Middlefield Canadian Income Trust

JUNE PORTFOLIO UPDATE

MIDDLEFIELD CANADIAN INCOME PCC (LON:MCT)

All information is at 30 June 2021 and unaudited

¹ Based on four quarterly interim dividends of 1.275p per share paid 31 January 2020, 30 April 2020, 31 July 2020, 30 October 2020, and based on the share price as at close of business on 31 December 2020.

² Ongoing charges represent the management fee and all other operating expenses excluding interest as a % of average shareholders' funds for the year ended 31 December 2020.

Performance with Net Income Reinvested

Source: Middlefield, Bloomberg.

Dean Orrico, representing the Investment Manager, noted:

Global equities continued to perform well in June with most major indices closing out the second quarter of 2021 at all-time highs. MCT's share price also hit a record high, driven by a 3.1% appreciation in the Fund's net asset value in June and 26.5% year-to-date.

In June, longer-duration interest rates pulled back and growth stocks regained their footing. The U.S. 10-Year Treasury yield declined to approximately 1.5% during the month with the downward momentum continuing into July. The decrease in longer-term yields has contributed to a flattening of the curve, suggesting increased investor uncertainty. Notwithstanding, we believe equities remain a desirable asset class as the North American profits recovery continues into 2022.

Although the Canadian equity market is tilted to cyclical and value sectors, the TSX Composite added 2.5% in June and has been one of the top performing indices in the world this year. A rebound in Canada's energy sector has been a major contributor to the market's outperformance, led by exploration and production companies, which returned 59% in the first half. WTI crude prices have risen more than 50% this year to above $75 per barrel while North American natural gas prices are at their highest levels in seven years. Against this backdrop, we expect significant free cash flow generation which is being used to grow production as well as fund strategic investments in renewables, carbon capture and storage, hydrogen infrastructure and other ESG initiatives.

Canadian Natural Resources (CNQ) represents one of the Fund's portfolio companies that is positioned to benefit from a positive commodity price environment. At current oil and gas prices, CNQ will generate over $10 billion of free cash flow in 2022, implying a 19% free cash flow yield. The company plans to allocate funds to its balance sheet in the near-term, targeting a debt to capitalization ratio below a conservative level of 30%. In addition, excess cash flow will also be directed to the company's ESG initiatives which align with many United Nations Sustainable Development Goals and include investments in research and technology to achieve net zero emissions. In 2019, CNQ led more than 60 projects and participated in another 37 at Canada's Oil Sands Innovation Alliance. Carbon capture, utilization and sequestration/storage projects in particular are a major focus area for the company and integral to its long-term net zero emissions goals.

Topaz Energy Corp. is another recent portfolio addition that returned over 20% in the month of June. Topaz is a Canadian royalty and energy infrastructure company focused on generating free cash flow growth and paying increasing levels of dividends to shareholders. Since Topaz does not conduct any oil and gas exploration on its lands, it is insulated from operational risks such as abandonment and reclamation obligations borne by producers. Its infrastructure revenues are underpinned by take-or-pay contracts that are ten to fifteen years in length and fully utilized. Topaz is the only North American royalty company levered to natural gas which will play an instrumental role in the global energy transition for decades. The company also has exposure to water infrastructure after recently entering a fifteen year take-or-pay water handling agreement with a water midstream company. The partnership will lower operational costs, reduce transportation requirements and remove the need for fresh potable water as an input to energy production. Dean Orrico recently sat down with Topaz Energy CEO, Marty Staples, to discuss the portfolio company's unique business model as well as its sustainability initiatives. You can watch the interview on MCT's YouTube Channel here.

Enquiries:

Notes to Editors

Middlefield Canadian Income PCC aims to provide long term returns through dividend income and capital growth from a diversified portfolio of predominantly Canadian equity income securities and US stocks. The Company has been listed since 2006 as London's only listed Canadian equity income fund.

For more information on the Company, please visit our website:

http://www.middlefield.co.uk/mcit.htm