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Sustainability of Distributions and Productive Capacity
The current level of distributions may change based on the performance of the Fund’s businesses, the level of continued investment, the Fund’s ability to obtain financing and the impacts of the Tax Fairness Plan. The Board of Trustees periodically approves changes to distributions based on cash flow to meet the Fund’s distribution policy. Overall, cash distributions of the Fund are governed by the Trust Indenture, which requires a distribution of all distributable cash flow. Distributable cash flow is defined to generally mean cash from operating, investing and financing activities, less certain items, including any cash withheld as a reserve that the Manager determines to be necessary or appropriate for the proper management of the Fund and its assets.
The sustainability of the Fund’s distributions is a function of several factors: the demand for the services provided by its businesses, maintenance of the productive capacity of its assets and its ability to comply with covenants in its debt agreements as well as repay or refinance its debt as it comes due.
Each operating segment maintains its productive capacity and ensures the future sustainability of its distributions through maintenance programs, which include annual maintenance expenditures as well as major maintenance capital expenditures. Maintenance expenditures are funded through cash from operations. Refer to the “Capital Expenditures” sections for further discussion on planned maintenance and enhancement capital activities for 2009.
The sustainability of the Fund’s distributions and productive capacity is also a function of its ability to meet its debt obligations and to economically obtain financing to fund growth and operational requirements.
The impact of the Tax Fairness Plan on the Fund’s distributions is discussed below under the “Risk Factors” section.