in Jersey. The auditors' report on those financial statements was unqualified.

2.   Accounting Policies

a.        Basis of preparation
The condensed financial information for the period ended 30 June 2013 has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union. The condensed interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2012, which have been prepared in accordance with International Financial Reporting Standards (IFRS).

The condensed financial statements have been prepared under the historical cost basis, except for the revaluation of fair value through profit or loss investments, and in accordance with IFRS. The condensed statement of comprehensive income is presented in accordance with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in January 2009 by the Association of Investment Companies ("AIC"), to the extent that it does not conflict with IFRS.

The condensed statement of financial position, condensed statement of comprehensive income, condensed statement of changes in redeemable participating preference shareholders' equity and condensed 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.   Going concern

In the opinion of the Directors, there is a reasonable expectation that 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 on the going concern basis.

The Directors have arrived at this opinion by considering, 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. 

c.   Standards and Interpretations

Except as described below the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2012, as described in those financial statements.

Standards and Interpretations in issue not yet adopted.

At the date of authorisation of these financial statements, the following Standard or Interpretation has been issued by the International Accounting Standards Board (IASB) but is not approved by the EU and therefore has not yet been adopted by the Fund:

• IFRS 9 (revised April 2009) Financial Instruments: Classification and Measurement effective for annual periods beginning on or after 1 January 2015. 

At the date of authorisation of these financial statements, the following Standard or Interpretation has been issued by the International Accounting Standards Board (IASB) and has been approved by the EU but has not yet been adopted by the Fund:

• IAS 32 (amended) "Offsetting Financial Assets and Financial Liabilities" effective date is 1 January 2014. 

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 Fund.

d.   Business and geographical segments

The Directors are of the opinion that the Fund is engaged in a single segment of business of investing predominantly in securities and REITs domiciled in Canada to which the Fund is solely exposed and therefore no segment reporting is provided.

3.           Securities (at fair value through profit or loss)

4.   Cash and cash equivalents

Cash and cash equivalents comprise bank balances and cash held by the Fund. The carrying value of these assets approximates their fair value.

5.   Other payables and accruals

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.

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 percent of the shares then in issue, or such lesser percentage as the Directors may decide.

At period end there were 16,650,000 treasury shares in issue.

7.        Net asset value per redeemable participating preference share

The net asset value per share of 106.39p (30 June 2012: 97.49p, 31 December 2012: 100.06p) is based on the net assets at the period end of £114,931,603 (30 June 2012: £86,134,235, 31 December 2012: £104,741,298) and on 108,032,250 redeemable participating preference shares, being the number of Redeemable Participating Preference shares in issue at the period end (30 June 2012: 88,347,500 shares, 31 December 2012: 104,682,250 shares).

8.   Dividend and interest income

9.   Net movement in the fair value of securities

10.   Profit  per redeemable participating preference share

The revenue gain per share is based on £2,069,158 net revenue gain on ordinary activities and a weighted average of 106,502,806 shares in issue. The capital gain per share is based on £7,081,313 net capital gain for the period and a weighted average of 106,502,806 shares in issue.

11.   Dividends

Dividends were paid on a quarterly basis during the period in the months of January and April totalling £2,646,431 (30 June 2012: £2,117,686).

12.   Taxation

The Company adopted UK tax residency from 11 October 2011 onwards. 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.

13.   Related party transactions

The directors are regarded as related parties.  

Total directors' fees paid during the period amounted to £52,966 of which £27,134 was due at the period end (30 June 2012: £46,634 of which £21,191 was due at the period end, 31 December 2012: £85,000 of which £21,250 was due at the year end).  These fees are all arms length transactions.  

14.   Loan payable

The Fund entered into a Credit Agreement with Royal Bank of Canada ("RBC") on 6 October 2011, whereby RBC provides a 364-day Revolving Term Credit Facility (the "Credit Facility"), with a maximum principal amount of the lesser of CAD50,000,000 and 25% of the Total Asset Value of the Fund. The Credit Facility was renewed on 5 October 2012 as an On Demand facility.

The Bankers' Acceptance drawn under the Credit Facility totals CAD30,000,000 (GBP equivalent of £18,661,637) (period ended 30 June 2012: CAD 15,000,000 (GBP equivalent of £9,334,978), year ended 31 December 2012: CAD25,000,000 (GBP equivalent £15,372,485)).

Pre-paid interest and stamping fees of £89,319 (period ended 30 June 2012: £46,186, year ended 31 December 2012: £73,375) were paid on the Bankers' Acceptance and these costs are being amortised over 91 days. Interest paid on the Bankers' Acceptance totalled £117,312 (period ended 30 June 2012: £52,759, year ended 31 December 2012: £141,188).

Interest is calculated at an annual percentage equal to, in the case of Prime Loans, the Prime Rate minus 0.35%. In the case of a Bankers' Acceptance, a stamping fee of 0.60% per annum is payable.

15.   Security agreement

In conjunction with entering into the Credit Facility, the Fund has entered into a General Security Agreement. Pursuant to the terms of the General Security Agreement the Fund has granted RBC interests in respect of collateral, being all present and after-acquired 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 investments, other receivables, cash and cash equivalents and other payables approximate their fair values.

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 and reserve accounts. The Investment Manager reviews the capital structure on a monthly basis. The Fund and the Company do not have any externally imposed capital requirements.

Investment and trading activities
It is intended that the Fund will continue throughout its life to be invested in a Canadian 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 commitments it has entered into with the Fund.

The Fund's principal assets are bank balances and cash 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.

The Fund's maximum exposure to credit risk is the carry value of the assets on the statement of financial position.

 

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.

Country risk
On 17 January 2012 the Financial Reporting Council ("FRC") released "Responding to the increased country and currency risk in financial reports".

The FRC 17 January 2012 update for directors of listed companies includes 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 Board has reviewed the disclosures and believes that no additional disclosures in light of this update are required since the Canadian economy is stable with a Moody's rating of AAA.

 

Fair value measurements
The Fund adopted the amendment to IFRS 7, effective 1 January 2009. IFRS 7 establishes a fair value hierarchy that prioritizes 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 7 are as follows:

• Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities 

• 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) 

• 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 of management, 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.  

The following table presents the Fund's financial assets and liabilities by level within the valuation hierarchy as of 30 June 2013.

The following table presents the Fund's financial assets and liabilities by level within the valuation hierarchy as of 31 December 2012.

The Fund holds securities that trade in active markets. Such financial instruments are classified as Level 1 of the IFRS 7 fair value hierarchy. There were no transfers between Level 1 and 2 during the period.

 

Price sensitivity
At 30 June 2013, 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 shares would have been £38,879,315 (30 June 2012: £25,342,296, December 2012: £33,450,580) higher, arising due to the increase in the fair value of financial assets at fair value through profit or loss by £38,879,315 (30 June 2012:  £25,342,296, 31 December 2012: £33,450,580).

At 30 June 2013, 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 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 30 June 2013, 30 June 2012 and 31 December 2012:               

The above analysis excludes short term debtors and creditors as all material amounts are non interest-bearing.

 

Interest rate sensitivity analysis
At 30 June 2013, had interest rates had 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 increased by £265,874 (31 December 2012: £238,660) due to the increase in market value of listed debt securities and to a lesser extent due to an increase in interest payable on the loan.

 

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 companies and REIT's listed on a Canadian Stock Exchange and are actively traded.
As at 30 June 2013, the Fund's exposure to liquidity risk was as follows:

As at 30 June 2012, the Fund's exposure to liquidity risk was as follows:

A

S

As at 31 December 2012, the Fund's exposure to liquidity risk was as follows:

Currency risk
The Fund is denominated in GBP, whereas the Fund's principal investments are denominated in CAD. 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 period end.

 

As at 30 June 2013, the Fund's net exposure to CAD currency was as follows:

The Fund's The Fund's net exposure to USD currency at the period end was as follows:

As at 31 December 2012, the Fund's net exposure to CAD currency was as follows:

The Fund's As at 31 December 2012, the Fund's net exposure to USD currency at the year end was as follows:

Currency sensitivity
At 30 June 2013, had GBP strengthened against the CAD by 5%, with all other variables held constant, the increase in net assets attributable to shareholders would amount to approximately £4,911,430 (31 December 2012: £4,586,914). Had GBP weakened against the CAD by 5%, this would amount to a decrease in net assets attributable to shareholders of approximately £5,428,423 (31 December 2012: £5,069,747).

At 30 June 2013, had GBP strengthened against the USD by 5%, with all other variables held constant, the increase in net assets attributable to shareholders would amount to approximately £584,801 (31 December 2012: £nil). Had GBP weakened against the CAD by 5%, this would amount to a decrease in net assets attributable to shareholders of approximately £646,360 (31 December 2012: £nil).

17.        Schedule of Investments - Securities (at fair value through profit or loss)

STATEMENT OF FINANCIAL POSITION OF THE COMPANY (unaudited)

As at 30 June 2013

with unaudited comparatives as at 30 June 2012
and audited comparatives as at 31 December 2012

The financial statements and notes on pages 24 to 25 were approved by the directors on 16 August 2013 and signed on behalf of the Board by:

Nicholas Villiers        Thomas Grose               
Director   Director

 

NOTES TO THE FINANCIAL STATEMENTS OF THE COMPANY (unaudited)
For the period ended 30 June 2013 with comparatives for the year ended 31 December 2012

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 notes 1 and 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 feel will 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.

3.   Taxation
The Company adopted UK tax residency from 11 October 2011 onwards. 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.