Middlefield Canadian Income announced its annual results for the year ended 31 December 2024. The company delivered very good relative performance in 2024. MCT delivered shareholder total returns of 20.6% and a NAV total return of 15.1%, both of which comfortably outperformed the benchmark total return of 7.6%. Financials, Energy, and Utilities were all positive contributors primarily due to sector allocation and stock selection gains. The investment manager believes that 2024 represented the early stages of a sustained outperformance following a period of challenging market conditions for the fund’s core sectors. In January 2025, the fund’s dividend was increased from 5.3p to 5.5p per share per annum.

Over 2024, the discount to net asset value at which the fund’s shares traded narrowed from 16.8% at the start of the year to 13.5% at the end. The discount moved to within 6% at the beginning of December 2024 which coincided with the share price increasing to 131.25p, a high point for the year. This increase reflected the buying activity by Saba Capital Management which first announced a notifiable holding in the fund’s shares in April 2024, and which has announced further increases in its holding since such date. Saba’s current total interest in the fund’s shares (comprising its direct and indirect exposure) is estimated to be 29 per cent.

Engagement with Saba

Since the fund’s year-end, on 10 February 2025, the fund, together with three other UK-listed closed-end funds, received a requisition notice from Saba, marking the second phase of Saba’s recent activist campaign in the UK-listed closed-end fund sector. The first phase commenced on 18 December 2024, with Saba requisitioning general meetings at seven UK-listed closed-end funds, proposing resolutions (each of which later failed) to remove the current independent directors of those seven funds and replace them with Saba’s own appointees, with a view to also terminating the management contracts and, in due course, replacing the investment managers with Saba.

The requisition notice received by the fund on 10 February 2025 was for the approval by shareholders of the taking of all necessary steps to implement a scheme or process by which shareholders would become (or have the option to become) shareholders of a UK-listed open-ended investment company (or similar open-ended investment vehicle) implementing a substantially similar strategy to the fund. Such a scheme or process could entail shareholders rolling into an existing or newly established UK-listed open-ended investment company (or similar open-ended investment vehicle), in either case managed by the fund’s existing investment manager or one of its affiliates.

Following consultation with a number of the fund’s largest shareholders, including Saba, and following constructive discussions with Saba, on 21 February 2025, the fund announced that Saba had agreed to withdraw its requisition notice for a period of 60 days to enable the fund and its advisers to formulate proposals that are in the best interests of all shareholders.

At the current time, the board is in the process of considering a number of strategic options in the best interests of shareholders as a whole. A further announcement regarding future proposals that the fund may put to shareholders will be made in due course.

Discussing the outlook for the trust, chairman Michael Phair commented:

“Canada is well-positioned for economic resilience and market outperformance, supported by a lower rate environment, strong corporate fundamentals, and favourable structural tailwinds across key sectors. 2024 served as a strong base for the fund’s core sector exposures, and we expect to build on that momentum. Canadian equities continue to offer attractive valuations, robust earnings growth, and compelling risk-adjusted returns relative to global peers. MCT remains strategically positioned to capitalise on these trends, with its core exposure in financials, real estate, energy, pipelines, and utilities—sectors that are well insulated from external trade policy uncertainty and provide strong income generation, stability, and long-term growth potential. The fund does not hold significant exposure to industries most vulnerable to tariffs, such as manufacturing, autos, and materials, reducing its reliance on unpredictable trade negotiations.

“Despite having similar expected earnings growth over the next two years, Canadian equities continue to trade at steep valuation discounts to US stocks. With a circa 4.5 per cent dividend yield, the fund also provides a stable and growing stream of income to investors in the form of quarterly distributions. We believe the current valuation discount embedded in Canadian equities offers a compelling entry point into high-quality Canadian companies. We continue to advocate that UK investors seeking North American equity exposure should allocate capital to Canada.

“We look forward to an ongoing dialogue with shareholders in order to inform our decision-making process going forward and to enable us to continue to act in the best interests of all shareholders.”