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COMPASS Income Fund: First Quarter Report 2003 For the quarter ended March 31, 2003

15:49 EDT Thursday, May 29, 2003

TORONTO, ONTARIO--COMPASS Income Fund ("COMPASS") is pleased to present its unaudited financial results for the quarter ended March 31, 2003, the details of which are attached.

In the first quarter of 2003, COMPASS continued to meet its objective of providing stable monthly distributions to unitholders. On an annualized basis, the current distribution rate of $0.075 per month represents a cash-on-cash yield of 9.2% per annum based on the current market price of $9.80 per unit. In addition to its monthly target distribution, the Fund paid a special distribution of $0.05 per unit to unitholders of record on April 30, 2003. The special distribution represents excess income generated by the Fund. COMPASS intends to maximize the current return to unitholders through the payment of special distributions from time to time out of income in excess of that required to pay $0.075 per unit monthly.

As at March 31, 2003, the asset class weightings for the COMPASS portfolio were:

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Asset Class                                    Portfolio Weighting
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Business Trusts                                                42%
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Pipeline and Power Generation Trusts                           25%
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Real Estate Investment Trusts                                  20%
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Oil and Gas Royalty Trusts                                     10%
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Cash                                                            3%
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COMPASS intends to achieve its objectives through careful security selection 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 heaviest weighting in the Fund's portfolio. The business trust component is supplemented by pipeline and power generation trusts, REITs and oil and gas royalty trusts. 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 and Guardian Capital Inc., who act as co-advisors to the Fund, responsible for asset mix and security selection. The objectives of COMPASS are to provide unitholders with a stable monthly income stream of 9% per annum and to return the original price upon termination of the Fund in December 2009. Monthly distributions paid by COMPASS provide an attractive cash-on-cash yield and favourable tax treatment.

COMPASS trades on the Toronto Stock Exchange under the symbol "CMZ.UN".

MANAGEMENT'S DISCUSSION AND ANALYSIS

MARCH 31, 2003 (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 2002 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

BUSINESS TRUSTS - 42%

During the first quarter of 2003, COMPASS increased its exposure to the business trust sector with the addition of several new trusts. The Fund initiated a position in one IPO, Specialty Foods Group Income Fund. Specialty Foods is a leading independent U.S. producer and marketer of premium branded and private-label processed meat products. Many of the company's national and regional brands hold dominant market share positions in their respective markets. Management has demonstrated an ability to increase cash flow and successfully identify, execute and integrate accretive acquisitions. COMPASS also introduced CCS Income Fund and The Consumers' Waterheater Income Fund to its portfolio during the quarter. CCS Income Fund is a diversified oilfield service company which operates waste-management facilities and owns the fourth largest well servicing fleet in western Canada. CCS has designed a gravity compression system that is generally more efficient than competitor models due to the ability to quickly separate waste components from recoverable oil. In addition, CCS has several treatment, recovery and disposal projects in key geographical areas which could contribute substantially to cash flow. Subsequent to the Fund's investment in CCS, the company announced an $0.18 per unit increase in annualized distributions, reflecting the significant growth in its cash flow. Consumers' Waterheater owns a portfolio of residential natural-gas fired water heaters in Ontario. Its leading market position within its primary target regions, growing customer base, long-life, low-risk asset base and track record of highly stable cash flows underpin the stability of its distributions.

PIPELINE AND POWER GENERATION TRUSTS - 25%

COMPASS continued to reduce its exposure to the power generation trust sector by trimming positions which exhibit a high correlation with movements in interest rates. Pipeline and power generation trusts, however, remain an integral part of COMPASS' portfolio and provide stable cash distributions supported by good quality assets and long-term agreements with creditworthy customers.

REAL ESTATE INVESTMENT TRUSTS - 20%

The Canadian REIT market continues to be supported by reasonable valuations, stable net asset values, low interest rates and a transparent business model. REITs have delivered excellent returns through various market cycles, outperforming the S&P/TSX Composite Index in six of the past eight years.

OIL AND GAS ROYALTY TRUSTS - 10%

The Fund's oil and gas component remained constant in the first quarter with no new names being added or sold.

DISTRIBUTIONS TO UNITHOLDERS

Cash distributions paid to unitholders in the first quarter totaled $0.225 per unit. On an annualized basis, the current monthly distribution rate of $0.075 per unit represents a cash-on-cash yield of 9.2% per annum based on the current market price of $9.80 per unit.

FINANCIAL PERFORMANCE

COMPASS was established on March 27, 2002 and commenced operations on April 16, 2002. As a result there are no comparative amounts for the period ended March 31, 2002. Net assets at March 31, 2003 amounted to $135 million compared to $137 million at December 31, 2002. Net asset value ("NAV") per unit was $9.66 at March 31, 2003 comparable to the NAV at December 31, 2002 of $9.68. COMPASS' total return for the three months ended March 31, 2003 was 2.1%.

Total investment income for the period ended March 31, 2003 amounted to $4.5 million. Net investment income for the period amounted to $3.6 million or $0.26 per unit. The ratio of management fees and other operating expenses (excluding interest expense and bank charges) to average net asset value ("MER") was 1.73% for the period ended March 31, 2003.

OUTLOOK

In the near term, we expect that the Bank of Canada will return to a neutral bias concerning interest rates, reflecting the recent strength in the Canadian dollar as well as the uncertainty with respect to the sustainability of the economic recovery in the U.S. As a result, we believe investors will continue to demand income producing investments as part of an overall portfolio strategy.

Statement Of Financial Highlights                                 
For the three months ended March 31, 2003                         
                                    
Unaudited                                                     2003
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Data Per Unit                                                     
Net Asset Value at Beginning of Period                $       9.68
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Income From Investment Operations:                                
Net Investment Income                                         0.26
Net Realized and Unrealized Loss on Investments             (0.05)
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                                                              0.21
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Distributions To Unitholders                                  0.23
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Net Asset Value at End of Period                      $       9.66
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Ratios/Supplemental Data                                          
Total Assets at End of Period                         $179,921,555
Total Net Assets at End of Period                     $135,311,737
Weighted Average Net Assets                           $137,538,925
Management Expense Ratio(a)                                  1.73%
Portfolio Turnover Rate                                      5.60%
Total Rate of Return for the Period                          2.11%
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(a) Excludes interest expense and bank charges                    


Statements Of Net Assets                                    
As at March 31, 2003 and December 31, 2002
                                          Mar 31            Dec 31
                                            2003              2002
                                       Unaudited           Audited
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Assets:                                                           
Investments at Market Value         $173,040,850      $174,689,000
Cash                                   4,911,902           472,978
Income and Interest Receivable         1,968,803         1,920,182
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                                     179,921,555       177,082,160
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Liabilities:                                                      
Loan Payable                          41,909,387        38,711,401
Accounts Payable and Accrued
 Liabilities                           1,648,815           683,383
Unitholder Distributions
 Payable                               1,051,616         1,061,239
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                                      44,609,818        40,456,023
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Net Assets                          $135,311,737      $136,626,137
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Units Issued and Outstanding          14,004,652        14,121,053
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The accompanying notes to financial statements are an integral
 part of these financial statements.                              


Statement Of Operations                                    
For the three months ended March 31, 2003                         
                                    
Unaudited                                                     2003
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Investment Income:                                                
Income from Investments                                 $4,530,554
Interest                                                    18,247
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                                                         4,548,801
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Expenses:                                                         
Management Fee                                             398,180
Interest and Bank Charges                                  391,946
Service Fee to Investment Dealers                           99,941
General and Administrative                                  87,674
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                                                           977,741
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Net Investment Income                                    3,571,060
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Net Realized and Unrealized Gain (Loss) on Investments:           
Net Realized Loss from Investment Transactions         (2,517,970)
Change in Net Unrealized Gain on Investments             1,929,435
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Net Loss on Investments                                  (588,535)
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Net Increase in Net Assets Resulting from Operations    $2,982,525
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Statement Of Changes In Net Assets                                
For the three months ended March 31, 2003                         
                                    
Unaudited                                                     2003
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Net Assets at Beginning of Period                     $136,626,137
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Operations:                                                       
Net Increase in Net Assets Resulting from Operations     2,982,525
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Distributions To Unitholders                           (3,161,812)
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Unitholder Transactions:                                          
Proceeds from Issue of Trust Units, Net                    145,222
Repurchase of Trust Units                              (1,280,335)
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                                                       (1,135,113)
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Net Decrease in Net Assets                             (1,314,400)
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Net Assets at End of Period                           $135,311,737
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The accompanying notes to financial statements are an integral
 part of these financial statements.                              


STATEMENT OF INVESTMENT PORTFOLIO                            
AS AT MARCH 31, 2003
Unaudited

Description                      No. of Units       Cost   Market Value
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Advanced Fiber Technologies Income
 Fund                                 400,000  $ 4,079,906  $ 4,300,000
Associated Brands Income Fund         325,000    3,497,155    3,851,250
Atlas Cold Storage Income Trust       500,000    5,522,277    5,850,000
BFI Canada Income Fund                420,000    4,262,304    4,914,000
CCS Income Fund                       125,000    2,105,625    2,206,250
Chemtrade Logistics Income Fund       300,000    4,271,000    4,380,000
Clearwater Seafoods Income Fund       310,000    3,161,502    3,456,500
Connors Bros. Income Fund             265,000    3,023,277    3,688,800
Davis + Henderson Income Fund         410,000    4,275,124    5,305,400
Heating Oil Partners Income Fund      345,000    3,767,928    3,995,100
IAT Air Cargo Facilities Income
 Fund                                 150,000    1,795,500    1,275,000
KCP Income Fund                       225,000    2,250,000    2,722,500
Livingston International Income
 Fund                                 300,000    3,112,292    3,888,000
Menu Foods Income Fund                175,000    1,750,000    2,563,750
Noranda Income Fund                   155,000    1,559,071    1,511,250
Specialty Foods Group Income Fund     250,000    2,500,000    2,522,500
Sun Gro Horticulture Income Fund      165,000    1,770,293    1,534,500
Superior Plus Income Fund             260,000    4,896,511    5,088,200
The Consumers' Waterheater Income
 Fund                                 100,000    1,090,000    1,090,000
Versacold Income Fund                 650,000    5,457,833    5,486,000
Westshore Terminals Income Fund     1,000,000    5,699,206    5,580,000
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BUSINESS TRUSTS: 42.2%                          69,846,804   75,209,000
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Algonquin Power Income Fund           520,000    4,909,887    4,576,000
Boralex Power Income Fund             475,000    4,947,994    4,631,250
Fort Chicago Energy Partners L.P.     630,000    5,448,729    5,474,700
Great Lakes Hydro Income Fund         315,000    4,408,364    4,709,250
Inter Pipeline Fund                   850,000    5,803,249    5,270,000
Northland Power Income Fund           440,000    4,670,977    4,734,400
Pembina Pipeline Income Fund          435,000    4,950,592    4,676,250
Taylor NGL Limited Partnership      1,000,000    4,687,007    4,920,000
TransAlta Power, L.P.                 515,000    4,575,519    4,701,950
TransCanada Power, L.P.                30,000      973,210      958,500
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PIPELINE AND POWER GENERATION
 TRUSTS: 25.1%                                  45,375,528   44,652,300
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CHIP Real Estate Investment Trust     475,000    4,392,441    4,037,500
Canadian Real Estate Investment
 Trust                                260,000    3,397,828    3,192,800
Cominar Real Estate Investment
 Trust                                150,000    1,863,354    1,845,000
H&R Real Estate Investment Trust      330,000    4,470,432    4,636,500
Morguard Real Estate Investment
 Trust                                585,000    5,228,014    4,837,950
O&Y Real Estate Investment Trust      265,000    2,848,904    2,517,500
Retirement Residences Real Estate
 Investment Trust                     265,000    3,305,506    2,777,200
RioCan Real Estate Investment Trust   400,000    4,816,419    5,272,000
Summit Real Estate Investment Trust   350,000    5,322,438    5,299,000
TGS North American Real Estate
 Investment Trust                     150,000    1,500,050    1,342,500
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REAL ESTATE INVESTMENT TRUSTS:
 20.1%                                          37,145,386   35,757,950
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Advantage Energy Income Fund          250,000    2,868,045    3,712,500
ARC Energy Trust                      325,000    4,019,565    3,766,750
Canadian Oil Sands Trust               85,000    3,532,879    3,004,750
Enerplus Resources Fund               100,000    2,555,000    2,815,000
Freehold Royalty Trust                170,000    1,712,465    2,002,600
Ultima Energy Trust                   400,000    2,218,465    2,120,000
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OIL AND GAS ROYALTY TRUSTS: 9.8%                16,906,419   17,421,600
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CASH: 2.8%                                       4,911,902    4,911,902
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Total Investment Portfolio, including
 Cash                                         $174,186,039 $177,952,752
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The accompanying notes to financial statements are an integral part of
 this financial statement.                                             


STATEMENT OF NET REALIZED LOSS FROM INVESTMENT TRANSACTIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2003

Unaudited                                                2003
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Proceeds from Sale of Investments               $  10,823,455
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Less: Cost of Investments Sold:
      Owned at Beginning of Period                172,851,722
      Purchased During Period                       9,763,840
      Owned at End of Period                    (169,274,137)
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                                                   13,341,425
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Net Realized Loss from Investment Transactions  $ (2,517,970)
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NOTES TO FINANCIAL STATEMENTS

MARCH 31, 2003 (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. They follow the same accounting policies and methods used in the Fund's financial statements for the period ended December 31, 2002. The Fund's interim financial statements should be read in conjunction with the financial statements for the period ended December 31, 2002 as set out on pages 9 to 13 of the Middlefield Income Funds 2002 Annual Report.

2. DISTRIBUTIONS

The Fund paid cash distributions of $0.075 per unit on each of February 14, March 14 and April 15, 2003 to all unitholders of record on the last day of each of January, February and March 2003, respectively.

3. COMPARATIVE FINANCIAL STATEMENTS

The Fund commenced operations on April 16, 2002. Accordingly, there are no comparative financial statements for the period ended March 31, 2002.

DISTRIBUTION REINVESTMENT PLAN

The Fund's Distribution Reinvestment Plan (the "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. The optional cash purchases require a minimum of $100 per payment. 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 pipeline and power generation 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, Vice President and Secretary
Sylvia V. Stinson, C.F.O.
Anthony P. Traub, Director
Angela V. Wanniappa, Vice President
Charles B. Young, Director

THE CO-ADVISORS

Guardian Capital Inc.
Kevin R. Hall, Portfolio Manager
Stephen D. Kearns, Senior Portfolio Manager
John G. Priestman, Managing Director
J.J. Woolverton, Managing Director

Middlefield Securities Limited
Murray J. Brasseur, Chairman
W. Garth Jestley, President, C.E.O. and Director
Dean C. Orrico, Senior Vice President

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@middlefield.com
Web Site  www.middlefield.com

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 COMPASS' annual report to unitholders and other documents filed with regulatory authorities.

FOR FURTHER INFORMATION PLEASE CONTACT:

COMPASS Income Fund
Dean Orrico
Senior Vice President
(416) 362-0714 ext. 203
www.middlefield.com




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