TORONTO, Aug. 29 /CNW/ - Middlefield Group is pleased to present the
unaudited financial results for COMPASS Income Fund (the "Fund") for the
period ended June 30, 2005, the details of which are attached.
In the second quarter of 2005, COMPASS paid distributions totalling
$0.225 per unit. The Fund's net asset value per unit increased by 23.4% year-
over-year to $14.25 at June 30, 2005.
As at June 30, 2005, the asset class weightings for the COMPASS portfolio
were:
<<
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Asset Class Portfolio Weighting
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Business Trusts 40%
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Real Estate Investment Trusts 27%
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Power and Pipeline Trusts 23%
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Oil and Gas Royalty Trusts 10%
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COMPASS seeks to invest in a diversified portfolio of income trusts with
a bias towards issuers with low capital expenditure requirements, stable cash
flows and dominant market positions. Business trusts, representing a diverse
collection of industries, comprise the largest weighting within the Fund's
portfolio. The business trust component is supplemented by REITs and power and
pipeline trusts, which offer cash flow stability supported by contractual
revenue streams. To enhance returns, the Fund may invest up to 10% of its
portfolio in the royalty trust sector. This strategy provides a favourable
balance of stable current income, significant tax deferral and potential for
capital appreciation.
COMPASS combines the investment management experience of both Middlefield
Capital Corporation and Guardian Capital LP, who act as Co-Advisors to the
Fund, responsible for asset mix and security selection.
COMPASS trades on the Toronto Stock Exchange under the symbol "CMZ.UN".
August 29, 2005
This press release contains forward-looking information. Actual future
results may differ materially. The risks, uncertainties and other factors
that could influence actual results are described in the YIELDPLUS annual
report and other documents filed with regulatory authorities.
MANAGEMENT'S DISCUSSION AND ANALYSIS
JUNE 30, 2005 AND 2004 (UNAUDITED)
The following discussion and analysis should be read in conjunction with
the attached unaudited interim financial statements. Readers should also refer
to Management's Discussion and Analysis in the Fund's 2004 Annual Report.
Management is responsible for the existence of appropriate information
systems, procedures and controls to ensure that information used internally
and disclosed externally is complete and reliable.
SECTOR ANALYSIS
The business trust sector continues to expand, offering both attractive
returns and broad industry diversification. The market capitalization of the
sector is almost $52 billion and currently comprises 125 issuers. During the
quarter, COMPASS added to its holdings in KCP Income Fund. KCP Income Fund is
North America's largest producer of private label household bleach and is fast
becoming a major player in the household cleaning and laundry products
category, as well as diversified consumer products with the recent acquisition
of CCL Industries Inc.'s Custom Manufacturing Division.
REITs rebounded in the second quarter of 2005 with the S&P/TSX Capped
REIT Index posting a total return of approximately 9.3%. Subsequent to quarter
end, Primaris Retail REIT (formerly Borealis Retail REIT) increased its
monthly distribution rate by 5.5%. Primaris owns a portfolio of mid-market
retail centres and is managed by Oxford Properties Group, one of Canada's
largest and most experienced managers of income-producing properties. Since
its IPO in July 2003, Primaris has completed eight accretive acquisitions and
has increased its monthly distribution rate twice.
During the quarter, crude oil prices continued to climb higher due to a
lack of spare productive capacity and no signs of a reduction in demand in
response to higher prices. Natural gas prices likewise continued to rise
reflecting higher crude prices and tight North American supply. COMPASS
maintained its positions in several high quality issuers and is biased in
favour of those royalty trusts with longer reserve life indices, high quality
assets and low payout ratios.
The Fund continued to maintain an underweight position in power and
pipeline trusts in light of the Co-Advisors' expectation of continued growth
in the North American economy and increasing interest rates over the next 12
months.
DISTRIBUTIONS TO UNITHOLDERS
The Fund continued to meet its monthly distribution target of $0.075 per
unit in the second quarter, unchanged from the same period last year.
FINANCIAL PERFORMANCE
The net asset value per unit increased by approximately 4.8% during the
quarter and 23.4% year-over-year to $14.25 at June 30, 2005. Net investment
income was $0.23 per unit in the second quarter of 2005, down from $0.26 per
unit in the second quarter of 2004 due to reduced leverage. Distributions
declared during the second quarter were $0.225 per unit, unchanged from the
same period last year. The ratio of management fees and other operating
expenses (excluding interest expense and bank charges) to average net asset
value ("MER") was 1.58% for the three months ended June 30, 2005, compared to
1.55% in the second quarter of 2004.
OUTLOOK
Looking forward, we expect income trusts will continue to generate
attractive returns over the next 12 to 18 months. This is supported by two key
factors. Firstly, the economic environment will likely be characterized by
modest growth, low interest rates, benign inflation and strong energy prices.
Secondly, income trusts will be added to Canada's primary equity index, the
S&P/TSX Composite Index (the "Index"), which is expected to result in
incremental demand from institutional and index investors totalling several
billion dollars. Demand from foreign investors, particularly from the United
States, is also expected to support current valuations in the income trust
sector. Today, U.S. ownership of Canadian royalty trusts is estimated to be
between 25% and 35% and U.S. investors are now turning their attention to the
broader income trust sector in search of high levels of stable income. As a
result, income trusts should continue to offer attractive returns comprised of
cash distributions and modest capital appreciation, particularly in those
issuers expected to be included in the Index.
FINANCIAL HIGHLIGHTS
FOR THE PERIODS ENDED
JUNE 30 Three Months Ended Six Months Ended
June 30 June 30
2005 2004 2005 2004
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DATA PER UNIT
Net Asset Value
at Beginning
of Period $ 13.60 $ 12.60 $ 13.69 $ 11.75
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INCOME FROM
INVESTMENT
OPERATIONS:
Net Investment
Income 0.23 0.26 0.47 0.55
Net Realized and
Unrealized Gain
(Loss) on
Investments 0.64 (1.09) 0.54 (0.30)
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0.87 (0.83) 1.01 0.25
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DISTRIBUTIONS TO
UNITHOLDERS 0.22 0.22 0.45 0.45
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Net Asset Value at
End of Period $ 14.25 $ 11.55 $ 14.25 $ 11.55
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Market Price at
End of Period $ 13.75 $ 11.07 $ 13.75 $ 11.07
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RATIOS/SUPPLEMENTAL
DATA
Total Assets at
End of Period $461,592,552 $421,597,794 $461,592,552 $421,597,794
Net Assets at
End of Period $405,527,348 $330,305,285 $405,527,348 $330,305,285
Weighted Average
Net Assets $395,667,354 $325,677,152 $397,219,879 $287,875,122
Market
Capitalization at
End of Period $391,284,768 $316,457,968 $391,284,768 $316,457,968
Management Expense
Ratio(1) 1.58% 1.55% 1.57% 1.65%
Total Rate of
Return for the
Period(2) 6.51% (6.45)% 7.62% 2.24%
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(1) Ratio of expenses to average net assets, based on annualized expenses
for the stated period, excluding interest expense and bank charges.
(2) Historical total return of an investment for the period, assuming
reinvestment of all distributions.
STATEMENTS OF NET ASSETS
AS AT JUNE 30, 2005 AND DECEMBER 31, 2004
Unaudited 2005 2004
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ASSETS:
Investments at Fair Value $456,617,600 $457,470,500
Income and Interest Receivable 2,600,549 2,546,041
Cash 2,271,732 8,367,564
Accounts Receivable 102,671 25,494
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461,592,552 468,409,599
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LIABILITIES:
Loan Payable 52,764,387 72,376,026
Unitholder Distributions Payable 2,135,796 2,151,562
Accounts Payable and Accrued Liabilities 1,165,021 1,055,331
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56,065,204 75,582,919
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Net Assets $405,527,348 $392,826,680
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Units Issued and Outstanding 28,457,074 28,687,492
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Net Asset Value per Unit $ 14.25 $ 13.69
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The accompanying notes to financial statements are an integral part of
these financial statements.
STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED
JUNE 30 Three Months Ended Six Months Ended
June 30 June 30
Unaudited 2005 2004 2005 2004
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INVESTMENT INCOME:
Income from
Investments $ 8,429,351 $ 9,498,486 $ 17,327,190 $ 16,844,335
Interest 25,475 24,066 55,553 107,849
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8,454,826 9,522,552 17,382,743 16,952,184
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EXPENSES:
Management Fee 1,163,370 949,499 2,320,788 1,794,876
Interest and Bank
Charges 385,124 556,404 905,565 1,072,179
Service Fee to
Investment Dealers 303,483 234,591 591,634 412,582
General and
Administrative 92,395 72,234 178,410 153,104
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1,944,372 1,812,728 3,996,397 3,432,741
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Net Investment
Income 6,510,454 7,709,824 13,386,346 13,519,443
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NET REALIZED AND
UNREALIZED GAIN
(LOSS) ON
INVESTMENTS:
Net Realized Gain
(Loss) from
Investment
Transactions (487,164) 575,651 9,276,047 (1,472,631)
Change in Net
Unrealized Gain
(Loss) on
Investments 18,971,176 (32,070,120) 5,885,332 (15,303,198)
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Net Gain (Loss)
on Investments 18,484,012 (31,494,469) 15,161,379 (16,775,829)
-------------------------------------------------------------------------
Net Increase
(Decrease) in
Net Assets
Resulting from
Operations $ 24,994,466 $(23,784,645) $ 28,547,725 $ (3,256,386)
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-------------------------------------------------------------------------
Earnings (Loss)
per Unit $ 0.88 $ (1.15) $ 1.00 $ (0.13)
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STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIODS
ENDED JUNE 30 Three Months Ended Six Months Ended
June 30 June 30
Unaudited 2005 2004 2005 2004
-------------------------------------------------------------------------
Net Assets at
Beginning of
Period $389,549,984 $362,139,951 $392,826,680 $149,691,242
-------------------------------------------------------------------------
OPERATIONS:
Net Increase
(Decrease) in
Net Assets
Resulting from
Operations 24,994,466 (23,784,645) 28,547,725 (3,256,386)
-------------------------------------------------------------------------
DISTRIBUTIONS TO
UNITHOLDERS (6,421,704) (6,436,910) (12,850,617) (11,643,106)
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UNITHOLDER
TRANSACTIONS:
Issue (Purchase)
of Trust Units,
Net (2,595,398) (1,613,111) (2,996,440) 195,513,535
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Net Increase
(Decrease)
in Net Assets 15,977,364 (31,834,666) 12,700,668 180,614,043
-------------------------------------------------------------------------
Net Assets at
End of Period $405,527,348 $330,305,285 $405,527,348 $330,305,285
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Distributions per
Unit $ 0.22 $ 0.22 $ 0.45 $ 0.45
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes to financial statements are an integral part of
these financial statements.
STATEMENT OF INVESTMENT PORTFOLIO
AS AT JUNE 30, 2005
Unaudited
Description No. of Units Cost Fair Value
-------------------------------------------------------------------------
BFI Canada Income Fund 595,000 $ 8,188,957 $ 16,243,500
CCS Income Fund 355,000 4,379,168 10,295,000
Chemtrade Logistics Income Fund 120,000 2,042,622 1,890,000
Connors Bros. Income Fund 725,000 11,618,609 10,947,500
Davis + Henderson Income Fund 550,000 7,544,330 11,506,000
Energy Savings Income Fund 475,000 7,985,435 8,312,500
Gateway Casinos Income Fund 600,000 11,513,010 11,604,000
Great Lakes Carbon Income Fund 625,000 7,440,017 7,631,250
Hardwoods Distribution Income Fund 300,000 3,812,055 3,495,000
P Income Fund 910,000 9,772,513 10,428,600
Keystone North America Inc. 490,000 4,911,153 4,826,500
Livingston International
Income Fund 350,000 4,887,479 7,448,000
Menu Foods Income Fund 450,000 5,802,975 4,387,500
Newalta Income Fund 500,000 8,269,599 11,055,000
Noranda Income Fund 880,000 9,835,370 10,956,000
Superior Plus Income Fund 425,000 9,743,094 13,536,250
The Consumers' Waterheater
Income Fund 500,000 7,062,805 8,140,000
UE Waterheater Income Fund 625,000 7,141,410 8,562,500
Westshore Terminals Income Fund 850,000 5,517,581 10,081,000
Yellow Pages Income Fund 885,000 11,156,889 13,195,350
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BUSINESS TRUSTS: 40.2% 148,625,071 184,541,450
-------------------------------------------------------------------------
Calloway Real Estate
Investment Trust 650,000 9,507,500 13,929,500
Canadian Hotel Income Properties
Real Estate Investment Trust 725,000 7,135,781 8,250,500
Canadian Real Estate Investment
Trust 545,000 8,241,943 10,523,950
Chartwell Seniors Housing Real
Estate Investment Trust 425,000 6,153,043 6,103,000
Cominar Real Estate Investment
Trust 505,000 7,137,417 9,529,350
H&R Real Estate Investment Trust 690,000 10,719,257 13,468,800
IPC US Income Commercial Real
Estate Investment Trust 635,000 6,997,947 6,978,650
O&Y Real Estate Investment Trust 500,000 6,125,249 7,500,000
Primaris Retail Real Estate
Investment Trust 550,000 6,916,978 7,782,500
Retirement Residences Real Estate
Investment Trust 760,000 9,438,557 6,908,400
RioCan Real Estate Investment Trust 700,000 10,020,050 14,000,000
Summit Real Estate Investment Trust 680,000 11,515,894 13,946,800
Sunrise Senior Living Real
Estate Investment Trust 265,000 2,831,389 3,328,400
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REAL ESTATE INVESTMENT TRUSTS:
26.7% 102,741,005 122,249,850
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Algonquin Power Income Fund 400,000 4,131,185 4,140,000
AltaGas Income Trust 390,000 8,476,896 9,839,700
Calpine Power Income Fund 870,000 9,831,015 9,048,000
Fort Chicago Energy Partners L.P. 1,005,000 10,009,639 13,075,050
Inter Pipeline Fund 1,150,000 8,925,529 11,247,000
Keyera Facilities Income Fund 600,000 7,177,067 9,804,000
Macquarie Power Income Fund 525,000 5,430,070 5,958,750
Northland Power Income Fund 845,000 9,848,789 12,387,700
Pembina Pipeline Income Fund 800,000 9,974,994 11,120,000
Taylor NGL Limited Partnership 1,200,000 6,022,134 11,256,000
TransAlta Power, L.P. 700,000 6,740,498 6,895,000
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POWER AND PIPELINE TRUSTS: 22.8% 86,567,816 104,771,200
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ARC Energy Trust 425,000 5,622,697 8,474,500
Bonavista Energy Trust 135,000 3,569,250 4,190,400
Canadian Oil Sands Trust 70,000 2,929,238 6,307,000
Enerplus Resources Fund 115,000 3,378,620 5,382,000
Focus Energy Trust 375,000 5,254,235 8,100,000
Vermilion Energy Trust 300,000 5,114,328 7,008,000
Viking Energy Royalty Trust 790,000 4,396,618 5,593,200
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OIL AND GAS ROYALTY TRUSTS: 9.8% 30,264,986 45,055,100
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CASH: 0.5% 2,271,732 2,271,732
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Total Investment Portfolio,
including Cash $370,470,610 $458,889,332
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The accompanying notes to financial statements are an integral part of
this financial statement.
STATEMENTS OF NET REALIZED GAIN (LOSS) FROM INVESTMENT TRANSACTIONS
FOR THE PERIODS
ENDED JUNE 30 Three Months Ended Six Months Ended
June 30 June 30
Unaudited 2005 2004 2005 2004
-------------------------------------------------------------------------
Proceeds from Sale
of Investments $ 30,734,291 $ 17,806,182 $ 71,098,099 $ 27,858,333
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Less: Cost of
Investments
Sold:
Owned at
Beginning
of Period 363,381,292 383,925,913 374,937,110 158,243,602
Purchased
During
Period 36,039,041 26,123,976 55,083,820 263,906,720
Owned at End
of Period (368,198,878) (392,819,358) (368,198,878) (392,819,358)
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31,221,455 17,230,531 61,822,052 29,330,964
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Net Realized Gain
(Loss) from
Investment
Transactions $ (487,164) $ 575,651 $ 9,276,047 $ (1,472,631)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005 AND 2004 (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES
The interim financial statements of COMPASS Income Fund (the "Fund") have
been prepared in accordance with Canadian generally accepted accounting
principles ("GAAP"). They follow the same accounting policies and methods
of application as the Fund's financial statements for the year ended
December 31, 2004. The Fund's interim financial statements do not include
all disclosures required by GAAP for annual financial statements and
accordingly, should be read in conjunction with the financial statements
for the year ended December 31, 2004 as set out on pages 49 to 51 and 78
to 82 of the Middlefield Income Funds 2004 Annual Report.
2. DISTRIBUTIONS
For the six months ended June 30, 2005, distributions amounted to $0.45
per unit (2004 - $0.45). Distributions of the Fund, at the discretion of
the unitholder, are reinvested in additional units of the Fund, under the
Distribution Reinvestment Plan without sales charge. For the six months
ended June 30, 2005, 15,848 units (2004 - 20,149) were issued under the
Plan of which no units (2004 - 3,164) were issued from treasury.
DISTRIBUTION REINVESTMENT PLAN
The Fund's Distribution Reinvestment Plan allows unitholders to
automatically reinvest monthly distributions in additional units of the
Fund. This feature provides unitholders with an excellent opportunity to
benefit from compounding by investing distributions at a high
reinvestment rate. The Plan also allows participants to purchase
additional units for cash. Please contact your investment advisor to
enroll in the Plan or contact Angela Wanniappa at (888) 890-1868.
FUND PROFILE
The primary objective of the Fund is to provide unitholders with a stable
monthly income stream of 9% per annum, as well as capital appreciation.
COMPASS invests in a diversified portfolio of income trusts with an emphasis
on business trusts, supplemented by power and pipeline trusts, real estate
investment trusts, and oil and gas royalty trusts. COMPASS is fully RRSP
eligible. COMPASS trades on the Toronto Stock Exchange under the symbol
"CMZ.UN".
DIRECTORS AND OFFICERS OF THE MANAGER
Murray J. Brasseur, Chairman
H. Roger Garland, Director
W. Garth Jestley, President, C.E.O. and Director
Dean C. Orrico, Executive Vice President
Sylvia V. Stinson, C.F.O. and Secretary
Angela V. Wanniappa, Senior Vice President
Charles B. Young, Director
THE CO-ADVISORS
Guardian Capital LP
Kevin R. Hall, Portfolio Manager
John G. Priestman, Managing Director
Michele Robitaille, Portfolio Manager
J.J. Woolverton, Managing Director
Middlefield Capital Corporation
Darren N. Cabral, Executive Director, Research
Richard L. Faiella, Managing Director, Corporate Finance
W. Garth Jestley, President and C.E.O.
Robert F. Lauzon, Executive Director, Trading
Dean C. Orrico, Managing Director
Scott A. Roberts, Director, Trading
HEAD OFFICE
Middlefield Group
One First Canadian Place
58th Floor
P.O. Box 192
Toronto, Canada M5X 1A6
Telephone (416) 362-0714
Fax (416) 362-7925
Email invest(at)middlefield.com
Web Site www.middlefield.com
>>
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COMPASS announces Second Quarter Results
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