Newfoundland Capital Corporation Limited - Second Quarter 2010 - Period Ended
June 30 (unaudited)

DARTMOUTH, NS, Aug. 5 /CNW/ - Newfoundland Capital Corporation Limited (the "Company") today announces its financial results for the second quarter ended June 30, 2010.

Highlights Double-digit revenue growth has continued into the second quarter.

    
    - Revenue was $30.8 million in the quarter, a $4.0 million or 15%
      increase over the same period in 2009 while year-to-date revenue of
      $56.5 million was $7.1 million or 14% higher than last year. This
      double-digit growth in revenue was primarily attributable to same-
      station revenue gains.

    - Earnings before interest, taxes, depreciation and amortization
      ("EBITDA"(1)) were $6.1 million in the quarter and $10.5 million year-
      to-date, $0.9 million and $3.3 million higher than the respective
      periods in 2009. A recent ruling by the Copyright Board has increased
      fees for the radio industry. As a result, the Company's copyright fees
      increased by $2.3 million, $1.8 million of which related to prior
      years. Excluding the impact of this adjustment, EBITDA
      would have been 62% higher than the second quarter last year and 77%
      higher than 2009 year-to-date results due to higher revenue.

    - Net income in the quarter was $2.1 million and $3.4 million year-to-
      date; lower than the respective prior periods due to the above-noted
      $2.3 million copyright fee expenses and a $1.6 million
      non-cash impairment charge on one of its broadcast licences.

    - On August 5, 2010, the Company declared dividends of $0.06 per share on
      each of its Class A Subordinate Voting Shares and Class B Common Shares
      payable September 15, 2010 to shareholders of record as at August 31,
      2010. This represents a 20% increase over the $0.05 per share dividend
      which has normally been declared at this time of year.
    

Significant events

    
    - During the quarter, the Company re-branded two of its radio stations.
      CHNO-FM was re-launched as Rewind 103.9, playing Sudbury's Greatest
      Hits and Hank-FM in Winnipeg was re-launched as K-Rock playing classic
      rock music as well as a diverse mix of blues and roots music.

    - Subsequent to quarter end the Copyright Board issued its ruling on
      certain tariffs which resulted in a $2.3 million adjustment for
      copyright fees. As a result of this ruling, copyright fees as a whole
      have increased from 7.3% to 8.9% of revenue.
    

"We have enjoyed double-digit revenue growth for the first half of 2010 and continue to outpace the radio industry's growth rate," commented Rob Steele, President and Chief Executive Officer. "We have achieved excellent positive organic growth as a result of the great efforts across all of our radio stations. We continue to explore new growth opportunities as we enter the second half of the year and remain committed to solidifying our financial position."

    
    Financial Highlights - Second Quarter
    (thousands of dollars except share information)      2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Revenue                                         $  30,785        26,772
    EBITDA(1)                                           6,143         5,224
    Net income                                          2,127         3,144
    -------------------------------------------------------------------------
    Earnings per share - basic                           0.06          0.10
    Share price, NCC.A (closing)                         7.20          7.33
    Weighted average number of shares outstanding
     (in thousands)                                    32,972        32,972
    -------------------------------------------------------------------------
    Total assets                                      231,433       237,790
    Long-term debt                                     51,044        71,840
    Shareholders' equity                              107,085        95,005
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Refer to page 17 for the reconciliation of EBITDA to net income.
    

Management's Discussion and Analysis

The purpose of the Management's Discussion and Analysis ("MD&A"), dated August 5, 2010, is to provide readers with additional complementary information regarding the financial condition and results of operations for Newfoundland Capital Corporation Limited (the "Company") and should be read in conjunction with the unaudited interim consolidated financial statements and related notes for the periods ended June 30, 2010 and 2009 as well as the annual audited consolidated financial statements and related notes and the MD&A contained in the Company's 2009 Annual Report. These documents along with the Company's Annual Information Form and other public information are filed electronically with various securities commissions in Canada through the System for Electronic Document Analysis and Retrieval ("SEDAR") and can be accessed at www.sedar.com. All amounts are stated in Canadian dollars. Certain of the comparative figures have been reclassified to conform to the financial statement presentation adopted in Fiscal 2010.

Management's Discussion and Analysis of financial condition and results of operations contains forward-looking statements. These forward-looking statements are based on current expectations. The use of terminology such as "expect", "intend", "anticipate", "believe", "may", "will", and other similar terminology relate to, but are not limited to, our objectives, goals, plans, strategies, intentions, outlook and estimates. By their very nature, these statements involve inherent risks and uncertainties, many of which are beyond the Company's control, which could cause actual results to differ materially from those expressed in such forward-looking statements. Readers are cautioned not to place undue reliance on these statements. Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

CORPORATE PROFILE

Newfoundland Capital Corporation Limited (the "Company") is Canada's largest pure-play radio company, employing approximately 800 of the best radio professionals across the country. The Company's portfolio of radio assets includes 60 FM and 19 AM licences which can be heard throughout Canada. The Company reaches millions of listeners each week through a variety of formats and is a recognized industry leader in radio programming, sales and networking.

STRATEGY AND OBJECTIVES

The Company's long-term strategy is to maximize returns on existing operations, convert AM stations to FM, and add new licences through business and licence acquisitions and through the Canadian Radio-television and Telecommunications Commission ("CRTC") licence application process.

As stated in the 2009 Annual Report, this year the Company will continue to grow its existing operations by increasing advertising revenue and remaining focused on controlling discretionary costs to drive EBITDA margins. It will launch recently awarded AM to FM conversions - four in Alberta and two in Newfoundland and Labrador. Management continues to explore acquisition and expansion opportunities that fit the Company's acquisition objectives and it will make applications to the CRTC for new licences and additional AM to FM conversions. The Company's commitment to its talented employees, its customers, its listeners and to the communities it serves remains critical to its success.

CORPORATE DEVELOPMENTS

The following is a review of the key corporate developments which should be considered when reviewing the "Consolidated Financial Review" section. The results of the acquired or launched stations have been included in the consolidated financial statements since the respective acquisition and launch dates.

2010 Developments:

    
    - February - launched the four repeater signals in Prince Edward Island.
    - February - CFCB in Corner Brook, Newfoundland and Labrador celebrated
      its 50th anniversary.
    - February - received CRTC approval to convert the AM station in
      Westlock, Alberta to FM. Planning for the conversion is underway.
    - March - CFRQ-FM, otherwise known as Q104, serving Halifax, Nova Scotia
      was named mid-market station of the year during Canada Music Week.
    - April - received CRTC approval to convert the AM station in Brooks,
      Alberta to FM. Conversion is underway.
    - May - re-launched CHNO-FM as Rewind 103.9 playing Sudbury, Ontario's
      Greatest Hits.
    - July - changed the format of CHNK-FM in Winnipeg, Manitoba re-branding
      it as K-Rock 100.7 World Class Rock. The station plays primarily
      classic rock music as well as a diverse mix of blues and roots music.
    

2009 Developments:

    
    - January - Launched the new FM station in Pincher Creek, Alberta playing
      country music.
    - April - CRTC approved two AM to FM conversions for stations in St. Paul
      and High Prairie, Alberta. Planning for the St. Paul conversion is
      underway while the High Prairie station is expected to be on-air in the
      fall of 2010.
    - June - CRTC approved the Company's applications to convert AM stations
      to FM in Wabush and Goose Bay, Newfoundland and Labrador. Anticipated
      on-air dates are late summer 2010.
    - June - Re-branded CFUL in Calgary, Alberta as a Contemporary Hits Radio
      format, branded as AMP Radio. This format is similar to the very
      popular Ottawa station, Hot 89.9, which was named the 2008 Contemporary
      Hits Radio station of the year.
    - July - Completed the previously announced exchange of assets with
      Rogers Broadcasting Limited. The Company's Halifax AM licence was
      exchanged for Rogers' AM licence in Sudbury, Ontario plus $5.0 million.
    - August - Launched Hot 93.5, the newly acquired Sudbury, Ontario radio
      station which was converted to FM. Its format is Top 40 and has been
      met with a very positive response from both listeners and clients.
    - August - Launched the converted FM radio station in Athabasca, Alberta.
      94.1 FM The River plays Classic Hits.
    - November - The Company's stock was split on a three-for-one basis.
    - December - Completed the previously announced sale of the broadcasting
      assets related to the two FM stations in Thunder Bay, Ontario for
      $4.5 million.
    

CONSOLIDATED FINANCIAL REVIEW

    
    Consolidated Financial Results of Operation
    (thousands of dollars, except percentages)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                   Three months ended June 30      Six months ended June 30
                     2010      2009    Growth      2010      2009    Growth
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Revenue        30,785    26,772        15%   56,491    49,432        14%
    Operating
     expenses      24,642    21,548        14%   45,956    42,164         9%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA(1)       6,143     5,224        18%   10,535     7,268        45%
    Depreciation
     and
     amortization     918       912         1%    1,794     1,813        (1%)
    Interest
     expense          786       935       (16%)   1,550     1,943       (20%)
    Accretion of
     other
     liabilities      190       227       (16%)     380       454       (16%)
    Other expense
     (income)        (624)     (998)      (37%)     (79)   (2,005)        -
    Impairment
     charge         1,609         -         -     1,609         -         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings from
     continuing
     operations     3,264     4,148       (21%)   5,281     5,063         4%
    Provision for
     income taxes   1,137     1,067         7%    1,917     1,398        37%
    -------------------------------------------------------------------------
    Net income
     from
     continuing
     operations     2,127     3,081       (31%)   3,364     3,665        (8%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income
     from
     discontinued
     operations         -        63         -         -        31         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income      2,127     3,144       (32%)   3,364     3,696        (9%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) EBITDA - Earnings before interest, taxes, depreciation and
        amortization - refer to page 17 for reconciliation to net income
    

A more thorough discussion on revenue, operating expenses and EBITDA are described in the section entitled "Financial Review by Segment".

Revenue

In the quarter, consolidated revenue of $30.8 million was $4.0 million or 15% higher than last year; for the six month period ended June 30, 2010 the increase was $7.1 million or 14% higher. The vast majority of this improvement was a result of increased revenue in the broadcasting segment.

Operating expenses

Consolidated operating expenses of $24.6 million were $3.1 million or 14% higher than the second quarter last year and year-to-date operating expenses of $46.0 million were $3.8 million or 9% higher than 2009. The increases were due to higher variable costs and a $2.3 million adjustment for copyright fees in the broadcasting segment.

EBITDA

Consolidated EBITDA in the quarter of $6.1 million was $0.9 million or 18% higher than the same period in 2009. Year-to-date consolidated EBITDA of $10.5 million was $3.3 million or 45% higher than last year. Improved EBITDA was due to growth in the broadcasting segment.

Depreciation and amortization

In the quarter and year-to-date, depreciation and amortization expense was on par with the same periods in 2009.

Interest expense

Interest expense in the second quarter and year-to-date, was less than the prior year due to the lower debt balance.

Accretion of other liabilities

Accretion of other liabilities arises from discounting Canadian Content Development ("CCD") commitments to reflect the fair value of the obligations. The expense decreases as CCD obligations are drawn down.

Other income

Other income generally consists of gains and losses, realized and unrealized, on the Company's marketable securities. Second quarter unrealized gains were $0.6 million (2009 - $1.0 million) and year-to-date unrealized gains were $0.8 million (2009 - $2.0 million), partially offset by a small realized loss.

Broadcast licence impairment charge

During the second quarter, management conducted a broadcast licence impairment analysis for one of its reporting units due to a triggering event in which the Company's request for the removal of certain format restrictions on one of its Winnipeg broadcast licences was not approved by the CRTC. As a result of the analysis, management recorded a broadcast licence impairment charge of $1.6 million, which is more fully described in note 4 of the Company's unaudited interim consolidated financial statements.

Discontinued operations

In 2009, the Company disposed of its net assets associated with the two FM radio stations in Thunder Bay, Ontario and therefore, the 2009 comparative financial results of operations from this component were treated as discontinued operations.

Provision for income taxes

The provision for income taxes is higher than 2009 due to improved pre-tax earnings. The effective income tax rate approximated 35% in the quarter and 36% year-to-date, slightly higher than the statutory rate of 34%. The effective rate for 2009 was lower than the current period because the prior period included mark to market investment gains which are taxed at one half of the normal tax rate.

Net income

Second quarter net income of $2.1 million was $1.0 million or 32% lower than last year. Net income year-to-date of $3.4 million decreased by $0.3 million or 9%. These declines were primarily a result of the $1.6 million broadcast licence impairment charge.

Other comprehensive income ("OCI")

OCI consists of the net change in the fair value of the Company's cash flow hedges. These include interest rate swaps and an equity total return swap. The net change in the fair value of the interest rate swaps recorded in OCI in the quarter was after-tax expense of $0.4 million (2009 - $1.7 million after-tax income) and year-to-date was $0.1 million (2009 - $1.8 million after-tax income). The net change in the fair value of the equity total return swap recorded in OCI in the quarter was after-tax expense of $0.1 million (2009 - $0.4 million after-tax income). Year-to-date the after-tax expense was $0.1 million (2009 - $0.8 million after-tax income).

FINANCIAL REVIEW BY SEGMENT

Consolidated financial figures include the results of operation of the Company's two separately reported segments - Broadcasting and Corporate and Other. The Company provides information about segment revenue, segment EBITDA and operating income because these financial measures are used by its key decision makers in making operating decisions and evaluating performance. For additional information about the Company's segmented information, see note 12 of the Company's unaudited interim consolidated financial statements.

    
    Broadcasting Segment:
    ---------------------
    

The broadcasting segment derives its revenue from the sale of broadcast advertising from its licences across the country. Advertising revenue can vary based on market and economic conditions, the audience share of a radio station, the quality of programming and the effectiveness of a company's team of sales professionals.

Reporting units within the broadcasting segment are managed and evaluated based on their revenue and EBITDA. Here are the key operating results of the broadcasting segment.

    
    Broadcasting Financial Results of Operation
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (thousands
     of dollars,
     except        Three months ended June 30      Six months ended June 30
     percentages)    2010      2009  % Change      2010      2009  % Change
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Revenue      $ 29,875    25,967        15%   54,771    47,764        15%
    Operating
     expenses      22,124    18,847        17%   40,957    37,215        10%
    -------------------------------------------------------------------------
    EBITDA          7,751     7,120         9%   13,814    10,549        31%
    -------------------------------------------------------------------------
    EBITDA
     margin            26%       27%       (1%)      25%       22%        3%
    -------------------------------------------------------------------------
    

Revenue

Broadcasting revenue in the quarter of $29.9 million was $3.9 million or 15% better than last year. For the six month period, broadcasting revenue was $54.8 million, an increase of $7.0 million or 15% over the same period in 2009. The increase came almost entirely from organic (same-station) revenue growth.

The significant revenue improvements were attributed to both local and national advertising revenue. Local revenue growth was 12% while national growth was 14%. Year-to-date, the Company achieved increases over the same period last year of 13% in its Western Canadian properties, a 13% increase in Central Canada and a 12% improvement in Atlantic Canada. These rates have exceeded industry growth.

The Company continues to benefit from successful ratings results and is optimistic this trend will carry on throughout 2010.

Operating expenses

For the quarter, broadcasting operating expenses were $22.1 million, up $3.3 million or 17% over last year. Year-to-date operating expenses were $41.0 million, $3.7 million or 10% higher than the same period in 2009. The increase in operating expenses was due to higher variable costs and the Copyright Board ruling which is described below.

In July 2010, the Copyright Board of Canada rendered a decision on an ongoing copyright fee issue (for more detailed information, refer to the heading "Subsequent Event" on page 15). New tariffs were introduced and one component of the existing tariffs was increased. The ruling was retroactive to January 2008. This resulted in a $2.3 million adjustment to operating expenses; $0.9 million of which related to 2008 and $0.9 million related to 2009.

Excluding the impact of the Copyright Board ruling, broadcasting operating expenses would have been $19.8 million in the quarter and $38.6 million year-to-date. This would have represented a 5% increase over the second quarter last year and a 4% increase year-to-date.

EBITDA

Broadcasting EBITDA for the first quarter was $7.8 million, $0.6 million or 9% higher than the same period in 2009. Year-to-date EBITDA was $13.8 million, $3.3 million or 31% higher than the first six months of 2009. Excluding the effect of the increased copyright fees, EBITDA for the second quarter would have been $10.1 million, $3.0 million or 42% higher than last year. Year-to-date EBITDA would have been $16.2 million, $5.6 million or 53% better than 2009. These significant EBITDA improvements were due to higher revenue and close monitoring of discretionary costs which allowed the Company to post EBITDA margins (prior to the adjustment for tariffs) of 34% in the quarter and 30% year-to-date - 7% and 8% higher than the respective comparative periods.

    
    Corporate and Other Segment:
    ----------------------------
    

The Corporate and Other segment derives its revenue from hotel operations. Corporate and other expenses are related to head office functions and hotel operations.

    
    Corporate and Other Financial Results of Operation
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (thousands
     of dollars,
     except        Three months ended June 30      Six months ended June 30
    percentages)     2010      2009  % Change      2010      2009  % Change
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Revenue      $    910       805        13%    1,720     1,668         3%
    Operating
     expenses       2,518     2,701        (7%)   4,999     4,949         1%
    -------------------------------------------------------------------------
    EBITDA         (1,608)   (1,896)       15%   (3,279)   (3,281)        -
    -------------------------------------------------------------------------
    

Revenue

Revenue for the second quarter and year-to-date was higher than the respective periods in 2009 due to higher hotel revenue.

Operating expenses

Corporate and Other operating expenses for the second quarter of $2.5 million were $0.2 million or 7% lower than 2009. The decrease was primarily related to lower stock-based compensation expense. For the six month period, Corporate and Other operating expenses of $5.0 million were only $0.1 million higher than last year.

EBITDA

Second quarter EBITDA was $0.3 million or 15% better than 2009 because of higher hotel revenue along with reduced stock-based compensation expense. Year-to-date EBITDA was on par with last year.

SELECTED QUARTERLY FINANCIAL INFORMATION

    
    (thousands
     of
     dollars
     except
     per          2010                    2009               2008 (restated)
     share ----------------- ------------------------------- ----------------
     data)      2nd     1st     4th     3rd     2nd     1st     4th     3rd
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Reve-
     nue   $ 30,785  25,706  30,458  25,408  26,772  22,660  29,306  26,069
    Net
     income
     (loss)   2,127   1,237   5,461   6,209   3,144     552  (3,796) (7,580)
    Earnings
     per
     share
      - Basic  0.06    0.04    0.17    0.19    0.10    0.02   (0.12)  (0.23)
      - Dilu-
         ted   0.06    0.04    0.16    0.18    0.09    0.02   (0.12)  (0.23)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

The Company's revenue and operating results vary depending on the quarter because of seasonal fluctuations in advertising sales. The first quarter is generally a period of lower retail spending while the fourth quarter tends to be a period of higher retail spending. The 2010 second quarter net income was impacted by the broadcast licence impairment charge of $1.6 million. In 2009, a gain on the disposal of a broadcasting licence positively impacted net income by $5.6 million in the third quarter. In 2008, the unrealized changes in the value of marketable securities affected net income in the quarters as follows: negative fluctuations of $8.8 million in the third quarter and $4.6 million in the fourth quarter.

As a result of the requirement to adopt CICA 3064 "Goodwill and Intangible Assets" in 2009 which set new accounting standards related to start-up operations, the 2008 comparative figures were restated to include pre-operating costs that had been previously capitalized and amortized. The earnings per share information was restated to reflect the three-for-one stock split that occurred during the fourth quarter in 2009. Discontinued operations, as described in note 3 of the Company's unaudited interim consolidated financial statements, also impacted the comparative figures.

Selected cash flow information - three months ended June 30, 2010

Cash from operating activities was $5.1 million. During the quarter, the Company repaid long-term debt in the amount of $4.5 million, purchased $0.5 million of property and equipment and paid $0.4 million toward CCD commitments.

Selected cash flow information - three months ended June 30, 2009

Cash from operating activities of $2.2 million was used primarily to finance property and equipment additions of $1.9 million.

Selected cash flow information - six months ended June 30, 2010

Cash from operating activities was $8.7 million. During the six month period, the Company repaid $5.6 million of long-term debt, paid dividends of $3.3 million, purchased $1.0 million of property and equipment and paid $0.8 million toward CCD commitments.

Selected cash flow information - six months ended June 30, 2009

Cash from operating activities of $6.2 million was used to purchase property and equipment totalling $2.5 million, to repay $2.0 million of long-term debt and to contribute $1.4 million toward CCD.

Capital expenditures and capital budget

The capital expenditures for 2010 are expected to be approximately $6.0 million. The major planned expenditures include launching recently awarded AM to FM conversions as well as general improvements and upgrades. The Company continuously upgrades its broadcast equipment to improve operating efficiencies.

FINANCIAL CONDITION

Total assets

Assets of $231.4 million were $1.4 million lower than those reported at December 31, 2009. This was mainly due to the reduction of $1.6 million in broadcast licences due to the impairment charge.

Total liabilities

As at June 30, 2010 the Company's total liabilities were $124.3 million, $4.8 million lower than those reported at December 31, 2009 primarily due to the repayment of long-term debt in the amount of $5.6 million.

LIQUIDITY

Liquidity risk

Liquidity risk is the risk that the Company is not able to meet its financial obligations as they become due or can do so only at excessive cost. The Company's growth is financed through a combination of the cash flows from operations and borrowings under the existing credit facility. One of management's primary goals is to maintain an optimal level of liquidity through the active management of the assets and liabilities as well as the cash flows.

Management deems its liquidity risk to be low and this is explained in the paragraphs that follow.

Credit facility and covenants

The Company's syndicated credit facility of $76.5 million was renewed and now expires in June 2012. The Company has chosen a revolving facility because it provides flexibility with no scheduled repayment terms. The cost of borrowing under the new facility is approximately 2 1/4% higher than the previous facility. Other terms and conditions of the facility were improved to give the Company flexibility for growth. Additional details on long-term debt are included in note 8 of the unaudited interim consolidated financial statements.

The Company is subject to covenants on its credit facility. The Company's bank covenants include certain maximum or minimum ratios such as total debt to EBITDA ratio, interest coverage and fixed charge coverage ratio. Other covenants include seeking prior approval for acquisitions or disposals in excess of a quantitative threshold. The Company was in compliance with the covenants throughout the quarter and at quarter end.

Funding sources

Cash flow from operations and funds available from the Company's $76.5 million credit facility have been the primary funding sources of working capital, capital expenditures, Canadian Content Development payments, dividend payments, debt repayments, and other contractually required payments through the past several years. For the six months ended June 30, 2010, the Company's cash generated from operating activities was $8.7 million, its long-term debt balance was $51.0 million and its bank indebtedness was $1.9 million which left $23.6 million available to be drawn upon from the credit facility.

Positive cash balances

The Company does not maintain any significant positive cash balances; instead it uses the vast majority of its positive cash balances to reduce debt and minimize interest expense. As a result, the Company nets its deposits in banks with bank indebtedness. The fact that the Company does not have positive cash positions on its balance sheet does not pose an increase to its liquidity risk because the Company generates cash from operations and, as part of its $76.5 million credit facility, it has a $5.0 million current operating credit line to fund any current obligations and it can also access any unused capacity in its credit facility to fund obligations.

Working capital requirements

As at June 30, 2010, the Company's working capital balance was $3.2 million. The cash from current receivables will be sufficient to cover the Company's current obligations to its suppliers and employees and in combination with ongoing cash from operations and the availability of cash from its debt facility, the Company will be able to meet all other current cash requirements as they arise. If cash inflows from customers are not sufficient to cover current obligations, because of timing issues, the Company has access to a $5.0 million operating credit line. The balance remaining on this operating credit line is $3.1 million.

Future cash requirements

Other than for operations, the Company's cash requirements are mostly for interest payments, repayment of debt, capital expenditures, Canadian Content Development payments, dividends and other contractual obligations. Management anticipates that its cash flows from operations and the availability of the credit facility will provide sufficient funds to meet its cash requirements.

Based on the above discussion and internal analysis, management deems its liquidity risk to be low.

COMMITMENTS AND CONTRACTUAL OBLIGATIONS

There has been no substantial change in the Company's commitments and contractual obligations since the publication of the 2009 Annual Report.

SHARE CAPITAL

Stock split

Effective on November 25, 2009, the Class A Subordinate Voting Shares and Class B Common Shares were split on a three-for-one basis. Accordingly, the comparative number of shares and per share amounts have been retroactively adjusted to reflect the three-for-one split.

Outstanding share data

The weighted average number of shares outstanding at June 30, 2010 was 32,972,220 (2009 - 32,972,220). As of this date, there are 29,200,518 Class A Subordinate Voting Shares and 3,771,702 Class B Common Shares outstanding.

Dividends

Dividends of $0.06 per share were declared in August to all shareholders of record as of August 31, 2010. The dividends will be paid September 15, 2010. Annual dividends of $0.10 per share were declared in December to all shareholders of record as of December 31, 2009. Those dividends were paid January 29, 2010.

Share repurchases

The Company has approval under a Normal Course Issuer Bid to repurchase up to 583,991 Class A Subordinate Voting Shares ("Class A shares") and 75,453 Class B Common Shares. This bid expires February 8, 2011. Year-to-date in 2010 and in 2009, the Company did not repurchase any of its outstanding Class A shares.

EXECUTIVE COMPENSATION

Executive stock option plan

Compensation expense related to executive stock options for the three months ended June 30, 2010 was less than $0.1 million (2009 - less than $0.1 million). Refer to note 5 of the unaudited interim consolidated financial statements for further details relating to the executive stock option plan.

Stock appreciation rights plan

For the quarter ended June 30, 2010, the compensation expense related to stock appreciation rights ("SARS") was $0.2 million (2009 - $0.7 million). Year-to-date, the expense was $0.2 million (2009 - $0.9 million). The total obligation was $1.2 million (2009 - $0.9 million). Refer to note 7 of the unaudited interim consolidated financial statements for further details relating to SARS.

FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

For more detailed disclosures about derivative financial instruments and financial risk management, refer to note 10 of the unaudited interim consolidated financial statements.

Interest rate risk management

To hedge its exposure to fluctuating interest rates on its long-term debt, the Company has entered into interest rate swap agreements with Canadian chartered banks. The swap agreements expire in 2013 and involve the exchange of the three-month bankers' acceptance floating interest rate for a fixed interest rate. The difference between the fixed and floating rates is settled quarterly with the bank and recorded as an increase or decrease to interest expense. The aggregate notional amount of the swap agreements was $55.0 million (2009 - $60.0 million). The Company formally assesses effectiveness of the swaps at inception and on a regular basis and has concluded that the swaps are effective in offsetting changes in interest rates. The aggregate fair value of the swap agreements, which represents the amount that would be payable by the Company if the agreements were terminated at June 30, 2010 was $3.6 million (2009 - $4.5 million). After-tax, the unrealized non-cash loss recognized in OCI for the quarter was $0.4 million (2009 - $1.7 million after-tax income) and year-to-date was $0.1 million (2009 - $1.8 million after-tax income).

Share price volatility management

In July 2006, the Company entered into an agreement to hedge its obligations under the stock appreciation rights plan using an equity total return swap agreement to reduce the volatility in cash flow and earnings due to possible future increases in the Company's share price. Gains or losses realized on the quarterly settlement dates are recognized in income in the same period as the SARS compensation expense. Unrealized gains and losses, to the extent that the hedge is effective, are deferred and included in OCI until such time as the hedged item affects net income. If at any time, the hedge is deemed to be ineffective or the hedge is terminated or de-designated, gains or losses, including those previously recognized in OCI, will be recorded in net income immediately.

The Company has concluded that this cash flow hedge is effective. The estimated fair value of the equity total return swap receivable at June 30, 2010 was $1.7 million (2009 - $1.9 million). After-tax the unrealized non-cash loss recognized in OCI for the quarter was $0.1 million (2009 - after-tax income of $0.4 million) and year-to-date was $0.1 million (2009 - after-tax income of $0.8 million).

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The fair value of the Company's marketable securities is affected by changes in the quoted share prices in active markets. Such prices can fluctuate and are affected by numerous factors beyond the Company's control. In order to minimize the risk associated with changes in the share price of any one particular investment, the Company diversifies its portfolio by investing in various stocks in varying industries. It also conducts regular financial reviews of publicly available information related to its investments to determine if any identified risks are within tolerable risk levels. As at June 30, 2010, a 10% change in the share prices of each marketable security would result in a $0.4 million after-tax change in net income.

Credit risk management

Credit risk is the exposure that the Company faces with respect to amounts receivable from other parties. Credit exposure is managed through credit approval and monitoring procedures.

The Company is subject to normal credit risk with respect to its receivables. A large customer base and geographic dispersion minimize credit risk. The Company reviews its receivables for possible indicators of impairment on a regular basis and as such, it maintains a provision for potential credit losses.

At June 30, 2010, the Company's credit exposure as it related to its receivables continued to be slightly higher than in the past due to the recent Canadian economic conditions. The Company sells advertising airtime primarily to retail customers and since their results may also be impacted by the current economy, it is difficult to predict the impact this could have on the Company's receivables' balance. The Company believes its provision for potential credit losses to be adequate at this time given the current circumstances.

With regard to the Company's derivative instruments, the counterparty risk is managed by only dealing with Canadian Chartered Banks having high credit ratings.

Capital Management

The Company defines its capital as shareholders' equity. The Company's objective when managing capital is to pursue its strategy of growth through acquisitions and through organic operations so that it can continue to provide adequate returns for shareholders. The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, issue new shares or repurchase shares. The Directors and senior management of the Company are of the opinion that from time to time the purchase of its shares at the prevailing market price would be a worthwhile investment and in the best interests of the Company and its shareholders. Material transactions and those considered to be outside the ordinary course of business, such as acquisitions and other major investments or disposals, are reviewed and approved by the Board of Directors.

FUTURE ACCOUNTING POLICIES

Section 1582 Business Combinations

During 2009, the CICA issued Handbook Section 1582 Business Combinations which replaces Section 1581 bearing the same name. This Section is effective for fiscal years beginning on or after January 1, 2011, with earlier adoption permitted, and the changes align the standard with the guidance in International Financial Reporting Standards ("IFRS"). Of the amendments in the Section, the one that will represent the most significant change in how the Company accounts for business combinations is the determination of the cost of the purchase. The cost that is allocated to the fair value of the net assets acquired is the direct cost of the business combination; indirect costs such as legal or restructuring are expensed. The Company intends to early adopt this standard if any business combinations should occur in 2010. The impact the changes will have on its consolidated results will continue to be monitored.

Section 1601 Consolidated Financial Statements and Section 1602 Non-controlling Interests

These Sections were issued and together replace Section 1600 Consolidated Financial Statements. These too are applicable for fiscal years beginning on or after January 1, 2011, with earlier adoption permitted. The new sections establish standards for the preparation of consolidated financial statements and for the accounting of a non-controlling interest in a subsidiary in consolidated financial statements subsequent to a business combination. The Company will continue to evaluate the impact of the amendments.

International Financial Reporting Standards

On February 13, 2008, the Accounting Standards Board confirmed that IFRS will be required for publicly accountable profit-oriented enterprises for fiscal years beginning on or after January 1, 2011. After that date, IFRS will replace Canadian GAAP for those enterprises. The Company will apply IFRS beginning January 1, 2011 and will present 2010 comparative figures using IFRS, starting in the first quarter of 2011.

The Company has committed adequate internal resources to oversee the IFRS project and external consultants have been engaged throughout the process. The Audit and Governance Committee is regularly updated on the status of the project. Management has satisfied itself that it has sufficient resources, systems and applications in place to meet its financial reporting requirements.

IFRS-1 First-time Adoption of International Financial Reporting Standards provides guidance for transition which generally requires an entity to apply all IFRS standards retrospectively, with prior period restatements, on adoption of the new standards. However, IFRS-1 also includes mandatory exceptions and certain exemptions which enable an entity to apply certain areas of the standards prospectively. Management has analysed the exceptions and exemptions available under IFRS-1 and is considering applying the exemptions listed in the table below. A brief description of the impact of applying these exemptions is discussed as well.

    
    -------------------------------------------------------------------------
    Exemption              Impact
    -------------------------------------------------------------------------
    Business combinations  The Company will elect to not restate any prior
                           business combinations on adoption, to the extent
                           the assets and liabilities meet the recognition
                           criteria under the relevant IFRS standards.

                           (If any business combinations occur during fiscal
                           2010, the Company will early adopt the new rules
                           under Canadian GAAP Section 1582 Business
                           Combinations, described earlier, as they are
                           consistent with IFRS.)
    -------------------------------------------------------------------------
    Fair value or          Due to the extensive cost involved in revaluing
    revaluation as         its property and equipment and the fact that most
    deemed cost            arose through business combinations, the Company
                           has chosen not to revalue property and equipment
                           on the transition date to its fair value.
    -------------------------------------------------------------------------
    Employee benefits      The Company has elected to charge to equity any
                           unamortized actuarial gains/losses arising from
                           the defined benefit pension plans.  The financial
                           impact of this election, along with other pension
                           restatement entries, approximates $2.0 million.
    -------------------------------------------------------------------------
    Share-based payment    The Company will elect not to retrospectively
    transactions           apply the IFRS-2 Share-Based Payments standards
                           for any executive stock options granted prior to
                           November 2002 and for any options that have fully
                           vested or have been exercised prior to transition
                           date.
    -------------------------------------------------------------------------
    

Management has identified the differences between Canadian GAAP and IFRS and has devoted considerable time and resources on those areas that will most significantly impact the Company. The following table sets forth the accounting standards that will most likely impact the Company's consolidated financial statements; however, the actual impact has not been fully measured and conclusions may differ as management continues its analysis. Some of the standards are in the process of being reviewed and/or modified and the impact of those changes could pose differences for the Company's consolidated financial statements as well. Management is monitoring these standards closely.

The following list shows the areas that management believes will present the most significant differences in accounting treatment based on the standards in effect as at June 30, 2010. It is not a complete and exhaustive list of all the Canadian GAAP and IFRS differences. Quantification of the impact is ongoing and will continue to be communicated as the transition date nears.

The following are the key accounting areas management believes will impact the Company's consolidated financial statements with a brief description of the likely impact.

    
    -------------------------------------------------------------------------
    Key accounting areas   Impact
    -------------------------------------------------------------------------
    IAS - 1 Presentation   Additional financial statement note disclosures
    of Financial           will be required.
    Statements
    -------------------------------------------------------------------------
    IAS - 12 Income Taxes  Future income tax assets/liabilities will be
                           referred to as deferred income tax
                           assets/liabilities and no current classification
                           will be permitted.
                           The criteria to recognize and measure deferred
                           income taxes may result in differences compared to
                           existing future income tax calculations.
    -------------------------------------------------------------------------
    IAS - 16 Property and  Entities are required to split traditional asset
    Equipment              categories into components based on varying useful
                           lives which may result in changes to the amount of
                           annual depreciation expense.
    -------------------------------------------------------------------------
    IAS - 19 Employee      An accounting policy choice is available for
    Benefits               actuarial gains or losses after adoption;
                             - an entity may elect to amortize the
                               gains/losses using the corridor approach;
                             - it may elect to recognize the gains/losses in
                               net income annually; or
                             - it may elect to recognize gains/losses in OCI
                               annually.
                           Under IFRS, there are differences in how defined
                           benefit plan assets are valued and how an entity
                           measures its plan asset valuation allowance, if
                           any.
                           This particular standard is under review by
                           standard setters and any modification to it may
                           dictate the accounting treatment the Company will
                           adopt as it relates to actuarial gains and losses.
    -------------------------------------------------------------------------
    IAS - 36 Impairment    Impairment calculations under IFRS are done at the
    of Assets              cash-generating unit ("CGU") which is defined as a
                           unit that has independent cash inflows (as opposed
                           to independent net cash flows under Canadian
                           GAAP).
                           Calculations are done using a discounted cash flow
                           method under a one-step approach (as opposed to a
                           two-step approach under Canadian GAAP).
                           Goodwill is allocated and tested in conjunction
                           with its related CGU or group of CGU's that
                           benefit from collective synergies. Any impairment
                           of intangible assets that occurs after the
                           adoption of IFRS, other than goodwill, may be
                           reversed.
    -------------------------------------------------------------------------
    IAS - 38 Intangible    After analysing IAS 38, management has concluded
    Assets                 that there will be no significant differences in
                           how the Company measures its internally-developed
                           broadcast licences under IFRS.
    -------------------------------------------------------------------------
    IAS - 39 Financial     This standard will effectively be replaced by new
    Instruments:           IFRS-9 Financial Instruments effective January 1,
    Recognition and        2013 and may pose differences in how the Company
    Measurement            classifies, recognizes and measures its financial
                           instruments, including how it accounts for hedges.
                           Earlier adoption may be permitted and the Company
                           will monitor these standards closely.
    -------------------------------------------------------------------------
    IFRS - 2 Share-based   The Company anticipates a change in how it
    Payments               measures executive compensation for its stock
                           appreciation rights' plan because of differences
                           related to pricing models, vesting periods and how
                           to account for forfeiture.
    -------------------------------------------------------------------------
    IFRS - 3 Business      Under this standard, acquisition-related costs
    Combinations           such as legal, accounting, and other
                           administrative costs, cannot be capitalized; they
                           are to be expensed as period costs. Under Canadian
                           GAAP, these costs were included in the cost of the
                           business combination and capitalized.
                           The Company is still researching the treatment of
                           other significant commitments that arise on
                           business combinations and are payable to third
                           parties, such as CCD commitments. The outcome of
                           this research will impact the accounting for any
                           future business acquisitions the Company
                           undertakes. Currently these commitments, which are
                           equal to 6% of the purchase price, are
                           capitalized under Canadian GAAP.
    -------------------------------------------------------------------------
    

At this time, management is on track with the conversion project; however it is not in a position to quantify the impact of all of the differences that will arise upon the adoption of IFRS. The Company will disclose more detailed information during its third quarter interim period as it proceeds with its analyses and conclusions. Certain analyses that will enable full disclosure are still being researched and their conclusions are important to the Company and its consolidated financial results.

CRITICAL ACCOUNTING ESTIMATES

There has been no substantial change in the Company's critical accounting estimates since the publication of the 2009 Annual Report.

OFF-BALANCE SHEET ARRANGEMENTS

The Company's off-balance sheet arrangements consist of operating leases. Other than these, which are considered in the ordinary course of business, the Company does not have any other off-balance sheet arrangements and does not expect to enter into any other such arrangement other than in the ordinary course of business.

SUBSEQUENT EVENT

Subsequent to June 30, 2010, the Copyright Board of Canada issued a fact sheet entitled "Commercial Radio Tariff 2008 to 2012" that introduced new copyright tariffs and that increased one component of the existing tariffs. The decision is retroactive to January 1, 2008 and repayment is expected to be made evenly over twelve months beginning in September 2010. As a result of this decision, the Company has adjusted its copyright fees expense, included in operating expenses, by $2.3 million, $0.9 million of which relates to 2008 and $0.9 million to 2009.

RISKS AND OPPORTUNITIES

There has been no substantial change in the Company's risks and opportunities since the publication of the 2009 Annual Report with the exception of the decision on the copyright tariffs as disclosed above under the heading "Subsequent Event".

CHANGES IN INTERNAL CONTROLS OVER FINANCIAL REPORTING

There were no changes in the Company's internal controls over financial reporting that occurred in the three months ending June 30, 2010 that have materially affected, or are likely to materially affect, the Company's internal controls over financial reporting.

OUTLOOK

The Company has experienced another impressive quarter by posting double digit revenue growth in its core operating segment. Management is optimistic that the positive growth will continue throughout the remainder of the year.

The close monitoring of discretionary costs has paid off; the EBITDA margins achieved throughout 2010 are some of the highest ever achieved by the Company's broadcasting segment (when excluding the $2.3 million adjustment for the copyright tariffs).

Management will carry on with its successful operating strategy and focus on the following:

    
    - Continue to maximize operating margins from the existing stations by:
        - Managing costs to achieve the highest possible EBITDA margins
          without compromising the quality of the product;
        - Increasing revenues by providing creative solutions to advertisers,
          particularly with regard to local revenue where management has the
          most ability to influence buying decisions;
        - Augmenting audience share by providing locally-focused programming
          that delivers the music, news and information that local
          communities want.
    - Plan and prepare to launch the upcoming AM to FM conversions;
    - Review all acquisition opportunities that are cash accretive in the
      near term and that would complement the Company's strategy;
    - Apply for licences in new communities, thereby expanding the number of
      licences held; and
    - Seek approval from the CRTC to convert additional AM stations to FM
      which generates immediate top line growth.
    

Non-GAAP Measure

(1) EBITDA is defined as net income from continuing operations excluding depreciation and amortization expense, interest expense, accretion of other liabilities, other expense (income), broadcast licence impairment charge and provision for income taxes. A calculation of this measure is as follows:

    
                                     Three months ended    Six months ended
                                                June 30             June 30
    (thousands of dollars)               2010      2009      2010      2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income from continuing
     operations                     $   2,127     3,081     3,364     3,665
    Provision for income taxes          1,137     1,067     1,917     1,398
    Broadcast licence impairment
     charge                             1,609         -     1,609         -
    Other expense (income)               (624)     (998)      (79)   (2,005)
    Accretion of other liabilities        190       227       380       454
    Interest expense                      786       935     1,550     1,943
    Depreciation and amortization
     expense                              918       912     1,794     1,813
                                    -------------------- --------------------
    EBITDA                          $   6,143     5,224    10,535     7,268
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

This measure is not defined by Generally Accepted Accounting Principles and is not standardized for public issuers. This measure may not be comparable to similar measures presented by other public enterprises. The Company has included this measure because the Company's key decision makers believe certain investors use it as a measure of the Company's financial performance and for valuation purposes. The Company also uses this measure internally to evaluate the performance of management. Beginning in 2010, other income, which is primarily the results from investment holdings, was excluded from the determination of EBITDA. Consolidated EBITDA for 2009 has been adjusted to reflect this reclassification.

    
    Newfoundland Capital Corporation Limited
    Notice of Disclosure of Non-Auditor Review of Interim Financial
    Statements for the three months and six months ended June 30, 2010 and
    2009
    

Pursuant to National Instrument 51-102, Part 4, subsection 4.3(3)(a) issued by the Canadian Securities Administrators, the interim financial statements must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor if an auditor has not performed a review of the interim financial statements.

The accompanying unaudited interim consolidated financial statements of the Company for the interim periods ended June 30, 2010 and 2009 have been prepared in accordance with Canadian generally accepted accounting principles and are the responsibility of the Company's management.

The Company's independent auditors, Ernst & Young LLP, have not performed a review of these interim consolidated financial statements in accordance with the standards established by the Canadian Institute of Chartered Accountants for a review of interim financial statements by an entity's auditor.

Dated this 5th day of August, 2010

    
    Interim Consolidated Balance Sheets
    (unaudited)
                                                      June 30   December 31
    (thousands of dollars)                               2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    ASSETS

    Current assets
      Marketable securities                         $   5,019         4,923
      Receivables                                      24,200        23,831
      Prepaid expenses                                  1,164           778
      Other assets                                      1,721         1,810
      Future income tax assets                          1,074         1,173
                                                    -------------------------
    Total current assets                               33,178        32,515

    Property and equipment                             36,464        37,248
    Other assets                                        4,423         4,216
    Broadcast licences (note 4)                       148,032       149,641
    Goodwill                                            7,045         7,045
    Future income tax assets                            2,291         2,188
                                                    -------------------------
                                                    $ 231,433       232,853
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    LIABILITIES AND SHAREHOLDERS' EQUITY

    Current liabilities
      Bank indebtedness                             $   1,912            99
      Accounts payable and accrued liabilities         19,828        17,118
      Income taxes payable                              8,280         6,836
      Dividends Payable                                     -         3,297
      Current portion of long-term debt                     -        57,100
                                                    -------------------------
        Total current liabilities                      30,020        84,450
    Long-term debt (note 8)                            51,044             -
    Other liabilities                                  17,571        18,946
    Future income tax liabilities                      25,713        25,668
    Shareholders' equity                              107,085       103,789
                                                    -------------------------
                                                    $ 231,433       232,853
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Subsequent events (note 13)
    See accompanying notes to the interim consolidated financial statements


    Interim Consolidated Statements of Income
    (unaudited)
                                     Three months ended    Six months ended
    (thousands of dollars except           June 30             June 30
     per share data)                     2010      2009      2010      2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Revenue                         $  30,785    26,772    56,491    49,432
    Operating expenses (note 13)       24,642    21,548    45,956    42,164
    Depreciation and amortization         918       912     1,794     1,813
                                    -----------------------------------------
    Operating income                    5,225     4,312     8,741     5,455
    Interest expense                      786       935     1,550     1,943
    Accretion of other liabilities        190       227       380       454
    Other expense (income)               (624)     (998)      (79)   (2,005)
    Broadcast licence impairment
     charge (note 4)                    1,609         -     1,609         -
                                    -----------------------------------------
    Earnings from continuing
     operations before income taxes     3,264     4,148     5,281     5,063
    Provision for income taxes          1,137     1,067     1,917     1,398
                                    -----------------------------------------
    Net income from continuing
     operations                         2,127     3,081     3,364     3,665
    Net income from discontinued
     operations (note 3)                    -        63         -        31
                                    -----------------------------------------
    Net income                      $   2,127     3,144     3,364     3,696
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per share from
     continuing operations (notes 5
     and 11)
      - basic                       $    0.06      0.09      0.10      0.11
      - diluted                          0.06      0.09      0.10      0.11
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Earnings per share (notes 5
     and 11)
      - basic                       $    0.06      0.10      0.10      0.11
      - diluted                          0.06      0.09      0.10      0.11
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the interim consolidated financial statements


    Interim Consolidated Statements of Shareholders' Equity
    (unaudited)

                                                           Six months ended
                                                               June 30
    (thousands of dollars)                               2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Retained earnings, beginning of period          $  60,616        48,547
    Net income                                          3,364         3,696
                                                    -------------------------
    Retained earnings, end of period                   63,980        52,243
    Capital stock                                      42,913        42,913
    Contributed surplus (note 6)                        2,342         2,044
    Accumulated other comprehensive loss               (2,150)       (2,195)
                                                    -------------------------

    Total shareholders' equity                      $ 107,085        95,005
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the interim consolidated financial statements


    Interim Consolidated Statements of Comprehensive Income
    (unaudited)
                                     Three months ended    Six months ended
                                           June 30             June 30
    (thousands of dollars)               2010      2009      2010      2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income                      $   2,127     3,144     3,364     3,696
                                    -----------------------------------------
    Other comprehensive income:
    Change in fair values of cash
     flow hedges
      Interest rate swaps (note
       10(b)):
        Increase (decrease) in fair
         value net of $328
         settlement and taxes            (416)    1,772       (83)    1,664
        Reclassification to net
         income of realized
         interest expense net of
         taxes                             45        (1)       22       110
        Credit risk adjustment net
         of taxes                         (26)        -       (45)        -
                                    -----------------------------------------
                                         (397)    1,721      (106)    1,774
                                    -----------------------------------------
      Total equity return swap
       (note 10(c)):
        Unrealized increase in fair
         value net of taxes               255       974       171     1,581
        Reclassification to net
         income of realized gains
         net of taxes                    (329)     (561)     (318)     (788)
                                    -----------------------------------------
                                          (74)      413      (147)      793
                                    -----------------------------------------
    Other comprehensive income
     (loss)                              (471)    2,134      (253)    2,567
                                    -----------------------------------------
    Comprehensive income            $   1,656     5,278     3,111     6,263
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the interim consolidated financial statements


    Interim Consolidated Statement of Accumulated Other Comprehensive Loss
    (unaudited)
                                                           Six months ended
                                                               June 30
    (thousands of dollars)                               2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Accumulated other comprehensive loss,
     beginning of period                            $  (1,897)       (4,762)
    Other comprehensive income (loss) for the
     period                                              (253)        2,567
                                                    -------------------------
    Accumulated other comprehensive loss, end of
     period                                         $  (2,150)       (2,195)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the interim consolidated financial statements


    Interim Consolidated Statements of Cash Flows
    (unaudited)
                                     Three months ended    Six months ended
                                           June 30             June 30
    (thousands of dollars)               2010      2009      2010      2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Operating Activities
    Net income from continuing
     operations                     $   2,127     3,081     3,364     3,665
    Items not involving cash from
     continuing operations
      Depreciation and amortization       918       912     1,794     1,813
      Future income taxes                  62     1,035       152     1,258
      Executive stock-based
       compensation plans (notes 5
       and 7)                             290       720       403       951
      Accretion of other
       liabilities                        190       227       380       454
      Unrealized gains on
       marketable securities             (632)     (982)     (817)   (1,974)
      Broadcast licence impairment
       charge (note 4)                  1,609         -     1,609         -
      Other                              (551)     (712)     (582)   (1,080)
                                    -----------------------------------------
                                        4,013     4,281     6,303     5,087
    Change in non-cash working
     capital relating to operating
     activities from continuing
     operations                         1,121    (2,115)    2,390     1,033
                                    -----------------------------------------
    Cash flow from continuing
     operating activities               5,134     2,166     8,693     6,120
    Discontinued operations                 -        31         -        79
                                    -----------------------------------------
                                        5,134     2,197     8,693     6,199
    -------------------------------------------------------------------------

    Financing Activities
    Change in bank indebtedness           240       579     1,813       158
    Long-term debt repayments          (4,500)        -    (5,600)   (2,005)
    Dividends paid                          -         -    (3,297)        -
                                    -----------------------------------------
                                       (4,260)      579    (7,084)   (1,847)
    -------------------------------------------------------------------------
    Investing Activities
    Property and equipment
     additions                           (482)   (1,867)     (986)   (2,463)
    Canadian Content Development
     payments                            (364)     (905)     (805)   (1,423)
    Other                                 (28)       (4)      182      (466)
                                    -----------------------------------------
                                         (874)   (2,776)   (1,609)   (4,352)
    -------------------------------------------------------------------------
    Cash, beginning and end of
     period                         $       -         -         -         -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Supplemental Cash Flow
     Information
      Interest paid                 $     635       846     1,751     1,666
      Income taxes paid                   132       714       323       784
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the interim consolidated financial statements


    Notes to the Interim Consolidated Financial Statements - June 30, 2010
    and 2009 (unaudited)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    1. ACCOUNTING PRESENTATIONS AND DISCLOSURES

    The interim financial statements presented herein were prepared by the
    Company and follow the same accounting policies and their methods of
    application as the 2009 annual financial statements. These financial
    statements are prepared in accordance with Canadian generally accepted
    accounting principles ("GAAP") for interim financial statements. They do
    not include all of the information and disclosures required by GAAP for
    annual financial statements. Accordingly, these financial statements
    should be read in conjunction with the Company's audited consolidated
    financial statements and the accompanying notes contained in the
    Company's 2009 Annual Report.

    Certain of the comparative figures have been reclassified to conform to
    the financial statement presentation adopted in the current year.

    2. FUTURE ACCOUNTING POLICIES

    Section 1582 Business Combinations

    During 2009, the CICA issued Handbook Section 1582 Business Combinations
    which replaces Section 1581 bearing the same name. This Section is
    effective for fiscal years beginning on or after January 1, 2011, with
    earlier adoption permitted, and the changes align the standard with the
    guidance in International Financial Reporting Standards ("IFRS"). Of the
    amendments in the Section, the one that will represent the most
    significant change in how the Company accounts for business combinations
    is the determination of the cost of the purchase. The cost that is
    allocated to the fair value of the net assets acquired is the direct cost
    of the business combination; indirect costs such as legal or
    restructuring are expensed. The Company intends to early adopt this
    standard if any business combinations should occur in 2010. The impact
    the changes will have on its consolidated results will continue to be
    monitored.

    Section 1601 Consolidated Financial Statements and Section 1602 Non-
    controlling Interests

    These Sections were issued and together replace Section 1600 Consolidated
    Financial Statements. These too are applicable for fiscal years beginning
    on or after January 1, 2011, with earlier adoption permitted. The new
    sections establish standards for the preparation of consolidated
    financial statements and for the accounting of a non-controlling interest
    in a subsidiary in consolidated financial statements subsequent to a
    business combination. The Company will continue to evaluate the impact of
    the amendments.

    3. DISCONTINUED OPERATIONS

    The Company disposed of its net assets associated with the two FM radio
    stations located in Thunder Bay, Ontario in 2009. The financial results
    of operations from this component have been treated as discontinued
    operations in the consolidated statements of income and cash flows for
    2009. The results of this component were also excluded from the
    comparative figures from the Broadcasting segment results in segmented
    information presented in note 12. Selected financial information for the
    reporting unit included in discontinued operations is presented below.

                                     Three months ended    Six months ended
                                           June 30             June 30
    (thousands of dollars)               2010      2009      2010      2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income from operations
     from discontinued component    $       -        93         -        46
    Income tax expense                      -       (30)        -       (15)
                                    -----------------------------------------
    Net income from discontinued
     operations                             -        63         -        31
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    4. BROADCAST LICENCE IMPAIRMENT CHARGE

    During the second quarter, management recorded an impairment charge of
    $1,609,000 related to its Winnipeg, Manitoba broadcast licences. The
    Company had applied to the Canadian Radio-television and
    Telecommunications Commission ("CRTC") for relief of certain restrictions
    imposed on one of its licences in Winnipeg and the application was
    unsuccessful. As a result, the Company performed an impairment test of
    the licences in Winnipeg and determined that a portion was impaired.

    5. CAPITAL STOCK

    Stock split

    On November 25, 2009, the Class A Subordinate Voting Shares and Class B
    Common Shares were split on a three-for-one basis. Accordingly, the
    comparative number of shares and per share amounts have been
    retroactively adjusted to reflect the three-for-one split.

    Share repurchases

    The Company has approval under a Normal Course Issuer Bid to repurchase
    up to 583,991 Class A Subordinate Voting Shares ("Class A shares") and
    75,453 Class B Common Shares. This bid expires February 8, 2011. The
    Company did not repurchase any of its outstanding Class A shares during
    the second quarter in 2010 and 2009.

    Executive stock option plan

    No options were granted pursuant to the executive stock option plan
    during the second quarters in 2010 and 2009. Year-to-date, 60,000 options
    (2009 - 90,000) were granted at a weighted average exercise price of
    $6.77 (2009 - $5.83). The options vest at a rate of twenty-five percent
    on the date of grant and twenty-five percent on each of the three
    succeeding anniversary dates and the options expire March 4, 2015. No
    options were exercised to date in 2010 (2009 - nil). Compensation expense
    related to stock options for the three months ended June 30, 2010 was
    $80,000 (2009 - $52,000) and year-to-date expense was $185,000 (2009 -
    $99,000).

    6. CONTRIBUTED SURPLUS

    (thousands of dollars)                               2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Balance, January 1                              $   2,157         1,945
    Executive stock option plan compensation
     expense                                              185            99
                                                    -------------------------
    Balance, June 30                                    2,342         2,044
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    7. STOCK APPRECIATION RIGHTS

    A total of 1,745,000 stock appreciation rights ("SARS" or "rights") have
    been granted since 2006 at a weighted-average reference price of $5.75.
    The SARS' expiry dates range from March 2011 to February 2015. As at
    June 30, 2010, 270,000 rights had expired and 410,350 rights had been
    exercised. The rights vest at a rate of 50% at the end of year three, 25%
    at the end of year four and 25% at the end of year five and are
    exercisable as they vest. At the date of exercise, cash payments are made
    to the holders based on the difference between the market value of the
    Company's Class A shares and the reference price. All rights granted
    under this plan expire on the 60th day following the 5th anniversary of
    the grant date. For the quarter ended June 30, 2010, 350,750 SARS (2009 -
    nil) were exercised for cash proceeds of $504,000 (2009 - $nil) and year-
    to-date 380,350 SARS were exercised (2009 - nil) for cash proceeds of
    $541,000 (2009 - $nil). Compensation expense in the second quarter was
    $210,000 (2009 - $668,000) and year-to-date expense was $218,000 (2009 -
    $852,000). The total obligation for SARS compensation was $1,221,000, of
    which $1,104,000 was current and classified as accounts payable and
    accrued liabilities (2009 - compensation payable was $919,000, of which
    $460,000 was current).

    8. LONG-TERM DEBT

                                                      June 30   December 31
    (thousands of dollars)                               2010          2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Revolving term credit facility of
     $76.5 million, renewable bi-annually,
     maturing June 2012                             $  51,500        57,100
    Less: Current portion                                   -        57,100
    Less: Debt transaction costs, net of
     accumulated amortization of $nil (2009 - $nil)       456             -
                                                    -------------------------

                                                    $  51,044             -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    During the second quarter, the Company extended its $76.5 million
    revolving term credit facility with the bank to mature in June 2012. The
    transaction costs associated with negotiating the new facility were
    $456,000 and these will be amortized over the term of the debt.

    Long-term debt bears interest at bankers' acceptance rates plus a premium
    based on certain financial ratios. To manage interest rate risk and
    ensure stability in the Company's interest costs, the Company has
    interest rate swap agreements on a portion of long term debt which fixes
    the floating bankers' acceptance rate.

    9. EMPLOYEE BENEFIT PLANS

                                     Three months ended    Six months ended
                                           June 30             June 30
    (thousands of dollars)               2010      2009      2010      2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Defined contribution plan
     expense                        $     368       362       725       702
    Defined benefit plan expense          118       125       237       250
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    10. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

    Estimated fair value of financial instruments

    Current assets and current liabilities' carrying values are
    representative of their fair values due to the relatively short period to
    maturity. The fair value of long-term debt approximates the carrying
    value because the interest charges under the terms of the long-term debt
    are based on the 3-month Canadian banker's acceptance rates. The fair
    values of Canadian Content Development commitments approximated their
    carrying values as they were recorded at the net present values of their
    future cash flows, using discount rates ranging from 8.0% to 14.3%.

    The following table outlines the hierarchy of inputs used in the
    calculation of fair value for each financial instrument:

                                                Level 1   Level 2   Level 3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                 Quoted
                                                 prices   Signifi-
                                              in active      cant   Signifi-
                                                markets     other      cant
                                               for iden-  observa-  unobser-
    (thousands of dollars)                        tical       ble     vable
    Description                         Total    assets    inputs    inputs
    -------------------------------------------------------------------------

    Cash and bank
     indebtedness                   $  (1,912)   (1,912)        -         -
    Marketable securities               5,019     5,019         -         -
    Accounts receivable                24,200         -    24,200         -
    Equity total return
     swap receivable                    1,721         -     1,721         -
    Accounts payable and
     accrued liabilities              (19,828)        -   (19,828)        -
    Long-term debt                    (51,044)        -   (51,044)        -
    CCD commitments                    (7,896)        -    (7,896)        -
    Interest rate swap
     payable                           (3,634)        -    (3,634)        -
    -------------------------------------------------------------------------

    The Company uses the following hierarchy for determining and disclosing
    the fair value of financial instruments by valuation techniques:

    Level 1:  quoted (unadjusted) prices in active markets for identical
              assets and liabilities
    Level 2:  other techniques for which all inputs that have a significant
              effect on the recorded value are observable, either directly or
              indirectly
    Level 3:  techniques which use inputs that have a significant effect on
              the recorded fair value that are not based on observable market
              data

    The following sections discuss the Company's risk management objectives
    and procedures as they relate to credit risk, market risk, liquidity risk
    and capital risk.

    Credit risk

    Credit exposure on financial instruments arises from the possibility that
    a counterparty to an instrument in which the Company is entitled to
    receive payment fails to perform. The maximum credit exposure
    approximated $26,000,000 as at June 30, 2010, which included accounts
    receivable and the equity total return swap receivable.

    The Company is subject to normal credit risk with respect to its
    receivables. A large customer base and geographic dispersion minimize the
    concentration of credit risk. Credit exposure is managed through credit
    approval and monitoring procedures. The Company does not require
    collateral or other security from clients for trade receivables; however
    the Company does perform credit checks on customers prior to extending
    credit. Based on the results of credit checks, the Company may require
    upfront deposits or full payments on account prior to providing service.
    The Company reviews its receivables for possible indicators of impairment
    on a regular basis and as such, it maintains a provision for potential
    credit losses which totaled $1,289,000 as at June 30, 2010. The Company
    is of the opinion that the provision for potential losses adequately
    reflects the credit risk associated with its receivables. Approximately
    87% of trade receivables are outstanding for less than 90 days. Amounts
    would be written off directly against accounts receivable and against the
    allowance only if and when it was clear the amount would not be collected
    due to customer insolvency. Historically, the significance and incidence
    of amounts written off directly against receivables have been low. The
    total amount written off in the second quarter was $83,000, and year-to-
    date was $260,000.

    As at June 30, 2010, the Company's credit exposure related to its
    receivables continued to be slightly higher than in the past due to the
    recent Canadian economic conditions. The Company sells advertising
    airtime primarily to retail customers and since their results may also be
    affected by the current economy, it is difficult to predict the impact
    this could have on the Company's receivables' balance. The Company
    believes its provision for potential credit losses is adequate at this
    time given the current economic circumstances.

    With regard to the Company's derivative instruments, the counterparty
    risk is managed by only dealing with Canadian Chartered Banks having high
    credit ratings.

    Market risk

    Market risk is the risk that the fair value or future cash flows of a
    financial instrument will fluctuate because of changes in market prices,
    which includes quoted share prices in active markets, interest rates and
    the Company's quoted share price as it relates to the stock appreciation
    rights plan.

    a) Managing risk associated with fluctuations in quoted share prices of
       marketable securities

       The fair value of the Company's marketable securities is affected by
       changes in the quoted share prices in active markets. Such prices can
       fluctuate and are affected by numerous factors beyond the Company's
       control. In order to minimize the risk associated with changes in the
       share price of any one particular investment, the Company diversifies
       its portfolio by investing in various stocks in varying industries. It
       also conducts regular financial reviews of publicly available
       information related to its investments to determine if any identified
       risks are within tolerable risk levels. As at June 30, 2010, a 10%
       change in the share prices of each marketable security would result in
       a $400,000 after-tax change in net income.

       For the quarter ended June 30, 2010, the change in fair value of
       marketable securities, recorded in other income, was an unrealized
       gain of $632,000 (2009 - $982,000) and year-to-date was $817,000
       (2009 - $1,974,000).

    b) Interest rate risk management

       To hedge its exposure to fluctuating interest rates on its long-term
       debt, the Company has entered into interest rate swap agreements with
       Canadian Chartered Banks. The swap agreements involve the exchange of
       the three-month bankers' acceptance floating interest rate for a fixed
       interest rate. The difference between the fixed and floating rates is
       settled quarterly with the bank and recorded as an increase or
       decrease to interest expense. The Company elected to apply hedge
       accounting and as such formally assesses effectiveness of the swaps at
       inception and on a regular basis and has concluded that the swaps are
       effective in offsetting changes in interest rates.

       Interest rate fluctuations would have an impact on the Company's
       results. A 0.5% change in the floating interest rates would have
       impacted OCI due to changes in fair value of the interest rate swaps
       by approximately $600,000 after-tax. There would have been no impact
       to net income.

       The Company has two interest rate swap agreements; one has a notional
       value of $10,000,000 and expires in June 2013, and the other has a
       notional amount of $45,000,000 and expires in May 2013. In 2008, the
       Company early terminated interest rate swap agreements resulting in a
       fair value payable of $349,000 which was blended into the interest
       rate of the $45,000,000 swap. This fair value payable is being
       transferred from OCI to net income (as interest expense) over the
       remaining term of the original swap agreements which expire between
       2009 and 2011. The before-tax amount related to the $349,000 fair
       value payable transferred to net income from OCI for the quarter was
       $17,000 (2009 - $17,000). The year-to-date amount transferred to net
       income was $33,000 (2009 - $70,000).

       Total before-tax interest expense transferred for the quarter from OCI
       to net income was $63,000 (2009 - $39,000) and for the year the amount
       was $30,000 (2009 -$150,000). In January 2010, the Company settled
       $5,000,000 of the $15,000,000 swap which resulted in a payout of
       $328,000. $5,000,000 of the remaining $10,000,000 swap has been
       de-designated and therefore, hedge accounting no longer applies on
       this portion. Of the amount of pre-tax interest expense transferred to
       net income from OCI, $58,000 related to the de-designated portion
       (2009 - $nil) in the quarter, and for the year the amount was $10,000
       (2009 - $nil).

       The Company has measured its own credit risk in relation to its
       interest rate swaps and as a result has recognized a $37,000 loss in
       OCI (2009 - $nil) in the second quarter and $62,000 year-to-date
       (2009 - $nil).

       The aggregate fair value payable of the swap agreements was $3,634,000
       (2009 - $4,528,000).

    c) Share price volatility risk management

       In July 2006, the Company entered into a cash-settled equity total
       return swap agreement to manage its exposure to fluctuations in its
       stock-based compensation costs related to the SAR plan. Compensation
       costs associated with the SAR Plan fluctuate as a result of changes in
       the market price of the Company's Class A shares. The Corporation
       entered into this swap for a total of 1,275,000 notional Class A
       shares with a hedged price of $5.85. The swap expires in July 2011.

       The swap includes an interest and dividend component. Interest is
       accrued and payable by the Company on quarterly settlement dates. Any
       dividends paid on the Class A shares are reimbursed to the Company on
       the quarterly settlement dates.

       The Company elected to apply hedge accounting and in order to qualify
       for hedge accounting, there must be reasonable assurance that the
       instrument is and will continue to be an effective hedge. At the
       inception of the hedge and on an ongoing basis, the Company formally
       assesses and documents whether the hedging relationship is effective
       in offsetting changes in cash flows of the hedged item. Gains or
       losses realized on the quarterly settlement dates are recognized in
       net income in the same period as the SAR Plan compensation expense.
       Unrealized gains and losses, to the extent that the hedge is
       effective, are deferred and included in OCI until such time as the
       hedged item affects net income. If at any time, the hedge is deemed to
       be ineffective or the hedge is terminated or de-designated, gains or
       losses, including those previously recognized in OCI, will be recorded
       in net income immediately.

       As at June 30, 2010, the Company de-designated 680,350 of the
       1,275,000 notional Class A shares; therefore, hedge accounting no
       longer applies on the de-designated portion. A total of $492,000
       before-tax gains were transferred from OCI to net income in the
       quarter (2009 - $741,000) and the amount year-to-date was $474,000
       (2009 - $1,059,000). Of the amount transferred to net income, the gain
       in the quarter that related to the de-designated portion was $572,000
       (2009 - $255,000) and year-to-date it was $573,000 (2009 - $422,000).

       The estimated fair value of the equity total return swap receivable,
       classified as current other assets, based on the Class A shares'
       market price at June 30, 2010 was $1,721,000 (2009 - $1,891,000 of
       which $856,000 was current).

    Liquidity risk

    Liquidity risk is the risk that the Company is not able to meet its
    financial obligations as they become due or can do so only at excessive
    cost. The Company's growth is financed through a combination of the cash
    flows from operations and borrowings under the existing credit facility.
    One of management's primary goals is to maintain an optimal level of
    liquidity through the active management of the assets and liabilities as
    well as the cash flows. Other than for operations, the Company's cash
    requirements are mostly for interest payments, repayment of debt, capital
    expenditures, Canadian Content Development payments, dividends and other
    contractual obligations that are disclosed below.

    The Company has renegotiated its credit facility with the bank which
    expires on June 30, 2012. The Company was in full compliance with its
    bank covenants throughout the quarter and at quarter end.

    The Company's liabilities have contractual maturities which are
    summarized below:

    Obligation (thousands of
     dollars)                         12 months   2011 - 2015    Thereafter
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Long-term debt                    $       -        51,500             -
    Bank indebtedness                     1,912             -             -
    Accounts payable and accrued
     liabilities                         19,828             -             -
    Income taxes payable                  8,280             -             -
    CCD commitments                       2,110         7,627           106
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                      $  32,130        59,127           106
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Capital risk

    The Company defines its capital as shareholders' equity. The Company's
    objective when managing capital is to pursue its strategy of growth
    through acquisitions and through organic operations so that it can
    continue to provide adequate returns for shareholders.

    The Company manages the capital structure and makes adjustments to it in
    light of changes in economic conditions and the risk characteristics of
    the underlying assets. In order to maintain or adjust the capital
    structure, the Company may adjust the amount of dividends paid to
    shareholders, issue new shares or repurchase shares. The Directors and
    senior management of the Company are of the opinion that from time to
    time the purchase of its shares at the prevailing market price would be a
    worthwhile investment and in the best interests of the Company and its
    shareholders. Material transactions and those considered to be outside
    the ordinary course of business, such as acquisitions and other major
    investments or disposals, are reviewed and approved by the Board of
    Directors.

    To comply with Federal Government directions, the Broadcasting Act and
    regulations governing radio stations (the "Regulations"), the Company has
    imposed restrictions respecting the issuance, transfer and, if
    applicable, voting of the Company's shares. Restrictions include
    limitations over foreign ownership of the issued and outstanding voting
    shares. Pursuant to such restrictions, the Company can prohibit the
    issuance of shares or refuse to register the transfer of shares or, if
    applicable, prohibit the voting of shares in circumstances that would or
    could adversely affect the ability of the Company, pursuant to the
    provisions of the Regulations, to obtain, maintain, renew or amend any
    licence required to carry on any business of the Company, including a
    licence to carry on a broadcasting undertaking, or to comply with such
    provisions or with those of any such licence.

    The Company is subject to covenants on its credit facility. The Company's
    bank covenants include certain maximum or minimum ratios such as total
    debt to EBITDA ratio, interest coverage and fixed charge coverage ratio.
    Other covenants include seeking prior approval for acquisitions or
    disposals in excess of a quantitative threshold. The Company was in
    compliance with the covenants throughout the quarter and at quarter end.

    Financial projections are updated and reviewed regularly to reasonably
    ensure that financial debt covenants will not be breached in future
    periods. The Company monitors the covenants and foreign ownership status
    of the issued and outstanding voting shares and presents this information
    to the Board of Directors quarterly. The Company was in compliance with
    all the above as at June 30, 2010.

    11. EARNINGS PER SHARE

                                     Three months ended    Six months ended
                                           June 30             June 30
    (thousands)                          2010      2009      2010      2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average common shares
     used in calculation of basic
     earnings per share                32,972    32,972    32,972    32,972
    Incremental common shares
     calculated in accordance with
     the treasury stock method          1,121     1,024     1,116       964
                                    -----------------------------------------
    Weighted average common shares
     used in calculation of diluted
     earnings per share                34,093    33,996    34,088    33,936
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    12. SEGMENTED INFORMATION

    The Company has two reportable segments - Broadcasting and Corporate and
    Other. The Broadcasting segment consists of the operations of the
    Company's radio and television licences. This segment derives its revenue
    from the sale of broadcast advertising. This reportable segment is a
    strategic business unit that offers different services and is managed
    separately. The Company evaluates performance based on earnings before
    interest, taxes, depreciation and amortization. Corporate and Other
    consists of a hotel and the head office functions. Its revenue relates to
    hotel operations. Details of segment operations are set out below.
    Results from the Thunder Bay reporting unit have been excluded from 2009
    figures as a result of accounting for discontinued operations as
    described in note 3. Beginning in 2010 other income, which is primarily
    the results from investment holdings, was excluded from the determination
    of operating income (loss). The comparative information for 2009 has been
    adjusted to reflect this reclassification.

                              Corpo-                        Corpo-
    (thousands      Broad-     rate               Broad-     rate
     of dollars)  casting   & Other     Total   casting   & Other     Total
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                   Three months ended June 30      Six months ended June 30
                   --------------------------      ------------------------
    2010
    Revenue      $ 29,875       910    30,785    54,771     1,720    56,491

    Operating
     expenses      22,124     2,518    24,642    40,957     4,999    45,956
    Depreciation
     and amorti-
     zation           848        70       918     1,654       140     1,794
                 ------------------------------------------------------------
    Operating
     income
     (loss)      $  6,903    (1,678)    5,225    12,160    (3,419)    8,741
                 ------------------------------------------------------------
    Assets
     employed                                  $213,164    18,269   231,433
    Broadcast
     licences                                   148,032         -   148,032
    Goodwill                                      7,045         -     7,045
    Capital
     expendi-
     tures       $    413        69       482       854       132       986
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    2009
    Revenue      $ 25,967       805    26,772    47,764     1,668    49,432
    Operating
     expenses      18,847     2,701    21,548    37,215     4,949    42,164
    Depreciation
     and amorti-
     zation           836        76       912     1,661       152     1,813
                 ------------------------------------------------------------
    Operating
     income
     (loss)      $  6,284    (1,972)    4,312     8,888    (3,433)    5,455
                 ------------------------------------------------------------
    Assets
     employed                                  $217,058    20,732   237,790
    Broadcast
     licences                                   148,396         -   148,396
    Goodwill                                      7,045         -     7,045
    Capital
     expendi-
     tures       $  1,849        18     1,867     2,421        42     2,463
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    13. SUBSEQUENT EVENTS

    Subsequent to June 30, 2010, the Copyright Board of Canada issued a fact
    sheet entitled "Commercial Radio Tariff 2008 to 2012" that introduced new
    copyright tariffs and that increased one component of the existing
    tariffs. The decision is retroactive to January 1, 2008 and repayment is
    expected to be made evenly over twelve months beginning in September
    2010. As a result of this decision, the Company has adjusted its
    copyright fees expense, included in operating expenses, by $2,344,000,
    $879,000 of which relates to 2008 and $893,000 to 2009.

    On August 5, 2010, the Company declared dividends of $0.06 per share on
    each of its Class A Subordinate Voting Shares and Class B Common Shares
    payable September 15, 2010 to shareholders of record as at August 31,
    2010.
    

%SEDAR: 00002995E

SOURCE Newfoundland Capital Corporation Limited

For further information: For further information: REF: Robert G. Steele, President and Chief Executive Officer; Scott G.M. Weatherby, Chief Financial Officer and Corporate Secretary, Newfoundland Capital Corporation Limited, 745 Windmill Road, Dartmouth, Nova Scotia, B3B 1C2, Tel: (902) 468-7557, Fax: (902) 468-7558, e-mail: investorrelations@ncc.ca, Web: www.ncc.ca


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