The year 2009 will long be remembered for dramatic government intervention in economies, extreme volatility in equity capital markets and the meltdown of confidence in credit markets worldwide. While Canada fared better than most OECD nations due to strong supply and demand fundamentals for many of our natural resources as well as the relative strength of our banking sector, Canada was not immune to the unfolding global crisis. In the midst of this turbulence, Middlefield Bancorp Limited ("MBN" or the "Company")generated consolidated net income of $2.1 million in fiscal 2009 by capitalizing on a number of attractive investment opportunities throughout the year.

MBN's public market activities in 2009 were concentrated in the resource and financial services industries. In early calendar 2009, our oil and gas consultant, Houston-based Groppe, Long and Littell ("GL&L"), forecasted a marked increase in the price of oil by year end as a result of the interplay of various fundamental forces. Based upon this input, MBN invested in a number of oil and gas exploration and production companies over the course of the year including sizeable positions in Canadian Natural Resources, Canadian Oil Sands and Nexen. The GL&L forecast proved correct and, as a result, this investment strategy generated gains of approximately $2.0 million. Among its resource investments outside the oil and gas sector, MBN assumed a position in PBS Coals Corp., which was subsequently tendered into a take-over bid by OAO Severstal. This transaction, which closed in the first quarter of the year, resulted in a realized gain to MBN of approximately $0.4 million.

With respect to the financial services sector, MBN capitalized on a value opportunity by purchasing a position in ING Canada Inc. early in the second quarter. This investment was made following the decision by parent company, ING Group, to divest most of its majority stake in ING Canada at a significant discount to the price at which the stock was trading. In the weeks following,

ING Canada's stock price appreciated beyond our estimation of fair value and, consequently, MBN disposed of its position and crystallized a gain of nearly $0.3 million, or 14%.MBN's 2009 investment activities have contributed significantly to earnings, with net realized and unrealized investment gains amounting to approximately $3.2 million.

Regarding the Company ’s oil and gas operations,during the third quarter 2M Energy Corp.(“2M ”)accepted a proposal from the operator of its oil and gas properties located in the Countess area of Alberta to sell its working interest and settle its liabilities in respect of these properties.The transaction resulted in a gain of approximately $0.4 million.

Outlook

With respect to investment plans,MBN will continue to focus on the . nancial services and oil and gas sectors in order to leverage our expertise in these areas.MBN intends to identify strategic opportunities,which offer exceptional prospects for long-term growth,as well as special situation investment opportunities in these and other areas that offer the potential for signi . cant short-term gains.

With approximately $2.00 per share in cash,marketable securities and net deposits with brokers,and no debt outstanding at year end, MBN is well positioned to pursue investment opportunities.We would like to thank our directors and staff for their commitment and support over the past year.

Murray J.Brasseur
Chairman

W.Garth Jestley
President