Newport Partners Income Fund

November 01, 2006 16:03 ET

Newport Comments on Proposed Tax Changes and Expected Impact on Business Plan and Distributions

TORONTO, ONTARIO--(CCNMatthews - Nov. 1, 2006) -


The announcement yesterday by The Honourable Jim Flaherty, Minister of Finance, that the government plans to change the taxation of income trusts has caused much speculation within the marketplace.

We would like to clarify, from our perspective, what the proposed changes mean to the unitholders of Newport Partners Income Fund ("Newport" or the "Fund")(TSX:NPF.UN) based on the available information.

First and foremost, the proposed tax changes do not come into effect on existing trusts until 2011.

Second, despite the proposed tax changes, we will to continue to pursue our business plan of diversifying and growing our portfolio of seasoned private businesses. Given this plan, it is our intention to maintain our current annual distribution rate of $1.00.

"Newport has grown its distributions to unitholders steadily since inception and we anticipate that by 2011 the level of annual distributions will be more than adequate to offset the introduction of this tax," said Mr. Peter Wallace, President & CEO of Newport. "We expect to continue to invest in growth and provide increased distributions to our unitholders."

The following are some of the key points that support these observations:

- While the impact of the proposed changes are having an adverse effect on the price of all income trust units in the market, including Newport, we have no short-term plans to raise additional equity.

- Based on the number of investment opportunities and the variety of sources of capital that are currently available to us from a relatively un-leveraged balance sheet, we can continue to make accretive investments that will allow us to deliver our growth plan and increase unitholder value.

- The proposed tax changes allow us to continue to enjoy, for the next four years, tax advantaged growth over publicly traded corporations and any new income trust entrants to the market.

- From an annual distribution rate of $0.64 per unit(1) at inception to Newport's current annual distribution rate of $1.00, we have increased distributions 56% over an approximate two and a half year period. During this same period, Newport has grown its portfolio to $489 million of capital invested in 17 companies in four industry segments.

- We anticipate growing demand for Newport's solution offering liquidity, diversification and growth for Canada's leading entrepreneurs.

- In starting the Fund, our objective was, as it is now, to provide growth and income for our clients and ourselves through equity ownership of a basket of profitable and growing private businesses. With approximately 10 million aging "baby boomers" in Canada, we think the demand for yield investments will remain strong.

(1) Represents annualized distribution by NPY from date of inception of February 27, 2004, adjusted for split at time of initial public offering of Newport on August 8, 2005.


Newport is an unincorporated, open-ended trust created to hold through the Company's investment in Newport Partners Commercial Trust, interests in Newport Private Yield LP, ("NPY") a limited partnership established under the laws of the Province of Ontario. Newport began trading on the TSX on August 8, 2005 under the symbol NPF.UN.

Newport is a leading Canadian asset manager. Newport invests in the private business asset class -- a major growth engine of the Canadian economy. Our objective is to make long-term equity investments in leading private businesses that have a track record of strong earnings and potential for future growth. We minimize risk by diversifying our portfolio, investing at attractive prices, with capable operating management who are known to us, and by using debt conservatively. Newport's portfolio currently consists of 17 high-quality businesses representing a diverse cross-section of the Canadian economy. Newport unitholders participate in the cash flows, growth and diversification of the portfolio through monthly distributions. Newport's management has decades of investment experience and a significant ownership position.

Certain statements in this news release may include "forward-looking" statements that relate to future events or future performance and reflect management's expectations and assumptions regarding the growth, results of operations, performance and business prospects and opportunities of Newport and the operating partnerships in which it holds an ownership interest (the "Operating Partnerships"). Such forward-looking statements reflect management's current beliefs and are based on information currently available to management of Newport and the Operating Partnerships. In some cases, forward-looking statements can be identified by terminology such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "estimate", "predict", "potential", "continue" or the negative of these terms or other similar expressions concerning matters that are not historical facts. In particular, statements regarding the future operating results and economic performance of Newport and the Operating Partnerships are forward-looking statements. A number of factors could cause actual events or results to differ materially from the events and results discussed in the forward-looking statements. In evaluating these statements, prospective purchasers should specifically consider various factors, including the risks outlined under "Risk Factors" in Management's Discussion and Analysis, which may cause actual events or results to differ materially from any forward-looking statement. Although the forward-looking statements are based on what management of Newport and the Operating Partnerships consider to be reasonable assumptions based on information currently available to it, there can be no assurance that actual events or results will be consistent with these forward-looking statements, and management's assumptions may prove to be incorrect. These forward-looking statements are made as of the date of this news release, and Newport does not assume any obligation to update or revise them to reflect new events or circumstances.

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