Newfoundland Capital Corporation Limited - Second Quarter 2007 - Period Ended June 30 (unaudited)



    DARTMOUTH, NS, Aug. 9 /CNW/ - August 9, 2007, Newfoundland Capital
Corporation Limited (the "Company"), one of Canada's leading radio
broadcasters, today announces its financial results for the second quarter
ended June 30, 2007.

    
    Highlights

    Newly launched stations contribute to the Company's track record of
positive revenue growth.

    - Revenue growth of 7% to $26.2 million in the quarter and 6% to
      $45.7 million year-to-date is primarily due to incremental growth from
      new stations, which include Calgary, Alberta and Charlottetown, Prince
      Edward Island.
    - Earnings before interest, taxes, depreciation and amortization
      ("EBITDA"(1)) were $7.2 million in the quarter and $7.3 million year-
      to-date. Excluding the effect of last year's marketable securities
      gains, $6.7 million in the quarter and $8.7 million year-to-date,
      consolidated EBITDA improved $2.2 million in the quarter and
      $1.1 million year to date.
    - Net income of $5.8 million ($0.53 per share) in the quarter was
      $1.7 million lower than 2006 due to lower investment income. Year-to-
      date, net income of $13.2 million ($1.19 per share) was $4.5 million
      better than 2006 driven by a $3.8 million gain on disposal of an equity
      accounted investment and a $10.8 million gain realized on the disposal
      of Halterm Income Fund Trust Units.
    - A dividend of $0.15 per share was declared by the Board of Directors
      subsequent to quarter end.

    Significant events

    The Company has taken steps to streamline its corporate structure in
situations where it owns less than 100% of a subsidiary. As part of this
initiative, the Company entered into agreements to purchase two minority
interest positions in certain of its broadcast properties, and in another
case, it sold a minority interest in one broadcast property. The Company
continues to have success in obtaining new FM licences from the Canadian
Radio-television and Telecommunications Commission ("CRTC"). More details are
as follows:

    - In May, the Company acquired for $10.7 million the 24% minority
      shareholder's interest in 3937844 Canada Inc. which holds 21 of the
      Company's 33 licences in Alberta.
    - In July, the Company entered into an agreement to acquire the
      38% minority interest in Atlantic Stereo Limited, which operates the
      two FM licences in Moncton, New Brunswick, for $6.9 million. The
      purchase is subject to CRTC approval.
    - In April, the Company disposed of its 29.9% interest in Larche
      Communications (Kitchener) Inc. which operates an FM radio station in
      Kitchener-Waterloo, Ontario for proceeds of $4.0 million.
    - In July the CRTC awarded the Company two new FM licences, one in Sydney
      and one in Kentville, Nova Scotia, and the right to convert an AM
      signal to FM in Carbonear, Newfoundland and Labrador.

    "We are pleased with the approvals granted to us by the CRTC this year,
which include two new FM licences and the right to convert three AM stations
to FM. Owning 100% of all our licences in Alberta and Moncton, New Brunswick
will allow us to fully capitalize on our strong competitive position in those
regions", commented Rob Steele, President and Chief Executive Officer.
Referring to the Company's financial performance, he stated: "Financial
results in the quarter and year-to-date are in line with expectations and we
are continuing to monitor operating expenses to generate year-over-year growth
in broadcasting EBITDA."


    Financial Highlights - Second Quarter
    (thousands of dollars except share information)       2007          2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Revenue                                          $  26,159        24,522
    EBITDA(1)                                            7,158        11,666
    Net income                                           5,807         7,506
    -------------------------------------------------------------------------
    Earnings per share - basic                            0.53          0.67
                       - diluted                          0.51          0.65
    Share price, NCC.A (closing)                         19.25         17.00
    Weighted average number of shares outstanding
     (in thousands)                                     11,062        11,220
    -------------------------------------------------------------------------
    Total assets                                       215,312       212,820
    Long-term debt                                      49,013        52,252
    Shareholders' equity                               101,215        91,108
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Management's Discussion and Analysis

    The following interim discussion and analysis of financial condition and
results of operations of Newfoundland Capital Corporation Limited (the
"Company") has been prepared as of August 9, 2007. The purpose of the
Management's Discussion and Analysis ("MD&A") is to provide readers with
additional complementary information regarding the Company's financial
condition and results of operations and should be read in conjunction with the
unaudited interim consolidated financial statements and related notes for the
periods ended June 30, 2007 and 2006 as well as the annual audited
consolidated financial statements and related notes and the MD&A contained in
the Company's 2006 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.
    Management's discussion and analysis of financial condition and results of
operations contains forward-looking statements. 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. 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

    The Company is one of Canada's leading radio broadcasters with 76 licences
across 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 overall goal is to increase value for shareholders. To accomplish
this, the Company seeks to achieve growth by adding new licences to its
portfolio of assets through business and licence acquisitions and through the
Canadian Radio-television and Telecommunications Commission ("CRTC") licence
application process, by converting AM stations to FM, and by maximizing
returns on existing operations. The section below describes some of the
Company's developments to date.

    Corporate developments

    The corporate developments below should be considered when reviewing the
"Overview of consolidated operating results" section.

    2007 developments

    - January 19, 2007 - the Company's investment in Halterm Income Fund
      Trust Units was disposed of for $14.5 million. The proceeds were used
      to repay long-term debt.

    - February 1, 2007 - the CRTC approved the Company's application to
      convert its AM signal to FM in Edson, Alberta. The Classic Hits FM
      station has been on-air since July.

    - March 19, 2007 - the Company successfully launched the new Calgary,
      Alberta FM station, FUEL 90.3, featuring an Adult Album Alternative
      format. Upon the launch date, the Company capitalized to broadcast
      licences the costs that were associated with obtaining the new licence
      in the amount of $4.9 million. Additional information is contained in
      Note 3 of the unaudited interim consolidated financial statements.

    - April 4, 2007 - the Company's request to convert its AM station in
      Halifax, Nova Scotia to FM was approved. The CRTC imposed certain
      conditions associated with this approval. The Company is currently
      examining its options with respect to the conditions.

    - April 12, 2007 - the Company disposed of its 29.9% interest in Larche
      Communications (Kitchener) Inc. which operates an FM radio station in
      Kitchener-Waterloo, Ontario for proceeds of $4.0 million resulting in a
      gain on disposal of $3.8 million.

    - May 16, 2007 - the Company acquired the minority shareholder's
      23.7% interest in 3937844 Canada Inc. for cash consideration of
      $10.7 million. As a result, $0.5 million was added to the value of
      broadcast licences. 3937844 Canada Inc. owns and operates 21 of the
      Company's 33 licences throughout the province of Alberta. Additional
      information is contained in Note 3 of the unaudited interim
      consolidated financial statements.

    - July 4, 2007 - subsequent to the second quarter, the Company received
      approval by the CRTC to convert its AM licence to FM in Carbonear,
      Newfoundland and Labrador. The FM station is expected to be on-air
      within the next twelve months.

    - July 6, 2007 - subsequent to the second quarter, the CRTC approved the
      Company's application for two new FM licences in Nova Scotia, one in
      Sydney and one in Kentville. Work towards launching these stations is
      in progress with official launch dates expected to be within the next
      twelve months.

    - July 11, 2007 - subsequent to the second quarter, the Company entered
      into an agreement to acquire the 37.8% non-controlling interest in
      Atlantic Stereo Limited which operates the two FM licences in Moncton,
      New Brunswick for cash consideration of $6.9 million. The purchase is
      subject to CRTC approval.

    2006 developments

    - January 18, 2006 - awarded a new FM radio licence in Lac La Biche,
      Alberta. This is the first commercial radio station to serve this
      community and is expected to launch in the fourth quarter of 2007.

    - March 10, 2006 - awarded full-station status, from repeater status, in
      Bonnyville, Alberta which allows the Company to originate and broadcast
      from that community. KOOL-FM, featuring contemporary hits, was launched
      in May 2006.

    - March 23, 2006 - the CRTC approved the purchase of CKJS Limited which
      held the CKJS-AM broadcast licence in Winnipeg, Manitoba. The
      transaction was completed April 30, 2006 for aggregate consideration of
      $2.3 million. Additional information is contained in Note 3 of the
      unaudited interim consolidated financial statements.

    - March 24, 2006 - awarded an FM radio licence in Charlottetown, Prince
      Edward Island and a conversion of the Company's existing station, CHTN-
      AM, from an AM to FM signal. The stations were launched in the Summer
      of 2006.

    - August 2, 2006 - the CRTC awarded the Company a second FM licence in
      Calgary, Alberta which was launched in March 2007.

    - November 15, 2006 - awarded a new FM radio licence to broadcast in Fort
      McMurray, Alberta. The station is expected to launch in the Fall of
      2007.

    The results of the above incremental operations have been included in the
consolidated financial statements since the respective acquisition and launch
dates.

    Overview of consolidated operating results

    The Company has one separately reportable segment - broadcasting, which
derives its revenue from the sale of broadcast advertising. Corporate and
other derives its revenue from hotel operations.


    Revenue
                   Three months ended June 30      Six months ended June 30
                   ----------------------------  ----------------------------
                                       Growth                        Growth
    (thousands of                   -----------                   -----------
     dollars except                  To-  Org-                     To-  Org-
     percentages)    2007     2006  tal  anic       2007     2006 tal  anic
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Revenue
      Broad-     $ 25,275   23,767    6%    2%    44,003   41,538   6%    2%
       casting
      Corporate
       and other      884      755   17%   17%     1,674    1,547   8%    8%
                 -----------------                ---------------
                 $ 26,159   24,522    7%    3%    45,677   43,085   6%    2%
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated revenue of $26.2 million in the quarter represented a
7% improvement over last year's quarter while year-to-date revenue of
$45.7 million was 6% higher than the same period last year. In the
broadcasting segment, organic revenue growth was 2% in the quarter and
year-to-date. Total broadcasting growth was derived primarily by the
incremental revenue associated with the recent launch of FUEL-FM in Calgary,
Alberta and last summer's launch of K-Rock in Charlottetown, Prince Edward
Island. Corporate and other revenue was higher than last year due to an
increase in hotel revenue in the second quarter.

    Other income (expense)

    Other income in the second quarter was $5.7 million lower than last year
while year-to-date figures were down $9.4 million. This is due to the
$6.7 million and $8.7 million marketable securities gains realized in the
second quarter and the six months ended June 30, 2006, respectively. Excluding
these 2006 gains, other income would have been $1.0 million better than last
year in the quarter and $0.7 million lower than 2006 on a year-to-date basis.

    Operating expenses

    In the second quarter and year-to-date, operating expenses were 2% higher
than the same periods last year. The increase is in line with higher variable
costs associated with higher revenue. Other operating expenses remained flat,
year-over-year.


    Earnings before interest, taxes, depreciation
    and amortization (EBITDA(1))

                   Three months ended June 30      Six months ended June 30
                   ----------------------------  ----------------------------
                                       Growth                        Growth
    (thousands of                   -----------                   -----------
     dollars except                  To-  Org-                     To-  Org-
     percentages)    2007     2006  tal  anic       2007    2006  tal  anic
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA(1)
      Broad-     $  7,937    7,373    8%    6%    11,252   9,915   14%   13%
       casting
      Corporate      (779)   4,293    -     -     (3,986)  4,950    -     -
       and other -----------------                 ---------------
                 $  7,158   11,666  (39%) (39%)    7,266  14,865  (51%) (51%)
    -------------------------------------------------------------------------
    % of Revenue
      Broadcasting     31%      31%   -     1%        26%     24%   2%    2%
      Total            26%      37% (11%) (11%)       16%     28% (12%) (13%)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Broadcasting EBITDA has continued to improve and at $7.9 million was ahead
of the same quarter last year by 8% and the $11.3 million year-to-date was 14%
better. Consolidated EBITDA was lower in the quarter and for the six month
period due to the gains recognized in 2006. These gains totaling $6.7 million
in the quarter and $8.7 million year-to-date were recognized in the 2006
Corporate and other EBITDA results. Excluding the effects of these,
consolidated EBITDA would have been $2.2 million better in the quarter and
$1.1 million better for the six months ended June 30, 2007.

    Depreciation and amortization

    Depreciation and amortization expense was 11% higher than the second
quarter last year and 8% higher than year-to-date comparatives. The reason for
these increases is the higher depreciable asset base in 2007.

    Interest expense

    Interest expense was lower than last year. The Company's lower long-term
debt balance helped to offset slightly higher interest rates.

    Accretion of other liabilities

    Accretion of other liabilities arises from discounting Canadian Content
Development commitments to reflect the fair value of the obligations. The
expense recognized in the quarter and the six months ended June 30, 2007 was
not significantly different from the same periods in 2006.

    Loss (income) on equity accounted investment

    The Company's 29.9% interest in Larche Communications (Kitchener) Inc. was
sold on April 12, 2007 and as a result, there was no amount for income on
equity accounted investment this quarter. Year-to-date results include the
Company's proportionate share of the losses realized up to March 31, 2007.

    Gain on disposal of equity accounted investment

    The Company disposed of its interest in Larche Communications (Kitchener)
Inc. for proceeds of $4.0 million which resulted in a $3.8 million gain.

    Gain on disposal of long-term investment

    On January 19, 2007, the Halterm Income Fund Trust Units were disposed of
for proceeds of $14.5 million (2006 - $0.4 million) which resulted in a gain
of $10.8 million (2006 - $0.2 million).

    Income taxes

    The effective income tax rate in the quarter was 32% and 25% for the six
month period ended June 30, 2007. These rates are consistent with the lower
tax rate attributed to the realized capital gains. The effective tax rate was
higher than the prior period because in June 2006 the Company re-measured its
future income tax assets and liabilities due to the enactment of lower general
corporate tax rates in Canada, resulting in a future income tax recovery of
$1.3 million.

    Non-controlling interest in subsidiaries' earnings

    Non-controlling interest in subsidiaries' earnings in the quarter and
year-to-date was lower than 2006. This is attributed to the fact that the
Company purchased one of its minority interests during the second quarter, no
longer requiring the use of non-controlling interest accounting since the
acquisition date.


    Net income

                             Three months ended            Six months ended
                                   June 30                     June 30
    (thousands of dollars)    2007          2006          2007          2006
    -------------------------------------------------------------------------
    Net income            $  5,807         7,506        13,215         8,673
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Net income in the second quarter was $1.7 million or 23% lower than last
year due to lower investment income this year. Year-to-date net income was
$4.5 million or 52% better than last year primarily due to gains that arose
from the disposals of Halterm Income Fund Trust Units and the equity accounted
investment in Larche Communications (Kitchener) Inc.

    Selected Quarterly Financial Information

    The Company's revenue is derived primarily from the sale of advertising
airtime which is subject to seasonal fluctuations. The first quarter of the
year is generally a period of lower retail spending. Other factors affecting
the variability of net income in the quarters presented below are as follows.
The net loss in the third quarter of 2005 included the $3.5 million Halterm
settlement. In 2006, a gain realized on marketable securities positively
affected the second quarter while the third quarter was negatively impacted by
a $1.6 million decline in the value of marketable securities. The 2007 first
quarter's net income is impacted by the gain on disposal of the Halterm Income
Fund Trust Units and the second quarter is affected by the gain on disposal of
the minority interest in Larche Communications (Kitchener) Inc.


    (thou-
     sands
     of
     dollars
     except
     per            2007                    2006                    2005
     share     --------------  ------------------------------  --------------
     data)       2nd     1st     4th     3rd     2nd     1st     4th     3rd
    -------------------------------------------------------------------------
    Revenue $ 26,159  19,518  28,064  22,788  24,522  18,563  24,600  19,359
    Net
     income
      (loss)   5,807   7,408   3,285       9   7,506   1,167   2,691  (1,245)
    Earnings
     per
     share
      - Basic   0.53    0.67    0.29    0.00    0.67    0.10    0.24   (0.11)
      - Dilu-
         ted    0.51    0.64    0.28    0.00    0.65    0.10    0.23   (0.11)
    -------------------------------------------------------------------------


    Liquidity and capital resources

    Selected cash flow information - three months ended June 30, 2007

    The cash from operating activities of $1.1 million was $8.0 million lower
than the same period last year due to lower investment income and a reduction
in the non-cash working capital. The long-term debt borrowings of
$9.0 million, combined with the $4.0 million proceeds from the disposition of
the equity accounted investment and other cash inflows were used to buy the
non-controlling interest in 3937844 Canada Inc. for $10.7 million, and to
repurchase capital stock for $3.7 million.

    Selected cash flow information - three months ended June 30, 2006

    The 2006 second quarter cash provided by operating activities was
$9.0 million. This cash was primarily used to repay long-term debt borrowings
of $4.5 million, to acquire CKJS Limited for $2.3 million and to buy $1.2
million of property and equipment.

    Selected cash flow information - six months ended June 30, 2007

    The cash used in operating activities was $2.5 million compared to last
year's source of cash of $8.0 million. The decrease was due to the lower
investment income. The aggregate proceeds of $18.5 million from the disposals
of Halterm Income Fund Trust Units and the equity accounted investment were
primarily used to acquire the non-controlling interest in 3937844 Canada Inc.
for $10.7 million, to repurchase capital stock of $3.7 million and to purchase
property and equipment of $1.8 million.

    Selected cash flow information - six months ended June 30, 2006

    The cash from operating activities of $8.0 million was used to finance the
CKJS Limited business acquisition in the amount of $2.3 million, property and
equipment of $1.9 million, capital stock repurchases for $1.6 million and to
pay $1.7 million in dividends.
    Expenditures in capital assets in the second quarter and year-to-date were
related to the launch of the new FM licence in Calgary, Alberta and the work
to date on the AM to FM conversion in Edson, Alberta. In the next twelve
months, the Company will spend approximately $10.0 million to launch new
licences, complete the AM to FM conversions, to relocate to new premises in
Ottawa, Ontario and to perform other upgrades throughout the Company.
    The Company expects its level of cash flow for the remainder of 2007,
combined with availability from its credit facility, to be sufficient to fund
working capital, capital expenditures, contractual obligations and other cash
requirements as described above.

    Credit facility and capital structure

    The Company's syndicated credit facility has not changed since the
publication of the 2006 Annual Report. The revolving credit facility is
renewed annually; the current maturity date is April 2008. This type of credit
facility provides flexibility because there are no scheduled repayment terms.
Covenants for the facility require that the Company maintain certain financial
ratios. The Company was in compliance with the covenants throughout the
quarter and at quarter end, and expects to be for the foreseeable future. As
at June 30, 2007 the Company had $4.3 million of bank indebtedness outstanding
and $49.0 million of long-term debt, of which less than $0.1 million was
current. Working capital was $6.7 million compared to $9.2 million as at
December 31, 2006; the decline was due to the decrease in current assets.

    Contractual obligations

    In addition to the Company's contractual obligations disclosed in the 2006
Annual Report, the Company is committed to Canadian Content Development
payments related to the conversions of AM to FM signals and the new FM
licences described under "Corporate Developments". The commitments aggregating
$1.3 million are payable at a rate of $0.2 million per year for seven years.

    Financial condition

    Capital employed

    Assets at quarter end totalled $215.3 million, down from $216.3 million at
December 31, 2006 primarily due to the decrease in current assets. At quarter
end the capital structure consisted of 47% equity ($101.2 million) and 53%
debt ($114.1 million). Total bank debt is 53% of equity, compared to the year
end ratio of 60%. The total bank debt to EBITDA ratio, calculated in
accordance with the Company's credit facility, was 3.2 to 1.

    Share repurchases

    The Company has approval under a Normal Course Issuer Bid to repurchase up
to 497,012 Class A Subordinate Voting Shares ("Class A shares") and
62,913 Class B Common Shares. This bid expires January 29, 2008. In the
quarter, no Class A shares were repurchased. For the same period in 2006,
20,200 Class A shares were purchased for a total cost of $0.3 million.
Year-to-date, the Company repurchased 198,800 of its outstanding Class A
shares (2006 - 95,100) for a total cost of $3.7 million (2006 - $1.6 million)
which resulted in reducing capital stock by $0.8 million (2006 - $0.4 million)
and retained earnings by $2.9 million (2006 - $1.2 million).

    Outstanding share data

    The weighted average number of shares outstanding was 11,062,000 as
compared to last year's 11,220,000; the reduction mainly due to share
repurchases. As at August 9, 2007, there are 9,833,000 Class A shares and
1,258,000 Class B Common Shares outstanding.

    Executive compensation

    Cashless exercise of stock options

    In May 2007, the Company received shareholder and Toronto Stock Exchange
("TSX") approval to amend certain aspects of the Executive Stock Option Plan,
including the option to exercise options on a cashless basis. On May 31, 2007,
195,000 options were exercised on a cashless basis to acquire Class A shares
of the Company at a weighted average exercise price of $12.75. The Company
issued 67,271 Class A shares with an aggregate value equal to the difference
between the exercise price of the options and the fair market value of the
Company's Class A shares. The fair market value of the Class A shares was
based on the volume weighted average trading price of one Class A share on the
TSX over the period of five consecutive trading days ended on and including
the day prior to May 31, 2007. This transaction resulted in increasing capital
stock and decreasing contributed surplus by $0.7 million.

    Executive stock option plan

    Pursuant to the Executive Stock Option Plan, 20,000 (2006 - 5,050) Class A
shares were issued in the second quarter for proceeds of $0.2 million (2006 -
less than $0.1 million). An additional 67,271 Class A shares were issued as a
result of a cashless exercise of 195,000 options during the quarter, described
above. This brings the total to 91,021 (2006 - 5,050) issued Class A shares
with cash proceeds of $0.2 million (2006 - less than $0.1 million). No options
were granted in the quarter or year-to-date. Last year, the Company granted
115,000 options at a weighted average exercise price of $16.53. The Company
has 760,000 stock options outstanding for Class A shares at prices ranging
from $7.30 to $16.53, of which 630,000 are vested. In May 2006, the expiry
date of certain options subject to expire was extended resulting in a one-time
charge to compensation expense in the amount of $0.8 million. Compensation
expense related to stock options for the three months ended June 30, 2007 was
$0.1 million (2006 - $0.9 million) and year-to-date was $0.2 million (2006 -
$1.1 million).

    Stock appreciation rights plan

    In January 2006, the Company granted 425,000 stock appreciation rights at
a reference price of $16.53. 30,000 of these rights have expired due to
forfeiture. On March 2, 2007, 5,000 stock appreciation rights were granted at
a reference price of $18.41. 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. The
rights 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 three months ended June 30, 2007, the compensation expense
related to the stock appreciation rights plan was $0.1 million (2006 - less
than $0.1 million). Year-to-date compensation expense was $0.2 million (2006 -
less than $0.1 million) and the total obligation included in other liabilities
was $0.3 million (2006 - less than $0.1 million).

    Derivative financial instruments and financial risk management

    Interest rate risk management

    The Company has two interest rate swap agreements having a notional amount
of $20.0 million and $5.0 million, expiring February 27, 2009 and February 27,
2011, respectively (2006 - $30.0 million). The Company enters into interest
rate swap agreements to hedge interest rate risk on a portion of its long-term
debt whereby the Company will exchange the three-month bankers' acceptance
floating interest rate for a fixed interest rate during the term of the
agreements. 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 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 estimated fair value of the interest
rate swaps at June 30, 2007 was a receivable of $0.2 million. The net change
in the fair value of the swaps recognized as a gain in other comprehensive
income ("OCI") in the second quarter aggregated $0.3 million, before income
tax expense of $0.1 million. Year-to-date the net change in fair value
recognized in OCI was a gain of $0.4 million, before income tax expense of
$0.1 million. For the same period last year, the fair value of the swap
agreements was a receivable of $0.1 million; however, this was not recorded
since prior to January 1, 2007 there was no requirement to adjust derivatives
designated as hedges on the balance sheet at their fair value when they
qualified for hedge accounting. The accumulated loss at January 1, 2007 of
$0.2 million was recorded, net of income tax recoveries of $0.1 million, as a
transition adjustment to opening accumulated other comprehensive income
("AOCI").

    Share price volatility management

    In July 2006, the Company entered into an agreement to hedge its
obligations under the stock appreciation rights plan ("SAR 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 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.
    The Company has concluded that this cash flow hedge is effective. The
estimated fair value of the gain receivable recorded in other assets as at
June 30, 2007 was $0.7 million. Of this balance, $0.5 million is the
unrealized portion. The net change in the fair value of the swap in the
quarter, recognized in OCI as a gain, was $0.1 million; the year-to-date
amount was $0.6 million. OCI income tax expense related to this cash flow
hedge in the quarter was less than $0.1 million while the year-to-date amount
was $0.2 million. Realized before-tax gains in the quarter of $0.1 million
were transferred from OCI to net income; the year-to-date amount was $0.2
million. The accumulated loss at January 1, 2007 related to this cash flow
hedge was $0.1 million and was recorded, net of income tax recoveries of less
than $0.1 million, as a transition adjustment to opening AOCI.

    Credit risk management

    Credit exposure on financial instruments arises from the possibility that
a counterparty to an instrument in which the Company is entitled to receive
payment of an unrealized gain fails to perform. Credit exposure is managed
through credit approval and monitoring procedures. The Company does not
anticipate any counterparties that it currently transacts with will fail to
meet their obligations as the counterparties are Canadian Chartered Banks. At
June 30, 2007 and 2006, there was no credit exposure to the Company related to
its financial instruments.
    The Company is subject to normal credit risk with respect to its
receivables and it maintains a provision for potential credit losses. A large
customer base and geographic dispersion minimize this risk.

    Adoption of new accounting policies

    The Company's accounting policies have remained unchanged since the 2006
Annual Report except for the accounting policies adopted January 1, 2007 as a
result of new policies issued by the Canadian Institute of Chartered
Accountants ("CICA"): Section 1530 Comprehensive Income, Section 3855
Financial Instruments - Recognition and Measurement and Section 3865 Hedges.
The changes in the accounting policies were applied retroactively without
restatement.

    Section 1530 Comprehensive Income

    This Section introduces the concept of comprehensive income which consists
of net income and OCI and represents the change in equity during a period from
transactions and other events from non-owner sources. Items to be recognized
in OCI include unrealized changes in the fair value of the effective portion
of cash flow hedging instruments, gains or losses on financial assets
classified as available-for-sale and the associated income tax effect of OCI
components. Amounts recognized in OCI eventually are reclassified to the
income statement. As a result of adopting this Section, the Company's
consolidated financial statements now include a consolidated statement of
comprehensive income and a consolidated statement of AOCI. AOCI is a separate
line item reported in the statement of shareholders' equity.

    Section 3855 Financial Instruments - Recognition and Measurement

    Section 3855 prescribes that all financial instruments are to be recorded
on the consolidated balance sheets at their fair value upon adoption of this
policy and on initial recognition of financial instruments. Thereafter,
measurement at fair value is required except for financial instruments
classified as held-to-maturity investments, loans and receivables or other
financial liabilities, which are to be measured at amortized cost using the
effective interest method ("EIM"). The Company has classified its financial
assets and liabilities according to the provisions covered under Section 3855;
details are included in Note 2 of the unaudited interim consolidated financial
statements.
    Instruments classified as held for trading are measured at fair value with
unrealized gains and losses recorded immediately in net income. Fair value of
marketable securities is based on the quoted share prices in active markets.
For the quarter ended June 30, 2007, the change in fair value of marketable
securities, recognized in other income (expense) in the consolidated income
statements, was a gain of $1.0 million reducing the year-to-date loss to $0.6
million. The Company's marketable securities are able to be sold in the near
term and this meets the criteria to classify these assets as held for trading.
    Assets classified as available-for-sale are measured at fair value with
unrealized gains and losses recognized in other comprehensive income. Fair
value of the Company's available-for-sale asset on January 1, 2007 was based
on the quoted unit price in active markets.
    The financial instruments classified as loans and receivables and other
liabilities are measured using amortized cost using EIM. Under the EIM,
interest income and expense are calculated and recorded using the effective
interest rate which is the rate that exactly discounts estimated future cash
receipts or payments throughout the expected life of the financial instrument.
Interest income and expense related to financial assets and financial
liabilities are being recorded using the EIM.
    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 floating
interest rate is reflective of the market interest rate available to the
Company. The carrying values of the Company's other financial assets and
liabilities approximate their fair values as at June 30, 2007.
    Transaction costs directly attributable to financial instruments
classified as other than held for trading are included in the initial carrying
value of such instruments and are amortized using the EIM.
    In accordance with Section 3855, the Company conducted a search for
embedded derivatives in its contractual arrangements dated or modified
subsequent to January 1, 2003. An embedded derivative is a component of a
hybrid instrument that also includes a non-derivative host contract, with the
effect that some of the cash flows of the combined instrument vary in a way
similar to a stand-alone derivative. When certain conditions are met, an
embedded derivative is separated from the host contract and accounted for
separately as a derivative on the balance sheet at fair value. The Company's
policy is to recognize embedded derivatives on the consolidated balance sheet,
when applicable. This rule has no impact on the consolidated financial
statements of the Company at this time.

    Section 3865 Hedges

    This Section applies to designated hedging relationships and provides
guidance by specifying how hedge accounting is applied and what disclosures
are required. In particular, derivatives designated as hedges must be recorded
on the balance sheet at fair value on adoption date; off-balance sheet
accounting is no longer permitted. Gains and losses from any ineffectiveness
in hedging relationships must now be identified, measured and recorded in net
income immediately. Gains and losses arising from the hedged risk in a cash
flow hedge, to the extent that the hedging relationship is effective, are
deferred and included in other comprehensive income until such time as the
hedged item affects net income.

    Transitional adjustments due to the adoption of new accounting policies

    As at January 1, 2007, the Company's investment in Halterm Income Fund
Trust Units was classified as an available-for-sale asset. It was disposed of
on January 19, 2007 for proceeds of $14.5 million which resulted in an
after-tax gain on disposal of $8.9 million. Section 3855 stipulates that
available-for-sale assets are to be recorded at fair value on the balance
sheet on the transition date and Section 1530 specifies that unrealized gains
or losses on available-for-sale assets are to be recorded in OCI until the
gains or losses are realized. As a result, on January 1, 2007, the Company
adjusted the carrying value of the investment and opening accumulated other
comprehensive income by $8.9 million. On the date of disposal, the realized
gain was transferred from OCI to net income.
    As at January 1, 2007, net cash flow hedge losses aggregating $0.1 million
were recorded as an adjustment to opening AOCI as a result of recognizing the
derivatives at fair value on the balance sheet. For further information on the
effect of adopting these new accounting policies on the Company's derivative
financial instruments, refer to Note 7 of the unaudited interim consolidated
financial statements.

    Future accounting policy changes

    The CICA released new sections that will be applicable to the Company
effective for years beginning on or after October 31, 2007. Section 1535
Capital Disclosures introduces new disclosure requirements surrounding an
entity's objectives, policies and procedures for managing capital. Section
3862 Financial Instruments - Disclosures and Section 3863 - Financial
Instruments - Presentation build on Section 3861 and provide additional
presentation and disclosure guidance for financial instruments. Other than the
additional disclosure and presentation requirements, the Company anticipates
no significant financial impact as a result of adopting these new Sections
January 1, 2008.

    Subsequent events

    As disclosed under "Corporate developments", in July the Company was
successful in its CRTC applications for two new FM licences in Sydney and
Kentville, Nova Scotia and for an AM to FM conversion in Carbonear,
Newfoundland and Labrador. As a result, the Company is committed to pay
$0.1 million toward Canadian Content Development every year for the next seven
years.
    On July 11, 2007, the Company entered into an agreement to acquire the
37.8% minority interest in Atlantic Stereo Limited, which operates the two FM
licences in Moncton, New Brunswick, for cash consideration of $6.9 million.
The purchase is subject to CRTC approval.
    On August 9, 2007, the Company declared dividends of $0.15 per share on
each of its Class A shares and Class B Common shares payable September 14,
2007 to shareholders of record as at August 31, 2007.

    Critical accounting estimates

    There has been no substantial change in the Company's critical accounting
estimates since the publication of the 2006 Annual Report except for certain
estimates required in determining fair value in conjunction with the adoption
of new accounting policies described in Note 2 of the unaudited interim
consolidated financial statements.

    Risks and opportunities

    There has been no substantial change in the Company's risks and
opportunities since the publication of the 2006 Annual Report.

    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 and six months ending June 30,
2007 that have materially affected, or are likely to materially affect, the
Company's internal controls over financial reporting.

    Outlook

    The Company's primary objectives for the remainder of the year include:

    - Effectively managing expenditures while at the same time improving
      programming and marketing strategies to improve EBITDA.

    - Launching the new FM licences in Lac La Biche and Fort McMurray,
      Alberta.

    - Integrating new stations into the Company's operating platform. The
      Company will begin working on launching the new licences in Sydney and
      Kentville, Nova Scotia as soon as possible.

    - More AM to FM conversions, wherever possible. The CRTC awarded the
      Company the ability to convert AM signals to FM in Edson, Alberta,
      Halifax, Nova Scotia and Carbonear, Newfoundland and Labrador. The
      Edson station was launched subsequent to quarter end, and management
      hopes to complete the other conversions as soon as possible. Other
      opportunities to convert from AM to FM will be explored throughout the
      remainder of the year.

    Management remains focused on accretive acquisitions as opportunities
present themselves.

    Non-GAAP Measure

    (1)EBITDA is defined as net income excluding depreciation and amortization
expense, interest expense, accretion of other liabilities, loss (income) on
equity accounted investment, gain on disposal of equity accounted investment,
gain on disposal of long-term investment, provision for income taxes and
non-controlling interest in subsidiaries' earnings. A calculation of this
measure is as follows:


                             Three months ended            Six months ended
                                   June 30                     June 30
    (thousands of dollars)    2007          2006          2007          2006
    -------------------------------------------------------------------------
    Net income            $  5,807         7,506        13,215         8,673
    Non-controlling
     interest in subsi-
     diaries' earnings         190           233           292           314
    Provision for income
     taxes                   2,847         1,780         4,413         1,970
    Gain on disposal of
     long-term investment        -             -       (10,843)         (168)
    Gain on disposal of
     equity accounted
     investment             (3,826)            -        (3,826)            -
    Loss (income) on
     equity accounted
     investment                  -           (42)           14             5
    Accretion of other
     liabilities               408           390           648           716
    Interest expense           730           893         1,468         1,607
    Depreciation and
     amortization
     expense                 1,002           906         1,885         1,748
                          -----------------------     -----------------------
    EBITDA                $  7,158        11,666         7,266        14,865
    -------------------------------------------------------------------------


    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 publicly traded companies. 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.

    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, 2007
    and 2006

    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 three months and six months ended June 30, 2007 and 2006
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 9th day of August, 2007


    Interim Consolidated Balance Sheets
    (unaudited)

                                                       June 30   December 31
    (thousands of dollars)                                2007          2006
    -------------------------------------------------------------------------

    Assets

    Current assets
      Marketable securities                          $  13,574        12,404
      Receivables                                       20,268        20,783
      Note receivable                                        -           927
      Prepaid expenses                                   1,411           610
      Other asset (note 2)                                   -         3,704
                                                   --------------------------
        Total current assets                            35,253        38,428
    Property and equipment                              32,569        32,392
    Other assets                                         4,862         8,069
    Broadcast licences (note 3)                        136,526       131,267
    Goodwill                                             4,337         4,337
    Future income tax assets                             1,765         1,794
                                                   --------------------------
                                                     $ 215,312       216,287
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities and Shareholders' Equity

    Current liabilities
      Bank indebtedness                              $   4,348           802
      Accounts payable and accrued liabilities          15,742        19,459
      Dividends payable                                      -         1,680
      Income taxes payable                               8,452         7,236
      Current portion of long-term debt                     23            23
                                                   --------------------------
        Total current liabilities                       28,565        29,200
    Long-term debt                                      49,013        53,771
    Other liabilities                                   20,337        17,083
    Future income tax liabilities                       15,170        13,631
    Non-controlling interest in subsidiaries
     (note 3)                                            1,012        11,680
    Shareholders' equity                               101,215        90,922
                                                   --------------------------
                                                     $ 215,312       216,287
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Commitments (note 11)
    Subsequent events (note 12)
    See accompanying notes to the interim consolidated financial statements


    Interim Consolidated Statements of Income
    (unaudited)

                             Three months ended            Six months ended
    (thousands of dollars          June 30                     June 30
    except per share data)    2007          2006          2007          2006
    -------------------------------------------------------------------------
    Revenue               $ 26,159        24,522        45,677        43,085
    Other income (expense)   1,221         6,893          (279)        9,128
                          ---------------------------------------------------
                            27,380        31,415        45,398        52,213
    Operating expenses      20,222        19,749        38,132        37,348
    Depreciation               815           780         1,590         1,504
    Amortization of
     deferred charges          187           126           295           244
                          ---------------------------------------------------
    Operating income         6,156        10,760         5,381        13,117
    Interest                   730           893         1,468         1,607
    Accretion of other
     liabilities (note 3)      408           390           648           716
    Loss (income) on
     equity accounted
     investment                  -           (42)           14             5
    Gain on disposal of
     equity accounted
     investment (note 3)    (3,826)            -        (3,826)            -
    Gain on disposal of
     long-term investment
     (note 2)                    -             -       (10,843)         (168)
                          ---------------------------------------------------
                             8,844         9,519        17,920        10,957
    Provision for income
     taxes (note 8)          2,847         1,780         4,413         1,970
                          ---------------------------------------------------
                             5,997         7,739        13,507         8,987
    Non-controlling
     interest in
     subsidiaries'
     earnings                  190           233           292           314
                          ---------------------------------------------------
    Net income            $  5,807         7,506        13,215         8,673
    -------------------------------------------------------------------------
    Earnings per share
     (note 9)
      - basic             $   0.53          0.67          1.19          0.77
      - diluted               0.51          0.65          1.15          0.75
    -------------------------------------------------------------------------
    See accompanying notes to the interim consolidated financial statements


    Interim Consolidated Statements of Shareholders' Equity
    (unaudited)

                                                           Six months ended
                                                               June 30
    (thousands of dollars)                                2007          2006
    -------------------------------------------------------------------------
    Retained earnings, beginning of period           $  45,525        38,441
    Net income                                          13,215         8,673
    Repurchase of capital stock (note 4)                (2,890)       (1,178)
                                                   --------------------------
    Retained earnings, end of period                    55,850        45,936
    Capital stock                                       43,345        43,287
    Contributed surplus                                  1,567         1,885
    Accumulated other comprehensive income
     (note 2)                                              453             -
                                                   --------------------------

    Total shareholders' equity                     $   101,215        91,108
    -------------------------------------------------------------------------
    See accompanying notes to the interim consolidated financial statements


    Interim Consolidated Statements of Comprehensive Income
    (unaudited)

                                                  Three months    Six months
                                                         ended         ended
                                                       June 30       June 30
    (thousands of dollars)                                2007          2007
    -------------------------------------------------------------------------

    Net income                                       $   5,807        13,215
                                                   --------------------------

    Other comprehensive income (loss):
    Net change in fair values of cash flow
     hedges (note 7)
      Net change in fair value of
       interest rate swaps                                 306           357
      Net change in fair value of
       equity total return swap                             81           554
      Income tax on net change in fair
       value of interest rate swap and equity
       total return swap                                  (145)         (335)
                                                   --------------------------
                                                           242           576
    Net change in fair value of asset available-
     for-sale (note 2)
      Realized gain on disposal of Halterm Income
       Fund Trust Units transferred to net income,
       net of income taxes of $1,952                         -        (8,891)
                                                   --------------------------

    Other comprehensive income (loss)                      242        (8,315)
                                                   --------------------------

    Comprehensive income                             $   6,049         4,900
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the interim consolidated financial statements


    Interim Consolidated Statement of Accumulated
     Other Comprehensive Income
     (unaudited)

                                                            Six months ended
                                                                     June 30
    (thousands of dollars)                                              2007
    -------------------------------------------------------------------------

    Accumulated other comprehensive income,
     beginning of period                                          $        -
    Transition adjustment for cash flow hedges, net of income
     tax recovery of $77 (note 2 and 7)                                 (123)
    Transition adjustment for unrealized
     gains associated with available-
     for-sale investment, net of income taxes of $1,952 (note 2)       8,891
                                                                  -----------
    Accumulated other comprehensive income,
     beginning of period                                               8,768
    Other comprehensive income (loss) for the period                  (8,315)
                                                                  -----------
    Accumulated other comprehensive income, end of period         $      453
    -------------------------------------------------------------------------
    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)    2007          2006          2007          2006
    -------------------------------------------------------------------------
    Operating Activities
    Net income            $  5,807         7,506        13,215         8,673
    Items not
     involving cash
      Depreciation and
       amortization          1,002           906         1,885         1,748
      Future income taxes    1,626           (77)        1,196            41
      Executive stock-based
       compensation plans
       (note 4 and 6)          209           908           408         1,073
      Accretion of other
       liabilities (note 3)    408           390           648           716
      Gain on disposal of
       equity accounted
       investment (note 3)  (3,826)            -        (3,826)            -
      Gain on disposal of
       long-term investment
       (note 2)                  -             -       (10,843)         (168)
      Non-controlling interest
       in subsidiaries'
       earnings                190           233           292           314
      Other                   (220)         (126)         (385)         (156)
                          ---------------------------------------------------
                             5,196         9,740         2,590        12,241
    Change in non-cash
     working capital
     relating to
     operating activities   (4,135)         (694)       (5,072)       (4,218)
                          ---------------------------------------------------
                             1,061         9,046        (2,482)        8,023
    -------------------------------------------------------------------------
    Financing Activities
    Change in bank
     indebtedness              787          (930)        3,546           491
    Long-term debt
     borrowings              9,000             -         9,000         3,500
    Long-term debt
     repayments               (267)       (4,456)      (13,758)       (4,533)
    Issuance of
     capital stock
     (note 4)                  153            43           185            43
    Repurchase of
     capital stock
     (note 4)               (3,737)         (343)       (3,737)       (1,583)
    Dividends paid               -             -        (1,680)       (1,695)
    Canadian Content
     Development commitment
     payments                 (561)         (795)         (858)         (913)
    Other                        -             -          (605)         (302)
                          ---------------------------------------------------
                             5,375        (6,481)       (7,907)       (4,992)
    -------------------------------------------------------------------------
    Investing Activities
    Note receivable          1,000         1,000         1,000         1,000
    Property and
     equipment additions      (770)       (1,231)       (1,767)       (1,889)
    Acquisition of
     businesses,
     licences and
     non-controlling
     interest (note 3)     (10,745)       (2,296)      (10,745)       (2,296)
    Proceeds from disposal
     of Halterm Income
     Fund Trust Units and
     equity accounted
     investment
     (note 2 and 3)          4,000             -        18,547           399
    Deferred charges          (320)           (9)         (696)         (415)
    Employee share purchase
     loan repayment              -             -         2,826             -
    Other                      399           (29)        1,224           170
                          ---------------------------------------------------
                            (6,436)       (2,565)       10,389        (3,031)
    -------------------------------------------------------------------------
    Cash, beginning and
     end of period        $      -             -             -             -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Supplemental Cash
     Flow Information
      Interest paid       $    735         1,111         1,606         1,745
      Income taxes paid        197           415           762           974
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    See accompanying notes to the interim consolidated financial statements


    Notes to the Interim Consolidated Financial Statements
    - June 30, 2007 and 2006
    (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 2006 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 2006 Annual Report.

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

    The Company's accounting policies have remained unchanged since the 2006
    Annual Report with the exception of the adoption of new accounting
    policies described in Note 2.

    2. ADOPTION OF NEW ACCOUNTING POLICIES

    Effective January 1, 2007, the Company has adopted the following new
    accounting policies as issued by the Canadian Institute of Chartered
    Accountants ("CICA"): Section 1530 Comprehensive Income, Section 3855
    Financial Instruments - Recognition and Measurement and Section 3865
    Hedges. The changes in the accounting policies were applied retroactively
    without restatement.

    Section 1530 Comprehensive Income

    This Section introduces the concept of comprehensive income which
    consists of net income and other comprehensive income ("OCI") and
    represents the change in equity during a period from transactions and
    other events from non-owner sources. Items to be recognized in OCI
    include unrealized changes in the fair value of the effective portion of
    cash flow hedging instruments, gains or losses on financial assets
    classified as available-for-sale and the associated income tax effect of
    OCI components. Amounts recognized in OCI eventually must be reclassified
    to the income statement. As a result of adopting this Section, the
    Company's consolidated financial statements now include a consolidated
    statement of comprehensive income and a consolidated statement of
    accumulated other comprehensive income ("AOCI"). AOCI is a separate line
    item reported in the statement of shareholders' equity.

    Section 3855 Financial Instruments - Recognition and Measurement

    Section 3855 prescribes that all financial instruments are to be recorded
    on the consolidated balance sheets at their fair value upon adoption of
    this policy and on initial recognition of financial instruments.
    Thereafter, measurement at fair value is required except for financial
    instruments classified as held-to-maturity investments, loans and
    receivables or other financial liabilities, which are to be measured at
    amortized cost using the effective interest method ("EIM"). The Company
    has classified its financial instruments as shown in the table below.
    Subsequent to fair value recognition on January 1, 2007, the adoption
    date, the financial instruments will be measured as follows based on
    their classification:


    Asset / Liability               Classification               Measurement
    -------------------------------------------------------------------------
    Cash and bank
     indebtedness                 Held for trading                Fair value
    Marketable securities         Held for trading                Fair value
    Investment in Halterm
     Income Fund Trust
     Units                      Available-for-sale                Fair value
    Receivables              Loans and receivables  Amortized cost using EIM
    Note receivable          Loans and receivables  Amortized cost using EIM
    Accounts payable and
     accrued liabilities         Other liabilities  Amortized cost using EIM
    Long-term debt               Other liabilities  Amortized cost using EIM
    Canadian Content Development
     commitments, included
     in other liabilities        Other liabilities  Amortized cost using EIM
    -------------------------------------------------------------------------


    Instruments classified as held for trading are measured at fair value
    with unrealized gains and losses recorded immediately in net income. Fair
    value of marketable securities is based on the quoted share prices in
    active markets. For the quarter ended June 30, 2007, the change in fair
    value of marketable securities, recognized in other income (expense) in
    the consolidated income statements, was a gain of $1,011,000 reducing the
    year-to-date loss to $627,000. The Company's marketable securities are
    able to be sold in the near term and this meets the criteria to classify
    these assets as held for trading.

    Assets classified as available-for-sale are measured at fair value with
    unrealized gains and losses recognized in other comprehensive income.
    Fair value of the Company's available-for-sale asset on January 1, 2007
    was based on the quoted unit price in active markets.

    The financial instruments classified as loans and receivables and other
    liabilities are measured using amortized cost using EIM. Under the EIM,
    interest income and expense are calculated and recorded using the
    effective interest rate which is the rate that exactly discounts
    estimated future cash receipts or payments throughout the expected life
    of the financial instrument. Interest income and expense related to
    financial assets and financial liabilities are being recorded using the
    EIM.

    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 floating interest rate is reflective of the market
    interest rate available to the Company. The carrying values of the
    Company's other financial assets and liabilities approximate their fair
    values as at June 30, 2007.

    Transaction costs directly attributable to financial instruments
    classified as other than held for trading are included in the initial
    carrying value of such instruments and are amortized using EIM.

    In accordance with Section 3855, the Company conducted a search for
    embedded derivatives in its contractual arrangements dated or modified
    subsequent to January 1, 2003. An embedded derivative is a component of a
    hybrid instrument that also includes a non-derivative host contract, with
    the effect that some of the cash flows of the combined instrument vary in
    a way similar to a stand-alone derivative. When certain conditions are
    met, an embedded derivative is separated from the host contract and
    accounted for separately as a derivative on the balance sheet at fair
    value. The Company's policy is to recognize embedded derivatives on the
    consolidated balance sheet, when applicable. This rule has no impact on
    the consolidated financial statements of the Company at this time.

    Section 3865 Hedges

    This Section applies to designated hedging relationships and provides
    guidance by specifying how hedge accounting is applied and what
    disclosures are required. In particular, derivatives designated as hedges
    must be recorded on the balance sheet at fair value on adoption date;
    off-balance sheet accounting is no longer permitted. Gains and losses
    from any ineffectiveness in hedging relationships must now be identified,
    measured and recorded in net income immediately. Gains and losses arising
    from the hedged risk in a cash flow hedge, to the extent that the hedging
    relationship is effective, are deferred and included in other
    comprehensive income until such time as the hedged item affects net
    income.

    Transitional adjustments due to the adoption of new accounting policies

    As at January 1, 2007, the Company's investment in Halterm Income Fund
    Trust Units was classified as an available-for-sale asset with a book
    value of $3,704,000. It was disposed of on January 19, 2007 for proceeds
    of $14,547,000 which resulted in a gain on disposal of $10,843,000
    ($8,891,000 after-tax). In 2006, certain units were disposed of for
    proceeds of $399,000 resulting in a $168,000 gain ($138,000 after-tax).
    Section 3855 stipulates that available-for-sale assets are to be recorded
    at fair value on the balance sheet on the transition date and Section
    1530 specifies that unrealized gains or losses on available-for-sale
    assets are to be recorded in OCI until the gains or losses are realized.
    As a result, on January 1, 2007, the Company adjusted the carrying value
    of the investment and opening accumulated other comprehensive income by
    $8,891,000. On the date of disposal, the realized gain was transferred
    from OCI to net income.

    As at January 1, 2007, cash flow hedge losses aggregating $200,000, net
    of income tax recoveries of $77,000, were recorded as an adjustment to
    opening AOCI as a result of recognizing the derivatives at fair value on
    the balance sheet. For further information on the effect of adopting
    these new accounting policies on the Company's derivative financial
    instruments, refer to Note 7.

    3. ADDITIONS, ACQUISITIONS AND DISPOSALS

    Broadcast licence additions

    On March 19, 2007, the Company launched its new FM radio station in
    Calgary, Alberta. Upon the launch date, the Company became obligated to
    pay $1,000,000 in Canadian Content Development ("CCD") commitments per
    year for seven years. Using the amortized cost basis to record these
    commitments on the consolidated balance sheets, $4,718,000 was
    capitalized as broadcast licences and recorded in other liabilities.
    Costs incurred related to the award of new broadcast licences such as
    application costs are also capitalized bringing the total amount
    capitalized to broadcast licences related to this station to $4,907,000.

    Business acquisitions

    On May 16, 2007, the Company acquired the minority shareholder's 23.66%
    interest in 3937844 Canada Inc. for cash consideration of
    $10,745,000. In addition, cash consideration of $255,000 was paid
    regarding a loan due to the minority interest shareholder. 3937844 Canada
    Inc. owns and operates twenty-one licences throughout the province of
    Alberta. The original 76.34% had been acquired in April 2002 for
    $30,660,000. The Company accounted for this acquisition of non-
    controlling interest as a step purchase. The acquisition was financed by
    the Company's credit facility.

    The excess of the purchase price over the net book value of the non-
    controlling interest acquired was allocated to the net identifiable
    assets acquired on the basis of their estimated fair market values using
    the purchase method of accounting. The allocation of the $391,000 excess
    was as follows: $504,000 to broadcast licences and $113,000 as a future
    tax liability.

    On April 30, 2006, the Company acquired 100% of the common shares of CKJS
    Limited ("CKJS") entitling it to the property, assets, broadcast licence
    and rights of CKJS used in connection with the operation of an AM radio
    station in Winnipeg, Manitoba. Consideration was $2,296,000 and the fair
    value of the most significant assets acquired and liabilities assumed was
    allocated as follows: broadcast licences - $1,630,000, goodwill -
    $727,000, fixed assets - $550,000, customer-related intangible assets -
    $310,000 and future income tax liabilities - $629,000. The customer-
    related intangible assets were included in other assets and are being
    amortized on a straight-line basis over twenty years. Goodwill was not
    deductible for tax purposes.

    Disposal of equity accounted investment

    On April 12, 2007, the Company disposed of its 29.9% interest in Larche
    Communications (Kitchener) Inc. which operates an FM radio station in
    Kitchener, Ontario. The proceeds were $4,000,000 which resulted in a gain
    on disposal of $3,826,000.

    Accretion expense on Canadian Content Development

    CCD commitments are capitalized as broadcast licences and recorded as
    other liabilities and are measured based on the amortized cost using EIM.
    This measurement basis gives rise to accretion expense which amounted to
    $408,000 for the second quarter (2006 - $390,000) and $648,000 year-to-
    date (2006 - $716,000).

    4. CAPITAL STOCK

    Share repurchases

    The Company has approval under a Normal Course Issuer Bid to repurchase
    up to 497,012 Class A Subordinate Voting Shares ("Class A shares") and
    62,913 Class B Common Shares. This bid expires January 29, 2008. In the
    quarter, no Class A shares were repurchased (2006 - 20,200 Class A shares
    were purchased for a total cost of $343,000). Year-to-date, the Company
    repurchased 198,800 of its outstanding Class A shares (2006 - 95,100) for
    a total cost of $3,737,000 (2006 - $1,583,000), paid in April, which
    resulted in reducing capital stock by $847,000 (2006 - $405,000) and
    retained earnings by $2,890,000 (2006 - $1,178,000).

    Cashless exercise of stock options

    In May 2007, the Company received shareholder and Toronto Stock Exchange
    ("TSX") approval to amend certain aspects of the Executive Stock Option
    Plan, including the option to exercise options on a cashless basis. On
    May 31, 2007, 195,000 options were exercised on a cashless basis to
    acquire Class A shares of the Company at a weighted average exercise
    price of $12.75. The Company issued 67,271 Class A shares with an
    aggregate value equal to the difference between the exercise price of the
    options and the fair market value of the Company's Class A shares. The
    fair market value of the Class A shares was based on the volume weighted
    average trading price of one Class A share on the TSX over the period of
    five consecutive trading days ended on and including the day prior to May
    31, 2007. This transaction resulted in increasing capital stock and
    decreasing contributed surplus by $693,000.

    Executive stock option plan

    Pursuant to the Executive Stock Option Plan, 20,000 (2006 - 5,050) Class
    A shares were issued in the second quarter for proceeds of $153,000
    (2006 - $43,000). An additional 67,271 Class A shares were issued as a
    result of a cashless exercise of 195,000 options during the quarter,
    described above. This brings the total to 91,021 (2006 - 5,050) issued
    Class A shares with proceeds of $185,000 (2006 - $43,000) for the six
    months of this year. No options were granted in the quarter or
    year-to-date. Last year, the Company granted 115,000 options at a
    weighted average exercise price of $16.53. In May 2006, the expiry date
    of certain options subject to expire was extended resulting in a one-time
    charge to compensation expense in the amount of $790,000. Compensation
    expense related to stock options for the three months ended June 30, 2007
    was $75,000 (2006 - $894,000) and year-to-date was $177,000
    (2006 - $1,050,000).

    5. EMPLOYEE BENEFIT PLANS

                             Three months ended            Six months ended
                                   June 30                     June 30
     (thousands of dollars)   2007          2006          2007          2006
    -------------------------------------------------------------------------
    Defined contribution
     plan expense         $    344           300           664           697
    Defined benefit
     plan expense              125           132           251           264
    -------------------------------------------------------------------------

    6. STOCK APPRECIATION RIGHTS

    In January 2006, the Company granted 425,000 stock appreciation rights at
    a reference price of $16.53. 30,000 of these rights have expired due to
    forfeiture. On March 2, 2007, 5,000 stock appreciation rights were
    granted at a reference price of $18.41. 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. The rights 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 three months
    ended June 30, 2007, the compensation expense was $134,000 (2006 -
    $14,000). Year-to-date compensation expense was $231,000 (2006 - $23,000)
    and the total obligation included in other liabilities was $334,000
    (2006 - $23,000).

    7. DERIVATIVE FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

    (a) Interest rate risk management

    The Company has two interest rate swap agreements having a notional
    amount of $20,000,000 and $5,000,000, expiring February 27, 2009 and
    February 27, 2011, respectively (2006 - $30,000,000). The Company enters
    into interest rate swap agreements to hedge interest rate risk on a
    portion of its long-term debt whereby the Company will exchange the
    three-month bankers' acceptance floating interest rate for a fixed
    interest rate during the term of the agreements. 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
    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 estimated fair value of the
    interest rate swaps at June 30, 2007 was a receivable of $205,000. The
    net change in the fair value of the swaps recognized as a gain in OCI in
    the second quarter aggregated $306,000, before income tax expense of
    $113,000. Year-to-date the net change in fair value recognized in OCI was
    a gain of $357,000, before income tax expense of $133,000. For the same
    period last year, the fair value of the swap agreements was a receivable
    of $95,000; however, this was not recorded since prior to January 1, 2007
    there was no requirement to adjust derivatives designated as hedges on
    the balance sheet at their fair value when they qualified for hedge
    accounting. The accumulated loss at January 1, 2007 of $153,000 was
    recorded, net of income tax recoveries of $60,000, as a transition
    adjustment to opening accumulated other comprehensive income.

    (b) 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 425,000 notional Class A shares with a hedged price of $17.55.
    The swap expires July 2011; however, the Company may elect to terminate
    the agreement prior to that date if the Class A share market price is
    equal to or less than the SAR Plan reference price of $16.53. The swap is
    settled on every quarterly settlement date. If the Company's share price
    is in excess of the hedged price on the settlement date, the Company is
    entitled to receive the difference per share, and if the Company's share
    price is less than the hedged price, the Company is obligated to pay the
    difference per share. A settlement date can automatically be triggered if
    during any 24 hour trading period, the share price drops by 10% or more.
    In this event, the Company must cash settle on that date based on that
    day's share price; however, on the quarterly settlement date if the share
    price has rebounded, the Company is reimbursed an amount equal to the
    difference between the hedged price and the share price which triggered
    the automatic settlement.

    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.

    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
    other 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 other comprehensive income 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 gain receivable recorded in other assets as
    at June 30, 2007 was $723,000. Of this balance, $514,000 is the
    unrealized portion. The net change in the fair value of the swap in the
    quarter, recognized in OCI as a gain, was $81,000; the year-to-date
    amount was $554,000. OCI income tax expense related to this cash flow
    hedge in the quarter was $32,000 while the year-to-date amount was
    $202,000. Realized before-tax gains in the quarter of $125,000 were
    transferred from OCI to net income; the year-to-date amount was $209,000.
    The accumulated loss at January 1, 2007 related to this cash flow hedge
    was $47,000 and was recorded, net of income tax recoveries of $17,000, as
    a transition adjustment to opening AOCI.

    (c) Credit risk management

    Credit exposure on financial instruments arises from the possibility that
    a counterparty to an instrument in which the Company is entitled to
    receive payment of an unrealized gain fails to perform. Credit exposure
    is managed through credit approval and monitoring procedures. The Company
    does not anticipate any counterparties that it currently transacts with
    will fail to meet their obligations as the counterparties are Canadian
    Chartered Banks. At June 30, 2007 and 2006, there was no credit exposure
    to the Company related to its financial instruments.

    The Company is subject to normal credit risk with respect to its
    receivables and it maintains a provision for potential credit losses. A
    large customer base and geographic dispersion minimize this risk.

    8. INCOME TAXES

    In June 2006, the Federal government enacted a decline in the general
    corporate income tax rate from 22% to 19% which will be phased in over a
    period between January 1, 2008 and January 1, 2010. Certain Provincial
    governments also reduced general corporate income tax rates. Future
    income tax assets and liabilities were re-measured using the newly
    enacted tax rates that are expected to be in effect when the related
    future tax assets and liabilities are settled. This resulted in a non-
    cash future income tax recovery of $1,300,000 in June 2006 netted against
    the provision for income taxes.

    9. EARNINGS PER SHARE

                             Three months ended            Six months ended
                                   June 30                     June 30
     (thousands)              2007          2006          2007          2006
    -------------------------------------------------------------------------
    Weighted average
     common shares used
     in calculation of basic
     earnings per share     11,062        11,220        11,098        11,221
    Incremental common
     shares calculated in
     accordance with the
     treasury stock method     417           299           412           321
                          ---------------------------------------------------
    Weighted average
     common shares used in
     calculation of diluted
     earnings per share     11,479        11,519        11,510        11,542
    -------------------------------------------------------------------------

    10. SEGMENTED INFORMATION

    The Company has one separately reportable segment - broadcasting, which
    consists of the operations of the Company's radio and television
    stations. This segment derives its revenue from the sale of broadcast
    advertising. The reportable segment is a strategic business unit that
    offers different services and is managed separately.  The Company
    evaluates performance based on earnings before depreciation and
    amortization. Corporate and other consists of a hotel and the head
    office functions. Its revenue relates to hotel operations and its other
    income relates to investment income. Details of segment operations are
    set out below.


                                  Corp-                        Corp-
                                 orate                        orate
    (thousands           Broad-      &               Broad-       &
     of dollars)       casting   other     Total   casting    other    Total
    -------------------------------------------------------------------------

                      Three months ended June 30    Six months ended June 30
                      ---------------------------  --------------------------
    2007
    Revenue           $ 25,275     884    26,159    44,003    1,674   45,677
    Other income
     (expense)               -   1,221     1,221         -     (279)    (279)
                      ---------------------------  --------------------------
                        25,275   2,105    27,380    44,003    1,395   45,398
    Operating expenses  17,338   2,884    20,222    32,751    5,381   38,132
    Depreciation and
     Amortization          936      66     1,002     1,754      131    1,885
                      ---------------------------  --------------------------
    Operating income
     (loss)           $  7,001    (845)    6,156     9,498   (4,117)   5,381
                      ---------------------------  --------------------------
    Assets employed                               $193,269   22,043  215,312
    Goodwill          $      -       -         -     4,337        -    4,337
    Capital
     expenditures     $    629     141       770     1,534      233    1,767
    -------------------------------------------------------------------------
    2006
    Revenue           $ 23,767     755    24,522    41,538    1,547   43,085
    Other income             -   6,893     6,893         -    9,128    9,128
                      ---------------------------  --------------------------
                        23,767   7,648    31,415    41,538   10,675   52,213
    Operating
     expenses           16,394   3,355    19,749    31,623    5,725   37,348
    Depreciation and
     amortization          848      58       906     1,638      110    1,748
                      ---------------------------  --------------------------
    Operating income  $  6,525   4,235    10,760     8,277    4,840   13,117
                      ---------------------------  --------------------------
    Assets employed                               $173,907   38,913  212,820
    Goodwill          $    727       -       727     4,337        -    4,337
    Capital
     expenditures     $  1,104     127     1,231     1,724      165    1,889
    -------------------------------------------------------------------------


    11. COMMITMENTS

    During the first quarter, the Canadian Radio-television and
    Telecommunications Commission ("CRTC") awarded the Company conversions
    from AM signals to FM in Edson, Alberta and Halifax, Nova Scotia. As a
    result of these approvals, the Company is obligated to pay $45,000 in
    Canadian Content Development commitments per year for seven years. The
    Company recognizes CCD commitments on its consolidated balance sheets as
    broadcast licences and other liabilities on the dates the station
    conversions are completed and launched. Refer to the subsequent events
    described in Note 12 for information on the Company's additional
    commitments.

    12. SUBSEQUENT EVENTS

    On July 4, 2007, the Company received approval to convert its AM licence
    to FM in Carbonear, Newfoundland and Labrador by the CRTC. On July 6,
    2007, the CRTC awarded the Company two new FM licences in Nova Scotia;
    one to serve Kentville and one to serve Sydney. As a result, the Company
    has committed to pay an aggregate of $140,000 annually for seven years
    towards Canadian Content Development.

    On July 11, 2007, the Company entered into an agreement to acquire the
    37.8% minority interest in Atlantic Stereo Limited, which operates the
    two FM licences in Moncton, New Brunswick, for cash consideration of
    $6.9 million. The purchase is subject to CRTC approval.

    On August 9, 2007, the Company declared a dividend of $0.15 per share on
    each of its Class A shares and Class B Common shares for all shareholders
    of record as at August 31, 2007.


    About Newfoundland Capital Corporation Limited

    Newfoundland Capital Corporation Limited (TSX: NCC.A, NCC.B) is one of
Canada's leading radio broadcasters with 76 licences across 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.
    
    %SEDAR: 00002995E




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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