AUGUST PORTFOLIO UPDATE

MIDDLEFIELD CANADIAN INCOME PCC (LON:MCT)

All information is at 31 August 2021 and unaudited

¹ Based on four quarterly interim dividends of 1.275p per share paid 30 October 2020, 29 January 2021, 30 April 2021, 30 July 2021, and based on the share price as at close of business on 31 August 2021.

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:

Markets continued to climb in August with the S&P 500 recording its seventh consecutive month of positive returns. The TSX Composite added 1.5% in British Pounds and edged above 20% on the year. The Fund's net asset value appreciated by 0.9% while its share price increased by 2.8%.

Prime Minister Justin Trudeau called a snap election during the month in the hope his Liberal Party retakes majority control of Canada's parliament. Despite polls showing many Canadians approve of Trudeau's handling of the COVID-19 pandemic, support for the party has fallen significantly in recent weeks as he's being criticized for opportunistically calling an election during a pandemic. The Liberals main opposition is the right-leaning Progressive Conservative Party, led by Erin O'Toole. The Conservatives are currently the slight favourites to win the election and preliminary polling suggesting the race will be very tight leading up to the vote on September 20th. Our team recently published a more comprehensive Canadian election update which you can read here.

Canada is relatively well-positioned to navigate a fourth COVID-19 wave driven by the delta variant and to sustain its economic recovery. As at 28 August 2021, 83% of Canadians over the age of twelve had received at least one COVID-19 vaccine dose, with more than 76% of the eligible population fully vaccinated. Moreover, Canada's unique strategy of mixing vaccine doses and spacing out dosing intervals may prove to be advantageous, with recent studies showing it should provide better protection against the virus over the long term. The COVID-19 situation is showing signs of improvement in the United States as well. Vaccine mandates have become commonplace, leading to a resurgence in daily vaccines administered. Vaccination levels have become an increasingly important factor in driving economic activity as Canada and the U.S. have progressively reopened most of their economies over the summer. While inflation may eventually dampen the ongoing monetary and fiscal policy efforts, high levels of cash among both consumers and corporations represent potential catalysts to support growth over the next 12-24 months.

The Canadian financials sector generated a total return of 1.8% this month, supported by strong fiscal Q3 results from Canada's Big 6 banks. Bank of Nova Scotia beat consensus revenue expectations by 3% in its international banking segment and 7% in its domestic banking business. Fee-based income and lower provisions for credit losses were the major drivers of variances. Bank of Montreal, the Fund's second largest holding, also posted a solid quarter with both EPS and pre-tax pre-provision earnings ahead of expectations. BMO generated commercial loan growth of 2% in Canada and 3% in the U.S. which provides an encouraging data point for the North American business lending environment. Q3 marks the fifth consecutive quarter that the banks beat consensus expectations.

Looking forward, Canadian banks remain attractive investments. We expect credit tailwinds to persist, underpinned by the aforementioned healthy Canadian consumer. The Canadian savings rate increased to 14.3% in Q2, up from 13% in Q1. Last year's 10.4% increase in personal disposable income was the biggest annual rise in four decades and incremental gains of more than 3% are expected in 2021. Canadians are poised to spend big when the last COVID-19 restrictions, mostly related to travel, begin to recede. We also anticipate net interest margins will inflect higher in fiscal 2022 due to growth in higher margin products, improving loan-to-deposit ratios and potential yield curve steepening. In terms of EPS sensitivity to rate increases, TD Bank, a top ten holding, stands out at roughly three to four times more sensitive than the group average.

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