##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, DC 20549


Form 10-K


|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|  
|   |  | For the Fiscal Year ended December 31, 2004                                                 
|  
|or
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|  
|   |  | For the transition period
    from           to                                             

Commission File No. 1-14164


Hollinger International Inc.


(Exact name of registrant as specified in its charter)


|                                                                                 |  |                                            
|-------------------------------------------------------------------------------- |  | -------------------------------------------
|Delaware                                                                         |  | 95-3518892                                 
|(State or other jurisdiction of
     incorporation or organization)              |  | (I.R.S. Employer
    Identification Number)
|712 Fifth Avenue,
     New York, New York(Address of Principal Executive Office) |  | 10019(Zip Code)                            

Registrants telephone number, including area code


(212) 586-5666


Securities registered pursuant to Section 12(b) of the
Act:


|                                              |  |                                                                        
|--------------------------------------------- |  | -----------------------------------------------------------------------
|Title of Each Class:                          |  | Name of Each Exchange on Which Registered:                             
|                                              |  |                                                                        
|Class A Common Stock par value $.01 per share |  | New York Stock Exchange                                                
|85/8% Senior
    Notes due 2005               |  | New York Stock Exchange (matured on March 15, 2005)                    
|9% Senior Notes due 2010                      |  | New York Stock Exchange (registration terminated on
    March 31, 2005)

Securities registered pursuant to Section 12(g) of the
Act:


None


o þ


o


þ o


o þ














---



##### Table of Contents



EXPLANATORY NOTE














---










TABLE OF CONTENTS


HOLLINGER INTERNATIONAL INC.


2004 FORM 10-K


|                                                                  |  |                                                                                                                      |  |      |     |  |  | 
|----------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------- |  | ---- | --- |  |  | 
|                                                                  |  |                                                                                                                      |  | Page |    
|                                                                  |  |                                                                                                                      |  |      |    
|PART I                                                           
|Item 1.                                                           |  | Business                                                                                                             |  |      | 5   | 
|Item 2.                                                           |  | Properties                                                                                                           |  |      | 22  | 
|Item 3.                                                           |  | Legal Proceedings                                                                                                    |  |      | 23  | 
|Item 4.                                                           |  | Submission of Matters to a Vote of Security
    Holders                                                              |  |      | 38  | 
|                                                                 
|PART II                                                          
|Item 5.                                                           |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |  |      | 38  | 
|Item 6                                                            |  | Selected Financial Data                                                                                              |  |      | 40  | 
|Item 7.                                                           |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |  |      | 43  | 
|Item 7A.                                                          |  | Quantitative and Qualitative Disclosures
    about Market Risk                                                       |  |      | 66  | 
|Item 8.                                                           |  | Financial Statements and Supplementary
    Data                                                                      |  |      | 67  | 
|Item 9.                                                           |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                             |  |      | 67  | 
|Item 9A.                                                          |  | Controls and Procedures                                                                                              |  |      | 67  | 
|Item 9B.                                                          |  | Other Information                                                                                                    |  |      | 71  | 
|                                                                 
|PART III                                                         
|Item 10.                                                          |  | Directors and Executive Officers of the
    Registrant                                                               |  |      | 74  | 
|Item 11.                                                          |  | Executive Compensation                                                                                               |  |      | 78  | 
|Item 12.                                                          |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |  |      | 87  | 
|Item 13.                                                          |  | Certain Relationships and Related
    Transactions                                                                   |  |      | 89  | 
|Item 14.                                                          |  | Principal Accountant Fees and Services                                                                               |  |      | 100 | 
|                                                                 
|PART IV                                                          
|Item 15.                                                          |  | Exhibits, Financial Statement Schedules,
    and Reports on Form 8-K                                                 |  |      | 101 | 
|EX-10.7: AGREEMENT                                               
|EX-10.8: AMENDED AGREEMENT OF COMPROMISE                         
|EX-10.12: SECOND CONSULTING AGREEMENT                            
|EX-21.1: SIGNIFICANT SUBSIDIARIES                                
|EX-23.1: CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|EX-31.1: CERTIFICATION                                           
|EX-31.2: CERTIFICATION                                           
|EX-32.1: CERTIFICATE                                             
|EX-32.2: CERTIFICATE                                             



3



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##### Table of Contents



FORWARD-LOOKING STATEMENTS






| |   |                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | changes in prevailing economic conditions, particularly as they
    affect Chicago, Illinois and its metropolitan area;                                                                 
|
| |  | actions of the Companys controlling stockholder;                                                                                                                                       
|
| |  | the impact of insolvency filings of The Ravelston Corporation
    Limited (Ravelston) and Ravelston Management, Inc.
    (RMI) and certain related entities and related
    matters;
|
| |  | adverse developments in pending litigation involving the Company
    and its affiliates, and current and former directors and
    officers;                                             
|
| |  | actions arising from continuing investigations by the SEC and
    other government agencies in the United States and Canada
    principally of matters identified in the Report;        
|
| |  | the resolution of certain United States and foreign tax matters;                                                                                                                        
|
| |  | actions of competitors, including price changes and the
    introduction of competitive service offerings;                                                                              
|
| |  | changes in the preferences of readers and advertisers,
    particularly in response to the growth of Internet-based media;                                                              
|
| |  | the effects of changing costs or availability of raw materials,
    including changes in the cost or availability of newsprint and
    magazine body paper;                             
|
| |  | changes in laws or regulations, including changes that affect
    the way business entities are taxed;                                                                                  
|
| |  | changes in accounting principles or in the way such principles
    are applied; and                                                                                                     
|
| |  | other matters identified in Item 1 
    Business  Risk Factors.                                                                                                                     





4



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##### Table of Contents






PART I







|        |         
|------- | --------
|Item 1. | Business

Overview


Chicago Sun-Times, Post-Tribune, Daily Southtown






| |              
| | -------------
| | Chicago Group

Chicago Sun-Times Chicago Sun-Times




| |                         
| | ------------------------
| | Canadian Newspaper Group



General




Business Strategy


Pursue Revenue Growth by Leveraging the Companys
Leading Market Position.


5



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##### Table of Contents



The Daily Telegraph,
The Sunday Telegraph, The Weekly Telegraph, telegraph.co.uk The Spectator Apollo Chicago Sun-Times.


Publish Relevant and Trusted High Quality Newspapers. Chicago
Sun-Times


Prudent Asset Management. The Jerusalem Post


Strong Corporate Governance Practices.


Risk Factors




Risks Relating to Control and Improper Conduct by Controlling
Stockholder




| |                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Companys controlling stockholder may cause
    actions to be taken that are not supported by the Companys
    Board of Directors or management, and which might not be in the
    best interests of the Companys public stockholders.





6



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##### Table of Contents







Agreement with RSM Richter
Inc. Receivership and CCAA Proceedings in Canada Involving the
Ravelston Entities






7



---



##### Table of Contents





| |                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------
| | The Company may face interference by its controlling
    stockholder that will prevent it from recovering on its
    claims.





| |                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------
| | The results of ongoing SEC investigations may have a
    material adverse effect on the Companys business and
    results of operations.





| |                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------
| | The Companys controlling stockholder may take
    actions that trigger the Special Monitor provisions of the Court
    Order.



8



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##### Table of Contents







| |                                                                            
| | ---------------------------------------------------------------------------
| | Pending litigation could have a material adverse effect on
    the Company.





| |                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------
| | The Companys senior management team is required to
    devote significant attention to matters arising from actions of
    prior management.



Risks Relating to the Companys Business and the
Industry




| |                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------
| | The Companys revenues are cyclical and dependent
    upon general economic conditions in the Companys target
    markets.





| |                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------
| | The Company is a holding company and relies on the
    Companys subsidiaries to meet its financial
    obligations.



9



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##### Table of Contents







| |                                                           
| | ----------------------------------------------------------
| | The Company has substantial potential tax
    liabilities.







| |                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company has substantial accruals for tax contingencies
    in a foreign jurisdiction: if payments are required, a portion
    may be paid with funds denominated in U.S. dollars.





| |                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------
| | Newsprint represents the Companys single largest raw
    material expense and changes in the price of newsprint could
    affect net income.



10



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##### Table of Contents





| |                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Competition in the newspaper industry originates from many
    sources. The advent of new technologies and industry practices,
    such as the provision of newspaper content on free Internet
    sites, may decrease sales or force the Company to make other
    changes that harm operating performance.





| |                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------
| | The Companys publications have experienced declines
    in circulation in the past and may do so in the future.

Chicago Sun-Times




| |                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company may experience labor disputes, which could
    slow down or halt production or distribution of the
    Companys newspapers or other publications.





| |                                                                                               
| | ----------------------------------------------------------------------------------------------
| | A substantial portion of the Companys operations are
    concentrated in one geographic area.

The Jerusalem Post


11



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| |                                                                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Companys internal control over financial
    reporting is not effective as of December 31, 2004 and
    weaknesses in the Companys internal controls and
    procedures could have a material effect on the Company.









| |                                                                                                                                                                                                           
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company has postponed the filing of its most recent
    quarterly reports, and material information concerning its
    current operating results and financial condition is therefore
    unavailable.





| |                                                                                                      
| | -----------------------------------------------------------------------------------------------------
| | Blacks renunciation of his Canadian citizenship
    could negatively affect the Canadian Operations.







12



---



##### Table of Contents





| |                                                                                                          
| | ---------------------------------------------------------------------------------------------------------
| | Overstatement of circulation figures in the past may
    result in the loss of advertisers in the future.

Chicago
Sun-Times. Chicago Sun-Times


Chicago Sun-Times Chicago Sun-Times


Chicago
Sun-Times. Chicago Sun-Times


Risks Related to Voting Control by a Single Stockholder




| |                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | There could be a change of control of the Company through
    a change in control of Hollinger Inc. under circumstances not
    approved by the independent directors of the Company.

Agreement with RSM Richter
Inc.






13



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| |                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company is a party to a Business Opportunities
    Agreement with Hollinger Inc., the terms of which limit the
    Companys ability to pursue certain business opportunities
    in certain countries.

Business Opportunities
Agreement.






| |                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If Hollinger Inc. sought protection from its creditors or
    became the subject of bankruptcy or insolvency proceedings there
    may be harm to, and there may be a change of control of, the
    Company.

7 8 7 8






14



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Description of Business


The Jerusalem Post Overview Significant Transactions in
2004.




| |              
| | -------------
| | Chicago Group





| |   |                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Chicago Sun-Times;                                                                                                                                                
|
| |  | Pioneer Newspapers (Pioneer), which currently
    publishes 63 weekly newspapers and one free distribution
    paper in Chicagos northern and northwestern suburbs;

15



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| |   |                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Midwest Suburban Publishing, which in addition to the Daily
    Southtown, publishes 22 biweekly newspapers, one daily
    newspaper and two free distribution papers primarily in
    Chicagos southern and southwestern suburbs;                                                                                                         
|
| |  | Fox Valley Publications, which publishes five daily newspapers
    (The Herald News, The Beacon News, The Courier News, The News
    Sunand The Naperville Sun), and 13 free distribution
    newspapers and seven free total market coverage
    (TMC) products in the fast growing counties
    surrounding Chicago and Cook County; and
|
| |  | Post-Tribune, located in northwest Indiana, which publishes the
    Post-Tribune, a weekly newspaper and one TMC product.                                                                                                                                                                                                                   









METRO: Chicago
Sun-Times




| |        |                                                                                                                                 
| | ------ | --------------------------------------------------------------------------------------------------------------------------------
| | NORTH: | This division includes the titles of Pioneer as well as certain
    titles that were previously part of Fox Valley Publications.



| |        |                                                                                                                                                                                          
| | ------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | SOUTH: | This division is comprised of a majority of Fox Valley
    Publications and Midwest Suburban Publishing. The
    Post-Tribunewill become part of the South Division at a
    future date.

Sources of Revenue.


|                       |  |                         |         |  |      |  |     |      |  |   |         |  |  |  |     |   |  |   |         |  |  |  |     |  
|---------------------- |  | ----------------------- | ------- |  | ---- |  | --- | ---- |  | - | ------- |  |  |  | --- | - |  | - | ------- |  |  |  | --- | -
|                       |  | Year Ended December 31, |        
|                       |  |                         |        
|                       |  | 2004                    |         |  | 2003 |  |     | 2002 | 
|                       |  |                         |         |  |      |  |     |      | 
|                       |  | (Dollars in thousands)  |        
|Advertising            |  | $                       | 362,355 |  |      |  | 78  | %    |  | $ | 352,029 |  |  |  | 78  | % |  | $ | 341,262 |  |  |  | 77  | %
|Circulation            |  |                         | 90,024  |  |      |  | 19  |      |  |   | 86,532  |  |  |  | 19  |   |  |   | 89,427  |  |  |  | 20  |  
|Job printing and Other |  |                         | 12,060  |  |      |  | 3   |      |  |   | 12,228  |  |  |  | 3   |   |  |   | 11,089  |  |  |  | 3   |  
|                       |  |                         |         |  |      |  |     |      |  |   |         |  |  |  |     |   |  |  
|Total                  |  | $                       | 464,439 |  |      |  | 100 | %    |  | $ | 450,789 |  |  |  | 100 | % |  | $ | 441,778 |  |  |  | 100 | %
|                       |  |                         |         |  |      |  |     |      |  |   |         |  |  |  |     |   |  |  

Advertising. Chicago
Sun-Times


16



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Chicago Sun-Times


Circulation. Chicago Sun-Times




Chicago Sun-Times The Chicago Sun-Times Circulation
Cases, Chicago Sun-Times Chicago Sun-Times Chicago Sun-Times


Post-Tribune Chicago Sun-Times


Other Publications and Business Enterprises. Suntimes.com www.classifiedschicago.com www.DriveChicago.com www.chicagojobs.com


17



---



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Sales and Marketing. Chicago Sun-Times Chicago Sun-Times


Distribution. Chicago Sun-Times Chicago Sun-Times Chicago Sun-Times Daily Southtown Chicago Sun-Times Daily Southtown Daily Southtown The Star Post-Tribunes


Printing. Chicago Sun-Times Chicago Sun-Times


Competition. Chicago Sun-Times Chicago Tribune Chicago Sun-Times


18



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Chicago Sun-Times Red Streak Chicago
Sun-Times. Red Eye


Employees and Labor Relations.




Raw Materials.


Canadian Newspaper Group






Sources of Revenue.


|                       |  |                         |        |  |      |  |     |      |  |   |        |  |  |  |     |   |  |   |        |  |  |  |     |  
|---------------------- |  | ----------------------- | ------ |  | ---- |  | --- | ---- |  | - | ------ |  |  |  | --- | - |  | - | ------ |  |  |  | --- | -
|                       |  | Year Ended December 31, |       
|                       |  |                         |       
|                       |  | 2004                    |        |  | 2003 |  |     | 2002 | 
|                       |  |                         |        |  |      |  |     |      | 
|                       |  | (Dollars in thousands)  |       
|Advertising            |  | $                       | 66,286 |  |      |  | 74  | %    |  | $ | 58,854 |  |  |  | 73  | % |  | $ | 49,355 |  |  |  | 71  | %
|Circulation            |  |                         | 12,504 |  |      |  | 14  |      |  |   | 11,688 |  |  |  | 15  |   |  |   | 10,864 |  |  |  | 16  |  
|Job printing and other |  |                         | 10,709 |  |      |  | 12  |      |  |   | 10,000 |  |  |  | 12  |   |  |   | 9,407  |  |  |  | 13  |  
|                       |  |                         |        |  |      |  |     |      |  |   |        |  |  |  |     |   |  |  
|Total                  |  | $                       | 89,499 |  |      |  | 100 | %    |  | $ | 80,542 |  |  |  | 100 | % |  | $ | 69,626 |  |  |  | 100 | %
|                       |  |                         |        |  |      |  |     |      |  |   |        |  |  |  |     |   |  |  

Advertising.


Circulation.


Job Printing and Other.


19



---



##### Table of Contents



Competition.


Employees and Labor Relations.




Raw Materials.


Regulatory Matters.


Ownership.




Investment and Corporate Group




20



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##### Table of Contents







| |              
| | -------------
| | Environmental





| |            
| | -----------
| | Seasonality





| |                      
| | ---------------------
| | Intellectual Property



Available Information






www.hollingerinternational.com.


www.hollingerinternational.com.


21



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|        |           
|------- | ----------
|Item 2. | Properties





| |              
| | -------------
| | Chicago Group

Chicago Sun-Times. Chicago
Sun-Times Chicago Sun-Times Chicago Sun-Times Significant Transactions in
2004  Disposition of Interest in Trump Joint
Venture






| |                         
| | ------------------------
| | Canadian Newspaper Group





| |                               
| | ------------------------------
| | Investment and Corporate Group



22



---



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|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings



| |                                                                    
| | -------------------------------------------------------------------
| | Overview of Investigation of Certain Related Party
    Transactions





Chicago Sun-Times


23



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##### Table of Contents









Release
and Settlement Agreement with Atkinson  Consulting Agreement with
Atkinson.


 Hollinger
International Inc. v. Conrad M. Black, Hollinger Inc., and
504468 N.B. Inc.


 Other Actions.


 Hollinger International Inc. v.
Ravelston, RMI and Hollinger Inc.






| |                                               
| | ----------------------------------------------
| | Overview of Corporate Review Committee Actions



24



---



##### Table of Contents



Hollinger International Inc. v. Conrad M.
Black, Hollinger Inc. and 504468 N.B. Inc.




| |                                  
| | ---------------------------------
| | Stockholder Derivative Litigation



Cardinal Value Equity Partners, L.P. Black,
et al.


Hollinger Inc. American Home Assurance
Company and Chubb Insurance Company of Canada.






 Litigation Involving Controlling
Stockholder, Senior Management and Directors.


25



---



##### Table of Contents





| |                          
| | -------------------------
| | Stockholder Class Actions

In re Hollinger Inc. Securities Litigation Chicago Sun-Times In re
Hollinger International Inc. Securities Litigation








| |                         
| | ------------------------
| | Tweedy Browne Litigation



26



---



##### Table of Contents







| |                                                                                  
| | ---------------------------------------------------------------------------------
| | Litigation Involving Controlling Stockholder, Senior
    Management and Directors

Hollinger International Inc. Hollinger
Inc., et al.


7 8


27



---



##### Table of Contents







| |                                                                                          
| | -----------------------------------------------------------------------------------------
| | Hollinger International Inc. v. Conrad M. Black,
    Hollinger Inc., and 504468 N.B. Inc.













28



---



##### Table of Contents





| |                                               
| | ----------------------------------------------
| | Hollinger Inc. v. Hollinger International Inc.





| |                                                                   
| | ------------------------------------------------------------------
| | Black v. Hollinger International Inc., filed on
    March 18, 2004





| |                                                                  
| | -----------------------------------------------------------------
| | Black v. Hollinger International Inc., filed on
    April 5, 2004

Hollinger International
Inc. Hollinger Inc., et al.  Litigation Involving Controlling
Stockholder, Senior Management and Directors.




| |                                                                 
| | ----------------------------------------------------------------
| | Black v. Hollinger International Inc., filed on
    May 13, 2005



Hollinger
International Inc. v. Conrad Black, Hollinger Inc., and
504468 N.B. Inc.


29



---



##### Table of Contents











| |                                                                      
| | ---------------------------------------------------------------------
| | Hollinger International Inc. v. Ravelston, RMI and
    Hollinger Inc.





Black v. Hollinger
International Inc., filed on April 5, 2004




| |                         
| | ------------------------
| | Black v. Breeden, et al.



30



---



##### Table of Contents



 Hollinger International Inc. v. Conrad W.
Black, Hollinger Inc. and 504468 N. B. Inc.










| |                                                                                     
| | ------------------------------------------------------------------------------------
| | United States Securities and Exchange Commission v.
    Hollinger International Inc.







| |                                                                                
| | -------------------------------------------------------------------------------
| | United States Securities and Exchange Commission v.
    Conrad M. Black, et al.



31



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| |                                                                 
| | ----------------------------------------------------------------
| | Federal Indictment of Ravelston and Former Company
    Officials





| |                                        
| | ---------------------------------------
| | The Chicago Sun-Times Circulation Cases

Chicago Sun-Times. Chicago Sun-Times Chicago Sun-Times


32



---



##### Table of Contents



Central Furniture, Inc. Hollinger International,
Inc. and Chicago Sun-Times, Inc. Ronald Freeman d/b/a Professional Weight Clinic Inc. Hollinger International, Inc. and Chicago Sun-Times,
Inc. Card &
Party Mart II Ltd. Hollinger International Inc.
and Chicago Sun-Times, Inc. Geier Enterprises, Inc. Chicago Sun-Times, Inc. and
Hollinger International, Inc. California Floor Coverings
d/b/a Olympic Carpet Chicago Sun-Times, Inc. BNB Land Venture, Inc. Chicago Sun-Times, Inc., Hollinger International
Publishing Inc. and Docs 1-5 Gleason & McMaster
LLC Chicago Sun-Times, Inc. and Hollinger
International Inc. James
Rolshouse & Associates PLLC Hollinger
International Inc. Chicago Sun-Times, Inc. and The
Sun-Times Co. Mark
Triffler Oldsmobile, Inc. et al. Hollinger
International Inc. and Chicago Sun-Times, Inc. In re:
Chicago Sun-Times Circulation Litigation Combined Circulation Proceeding International Profit Assocs.,
Inc. Chicago Sun-Times, Inc. and Hollinger
International Inc. Business Pro Communications, Inc. Hollinger Inc., Hollinger International Inc. and The
Sun-Times Co. In re:
Chicago Sun-Times Circulation Litigation Chicago Sun-Times Chicago Sun-Times


First Federal Auto Auction, Inc. Chicago Sun-Times, Inc., Hollinger International Inc. and F.
David Radler American Mattress, Inc. Hollinger International
Inc. and Chicago Sun-Times, Inc. National Foundation for Abused and
Neglected Children, Inc. Chicago Sun-Times, Inc.,
Hollinger International Inc. and F. David Radler Joe


33



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##### Table of Contents



Rizza Lincoln Mercury, Inc. et al. Chicago
Sun-Times, Inc. Chicago Sun-Times, Inc. Oral
Sekendur Mancaris
Chrysler-Jeep-Dodge of Des Plaines, Inc.; Mancaris of
Orland Park, Inc.; Mancaris Chrysler Jeep of Crestwood,
Inc.; and Mancaris Chrysler Jeep, Inc. v. Chicago
Sun-Times, Inc., AJEs the Salon, Inc. The Sun-Times, Co., Hollinger International Inc. and F.
David Radler National Foundation for Abused and Neglected Children,
Inc. American Mattress


Chicago Sun-Times Chicago Sun-Times.


Chicago Sun-Times




| |                                                                                 
| | --------------------------------------------------------------------------------
| | Receivership and CCAA Proceedings in Canada involving the
    Ravelston Entities

Litigation Involving Controlling Stockholder, Senior
Management and Directors Agreement with RSM Richter
Inc. There could be a change of control of the
Company through a change in control of Hollinger Inc. under
circumstances not approved by the independent directors of the
Company.




34



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35



---



##### Table of Contents







| |                    
| | -------------------
| | CanWest Arbitration





| |                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | CanWest and The National Post Company v. Hollinger
    Inc., Hollinger International Inc., the Ravelston Corporation
    Limited and Ravelston Management Inc.

National Post (CanWest Arbitration)


Certain Relationships and
Related Transactions  NP Holdings Sale.




| |                                                                                   
| | ----------------------------------------------------------------------------------
| | Wells Fargo Bank Northwest, N.A. v. Sugra (Bermuda)
    Limited and Hollinger Inc.

Wells Fargo Bank Northwest, N.A. v. Sugra
(Bermuda) Limited and Hollinger Inc.




36



---



##### Table of Contents







| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | Hollinger Inc. v. American Home Assurance Company and
    Chubb Insurance Company of Canada





| |              
| | -------------
| | Other Actions

 Litigation Involving Controlling
Stockholder, Senior Management and Directors.


37



---



##### Table of Contents



National Post Whyte v. Hollinger International Inc.













|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders






PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities



38



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##### Table of Contents





|                |  |             |       |      |           |   |       |       |  |   |      | 
|--------------- |  | ----------- | ----- | ---- | --------- | - | ----- | ----- |  | - | ---- | 
|                |  |             |       | Cash |          
|                |  | Price Range |       |      | Dividends |  
|                |  |             |       |      | Paid per  |  
|Calendar Period |  | High        |       |      | Low       |   |       | Share | 
|                |  |             |       |      |           |   |       |       | 
|2003            |  |             |       |      |           |   |       |       |  |   |      | 
|First Quarter   |  | $           | 10.73 |      |           | $ | 7.54  |       |  | $ | 0.05 | 
|Second Quarter  |  |             | 11.70 |      |           |   | 7.89  |       |  |   | 0.05 | 
|Third Quarter   |  |             | 13.65 |      |           |   | 10.45 |       |  |   | 0.05 | 
|Fourth Quarter  |  |             | 16.12 |      |           |   | 11.90 |       |  |   | 0.05 | 
|2004            |  |             |       |      |           |   |       |       |  |   |      | 
|First Quarter   |  | $           | 19.81 |      |           | $ | 14.25 |       |  | $ | 0.05 | 
|Second Quarter  |  |             | 20.50 |      |           |   | 15.81 |       |  |   | 0.05 | 
|Third Quarter   |  |             | 17.75 |      |           |   | 15.60 |       |  |   | 0.05 | 
|Fourth Quarter  |  |             | 18.95 |      |           |   | 15.38 |       |  |   | 0.05 | 
|2005            |  |             |       |      |           |   |       |       |  |   |      | 
|First Quarter   |  | $           | 15.93 |      |           | $ | 10.75 |       |  | $ | 5.55 | 
|Second Quarter  |  |             | 11.01 |      |           |   | 9.06  |       |  |   | 0.05 | 
|Third Quarter   |  |             | 10.60 |      |           |   | 9.51  |       |  |   | 0.05 | 







Equity Compensation Plan Information


|                                                           |       |                      |           |           |                      |                      |                     |                      |  |  |           |           | 
|---------------------------------------------------------- | ----- | -------------------- | --------- | --------- | -------------------- | -------------------- | ------------------- | -------------------- |  |  | --------- | --------- | 
|                                                           |       |                      |           |           |                      | Number of Securities |                    
|                                                           |       |                      |           |           |                      | Remaining Available  |                    
|                                                           |       | (a)                  |           |           |                      |                      | for Future Issuance |                     
|                                                           |       | Number of Securities |           |           |                      |                      | Under Equity        |                     
|                                                           |       | to be Issued Upon    |           |           | Weighted-Average     |                      |                     | Compensation Plans   | 
|                                                           |       | Exercise of          |           |           | Exercise Price of    |                      |                     | (Excluding           | 
|                                                           |       | Outstanding Options, |           |           | Outstanding Options, |                      |                     | Securities Reflected | 
|Plan Category                                              |       | Warrants and Rights  |           |           | Warrants and Rights  |                      |                     | in Column (a))       | 
|                                                           |       |                      |           |           |                      |                      |                     |                      | 
|Equity compensation plans approved by security holders     |       |                      | 3,240,136 |           |                      | $                    | 11.54               |                      |  |  | 4,324,675 |          
|Equity compensation plans not approved by security holders |       |                      |          |           |                      |                      |                    |                      |  |  |          |          
|                                                           |       |                      |           |           |                      |                      |                     |                      | 
|                                                           | Total |                      |           | 3,240,136 |                      |                      | $                   | 11.54                |  |  |           | 4,324,675 | 
|                                                           |       |                      |           |           |                      |                      |                     |                      | 



39



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Recent Sales of Unregistered Securities




Purchases of Equity Securities by the Issuer and Affiliated
Purchasers









|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

|                                                                                         |                                       |                                          |          |             |      |   |             |         |   |   |          |         |   |      |          |         |   |   |           |           | 
|---------------------------------------------------------------------------------------- | ------------------------------------- | ---------------------------------------- | -------- | ----------- | ---- | - | ----------- | ------- | - | - | -------- | ------- | - | ---- | -------- | ------- | - | - | --------- | --------- | 
|                                                                                         |                                       | Year Ended December 31,                  |         
|                                                                                         |                                       |                                          |         
|                                                                                         |                                       | 2004                                     |          |             | 2003 |   |             | 2002    |   |   | 2001     |         |   | 2000 |         
|                                                                                         |                                       |                                          |          |             |      |   |             |         |   |   |          |         |   |      |         
|                                                                                         |                                       | (In thousands, except per share amounts) |         
|                                                                                         |                                       |                                          |          | Restated(6) |      |   | Restated(6) |        
|Statement of Operations Data(1):                                                         |                                       |                                          |          |             |      |   |             |         |   |   |          |         |   |      |          |         |   |   |           |          
|Operating revenues:                                                                      |                                       |                                          |          |             |      |   |             |         |   |   |          |         |   |      |          |         |   |   |           |          
|                                                                                         | Advertising                           |                                          | $        | 428,641     |      |   | $           | 410,883 |   |   | $        | 390,617 |   |      | $        | 469,615 |   |   | $         | 1,149,608 | 
|                                                                                         | Circulation                           |                                          |          | 102,528     |      |   |             | 98,220  |   |   |          | 100,291 |   |      |          | 134,526 |   |   |           | 293,488   | 
|                                                                                         | Job printing                          |                                          |          | 17,194      |      |   |             | 15,698  |   |   |          | 13,819  |   |      |          | 20,234  |   |   |           | 53,127    | 
|                                                                                         | Other                                 |                                          |          | 5,575       |      |   |             | 6,530   |   |   |          | 6,677   |   |      |          | 17,271  |   |   |           | 16,627    | 
|                                                                                         |                                       |                                          |          |             |      |   |             |         |   |   |          |         |   |      |         
|Total operating revenues                                                                 |                                       |                                          | 553,938  |             |      |   | 531,331     |         |   |   | 511,404  |         |   |      | 641,646  |         |   |   | 1,512,850 |          
|Operating costs and expenses                                                             |                                       |                                          | 532,210  |             |      |   | 518,150     |         |   |   | 452,683  |         |   |      | 648,234  |         |   |   | 1,272,859 |          
|Depreciation and amortization(2)                                                         |                                       |                                          | 32,739   |             |      |   | 39,180      |         |   |   | 39,061   |         |   |      | 51,961   |         |   |   | 103,634   |          
|                                                                                         |                                       |                                          |          |             |      |   |             |         |   |   |          |         |   |      |         
|Operating income (loss)                                                                  |                                       |                                          | (11,011  | )           |      |   | (25,999     | )       |   |   | 19,660   |         |   |      | (58,549  | )       |   |   | 136,357   |          
|Interest expense                                                                         |                                       |                                          | (19,084  | )           |      |   | (29,377     | )       |   |   | (57,341  | )       |   |      | (77,872  | )       |   |   | (141,983  | )        
|Amortization of deferred financing costs                                                 |                                       |                                          | (780     | )           |      |   | (1,503      | )       |   |   | (5,585   | )       |   |      | (10,367  | )       |   |   | (10,469   | )        
|Interest and dividend income                                                             |                                       |                                          | 19,876   |             |      |   | 22,886      |         |   |   | 15,109   |         |   |      | 63,155   |         |   |   | 16,686    |          
|Other income (expense), net(3)                                                           |                                       |                                          | (116,068 | )           |      |   | 78,110      |         |   |   | (168,086 | )       |   |      | (312,315 | )       |   |   | 529,919   |          
|                                                                                         |                                       |                                          |          |             |      |   |             |         |   |   |          |         |   |      |         
|Earnings (loss) from continuing operations before income taxes
    and minority interest |                                       |                                          | (127,067 | )           |      |   | 44,117      |         |   |   | (196,243 | )       |   |      | (395,948 | )       |   |   | 530,510   |          
|Income taxes (benefit)                                                                   |                                       |                                          | 35,650   |             |      |   | 128,001     |         |   |   | 37,390   |         |   |      | (33,536  | )       |   |   | 371,897   |          
|Minority interest                                                                        |                                       |                                          | 1,185    |             |      |   | 5,325       |         |   |   | 2,167    |         |   |      | (13,803  | )       |   |   | 50,760    |          
|                                                                                         |                                       |                                          |          |             |      |   |             |         |   |   |          |         |   |      |         
|Earnings (loss) from continuing operations                                               |                                       |                                          | (163,902 | )           |      |   | (89,209     | )       |   |   | (235,800 | )       |   |      | (348,609 | )       |   |   | 107,853   |          
|                                                                                         |                                       |                                          |          |             |      |   |             |         |   |   |          |         |   |      |         
|Earnings from discontinued operations (net of income taxes)                              |                                       |                                          | 398,570  |             |      |   | 14,901      |         |   |   | 5,171    |         |   |      | 20,103   |         |   |   | 41,334    |          
|                                                                                         |                                       |                                          |          |             |      |   |             |         |   |   |          |         |   |      |         
|Net earnings (loss)                                                                      |                                       | $                                        | 234,668  |             |      | $ | (74,308     | )       |   | $ | (230,629 | )       |   | $    | (328,506 | )       |   | $ | 149,187   |          
|                                                                                         |                                       |                                          |          |             |      |   |             |         |   |   |          |         |   |      |         
|Diluted earnings per share:                                                              |                                       |                                          |          |             |      |   |             |         |   |   |          |         |   |      |          |         |   |   |           |          
|                                                                                         | Loss from continuing operations       |                                          | $        | (1.81       | )    |   | $           | (1.02   | ) |   | $        | (2.46   | ) |      | $        | (3.48   | ) |   | $         | 0.97      | 
|                                                                                         | Earnings from discontinued operations |                                          |          | 4.40        |      |   |             | 0.17    |   |   |          | 0.06    |   |      |          | 0.20    |   |   |           | 0.37      | 
|                                                                                         |                                       |                                          |          |             |      |   |             |         |   |   |          |         |   |      |         
|                                                                                         | Net earnings (loss)(4)                |                                          | $        | 2.59        |      |   | $           | (0.85   | ) |   | $        | (2.40   | ) |      | $        | (3.28   | ) |   | $         | 1.34      | 
|                                                                                         |                                       |                                          |          |             |      |   |             |         |   |   |          |         |   |      |         
|Cash dividends per share paid on Class A and Class B
    Common Stock                    |                                       | $                                        | 0.20     |             |      | $ | 0.20        |         |   | $ | 0.41     |         |   | $    | 0.55     |         |   | $ | 0.55      |          
|                                                                                         |                                       |                                          |          |             |      |   |             |         |   |   |          |         |   |      |         

40



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|                       |                                           |                    |   |             |      |  |             |           |   |             |      |           |             |      |   |           |  |  |   |           |  
|---------------------- | ----------------------------------------- | ------------------ | - | ----------- | ---- |  | ----------- | --------- | - | ----------- | ---- | --------- | ----------- | ---- | - | --------- |  |  | - | --------- | -
|                       |                                           | As of December 31, |  
|                       |                                           |                    |  
|                       |                                           | 2004               |   |             | 2003 |  |             | 2002      |   |             | 2001 |           |             | 2000 |  
|                       |                                           |                    |   |             |      |  |             |           |   |             |      |           |             |      |  
|                       |                                           | (In thousands)     |  
|                       |                                           |                    |   | Restated(6) |      |  | Restated(6) |           |   | Restated(6) |      |           | Restated(6) |     
|Balance Sheet Data(1): |                                           |                    |   |             |      |  |             |           |   |             |      |           |             |      |   |           |  |  |   |          
|                       | Working capital (deficiency)(a)           |                    | $ | (34,469     | )    |  | $           | (368,484  | ) |             | $    | (235,940  | )           |      | $ | 111,992   |  |  | $ | (267,412  | )
|                       | Total assets(5)                           |                    |   | 1,738,898   |      |  |             | 1,785,104 |   |             |      | 2,161,433 |             |      |   | 2,076,958 |  |  |   | 2,846,894 |  
|                       | Minority interest                         |                    |   | 29,845      |      |  |             | 28,255    |   |             |      | 17,097    |             |      |   | 16,084    |  |  |   | 89,228    |  
|                       | Long-term debt, less current installments |                    |   | 2,053       |      |  |             | 308,168   |   |             |      | 310,105   |             |      |   | 806,512   |  |  |   | 807,495   |  
|                       | Redeemable preferred stock                |                    |   |            |      |  |             |          |   |             |      | 8,650     |             |      |   | 8,582     |  |  |   | 13,088    |  
|                       | Total stockholders equity                |                    |   | 152,186     |      |  |             | 4,926     |   |             |      | 117,933   |             |      |   | 345,656   |  |  |   | 871,228   |  

|                              |                                |                         |         |          |      |   |         |         |   |   |         |         |   |      |         |         |   |   |           |           |  
|----------------------------- | ------------------------------ | ----------------------- | ------- | -------- | ---- | - | ------- | ------- | - | - | ------- | ------- | - | ---- | ------- | ------- | - | - | --------- | --------- | -
|                              |                                | Year Ended December 31, |        
|                              |                                |                         |        
|                              |                                | 2004                    |         |          | 2003 |   |         | 2002    |   |   | 2001    |         |   | 2000 |        
|                              |                                |                         |         |          |      |   |         |         |   |   |         |         |   |      |        
|                              |                                | (In thousands)          |        
|Segment Data(1):              |                                |                         |         |          |      |   |         |         |   |   |         |         |   |      |         |         |   |   |           |          
|Operating revenues:           |                                |                         |         |          |      |   |         |         |   |   |         |         |   |      |         |         |   |   |           |          
|                              | Chicago Group                  |                         | $       | 464,439  |      |   | $       | 450,789 |   |   | $       | 441,778 |   |      | $       | 442,884 |   |   | $         | 401,417   |  
|                              | Canadian Newspaper Group       |                         |         | 89,499   |      |   |         | 80,542  |   |   |         | 69,626  |   |      |         | 197,948 |   |   |           | 1,065,198 |  
|                              | U.S. Community Group           |                         |         |         |      |   |         |        |   |   |         |        |   |      |         | 814     |   |   |           | 46,235    |  
|                              |                                |                         |         |          |      |   |         |         |   |   |         |         |   |      |        
|Total operating revenues      |                                | $                       | 553,938 |          |      | $ | 531,331 |         |   | $ | 511,404 |         |   | $    | 641,646 |         |   | $ | 1,512,850 |          
|                              |                                |                         |         |          |      |   |         |         |   |   |         |         |   |      |        
|Operating income (loss):      |                                |                         |         |          |      |   |         |         |   |   |         |         |   |      |         |         |   |   |           |          
|                              | Chicago Group                  |                         | $       | 96,420   |      |   | $       | 24,358  |   |   | $       | 38,640  |   |      | $       | 5,965   |   |   | $         | 29,213    |  
|                              | Canadian Newspaper Group       |                         |         | 4,091    |      |   |         | (4,983  | ) |   |         | 605     |   |      |         | (45,244 | ) |   |           | 115,115   |  
|                              | U.S. Community Group           |                         |         |         |      |   |         |        |   |   |         |        |   |      |         | (121    | ) |   |           | 4,561     |  
|                              | Investment and Corporate Group |                         |         | (111,522 | )    |   |         | (45,374 | ) |   |         | (19,585 | ) |      |         | (19,149 | ) |   |           | (12,532   | )
|                              |                                |                         |         |          |      |   |         |         |   |   |         |         |   |      |        
|Total operating income (loss) |                                | $                       | (11,011 | )        |      | $ | (25,999 | )       |   | $ | 19,660  |         |   | $    | (58,549 | )       |   | $ | 136,357   |          
|                              |                                |                         |         |          |      |   |         |         |   |   |         |         |   |      |        






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Excluding escrow deposits and restricted cash, assets and
    liabilities of operations to be disposed of and current
    installments of long-term debt.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(1) | The financial data as of December 31, 2004 and 2003 and for
    each of the years in the three-year period ended
    December 31, 2004 are derived from, and should be read in
    conjunction with, the audited consolidated financial statements
    of the Company and the notes thereto appearing elsewhere herein.
    The financial data as of December 31, 2002, 2001 and 2000
    and for the years ended December 31, 2001 and 2000 are
    derived from audited financial statements not presented
    separately herein and has been adjusted as necessary for the
    effects of the restatements described in (6) below. The
    financial data for all periods has been revised to reflect
    discontinued operations treatment of the Telegraph Group and
    The Jerusalem Post. During 2004, 2003 and 2002, The
    Jerusalem Postrepresented substantially all operations and
    assets in the Community Group. Remaining, immaterial, data of
    the previous U.K. Newspaper Group for all periods presented and
    the Community Group as of and for the years ended
    December 31, 2004, 2003 and 2002, is reflected in the
    Investment and Corporate Group. The remaining Community Group
    newspapers, which were disposed of during 2001 and 2000, have
    been reflected as continuing operations for those years in
    U.S. Community Group. In addition, in 2001, the Company
    sold its remaining interest in the National Postto
    CanWest and several Canadian newspapers to Osprey Media and in
    2000 it sold a majority of its Canadian newspapers and related
    assets to CanWest. These dispositions are the primary cause for
    the significant decrease from 2000 to 2001 in Total
    operating revenues, Operating costs and
    expenses and Depreciation and amortization.
|   
|(2) | Effective January 1, 2002, the Company adopted Statement of
    Financial Accounting Standards (SFAS) No. 142,
    Goodwill and Other Intangible Assets
    (SFAS No. 142). As a consequence, the
    Company no longer amortizes goodwill and intangible assets with
    indefinite useful lives. See Note 1(j) of Notes to the
    consolidated financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

41



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|    |                                                                                   
|--- | ----------------------------------------------------------------------------------
|(3) | The principal components of Other income (expense),
    net are presented below:

|                                                                                                   |  |                |          |   |      |   |         |      |  |   |          |   |  |      |          |   |  |   |         |  
|-------------------------------------------------------------------------------------------------- |  | -------------- | -------- | - | ---- | - | ------- | ---- |  | - | -------- | - |  | ---- | -------- | - |  | - | ------- | -
|                                                                                                   |  | 2004           |          |   | 2003 |   |         | 2002 |  |   | 2001     |   |  | 2000 |         
|                                                                                                   |  |                |          |   |      |   |         |      |  |   |          |   |  |      |         
|                                                                                                   |  | (In thousands) |         
|Loss on extinguishment of debt                                                                     |  | $              | (60,381  | ) |      | $ | (37,291 | )    |  | $ | (35,460  | ) |  | $    |         |   |  | $ | (10,554 | )
|Write-down of investments                                                                          |  |                | (365     | ) |      |   | (7,700  | )    |  |   | (40,536  | ) |  |      | (48,037  | ) |  |   | (20,621 | )
|Write-down of FDR Collection                                                                       |  |                |         |   |      |   | (6,796  | )    |  |   |         |   |  |      |         |   |  |   |        |  
|Gain (loss) on Participation Trust and CanWest Debentures,
    including exchange gains and losses |  |                | (30,859  | ) |      |   | 112,504 |      |  |   | 2,627    |   |  |      | (16,062  | ) |  |   |        |  
|Foreign currency gains (losses), net                                                               |  |                | (222     | ) |      |   | (1,167  | )    |  |   | (82,142  | ) |  |      | 16,437   |   |  |   | (15,888 | )
|Losses on Total Return Equity Swap                                                                 |  |                |         |   |      |   |        |      |  |   | (15,237  | ) |  |      | (73,863  | ) |  |   | (16,334 | )
|Gain (loss) on sales of publishing interests, net(a)                                               |  |                | (19,007  | ) |      |   | (6,251  | )    |  |   |         |   |  |      | (1,236   | ) |  |   | 564,702 |  
|Settlements with former directors and officers                                                     |  |                | 1,718    |   |      |   | 31,547  |      |  |   |         |   |  |      |         |   |  |   |        |  
|Gain (loss) on sale of investments                                                                 |  |                | 1,709    |   |      |   | 3,578   |      |  |   |         |   |  |      | (147,213 | ) |  |   | 31,159  |  
|Gain on sale of non-operating assets                                                               |  |                | 1,090    |   |      |   |        |      |  |   | 2,591    |   |  |      |         |   |  |   | 718     |  
|Write-down of property, plant and equipment                                                        |  |                |         |   |      |   | (5,622  | )    |  |   |         |   |  |      | (1,343   | ) |  |   |        |  
|Equity in losses of affiliates, net of dividends received                                          |  |                | (3,321   | ) |      |   | (2,373  | )    |  |   | (907     | ) |  |      | (11,990  | ) |  |   | (14,753 | )
|Gain related to dilution of investment in equity accounted
    company                             |  |                |         |   |      |   |        |      |  |   |         |   |  |      |         |   |  |   | 17,008  |  
|Non-competition payments                                                                         |  |                |         |   |      |   |        |      |  |   |         |   |  |      | (6,100   | ) |  |   |        |  
|Other                                                                                              |  |                | (6,430   | ) |      |   | (2,319  | )    |  |   | 978      |   |  |      | (22,908  | ) |  |   | (5,518  | )
|                                                                                                   |  |                |          |   |      |   |         |      |  |   |          |   |  |      |         
|                                                                                                   |  | $              | (116,068 | ) |      | $ | 78,110  |      |  | $ | (168,086 | ) |  | $    | (312,315 | ) |  | $ | 529,919 |  
|                                                                                                   |  |                |          |   |      |   |         |      |  |   |          |   |  |      |         



|    |  |                                                                                                                                                            
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Amount recorded in 2004 represents adjustments in estimated net
    proceeds to be received related to the sale of publishing
    interests in prior years.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | The Companys diluted earnings per share is calculated on
    the following diluted number of shares outstanding (in
    thousands): 2004  90,486, 2003  87,311,
    2002  96,066, 2001  100,128 and
    2000  111,510.                                                                                                                                                                                      
|   
|(5) | Includes goodwill and intangible assets, net of accumulated
    amortization, of $287.1 million at December 31, 2004,
    $287.9 million at December 31, 2003,
    $290.5 million at December 31, 2002,
    $332.4 million at December 31, 2001 and
    $593.9 million at December 31, 2000.                                                                                                                      
|   
|(6) | The Company has restated its Consolidated Balance Sheets as of
    December 31, 2003, 2002, 2001 and 2000 and its Consolidated
    Statements of Operations for the years ended December 31,
    2001 and 2000 due to the correction of accounting errors in
    prior periods. The restatement resulted from errors and expected
    adjustments to the Companys U.S. federal tax returns
    for 1999 and 1998.



|                                                                                                                                                 |  |                         |         |   |      |   |         | 
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------- | ------- | - | ---- | - | ------- | 
|                                                                                                                                                 |  | Year Ended December 31, |        
|                                                                                                                                                 |  |                         |        
|                                                                                                                                                 |  | 2001                    |         |   | 2000 |  
|                                                                                                                                                 |  |                         |         |   |      |  
|Income taxes (benefit) after effect of discontinued operations(a)                                                                                |  | $                       | (35,469 | ) |      | $ | 370,210 | 
|Additional interest on accrued income taxes largely resulting
    from additional gain on sale of assets and newspaper operations
    in 1999(b) |  |                         | 1,933   |   |      |   | 1,687   | 
|                                                                                                                                                 |  |                         |         |   |      |  
|Restated income taxes (benefit)                                                                                                                  |  | $                       | (33,536 | ) |      | $ | 371,897 | 
|                                                                                                                                                 |  |                         |         |   |      |  

42



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|                                                                                                                                                          |  |                    |          |   |      |   |          |      |  |   |         |   |  |   |          |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | -------- | - | ---- | - | -------- | ---- |  | - | ------- | - |  | - | -------- | -
|                                                                                                                                                          |  | As of December 31, |         
|                                                                                                                                                          |  |                    |         
|                                                                                                                                                          |  | 2003               |          |   | 2002 |   |          | 2001 |  |   | 2000    |  
|                                                                                                                                                          |  |                    |          |   |      |   |          |      |  |   |         |  
|Working capital (deficiency), as previously reported                                                                                                      |  | $                  | (345,319 | ) |      | $ | (212,775 | )    |  | $ | 135,157 |   |  | $ | (245,425 | )
|Additional income taxes payable and related interest largely
    resulting from additional gain on sale of assets and newspaper
    operations in 1999(b) |  |                    | (23,165  | ) |      |   | (23,165  | )    |  |   | (23,165 | ) |  |   | (21,987  | )
|                                                                                                                                                          |  |                    |          |   |      |   |          |      |  |   |         |  
|Restated working capital (deficiency)                                                                                                                     |  | $                  | (368,484 | ) |      | $ | (235,940 | )    |  | $ | 111,992 |   |  | $ | (267,412 | )
|                                                                                                                                                          |  |                    |          |   |      |   |          |      |  |   |         |  
|Total stockholders equity, as previously reported                                                                                                        |  | $                  | 36,776   |   |      | $ | 149,783  |      |  | $ | 377,506 |   |  | $ | 901,145  |  
|Additional income taxes and related interest largely resulting
    from additional gain on sale of assets and newspaper operations
    in 1999(b)         |  |                    | (31,850  | ) |      |   | (31,850  | )    |  |   | (31,850 | ) |  |   | (29,917  | )
|                                                                                                                                                          |  |                    |          |   |      |   |          |      |  |   |         |  
|Restated total stockholders equity                                                                                                                       |  | $                  | 4,926    |   |      | $ | 117,933  |      |  | $ | 345,656 |   |  | $ | 871,228  |  
|                                                                                                                                                          |  |                    |          |   |      |   |          |      |  |   |         |  






|    |  |                                                                                                                                                                                                                                                                                                                                                                                              
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | The financial statements for all periods presented have been
    revised to reflect discontinued operations treatment, in
    accordance with SFAS No. 144 Accounting for the
    Impairment or Disposal of Long-Lived Assets (SFAS
    No. 144), resulting from the sale of certain
    operations as described in Note 3 to the consolidated
    financial statements contained herein.
|   
|(b) |  | The errors and expected adjustments relate to the Companys
    U.S. federal tax returns for 1998 and 1999. The increased
    tax liability largely represents additional income taxes and
    related interest (net of applicable tax benefits) resulting
    principally from errors in computing the gain on sale of assets
    and newspaper operations sold in 1999.                    






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

General




Overview


Chicago Sun-Times, Post Tribune, Daily Southtown


Item 1 
Business The Jerusalem Post The Jerusalem Post


43



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##### Table of Contents









The
Jerusalem Post






| |                                     
| | ------------------------------------
| | Developments Since December 31, 2004







44



---



##### Table of Contents











Cardinal Value Equity Partners, L.P. Black, et al. Stockholder Derivative Litigation


Black v.
Hollinger International Inc., filed on May 13,
2005






| |                                 
| | --------------------------------
| | Significant Transactions in 2004

Disputes, Investigations and Legal Proceedings with Former
Executive Officers and Certain Current and Former
Directors


45



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##### Table of Contents













Sale of the Telegraph Group


46



---



##### Table of Contents







Retirement of 9% Senior Notes


Declaration of Special and Regular Dividends


The Chicago Sun-Times Circulation
Overstatement Chicago Sun-Times. Chicago
Sun-Times Chicago Sun-Times.


Chicago Sun-Times Chicago Sun-Times


Chicago Sun-Times


47



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##### Table of Contents



 Chicago
Sun-Times Circulation Cases.


Daily
Southtown The Star. Daily Southtown The Star The
Jerusalem Post The Jerusalem Post




Disposition of Interest in Trump Joint
Venture Chicago Sun-Times Chicago Sun-Times


Chicago Sun-Times Chicago
Sun-Times


Hollinger L.P. Tender Offer


CanWest Debentures 1 8


48



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Sale of The Jerusalem Post The
Jerusalem Post, The Jerusalem Report The Jerusalem Post


Critical Accounting Policies and Estimates








| |                                        
| | ---------------------------------------
| | Accruals for Contingent Tax Liabilities



49



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| |                                
| | -------------------------------
| | Allowance for Doubtful Accounts





| |                                 
| | --------------------------------
| | Potential Impairment of Goodwill





| |                                          
| | -----------------------------------------
| | Valuation Allowance  Deferred Tax Assets





| |                              
| | -----------------------------
| | Defined Benefit Pension Plans





50



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Restatements and Reclassifications




Results of Operations for the Years ended December 31,
2004, 2003 and 2002




|                              |                                |                         |         |          |              |   |         |         |   |   |         |         |   |      |       |      |      |  |       |      |   |  |       |      |  
|----------------------------- | ------------------------------ | ----------------------- | ------- | -------- | ------------ | - | ------- | ------- | - | - | ------- | ------- | - | ---- | ----- | ---- | ---- |  | ----- | ---- | - |  | ----- | ---- | -
|                              |                                | Year Ended December 31, |        
|                              |                                |                         |        
|                              |                                | 2004                    |         |          | 2003         |   |         | 2002    |   |   | 2004    |         |   | 2003 |       |      | 2002 | 
|                              |                                |                         |         |          |              |   |         |         |   |   |         |         |   |      |       |      |      | 
|                              |                                | (Dollars in thousands)  |         |          | (Percentage) |  
|Operating revenues:           |                                |                         |         |          |              |   |         |         |   |   |         |         |   |      |       |      |      |  |       |      |   |  |       |     
|                              | Chicago Group                  |                         | $       | 464,439  |              |   | $       | 450,789 |   |   | $       | 441,778 |   |      |       | 83.8 | %    |  |       | 84.8 | % |  |       | 86.4 | %
|                              | Canadian Newspaper Group       |                         |         | 89,499   |              |   |         | 80,542  |   |   |         | 69,626  |   |      |       | 16.2 |      |  |       | 15.2 |   |  |       | 13.6 |  
|                              |                                |                         |         |          |              |   |         |         |   |   |         |         |   |      |       |      |      | 
|Total operating revenues      |                                | $                       | 553,938 |          |              | $ | 531,331 |         |   | $ | 511,404 |         |   |      | 100.0 | %    |      |  | 100.0 | %    |   |  | 100.0 | %   
|                              |                                |                         |         |          |              |   |         |         |   |   |         |         |   |      |       |      |      | 
|Operating income (loss):      |                                |                         |         |          |              |   |         |         |   |   |         |         |   |      |       |      |      |  |       |      |   |  |       |     
|                              | Chicago Group                  |                         | $       | 96,420   |              |   | $       | 24,358  |   |   | $       | 38,640  |   |      |       |      |      |  |       |      |   |  |       |      |  
|                              | Canadian Newspaper Group       |                         |         | 4,091    |              |   |         | (4,983  | ) |   |         | 605     |   |      |       |      |      |  |       |      |   |  |       |      |  
|                              | Investment and Corporate Group |                         |         | (111,522 | )            |   |         | (45,374 | ) |   |         | (19,585 | ) |      |       |      |      |  |       |      |   |  |       |      |  
|                              |                                |                         |         |          |              |   |         |         |   |   |         |         |   |      |       |      |      | 
|Total operating income (loss) |                                | $                       | (11,011 | )        |              | $ | (25,999 | )       |   | $ | 19,660  |         |   |      |       |      |      |  |       |      |   |  |       |     
|                              |                                |                         |         |          |              |   |         |         |   |   |         |         |   |      |       |      |      | 

51



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|                                                                                         |              |                                          |          |         |      |   |         |         |  |   |          |         | 
|---------------------------------------------------------------------------------------- | ------------ | ---------------------------------------- | -------- | ------- | ---- | - | ------- | ------- |  | - | -------- | ------- | 
|                                                                                         |              | Year Ended December 31,                  |         
|                                                                                         |              |                                          |         
|                                                                                         |              | 2004                                     |          |         | 2003 |   |         | 2002    | 
|                                                                                         |              |                                          |          |         |      |   |         |         | 
|                                                                                         |              | (In thousands, except per share amounts) |         
|Statement of Operations Data:                                                            |              |                                          |          |         |      |   |         |         |  |   |          |        
|Operating revenues:                                                                      |              |                                          |          |         |      |   |         |         |  |   |          |        
|                                                                                         | Advertising  |                                          | $        | 428,641 |      |   | $       | 410,883 |  |   | $        | 390,617 | 
|                                                                                         | Circulation  |                                          |          | 102,528 |      |   |         | 98,220  |  |   |          | 100,291 | 
|                                                                                         | Job printing |                                          |          | 17,194  |      |   |         | 15,698  |  |   |          | 13,819  | 
|                                                                                         | Other        |                                          |          | 5,575   |      |   |         | 6,530   |  |   |          | 6,677   | 
|                                                                                         |              |                                          |          |         |      |   |         |         | 
|Total operating revenues                                                                 |              |                                          | 553,938  |         |      |   | 531,331 |         |  |   | 511,404  |        
|Total operating costs and expenses                                                       |              |                                          | 564,949  |         |      |   | 557,330 |         |  |   | 491,744  |        
|                                                                                         |              |                                          |          |         |      |   |         |         | 
|Operating income (loss)                                                                  |              |                                          | (11,011  | )       |      |   | (25,999 | )       |  |   | 19,660   |        
|Interest expense                                                                         |              |                                          | (19,084  | )       |      |   | (29,377 | )       |  |   | (57,341  | )      
|Amortization of deferred financing costs                                                 |              |                                          | (780     | )       |      |   | (1,503  | )       |  |   | (5,585   | )      
|Interest and dividend income                                                             |              |                                          | 19,876   |         |      |   | 22,886  |         |  |   | 15,109   |        
|Other income (expense), net                                                              |              |                                          | (116,068 | )       |      |   | 78,110  |         |  |   | (168,086 | )      
|                                                                                         |              |                                          |          |         |      |   |         |         | 
|Earnings (loss) from continuing operations before income taxes
    and minority interest |              |                                          | (127,067 | )       |      |   | 44,117  |         |  |   | (196,243 | )      
|Income taxes                                                                             |              |                                          | 35,650   |         |      |   | 128,001 |         |  |   | 37,390   |        
|Minority interest                                                                        |              |                                          | 1,185    |         |      |   | 5,325   |         |  |   | 2,167    |        
|                                                                                         |              |                                          |          |         |      |   |         |         | 
|Loss from continuing operations                                                          |              |                                          | (163,902 | )       |      |   | (89,209 | )       |  |   | (235,800 | )      
|                                                                                         |              |                                          |          |         |      |   |         |         | 
|Earnings from discontinued operations (net of income taxes)                              |              |                                          | 398,570  |         |      |   | 14,901  |         |  |   | 5,171    |        
|                                                                                         |              |                                          |          |         |      |   |         |         | 
|Net earnings (loss)                                                                      |              | $                                        | 234,668  |         |      | $ | (74,308 | )       |  | $ | (230,629 | )      
|                                                                                         |              |                                          |          |         |      |   |         |         | 
|Loss per share from continuing operations                                                |              | $                                        | (1.81    | )       |      | $ | (1.02   | )       |  | $ | (2.46    | )      
|                                                                                         |              |                                          |          |         |      |   |         |         | 
|Net earnings (loss) per share                                                            |              | $                                        | 2.59     |         |      | $ | (0.85   | )       |  | $ | (2.40    | )      
|                                                                                         |              |                                          |          |         |      |   |         |         | 



| |                        
| | -----------------------
| | 2004 Compared with 2003



| |                                
| | -------------------------------
| | Loss from Continuing Operations





| |                                      
| | -------------------------------------
| | Operating Revenues and Operating Loss



52



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| |                             
| | ----------------------------
| | Operating Costs and Expenses

Chicago Sun-Times




| |                 
| | ----------------
| | Interest Expense





| |                             
| | ----------------------------
| | Interest and Dividend Income





| |                            
| | ---------------------------
| | Other Income (Expense), Net





| |             
| | ------------
| | Income Taxes



53



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| |                  
| | -----------------
| | Minority Interest





| |                        
| | -----------------------
| | Discontinued Operations

The Jerusalem Post




| |                        
| | -----------------------
| | 2003 Compared with 2002



| |                                
| | -------------------------------
| | Loss from Continuing Operations





| |                                               
| | ----------------------------------------------
| | Operating Revenues and Operating Income (Loss)

Chicago Sun-Times




| |                             
| | ----------------------------
| | Operating Costs and Expenses

Chicago Sun-Times


54



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| |                 
| | ----------------
| | Interest Expense





| |                             
| | ----------------------------
| | Interest and Dividend Income





| |                            
| | ---------------------------
| | Other Income (Expense), Net





| |             
| | ------------
| | Income Taxes





| |                  
| | -----------------
| | Minority Interest



55



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| |                               
| | ------------------------------
| | Change in Accounting Principle

The Jerusalem Post The Jerusalem Post




| |                        
| | -----------------------
| | Discontinued Operations

The
Jerusalem Post Significant
Transactions in 2004




| |                
| | ---------------
| | Segment Results







| |              
| | -------------
| | Chicago Group



|                                   |                        |                         |         |         |              |   |         |         |  |   |         |         |  |      |       |      |      |  |       |      |   |  |       |      |  
|---------------------------------- | ---------------------- | ----------------------- | ------- | ------- | ------------ | - | ------- | ------- |  | - | ------- | ------- |  | ---- | ----- | ---- | ---- |  | ----- | ---- | - |  | ----- | ---- | -
|                                   |                        | Year Ended December 31, |        
|                                   |                        |                         |        
|                                   |                        | 2004                    |         |         | 2003         |   |         | 2002    |  |   | 2004    |         |  | 2003 |       |      | 2002 | 
|                                   |                        |                         |         |         |              |   |         |         |  |   |         |         |  |      |       |      |      | 
|                                   |                        | (Dollars in thousands)  |         |         | (Percentage) |  
|Operating revenues:                |                        |                         |         |         |              |   |         |         |  |   |         |         |  |      |       |      |      |  |       |      |   |  |       |     
|                                   | Advertising            |                         | $       | 362,355 |              |   | $       | 352,029 |  |   | $       | 341,262 |  |      |       | 78.0 | %    |  |       | 78.1 | % |  |       | 77.2 | %
|                                   | Circulation            |                         |         | 90,024  |              |   |         | 86,532  |  |   |         | 89,427  |  |      |       | 19.4 |      |  |       | 19.2 |   |  |       | 20.2 |  
|                                   | Job printing and other |                         |         | 12,060  |              |   |         | 12,228  |  |   |         | 11,089  |  |      |       | 2.6  |      |  |       | 2.7  |   |  |       | 2.6  |  
|                                   |                        |                         |         |         |              |   |         |         |  |   |         |         |  |      |       |      |      | 
|Total operating revenues           |                        |                         | 464,439 |         |              |   | 450,789 |         |  |   | 441,778 |         |  |      | 100.0 |      |      |  | 100.0 |      |   |  | 100.0 |     
|                                   |                        |                         |         |         |              |   |         |         |  |   |         |         |  |      |       |      |      | 
|Operating costs and expenses:      |                        |                         |         |         |              |   |         |         |  |   |         |         |  |      |       |      |      |  |       |      |   |  |       |     
|                                   | Newsprint              |                         |         | 67,823  |              |   |         | 65,109  |  |   |         | 60,146  |  |      |       | 14.6 |      |  |       | 14.4 |   |  |       | 13.6 |  
|                                   | Compensation           |                         |         | 174,009 |              |   |         | 170,483 |  |   |         | 170,895 |  |      |       | 37.5 |      |  |       | 37.8 |   |  |       | 38.7 |  
|                                   | Other operating costs  |                         |         | 95,662  |              |   |         | 155,141 |  |   |         | 136,099 |  |      |       | 20.6 |      |  |       | 34.5 |   |  |       | 30.8 |  
|                                   | Depreciation           |                         |         | 18,673  |              |   |         | 19,344  |  |   |         | 18,847  |  |      |       | 4.0  |      |  |       | 4.3  |   |  |       | 4.3  |  
|                                   | Amortization           |                         |         | 11,852  |              |   |         | 16,354  |  |   |         | 17,151  |  |      |       | 2.5  |      |  |       | 3.6  |   |  |       | 3.9  |  
|                                   |                        |                         |         |         |              |   |         |         |  |   |         |         |  |      |       |      |      | 
|Total operating costs and expenses |                        |                         | 368,019 |         |              |   | 426,431 |         |  |   | 403,138 |         |  |      | 79.2  |      |      |  | 94.6  |      |   |  | 91.3  |     
|                                   |                        |                         |         |         |              |   |         |         |  |   |         |         |  |      |       |      |      | 
|Operating income                   |                        | $                       | 96,420  |         |              | $ | 24,358  |         |  | $ | 38,640  |         |  |      | 20.8  | %    |      |  | 5.4   | %    |   |  | 8.7   | %   
|                                   |                        |                         |         |         |              |   |         |         |  |   |         |         |  |      |       |      |      | 

56



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| |                        
| | -----------------------
| | 2004 Compared with 2003





Chicago Sun-Times


Chicago Sun-Times




Chicago Sun-Times




Chicago Sun-Times






57



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| |                        
| | -----------------------
| | 2003 Compared with 2002



















58



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| |                         
| | ------------------------
| | Canadian Newspaper Group



|                                   |                        |                         |        |        |              |   |        |        |  |   |        |        |  |      |       |      |      |  |       |      |   |  |       |      |  
|---------------------------------- | ---------------------- | ----------------------- | ------ | ------ | ------------ | - | ------ | ------ |  | - | ------ | ------ |  | ---- | ----- | ---- | ---- |  | ----- | ---- | - |  | ----- | ---- | -
|                                   |                        | Year Ended December 31, |       
|                                   |                        |                         |       
|                                   |                        | 2004                    |        |        | 2003         |   |        | 2002   |  |   | 2004   |        |  | 2003 |       |      | 2002 | 
|                                   |                        |                         |        |        |              |   |        |        |  |   |        |        |  |      |       |      |      | 
|                                   |                        | (Dollars in thousands)  |        |        | (Percentage) |  
|Operating revenues:                |                        |                         |        |        |              |   |        |        |  |   |        |        |  |      |       |      |      |  |       |      |   |  |       |     
|                                   | Advertising            |                         | $      | 66,286 |              |   | $      | 58,854 |  |   | $      | 49,355 |  |      |       | 74.1 | %    |  |       | 73.1 | % |  |       | 70.9 | %
|                                   | Circulation            |                         |        | 12,504 |              |   |        | 11,688 |  |   |        | 10,864 |  |      |       | 14.0 |      |  |       | 14.5 |   |  |       | 15.6 |  
|                                   | Job printing and other |                         |        | 10,709 |              |   |        | 10,000 |  |   |        | 9,407  |  |      |       | 11.9 |      |  |       | 12.4 |   |  |       | 13.5 |  
|                                   |                        |                         |        |        |              |   |        |        |  |   |        |        |  |      |       |      |      | 
|Total operating revenues           |                        |                         | 89,499 |        |              |   | 80,542 |        |  |   | 69,626 |        |  |      | 100.0 |      |      |  | 100.0 |      |   |  | 100.0 |     
|                                   |                        |                         |        |        |              |   |        |        |  |   |        |        |  |      |       |      |      | 
|Operating costs and expenses:      |                        |                         |        |        |              |   |        |        |  |   |        |        |  |      |       |      |      |  |       |      |   |  |       |     
|                                   | Newsprint              |                         |        | 7,640  |              |   |        | 6,810  |  |   |        | 5,210  |  |      |       | 8.5  |      |  |       | 8.5  |   |  |       | 7.5  |  
|                                   | Compensation           |                         |        | 40,890 |              |   |        | 43,511 |  |   |        | 33,713 |  |      |       | 45.7 |      |  |       | 54.0 |   |  |       | 48.4 |  
|                                   | Other operating costs  |                         |        | 35,163 |              |   |        | 33,648 |  |   |        | 28,797 |  |      |       | 39.3 |      |  |       | 41.8 |   |  |       | 41.3 |  
|                                   | Depreciation           |                         |        | 1,715  |              |   |        | 1,556  |  |   |        | 1,301  |  |      |       | 1.9  |      |  |       | 1.9  |   |  |       | 1.9  |  
|                                   |                        |                         |        |        |              |   |        |        |  |   |        |        |  |      |       |      |      | 
|Total operating costs and expenses |                        |                         | 85,408 |        |              |   | 85,525 |        |  |   | 69,021 |        |  |      | 95.4  |      |      |  | 106.2 |      |   |  | 99.1  |     
|                                   |                        |                         |        |        |              |   |        |        |  |   |        |        |  |      |       |      |      | 
|Operating income (loss)            |                        | $                       | 4,091  |        |              | $ | (4,983 | )      |  | $ | 605    |        |  |      | 4.6   | %    |      |  | (6.2  | )%   |   |  | 0.9   | %   
|                                   |                        |                         |        |        |              |   |        |        |  |   |        |        |  |      |       |      |      | 



| |                        
| | -----------------------
| | 2004 Compared with 2003









| |                        
| | -----------------------
| | 2003 Compared with 2002



59



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| |                               
| | ------------------------------
| | Investment and Corporate Group



|                                   |                       |                         |          |        |      |   |         |        |  |   |         |        | 
|---------------------------------- | --------------------- | ----------------------- | -------- | ------ | ---- | - | ------- | ------ |  | - | ------- | ------ | 
|                                   |                       | Year Ended December 31, |         
|                                   |                       |                         |         
|                                   |                       | 2004                    |          |        | 2003 |   |         | 2002   | 
|                                   |                       |                         |          |        |      |   |         |        | 
|                                   |                       | (In thousands)          |         
|Operating costs and expenses:      |                       |                         |          |        |      |   |         |        |  |   |         |       
|                                   | Compensation          |                         | $        | 18,502 |      |   | $       | 10,687 |  |   | $       | 3,171  | 
|                                   | Other operating costs |                         |          | 92,521 |      |   |         | 32,761 |  |   |         | 14,652 | 
|                                   | Depreciation          |                         |          | 499    |      |   |         | 1,926  |  |   |         | 1,762  | 
|                                   |                       |                         |          |        |      |   |         |        | 
|Total operating costs and expenses |                       |                         | 111,522  |        |      |   | 45,374  |        |  |   | 19,585  |       
|                                   |                       |                         |          |        |      |   |         |        | 
|Operating loss                     |                       | $                       | (111,522 | )      |      | $ | (45,374 | )      |  | $ | (19,585 | )     
|                                   |                       |                         |          |        |      |   |         |        | 



| |                        
| | -----------------------
| | 2004 Compared with 2003





60



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| |                        
| | -----------------------
| | 2003 Compared with 2002



Liquidity and Capital Resources










61



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##### Table of Contents





|                                               |  |                |         |  |              |   |         | 
|---------------------------------------------- |  | -------------- | ------- |  | ------------ | - | ------- | 
|                                               |  | December 31,   |         |  | December 31, |  
|                                               |  | 2004           |         |  | 2003         |  
|                                               |  |                |         |  |              |  
|                                               |  | (In thousands) |        
|Cash and cash equivalents                      |  | $              | 395,926 |  |              | $ | 66,589  | 
|Short-term investments                         |  |                | 532,050 |  |              |   | 19,400  | 
|                                               |  |                |         |  |              |  
|Total cash and short-term investments          |  | $              | 927,976 |  |              | $ | 85,989  | 
|                                               |  |                |         |  |              |  
|8.625% Senior Notes, matured on March 15, 2005 |  | $              | 5,082   |  |              | $ | 5,082   | 
|9% Senior Notes due 2010                       |  |                | 6,000   |  |              |   | 300,000 | 
|Other debt                                     |  |                | 3,276   |  |              |   | 5,117   | 
|                                               |  |                |         |  |              |  
|Total debt                                     |  | $              | 14,358  |  |              | $ | 310,199 | 
|                                               |  |                |         |  |              |  





|                                      |  |                |         |  |              |   |         | 
|------------------------------------- |  | -------------- | ------- |  | ------------ | - | ------- | 
|                                      |  | December 31,   |         |  | December 31, |  
|                                      |  | 2004           |         |  | 2003         |  
|                                      |  |                |         |  |              |  
|                                      |  | (In thousands) |        
|Classified as current liabilities     |  | $              | 518,300 |  |              | $ | 455,599 | 
|Classified as non-current liabilities |  |                | 349,228 |  |              |   | 301,896 | 
|                                      |  |                |         |  |              |  
|                                      |  | $              | 867,528 |  |              | $ | 757,495 | 
|                                      |  |                |         |  |              |  





62



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| |           
| | ----------
| | Cash Flows





Chicago
Sun-Times.


63



---



##### Table of Contents







| |     
| | ----
| | Debt









| |       
| | ------
| | Leases

Chicago Sun-Times.




| |                     
| | --------------------
| | Capital Expenditures

Chicago Sun-Times




| |                                
| | -------------------------------
| | Dividends and Other Commitments



64



---



##### Table of Contents





| |                               
| | ------------------------------
| | Off-Balance Sheet Arrangements



| |                              
| | -----------------------------
| | Hollinger Participation Trust







| |            
| | -----------
| | Derivatives







| |                                                   
| | --------------------------------------------------
| | Commercial Commitments and Contractual Obligations





|                                   |  |                |        |           |      |   |             |               |  |             |               |  |          |         |        |  |  |   |        | 
|---------------------------------- |  | -------------- | ------ | --------- | ---- | - | ----------- | ------------- |  | ----------- | ------------- |  | -------- | ------- | ------ |  |  | - | ------ | 
|                                   |  |                |        | Due in    |      |   |             |               |  |             |              
|                                   |  |                |        | 1 Year or |      |   | Due Between |               |  | Due Between |               |  | Due Over |        
|                                   |  | Total          |        |           | Less |   |             | 1 and 3 Years |  |             | 3 and 5 Years |  |          | 5 Years |       
|                                   |  |                |        |           |      |   |             |               |  |             |               |  |          |         |       
|                                   |  | (In thousands) |       
|8.625% Senior Notes(1)             |  | $              | 5,082  |           |      | $ | 5,082       |               |  | $           |              |  |          | $       |       |  |  | $ |       | 
|9% Senior Notes(2)                 |  |                | 6,000  |           |      |   | 6,000       |               |  |             |              |  |          |         |       |  |  |   |       | 
|Other long-term debt               |  |                | 3,276  |           |      |   | 1,223       |               |  |             | 2,012         |  |          |         | 41     |  |  |   |       | 
|Operating leases                   |  |                | 66,877 |           |      |   | 5,459       |               |  |             | 12,280        |  |          |         | 10,514 |  |  |   | 38,624 | 
|                                   |  |                |        |           |      |   |             |               |  |             |               |  |          |         |       
|Total contractual cash obligations |  | $              | 81,235 |           |      | $ | 17,764      |               |  | $           | 14,292        |  |          | $       | 10,555 |  |  | $ | 38,624 | 
|                                   |  |                |        |           |      |   |             |               |  |             |               |  |          |         |       






|    |                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | These notes matured and were retired in March 2005.                                                                                                                                                              
|   
|(2) | The Company intends to purchase the remaining principal of the
    9% Senior Notes as they become available on the open
    market. Accordingly, the $6.0 million outstanding on the
    9% Senior Notes has been

65



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| |                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------
| | reflected as Current portion of long-term debt in
    the accompanying Consolidated Balance Sheet at December 31,
    2004.



Recent Accounting Pronouncements











|         |                                                              
|-------- | -------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosure About Market
    Risk

Newsprint.


Inflation.


Interest Rates.


Foreign Exchange Rates.


66



---



##### Table of Contents





|       |  |                |              |                |                   |   |       | 
|------ |  | -------------- | ------------ | -------------- | ----------------- | - | ----- | 
|       |  | Actual Average |              |                |                  
|       |  | 2004 Rate      |              |                | Increase/Decrease |  
|       |  |                |              |                |                   |  
|       |  |                |              | (In thousands) |                  
|Canada |  | $              | 0.7697/Cdn.$ |                |                   | $ | 4,295 | 








|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data








|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure








|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

(a)     Evaluation of Disclosure
Controls and Procedures








(b)     Managements Report on
Internal Control over Financial Reporting






| |                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. Pertain to the maintenance of records that, in
    reasonable detail, accurately and fairly reflect the
    transactions and dispositions of the assets of the Company;

67



---



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| |                                                                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2. Provide reasonable assurance that transactions are
    recorded as necessary to permit preparation of financial
    statements in accordance with generally accepted accounting
    principles, and that receipts and expenditures of the Company
    are being made only in accordance with authorizations of
    management and directors of the Company; and
|
| | 3. Provide reasonable assurance regarding prevention or
    timely detection of unauthorized acquisition, use or disposition
    of the Companys assets that could have a material effect
    on the financial statements.                                                                                                                                       

Internal Control  Integrated Framework








Ineffective Control Environment:




| |   |                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Former senior management did not set an appropriate tone
    at the top to instill a company-wide attitude of integrity
    and control consciousness.                                                                                      
|
| |  | Numerous management review and approval controls, across both
    operational and financial processes, were ineffective.                                                                                                                      
|
| |  | There was no documentation of the Companys accounting
    policies to ensure the proper and consistent application of U.S.
    GAAP throughout the organization.                                                                             
|
| |  | There was a pervasive lack of resources, including both
    personnel and system capabilities, in key control areas.                                                                                                                          
|
| |  | The Companys internal audit function was inadequately
    staffed to plan or perform routine internal audits in addition
    to assisting with managements assessment of the
    effectiveness of internal control over financial reporting.
|
| |  | Inadequate planning, management and execution of the
    Companys assessment of the effectiveness of internal
    control over financial reporting to comply with Section 404
    of the Sarbanes-Oxley Act of 2002                          

68



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| |  |                                                                                                                                   
| |  | ----------------------------------------------------------------------------------------------------------------------------------
| |  | resulted in the failure of management to evaluate the
    Companys automated IT application controls as of
    December 31, 2004.





IT General Controls:


Ineffective Risk Assessment:


Ineffective Financial Reporting Process:




| |   |                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Staffing levels in the accounting and finance functions were
    insufficient given the level of complexity of the Companys
    operations, corporate transactions, litigation and organization
    structure. Roles and responsibilities within the accounting
    function were not clearly defined.
|
| |  | The Companys information systems were inadequate to
    support the complexity described above due to multiple,
    incompatible applications and platforms, manual interfaces and
    inadequate IT support staff.                                                                                   
|
| |  | There were no documented procedures for the approval and review
    of standard and non-standard journal entries and account
    reconciliations.                                                                                                                                                      
|
| |  | There were no defined, consistent and documented processes and
    procedures for the initiation, processing and recording of the
    underlying accounts, the financial close process, and the
    consolidation and preparation of interim and year-end financial
    statements.                    



Income Taxes:


69



---



##### Table of Contents







(c)     Changes in Internal Control
over Financial Reporting and Other Remediation






| |   |                                                                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | An update of the Companys Code of Business Conduct and
    Ethics with a communication to all employees that everyone in
    the Company is required to read, understand and follow the
    policies therein. This communication also outlined several
    methods for employees to report improper or unethical behavior,
    including use of a confidential whistleblower
    process.
|
| |  | Separation of the distribution function from the circulation
    department with a requirement to report independently to senior
    management.                                                                                                                                                                                                                                            
|
| |  | The implementation of random monthly audits of reported
    circulation.                                                                                                                                                                                                                                                                                                                    







| |   |                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A function dedicated to internal control documentation, testing
    and implementation has been created and staffed.                                                                                                                                                            
|
| |  | The Company has engaged an outside service provider to staff the
    internal audit function and to assist in developing and
    implementing a comprehensive audit plan.                                                                                                       
|
| |  | The Company is engaged in a comprehensive strategic planning
    process and related strategic enterprise risk management
    assessment.                                                                                                                                       
|
| |  | Personnel have been hired, or a search is otherwise underway,
    for the roles of director of internal control, director of
    internal audit, manager of financial reporting, vice-president
    of finance (Chicago Group) and vice-president of information
    technology.
|
| |  | The Company has begun a comprehensive analysis of its IT control
    systems, in order to identify and prioritize those controls
    requiring remediation. Remediation commenced in 2005 and will
    continue into 2006.                                                      
|
| |  | The Company has increased the size and capabilities of its tax
    department, and has engaged an outside service provider to
    assist in the design and documentation of appropriate tax
    controls.                                                                       

70



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Item 9B.     Other
Information




Report of Independent Registered Public Accounting
Firm












71



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##### Table of Contents





Ineffective Control Environment:




| |   |                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Former senior management did not set an appropriate tone at the
    top to instill a company-wide attitude of integrity and control
    consciousness.                                                                                                                                                                                                 
|
| |  | Numerous management review and approval controls, across both
    operational and financial processes, were ineffective.                                                                                                                                                                                                                               
|
| |  | There was no documentation of the Companys accounting
    policies to ensure the proper and consistent application of U.S.
    GAAP throughout the organization.                                                                                                                                                                                      
|
| |  | There was a pervasive lack of resources, including both
    personnel and system capabilities, in key control areas.                                                                                                                                                                                                                                   
|
| |  | The Companys internal audit function was inadequately
    staffed to plan or perform routine internal audits in addition
    to assisting with managements assessment of the
    effectiveness of internal control over financial reporting.                                                                                                         
|
| |  | Inadequate planning, management and execution of the
    Companys assessment of the effectiveness of internal
    control over financial reporting to comply with Section 404
    of the Sarbanes-Oxley Act of 2002 resulted in the failure of
    management to evaluate the Companys automated IT
    application controls as of December 31, 2004.



IT General Controls:


Ineffective Risk Assessment:


Ineffective Financial Reporting Process:




| |   |                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Staffing levels in the accounting and finance functions were
    insufficient given the level of complexity of the Companys
    operations, corporate transactions, litigation and organization
    structure. Roles and responsibilities within the accounting
    function were not clearly defined.
|
| |  | The Companys information systems were inadequate to
    support the complexity described above due to multiple,
    incompatible applications and platforms, manual interfaces and
    inadequate IT support staff.                                                                                   

72



---



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| |   |                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | There were no documented procedures for the approval and review
    of standard and non-standard journal entries and account
    reconciliations.                                                                                                                                  
|
| |  | There were no defined, consistent and documented processes and
    procedures for the initiation, processing and recording of the
    underlying accounts, the financial close process, and the
    consolidation and preparation of interim and year-end financial
    statements.



Income Taxes:










73



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##### Table of Contents







| |                  
| | -----------------
| | (signed) KPMG LLP








PART III







|         |                                                   
|-------- | --------------------------------------------------
|Item 10. | Directors and Executive Officers of the Registrant



|                           |  |                                                                              
|-------------------------- |  | -----------------------------------------------------------------------------
|Name and Age               |  | Position(s) with the Company                                                 
|                           |  |                                                                              
|Barbara Amiel Black, 64(1) |  | Director                                                                     
|Conrad M. Black, 60(1)     |  | Director                                                                     
|Richard R. Burt, 57        |  | Director                                                                     
|Daniel W. Colson, 57       |  | Director                                                                     
|John D. Cruickshank, 51    |  | Chief Operating Officer  Chicago Group                                      
|Cyrus F. Friedheim, 69(3)  |  | Director                                                                     
|Paul B. Healy, 41          |  | Vice President, Corporate Development and Investor Relations                 
|Henry A. Kissinger, 81     |  | Director                                                                     
|Peter K. Lane, 51          |  | Vice President and Chief Financial Officer                                   
|Shmuel Meitar, 61          |  | Director                                                                     
|John M. OBrien, 63(2)     |  | Director                                                                     
|Gordon A. Paris, 51        |  | Chairman of the Board of Directors, President and Chief
    Executive Officer
|Richard N. Perle, 63       |  | Director                                                                     
|Graham W. Savage, 55       |  | Director                                                                     
|Raymond G. H. Seitz, 64    |  | Director                                                                     
|Robert T. Smith, 61        |  | Treasurer                                                                    
|James R. Thompson, 68      |  | Director                                                                     
|James R. Van Horn, 48      |  | Vice President, General Counsel and Secretary                                






|    |                                  
|--- | ---------------------------------
|(1) | Resigned as of June 2, 2005.     
|   
|(2) | Appointed as of August 4, 2005.  
|   
|(3) | Appointed as of October 25, 2005.



Barbara Amiel Black


74



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##### Table of Contents





Conrad M. Black


Richard R. Burt


Daniel W. Colson


John D. Cruickshank Chicago Sun-Times Chicago Sun-Times Chicago Sun-Times The
Vancouver Sun The Globe and Mail


Cyrus F. Freidheim


Paul B. Healy


Henry A. Kissinger


75



---



##### Table of Contents





Peter K. Lane


Shmuel Meitar The Jerusalem Post


John M. OBrien New York Times


Gordon A. Paris


Richard N. Perle The Jerusalem Post


Graham W. Savage


Raymond G. H. Seitz


Robert T. Smith


James R. Thompson


76



---



##### Table of Contents





James R. Van Horn






Audit Committee




Code of Ethics




Section 16(a) Beneficial Ownership Reporting
Compliance




77



---



##### Table of Contents








|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

Summary Compensation Table




|                            |                                              |      |      |                     |        |  |              |         |            |              |              |         |           |            |       |       |                 |  |   |        |  |  |        |         | 
|--------------------------- | -------------------------------------------- | ---- | ---- | ------------------- | ------ |  | ------------ | ------- | ---------- | ------------ | ------------ | ------- | --------- | ---------- | ----- | ----- | --------------- |  | - | ------ |  |  | ------ | ------- | 
|                            |                                              |      |      |                     |        |  |              |         |            | Long Term    |              |         |          
|                            |                                              |      |      |                     |        |  |              |         |            | Compensation |              |         |          
|                            |                                              |      |      |                     |        |  |              |         |            |              |             
|                            |                                              |      |      | Annual Compensation |        |  |              |         | Securities |              |              |        
|                            |                                              |      |      |                     |        |  | Other Annual |         |            | Underlying   |              |         | All Other |           
|Name and Principal Position |                                              | Year |      |                     | Salary |  |              | Bonus   |            |              | Compensation |         |           | Options(2) |       |       | Compensation(1) | 
|                            |                                              |      |      |                     |        |  |              |         |            |              |              |         |           |            |       |       |                 | 
|GORDON A. PARIS             |                                              |      | 2004 |                     |        |  | 1,714,087    |         |            |              | 1,100,000    |         |           |            |      |       |                 |  |  |        |  |  | 7,350  |        
|                            | Chairman, President and                      |      |      | 2003                |        |  |              | 220,625 |            |              |              |        |           |            |       |      |                 |  |   |       |  |  |        | 290,750 | 
|                            | Chief Executive Officer(3)                   |      |      | 2002                |        |  |              |        |            |              |              |        |           |            |       |      |                 |  |   |       |  |  |        |        | 
|JOHN D. CRUICKSHANK         |                                              |      | 2004 |                     |        |  | 349,038      |         |            |              | 308,750      |         |           |            | 6,038 |       |                 |  |  |        |  |  | 51,100 |        
|                            | Chief Operating Officer                     |      |      | 2003                |        |  |              | 171,067 |            |              |              |        |           |            |       | 6,600 |                 |  |   | 26,852 |  |  |        | 6,218   | 
|                            | Chicago Group                                |      |      | 2002                |        |  |              | 165,000 |            |              |              | 62,200  |           |            |       | 6,300 |                 |  |   | 21,199 |  |  |        | 7,000   | 
|PAUL B. HEALY               |                                              |      | 2004 |                     |        |  | 349,904      |         |            |              | 298,750      |         |           |            |      |       |                 |  |  |        |  |  | 51,100 |        
|                            | Vice President,                              |      |      | 2003                |        |  |              | 345,000 |            |              |              | 235,000 |           |            |       |      |                 |  |   | 61,480 |  |  |        | 7,175   | 
|                            | Investor Relations and Corporate Development |      |      | 2002                |        |  |              | 316,000 |            |              |              | 175,000 |           |            |       |      |                 |  |   | 63,599 |  |  |        | 7,000   | 
|PETER K. LANE               |                                              |      | 2004 |                     |        |  | 373,304      |         |            |              | 153,940      |         |           |            |      |       |                 |  |  |        |  |  | 60,625 |        
|                            | Vice President                               |      |      | 2003                |        |  |              | 339,956 |            |              |              |        |           |            |       |      |                 |  |   |       |  |  |        |        | 
|                            | Chief Financial Officer                      |      |      | 2002                |        |  |              | 74,812  |            |              |              |        |           |            |       |      |                 |  |   |       |  |  |        |        | 
|ROBERT T. SMITH             |                                              |      | 2004 |                     |        |  | 299,673      |         |            |              | 255,000      |         |           |            |      |       |                 |  |  |        |  |  | 44,850 |        
|                            | Treasurer                                    |      |      | 2003                |        |  |              | 282,654 |            |              |              | 100,000 |           |            |       |      |                 |  |   | 26,145 |  |  |        | 7,000   | 
|                            |                                              |      |      | 2002                |        |  |              | 264,567 |            |              |              | 72,750  |           |            |       |      |                 |  |   | 28,266 |  |  |        | 7,000   | 






|    |                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | With respect to Paris, includes director fees paid to him for
    service on the Board of Directors and various committees from
    May 2003 until his appointment as Interim President and Chief
    Executive Officer in November 2003.



| |                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Compensation listed under All Other Compensation
    includes Company contributions under the Companys 401(k)
    plan for Mr. Paris, retention bonus paid in 2004 for
    Mr. Lane and retention bonus and 401(k) contributions for
    Messrs. Cruickshank, Healy and Smith.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Represents number of shares of Class A Common Stock with
    respect to which options were awarded pursuant to the
    Companys 1999 Stock Incentive Plan. Option grants vest in
    twenty-five percent increments over a four-year period from the
    date of grant. The initial dates of grant and exercise prices
    for these option grants are as follows: 2003 
    $9.45 per share with an initial grant date of
    February 6, 2003; 2002  $11.13 per share
    with an initial grant date of February 5, 2002. See
    1999 Incentive Stock Plan below. Number of shares
    represented by each option were adjusted by the Board of
    Directors of the Company in 2005 to preserve the value of
    options in light of the two special dividends declared and paid
    in respect of the Companys common stock in late 2004 and
    early 2005. Number of shares presented herein reflect this
    adjustment.
|   
|(3) | Paris became a director of the Company in May 2003, became the
    Interim President and Chief Executive Officer in November 2003
    and became the Interim Chairman in January 2004. In January
    2005, the word interim was removed from Paris
    titles. Paris 2003 salary was accrued in 2003, but paid in
    2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(4) | With respect to Mr. Lane, compensation was paid by the
    Company in Canadian Dollars and have been converted to
    U.S. Dollars at the following rates: 2004 
    0.7697; 2003  0.7157; 2002  0.6367.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

Stock Option Plans




| |                       
| | ----------------------
| | 1994 Stock Option Plan



78



---



##### Table of Contents







| |                          
| | -------------------------
| | 1997 Stock Incentive Plan





| |                          
| | -------------------------
| | 1999 Stock Incentive Plan





| |                               
| | ------------------------------
| | Suspension of Option Exercises



79



---



##### Table of Contents





| |                                  
| | ---------------------------------
| | Option Grants in Last Fiscal Year





| |                                                                                     
| | ------------------------------------------------------------------------------------
| | Aggregated Option Exercises During Fiscal 2004 and Fiscal
    Year-End Option Values



Aggregated Option Exercises During Fiscal 2004


and


Option Values at December 31, 2004


for the Company and Hollinger L.P.


|                    |  |             |   |  |          |                      |                        |                            |                      |                         |                        |  |  |             |        |  |               |  |         |  |  |  |         | 
|------------------- |  | ----------- | - |  | -------- | -------------------- | ---------------------- | -------------------------- | -------------------- | ----------------------- | ---------------------- |  |  | ----------- | ------ |  | ------------- |  | ------- |  |  |  | ------- | 
|                    |  |             |   |  |          | Number of Securities |                        |                            | Value of Unexercised |                        
|                    |  | Number of   |   |  |          |                      | Underlying Unexercised |                            |                      | In-The-Money Options at |                       
|                    |  | Shares      |   |  | Value    |                      |                        | Options at Fiscal Year-End |                      |                         | Fiscal Year-End ($)(1) | 
|                    |  | Acquired on |   |  | Realized |                      |                        |                            |                      |                         |                        | 
|Name                |  | Exercise    |   |  | ($)      |                      |                        | Exercisable                |                      |                         | Unexercisable          |  |  | Exercisable |        |  | Unexercisable | 
|                    |  |             |   |  |          |                      |                        |                            |                      |                         |                        |  |  |             |        |  |               | 
|Gordon A. Paris     |  |             |  |  |          |                      |                       |                            |                      |                         |                       |  |  |             |       |  |               |  |        |  |  |  |        | 
|John D. Cruickshank |  |             |  |  |          |                      |                       |                            |                      |                         | 41,625                 |  |  |             | 24,875 |  |               |  | 136,564 |  |  |  | 127,991 | 
|Paul B. Healy       |  |             |  |  |          |                      |                       |                            |                      |                         | 254,775                |  |  |             | 67,625 |  |               |  | 983,680 |  |  |  | 324,709 | 
|Peter K. Lane       |  |             |  |  |          |                      |                       |                            |                      |                         |                       |  |  |             |       |  |               |  |        |  |  |  |        | 
|Robert T. Smith     |  |             |  |  |          |                      |                       |                            |                      |                         | 64,625                 |  |  |             | 28,875 |  |               |  | 260,299 |  |  |  | 139,646 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In accordance with the rules of the SEC, Company option values
    are calculated by subtracting the exercise price from the fair
    market value of the underlying common stock. For purposes of
    this table, fair market value is deemed to be $15.72, the
    average of the high and low common stock price reported for New
    York Stock Exchange transactions on December 31, 2004, the
    last business day of the Companys fiscal year. Subsequent
    to December 31, 2004, the number of shares for named
    executive officers were adjusted, pursuant to the underlying
    stock option plans, following the payment of the special
    dividends in 2005.



| |                        
| | -----------------------
| | Directors Compensation





80



---



##### Table of Contents











| |                     
| | --------------------
| | Deferred Stock Units





| |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) 25% of the DSUs awarded will vest and become
    non-forfeitable on each of the first, second, third and fourth
    anniversaries of the grant date, unless forfeited earlier under
    paragraph (v) below;                                                                                                                                                                                                
|
| | (ii) Upon the unitholders termination of employment
    by death or permanent disability, the DSUs which have not
    yet vested will vest and become non-forfeitable on the date of
    such death or permanent disability;                                                                                                                                                                                   
|
| | (iii) Upon the unitholders termination of employment
    by reason of retirement from the Company or its subsidiaries at
    or after attaining the age of
    591/2
    and after having served as an employee of the Company or its
    subsidiaries for at least five continuous years, the DSUs
    which have not yet vested will vest and become non-forfeitable
    on such termination of employment;  
|
| | (iv) Upon a change in control (as defined in the
    Agreement); or                                                                                                                                                                                                                                                                                                                                              
|
| | (v) Unless the Compensation Committee of the Companys
    Board of Directors determines otherwise in its sole discretion,
    if the unitholders employment with the Company terminates
    for any reason other than paragraphs (i), (ii) or
    (iii) above, the DSUs which have not vested as of the
    date of such termination of employment will be permanently
    forfeited on such termination date.



81



---



##### Table of Contents





| |                                            
| | -------------------------------------------
| | Employment And Change Of Control Agreements





| |                         
| | ------------------------
| | Terms of Paris Agreement

















| |                         
| | ------------------------
| | Terms of Healy Agreement



82



---



##### Table of Contents









| |                               
| | ------------------------------
| | Terms of Cruickshank Agreement

Chicago
Sun-Times






| |                     
| | --------------------
| | Retention Agreements

1 8




| |                                                            
| | -----------------------------------------------------------
| | Compensation Committee Report on Executive
    Compensation





| |   |                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | reviewing from time to time and approving the overall
    compensation policies of the Company applicable to the
    Companys executive officers.                                                               
|
| |  | reviewing and approving corporate goals and objectives relevant
    to the compensation of the Chief Executive Officer of the
    Company; evaluating the performance of the Chief Executive
    Officer in light

83



---



##### Table of Contents



| |   |                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | of these goals and objectives; and setting the compensation of
    the Chief Executive Officer based on the Committees
    evaluation and competitive compensation market data.                                                                                                                                                                      
|
| |  | reviewing and approving the compensation levels for the
    executive officers of the Company other than the Chief Executive
    Officer.                                                                                                                                                                                                             
|
| |  | reviewing, approving, administering and annually evaluating the
    Companys compensation plans, equity-based plans and
    benefit plans or programs for executive officers and such other
    officers as the Compensation Committee deems appropriate, as
    well as establishing individual targets and ranges under such
    plans or programs.
|
| |  | reviewing and approving equity-based grants to the
    Companys executive officers and others.                                                                                                                                                                                                                                                       
|
| |  | reviewing, approving and at least annually evaluating the
    compensation and benefits for the Companys non-employee
    directors.                                                                                                                                                                                                                 







| |   |                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------
| |  | competitive base salaries that reflect the competitive
    marketplace for the talents that the Committee desires to
    attract and retain;
|
| |  | retention and long-term incentives through the provision of
    equity-based awards that vest over a period of time;                        
|
| |  | short-term incentives through the payment of annual cash bonuses;                                                                           
|
| |  | competitive executive benefits and perquisites.                                                                                             



84



---



##### Table of Contents







| |                       
| | ----------------------
| | Compensation Committee
|
| | /s/ JAMES R. THOMPSON 
| |                       
| | James R. Thompson     
|
| | /s/ RICHARD R. BURT   
| |                       
| | Richard R. Burt       

85



---



##### Table of Contents





| |                                     
| | ------------------------------------
| | Stockholder Return Performance Graph



Comparison of Cumulative Total Return of the


Company, Peer Groups, Industry Indexes and/or Broad
Markets


COMPARE 5-YEAR CUMULATIVE TOTAL RETURN


AMONG HOLLINGER INTERNATIONAL INC.,


NYSE MARKET INDEX AND MEDIA GENERAL GROUP INDEX





ASSUMES $100 INVESTED ON JAN. 01, 2000


ASSUMES DIVIDEND REINVESTED


FISCAL YEAR ENDING DEC. 31, 2004


|                             |  |  |      |        |  |      |  |  |        |  |  |      |  |       |  |  |  |  |       |  |  |  |        | 
|---------------------------- |  |  | ---- | ------ |  | ---- |  |  | ------ |  |  | ---- |  | ----- |  |  |  |  | ----- |  |  |  | ------ | 
|                             |  |  |      |        |  |      |  |  |        |  |  |      |  |       |  |  |  |  |      
|                             |  |  | 2000 |        |  | 2001 |  |  | 2002   |  |  | 2003 |  | 2004  | 
|                             |  |  |      |        |  |      |  |  |        |  |  |      |  |       |  |  |  |  |      
|Hollinger International Inc. |  |  |      | 100.00 |  |      |  |  | 127.56 |  |  |      |  | 98.28 |  |  |  |  | 87.70 |  |  |  | 137.27 | 
|                             |  |  |      |        |  |      |  |  |        |  |  |      |  |       |  |  |  |  |      
|Media General Group Index    |  |  |      | 100.00 |  |      |  |  | 88.50  |  |  |      |  | 76.80 |  |  |  |  | 80.42 |  |  |  | 97.30  | 
|                             |  |  |      |        |  |      |  |  |        |  |  |      |  |       |  |  |  |  |      
|NYSE Market Index            |  |  |      | 100.00 |  |      |  |  | 102.38 |  |  |      |  | 93.26 |  |  |  |  | 76.18 |  |  |  | 98.69  | 
|                             |  |  |      |        |  |      |  |  |        |  |  |      |  |       |  |  |  |  |      

SOURCE:












86



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##### Table of Contents








|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial Owners and
    Management and Related Stockholder Matters



|                                                                                                                |                                                                                                             |                            |            |            |            |  |                |                |  |  |      |       |  
|--------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | -------------------------- | ---------- | ---------- | ---------- |  | -------------- | -------------- |  |  | ---- | ----- | -
|                                                                                                                |                                                                                                             | Class and Number of Shares |            |            | Percent of | 
|Name and Address                                                                                                |                                                                                                             | Beneficially Owned(1)      |            |            | Class(4)   | 
|                                                                                                                |                                                                                                             |                            |            |            |            | 
|Tweedy, Browne Company LLC(2)                                                                                   |                                                                                                             |                            | 11,733,806 |            |            |  | Class A Common |                |  |  | 15.5 | %    
|                                                                                                                | 350 Park Avenue
    New York, New York 10022                                                                |                            |            |            |            |  |                |                |  |  |      |       |  
|Hollinger Inc. and affiliates(5)                                                                                |                                                                                                             |                            | 15,772,923 |            |            |  | Class A Common |                |  |  | 17.4 | %    
|                                                                                                                | 10 Toronto Street                                                                                           |                            |            | 14,990,000 |            |  |                | Class B Common |  |  |      | 100.0 | %
|                                                                                                                | Toronto, Ontario
    M5C 2B7 Canada                                                                         |                            |            |            |            |  |                |                |  |  |      |       |  
|Barbara Amiel Black(5),(6)                                                                                      |                                                                                                             |                            | 16,052,673 |            |            |  | Class A Common |                |  |  | 17.7 | %    
|Conrad M. Black(5),(6)                                                                                          |                                                                                                             |                            | 16,052,673 |            |            |  | Class A Common |                |  |  | 17.7 | %    
|Paulson & Co. Inc.(8)                                                                                           |                                                                                                             |                            | 7,465,009  |            |            |  | Class A Common |                |  |  | 9.9  | %    
|                                                                                                                | 590 Madison Ave
    New York, NY 10022                                                                      |                            |            |            |            |  |                |                |  |  |      |       |  
|Marathon Asset Management LLP                                                                                   |                                                                                                             |                            | 4,446,048  |            |            |  | Class A Common |                |  |  | 5.9  | %    
|                                                                                                                | Orion House
    5 Upper St. Martins Lane
    London WC2H 9EA
    United Kingdom                             |                            |            |            |            |  |                |                |  |  |      |       |  
|Morgan Stanley(2)                                                                                               |                                                                                                             |                            | 4,409,805  |            |            |  | Class A Common |                |  |  | 5.8  | %    
|                                                                                                                | 1585 Broadway
    New York, NY 10036                                                                        |                            |            |            |            |  |                |                |  |  |      |       |  
|Cheyne Special Situations Fund L.P.(9)                                                                          |                                                                                                             |                            | 3,991,900  |            |            |  | Class A Common |                |  |  | 5.3  | %    
|                                                                                                                | Cheyne General Partner Inc.
    Walker House, Mary Street
    PO Box 908GT
    Grand Cayman, Cayman Islands |                            |            |            |            |  |                |                |  |  |      |       |  
|Cheyne Capital Management Limited
    Stornoway House
    13 Cleveland Row
    London, SW1A 3DH, United Kingdom |                                                                                                             |                            |            |            |            |  |                |                |  |  |      |      
|Richard R. Burt                                                                                                 |                                                                                                             |                            | 31,587     |            |            |  | Class A Common |                |  |  | *    |      
|Daniel W. Colson                                                                                                |                                                                                                             |                            | 1,437,511  |            |            |  | Class A Common |                |  |  | 1.9  | %    
|John D. Cruickshank                                                                                             |                                                                                                             |                            | 100,472    |            |            |  | Class A Common |                |  |  | *    |      
|Paul B. Healy                                                                                                   |                                                                                                             |                            | 375,620    |            |            |  | Class A Common |                |  |  | *    |      
|Henry A. Kissinger                                                                                              |                                                                                                             |                            | 31,587     |            |            |  | Class A Common |                |  |  | *    |      
|Peter K. Lane                                                                                                   |                                                                                                             |                            |           |            |            |  | Class A Common |                |  |  | *    |      
|Shmuel Meitar                                                                                                   |                                                                                                             |                            | 31,587     |            |            |  | Class A Common |                |  |  | *    |      
|Gordon A. Paris                                                                                                 |                                                                                                             |                            | 213,731    |            |            |  | Class A Common |                |  |  | *    |      
|Richard N. Perle(7)                                                                                             |                                                                                                             |                            | 17,296     |            |            |  | Class A Common |                |  |  | *    |      
|Graham W. Savage                                                                                                |                                                                                                             |                            |           |            |            |  | Class A Common |                |  |  | *    |      
|Raymond G. H. Seitz                                                                                             |                                                                                                             |                            |           |            |            |  | Class A Common |                |  |  | *    |      
|Robert T. Smith                                                                                                 |                                                                                                             |                            | 121,448    |            |            |  | Class A Common |                |  |  | *    |      

87



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|                                                                    |  |                            |           |  |            |  |                |  |  |  |     |  
|------------------------------------------------------------------- |  | -------------------------- | --------- |  | ---------- |  | -------------- |  |  |  | --- | -
|                                                                    |  | Class and Number of Shares |           |  | Percent of | 
|Name and Address                                                    |  | Beneficially Owned(1)      |           |  | Class(4)   | 
|                                                                    |  |                            |           |  |            | 
|James R. Thompson                                                   |  |                            | 32,087    |  |            |  | Class A Common |  |  |  | *   |  
|All Directors and Executive Officers as a group
    (17 persons)(3) |  |                            | 2,436,752 |  |            |  | Class A Common |  |  |  | 3.2 | %






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes shares subject to presently exercisable options or
    options exercisable within 60 days of September 30,
    2005, held by executive officers and directors under the
    Companys 1994 Stock Option Plan, 1997 Stock Incentive Plan
    and 1999 Stock Incentive Plan as follows: Burt
    22,000 options to purchase 31,087 shares; Colson
    1,017,125 options to purchase 1,437,511 shares;
    Cruickshank 53,250 options to purchase 75,255 shares;
    Healy 252,400 options to purchase 356,707 shares;
    Kissinger 22,000 options to purchase 31,087 shares;
    Meitar 22,000 options to purchase 31,087 shares; Perle
    7,625 options to purchase 10,776 shares; Smith
    79,250 options to purchase 111,991 shares; and
    Thompson 22,000 options to purchase 31,087 shares.
    Also includes shares issuable pursuant to Deferred Stock Units
    as follows: Cruickshank 25,217 shares; Healy
    18,913 shares; Paris 213,731 shares; and Smith
    9,457 shares.                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(2) | As reported by the stockholder as of June 30, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(3) | The directors and executive officers as a group (17 persons)
    were the beneficial owners of 2,436,752 shares of
    Class A Common Stock (which includes presently exercisable
    options to purchase 2,116,588 shares of Class A
    Common Stock, owned shares of 9,520 and 310,644 shares
    issuable pursuant to Deferred Stock Units). Certain current and
    former directors and officers may still hold Hollinger Inc.
    Retractable Shares (Retractable Shares) which are
    exchangeable at the option of Hollinger Inc. for shares of the
    Companys Class A Common Stock. The Company is
    currently unable to determine how many Retractable Shares are
    currently held by current and former directors and officers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(4) | An asterisk (*) indicates less than one percent of a class of
    stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|(5) | As of December 15, 2004, includes:
    (i) 2,000,000 shares of Class A Common Stock
    issuable upon conversion of 2,000,000 shares of
    Class B Common Stock held by Hollinger Inc.;
    (ii) 12,990,000 shares of Class A Common Stock
    issuable upon conversion of 12,990,000 shares of
    Class B Common Stock held by 504468 N.B. Inc.
    (NBCo), an indirect wholly owned subsidiary of
    Hollinger Inc.; and (iii) 782,923 shares of
    Class A Common Stock held by NBCo.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(6) | As of December 15, 2004, includes:
    (i) 15,772,923 shares of Class A Common Stock
    beneficially owned by Hollinger Inc. (See Note 5 above)
    (Prior to the appointment of the Receiver in the CCAA
    proceedings in respect of Ravelston in April 2005, Black
    controlled Ravelston, which in turn controls Hollinger Inc. See
    Item 3  Legal Proceedings 
    Receivership and CCAA Proceedings in Canada Involving the
    Ravelston Entities.); (ii) 600 shares of
    Class A Common Stock held by Black;
    (iii) 9,600 shares of Class A Common Stock held
    by Conrad Black Capital Corporation, which Black controls;
    (iv) 50 shares of Class A Common Stock held by
    Blacks son; and (v) 269,500 shares of
    Class A Common Stock held by Amiel Black, Blacks
    spouse. Black disclaims beneficial ownership of his sons
    and spouses securities. Amiel Black disclaims beneficial
    ownership of all securities held directly or indirectly by her
    spouse and spouses son. This excludes the
    1,363,750 shares of Class A Common Stock that Black
    alleges he owns in connection with stock options that he
    attempted to exercise in February and April 2004, which are the
    subject of pending litigation between Black and the Company. See
    Item 3 Legal Proceedings  Black v.
    Hollinger International Inc., filed on April 5,
    2004.
|   
|(7) | Includes 2,120 shares of Class A Common Stock held by
    Perles wife, 800 shares of Class A Common Stock
    held by the Perle Defined Pension Plan as to which Perle may be
    deemed to have indirect beneficial ownership and
    3,600 shares owned by Perle.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(8) | As reported by the stockholders as of April 30, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(9) | As reported by the stockholders as of September 13, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

88



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##### Table of Contents





| |                   
| | ------------------
| | Changes in Control

Litigation
Involving Controlling Stockholder, Senior Management and
Directors Agreement
with RSM Richter Inc. Legal Proceedings 
Receivership and CCAA Proceedings in Canada Involving the
Ravelston Entities There could be a change of control of the Company through a
change in control of Hollinger Inc. under circumstances not
approved by the independent directors of the Company.




| |                      
| | ---------------------
| | Pledges of Securities

7 8 7 8




Equity Compensation Plan Information









|         |                                               
|-------- | ----------------------------------------------
|Item 13. | Certain Relationships and Related Transactions



89



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##### Table of Contents







| |                        
| | -----------------------
| | Restructuring Agreement







| |                               
| | ------------------------------
| | Management Services Agreements





Hollinger International Inc. v. Ravelston, RMI and
Hollinger Inc.


90



---



##### Table of Contents



Litigation Involving
Controlling Stockholder, Senior Management and
Directors




| |                                     
| | ------------------------------------
| | Loan to Subsidiary of Hollinger Inc.



7 8




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $25.8 million of the loan was repaid by the Hollinger Inc.
    subsidiary by application of amounts due to it with respect to
    the repurchase of shares of Class A Common Stock and
    redemption of shares of Series E Preferred Stock by the
    Company as discussed below; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | The remaining indebtedness of $20.4 million under this
    loan, according to the Companys incorrect calculation, was
    subordinated in right of payment to the Hollinger Inc.
    117/8% Senior
    Secured Notes due 2011 and now bears interest at a rate of
    14.25% if paid in cash and 16.5% if paid in kind. The
    subordination agreement permits the subsidiary of Hollinger Inc.
    to pay amounts due on this subordinated loan to the extent not
    prohibited under the indenture governing the
    117/8%
    Senior Secured Notes. The reimbursement obligations of the
    Hollinger Inc. subsidiary under this loan are secured by a cash
    collateral account that Ravelston was required to fund.
    Ravelston has funded approximately $147,000 to this account. The
    loan is guaranteed by Ravelston. See
    Item 3  Receivership and CCAA
    Proceedings in Canada Involving the Ravelston
    Entities. The Company has not yet sought to collect on
    the Ravelston guarantee or attach the receivables. Instead, the
    Company has sued Hollinger Inc. and Ravelston seeking to rescind
    the loan entirely and have it repaid in full. The Company claims
    that Black, Radler, Boultbee and Hollinger Inc. and its
    subsidiary made material misrepresentations to the Audit
    Committee in order to obtain its approval for the loan in July
    2000 and, therefore, the Company is entitled to rescind the
    loan. The Company seeks repayment of the entire loan balance,
    properly calculated without regard to the unauthorized interest
    rate reduction.



7 8


91



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##### Table of Contents



Litigation Involving Controlling
Stockholder, Senior Management and Directors




| |                 
| | ----------------
| | NP Holdings Sale


Litigation Involving Controlling Stockholder, Senior Management
and Directors National Post




| |                   
| | ------------------
| | Berenson & Company





| |                                                   
| | --------------------------------------------------
| | Special Committee Costs; Advancement of Legal Fees



92



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##### Table of Contents







|                |  |                |        |  |      |   |       | 
|--------------- |  | -------------- | ------ |  | ---- | - | ----- | 
|                |  | 2004           |        |  | 2003 |  
|                |  |                |        |  |      |  
|                |  | (In thousands) |       
|P. Atkinson     |  | $              | 937    |  |      | $ | 368   | 
|C. Black        |  |                | 5,835  |  |      |   | 388   | 
|B. Amiel Black  |  |                | 796    |  |      |   |      | 
|J. Boultbee     |  |                | 1,054  |  |      |   |      | 
|R. Burt         |  |                | 740    |  |      |   |      | 
|D. Colson       |  |                | 389    |  |      |   | 23    | 
|F. Creasey      |  |                | 247    |  |      |   |      | 
|P. Healy        |  |                |       |  |      |   | 139   | 
|C. Hollick      |  |                | 86     |  |      |   |      | 
|M. Josee-Kravis |  |                | 205    |  |      |   |      | 
|M. Kipnis       |  |                | 1,731  |  |      |   | 163   | 
|H. Kissinger    |  |                | 221    |  |      |   |      | 
|R. McBride      |  |                | 86     |  |      |   |      | 
|S. Meitar       |  |                | 102    |  |      |   |      | 
|R. Perle        |  |                | 1,081  |  |      |   |      | 
|F.D. Radler     |  |                | 3,985  |  |      |   | 316   | 
|T. Vogt         |  |                | 244    |  |      |   | 8     | 
|G. Weidenfeld   |  |                | 135    |  |      |   |      | 
|Others(1)       |  |                | 123    |  |      |   | 224   | 
|                |  |                |        |  |      |  
|                |  | $              | 17,997 |  |      | $ | 1,629 | 
|                |  |                |        |  |      |  






|    |                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes amounts advanced or reimbursed by the Company to
    current or former directors or officers, not otherwise noted, if
    the total amount was $60,000 or less individually during periods
    presented.



| |                   
| | ------------------
| | Corporate Aircraft





93



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| |                   
| | ------------------
| | Osprey Media Sales



Litigation Involving Controlling Stockholder, Senior
Management and Directors.




| |                     
| | --------------------
| | CanWest Transactions



National
Post Receivership and CCAA Proceedings in
Canada Involving the Ravelston Entities


Litigation Involving Controlling
Stockholder, Senior Management and Directors.




| |                          
| | -------------------------
| | Community Newspaper Sales



94



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##### Table of Contents



Litigation Involving Controlling Stockholder, Senior
Management and Directors.


Litigation Involving Controlling Stockholder, Senior
Management and Directors.


Litigation Involving Controlling
Stockholder, Senior Management and Directors.




| |                                                                         
| | ------------------------------------------------------------------------
| | Horizon Operations (Canada) Ltd. and Horizon Publications
    Inc. Sales



Litigation Involving Controlling Stockholder, Senior
Management and Directors.


Kelowna Capital Vernon Sun-Review Kelowna Capital Vernon Sun-Review Vernon
Sun-Review


95



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##### Table of Contents



Litigation Involving Controlling
Stockholder, Senior Management and Directors


Litigation Involving Controlling Stockholder, Senior
Management and Directors.




| |                  
| | -----------------
| | Hollinger Digital



Litigation Involving Controlling
Stockholder, Senior Management and Directors. Release and
Settlement Agreement with Atkinson




| |                  
| | -----------------
| | Payment to Colson


Litigation Involving Controlling Stockholder, Senior Management
and Directors.




| |                        
| | -----------------------
| | Payments to Amiel Black

The Daily Telegraph The
Sunday Telegraph The Daily Telegraph The
Sunday Telegraph.


Litigation Involving
Controlling Stockholder, Senior Management and
Directors.




| |                                               
| | ----------------------------------------------
| | Amounts Paid to Rona Radler and Melissa Radler



96



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##### Table of Contents



Chicago
Sun-Times.




| |                                
| | -------------------------------
| | Management Fees Paid to Horizon





| |                       
| | ----------------------
| | Trireme Associates LLC





| |                         
| | ------------------------
| | Charitable Contributions

The National
Interest The National Interest. The National Interest. The National Interest.




| |                                                
| | -----------------------------------------------
| | Hollinger Inc. Information Technology Equipment





| |                                               
| | ----------------------------------------------
| | Release and Settlement Agreement with Atkinson

Stockholder Derivative Litigation  Litigation Involving Controlling
Stockholder, Senior Management and Directors.




97



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##### Table of Contents







 Consulting Agreement with Atkinson


 Special Committee Costs;
Advancement of Legal Fees






| |                                   
| | ----------------------------------
| | Consulting Agreement with Atkinson





| |                                 
| | --------------------------------
| | Compromise Agreement with Colson



98



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##### Table of Contents









 Special Committee Costs;
Advancement of Legal Fees




| |                                 
| | --------------------------------
| | Business Opportunities Agreement









| |                                                                               
| | ------------------------------------------------------------------------------
| | Settlement Agreement with Certain Former and Current
    Independent Directors

Stockholder Derivative
Litigation


99



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##### Table of Contents



Hollinger Inc. v. American
Home Assurance Company and Chubb Insurance Company of
Canada




 Release and Settlement Agreement
with Atkinson




| |                                
| | -------------------------------
| | Agreement with RSM Richter Inc.








|         |                                       
|-------- | --------------------------------------
|Item 14. | Principal Accountant Fees and Services





Audit Services.


Audit Related Services.


Tax Services.


100



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##### Table of Contents



Other Services.




|                                   |  |      |           |  |      |   |           | 
|---------------------------------- |  | ---- | --------- |  | ---- | - | --------- | 
|                                   |  | 2004 |           |  | 2003 |  
|                                   |  |      |           |  |      |  
|Audit fees(1)                      |  | $    | 4,565,098 |  |      | $ | 6,730,047 | 
|Audit related fees(2)              |  |      | 442,176   |  |      |   | 161,000   | 
|                                   |  |      |           |  |      |  
|Total audit and audit related fees |  |      | 5,007,274 |  |      |   | 6,891,047 | 
|Tax fees(3)                        |  |      | 3,897,929 |  |      |   | 2,696,905 | 
|All other fees(4)                  |  |      | 801,155   |  |      |   | 56,737    | 
|                                   |  |      |           |  |      |  
|Total fees                         |  | $    | 9,706,358 |  |      | $ | 9,644,689 | 
|                                   |  |      |           |  |      |  






|    |                                                                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Audit fees for 2004 and 2003 include fees for the annual audit,
    quarterly reviews, and statutory audits. The amount for 2004
    represents a current estimate of overall fees, which have not
    yet been fully billed.
|   
|(2) | Audit related fees consist of fees for employee benefit plan
    audits, assistance with the CanWest arbitration, due diligence
    procedures performed and accounting advice with respect to
    dispositions.             
|   
|(3) | Tax fees consist of fees for tax compliance, federal, state and
    international tax planning and transaction assistance.                                                                                                   
|   
|(4) | All other fees consist principally of billings related to
    responding to subpoenas and performing certain investigations.                                                                                                 

de minimis





PART IV







|         |                                                                     
|-------- | --------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules, and Reports on
    Form 8-K





| |                                                                      
| | ---------------------------------------------------------------------
| | (1) Consolidated Financial Statements and Supplemental
    Schedules.



|        |   |    |                        |                                                                                                                                              |                                        |                                                                                                                                               
|------- | - | -- | ---------------------- | -------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |   |    |                        |                                                                                                                                              |                                       
|No.     |   |    | Description of Exhibit |                                                                                                                                              | Prior Filing or Sequential Page Number
|        |   |    |                        |                                                                                                                                              |                                       
|        | 3 | .1 |                        | Restated Certificate of Incorporation                                                                                                        |                                        | Incorporated by reference to Exhibit 3.1 to Annual Report
    on Form 10-K for the year ended December 31, 2003
    filed on January 18, 2005.
|       
|        | 3 | .2 |                        | Bylaws of Hollinger International Inc., as amended                                                                                           |                                        | Incorporated by reference to Exhibit 3.1 to Annual Report
    on Form 10-K for the year ended December 31, 2003
    filed on January 18, 2005.
|       
|        | 4 | .1 |                        | Rights Agreement between Hollinger International Inc. and Mellon
    Investor Services LLC as Rights Agent, dated as of
    January 25, 2004 |                                        | Incorporated by reference to Exhibit 4.1 to Item 5 of
    Current Report on Form 8-K dated January 26, 2004.                                  

101



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|        |    |    |                        |                                                                                                                                                                                                                                                                                                       |                                        |                                                                                                                                                 
|------- | -- | -- | ---------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |    |                        |                                                                                                                                                                                                                                                                                                       |                                       
|No.     |    |    | Description of Exhibit |                                                                                                                                                                                                                                                                                                       | Prior Filing or Sequential Page Number
|        |    |    |                        |                                                                                                                                                                                                                                                                                                       |                                       
|        | 4  | .2 |                        | Amendment No. 1 to the Rights Agreement between Hollinger
    International Inc. and Mellon Investor Services LLC as Rights
    Agent, dated May 10, 2005                                                                                                                                             |                                        | Incorporated by reference to Exhibit 4.1 to Item 1.01
    of Current Report on Form 8-K dated May 11, 2005.                                     
|       
|        | 4  | .3 |                        | First Supplemental Indenture among Hollinger International
    Publishing Inc., the Company and Wachovia Trust Company, dated
    as of July 13, 2004                                                                                                                                                 |                                        | Incorporated by reference to Exhibit 99.1 to Item 5 of
    the Current Report on Form 8-K dated August 2, 2004.                                 
|       
|        | 4  | .4 |                        | Indenture dated as of December 23, 2002 among Hollinger
    International Publishing Inc., the Company and Wachovia Trust
    Company, National Association                                                                                                                                           |                                        | Incorporated by reference to Exhibit 10.21 to Annual Report
    on Form 10-K for the year ended December 31, 2002.                              
|       
|        | 10 | .1 |                        | Stock Purchase Agreement by and among Mirkaei Tikshoret Ltd.,
    American Publishing Holdings, Inc. and Hollinger International
    Inc. dated as of November 16, 2004                                                                                                                               |                                        | Incorporated by reference to Exhibit 10.1 of Annual Report
    on Form 10-K for the year ended December 31, 2003
    filed on January 18, 2005. 
|       
|        | 10 | .2 |                        | Facilitation Agreement by and between Hollinger International
    Inc., Hollinger Canadian Newspapers, Limited Partnership,
    3815668 Canada Inc., Hollinger Canadian Publishing Holdings Co.,
    HCN Publications Company and CanWest Global Communications Corp.
    dated as of October 7, 2004 |                                        | Incorporated by reference to Exhibit 10.2 of Annual Report
    on Form 10-K for the year ended December 31, 2003
    filed on January 18, 2005. 
|       
|        | 10 | .3 |                        | Agreement for Sale and Purchase of Shares in the Telegraph Group
    Limited, by and between DT Holdings Limited, First DT Holdings
    Limited, Second DT Holdings Limited, the Company, Press
    Acquisitions Limited dated June 22, 2004                                                          |                                        | Incorporated by reference to Exhibit 2.1 to Item 2 of
    Current Report on Form 8-K dated June 23, 2004.                                       
|       
|        | 10 | .4 |                        | Agreed Form of Tax Deed relating to Sale and Purchase of Shares
    in Telegraph Group Limited, by and between DT Holdings Limited,
    First DT Holdings Limited, Second DT Acquisitions Limited                                                                                                     |                                        | Incorporated by reference to Exhibit 2.2 to Item 2 of
    Current Report on Form 8-K dated June 23, 2004.                                       
|       
|        | 10 | .5 |                        | Agreement dated November 15, 2003 between Conrad M. Black
    and Hollinger International Inc.                                                                                                                                                                                                        |                                        | Incorporated by reference to Exhibit 99.1 to Item 5 of
    Current Report on Form 8-K dated January 6, 2004.                                    
|       
|        | 10 | .6 |                        | Business Opportunities Agreement between Hollinger Inc. and
    Hollinger International Inc., as amended and restated as of
    February 7, 1996                                                                                                                                                      |                                        | Incorporated by reference to Exhibit 10.19 to Annual Report
    on Form 10-K for the year ended December 31, 2003
    filed on January 18, 2005.
|       
|        | 10 | .7 |                        | Agreement, dated as of May 12, 2005, by and between
    Hollinger International Inc. and RSM Richter Inc., in its
    capacity as court appointed receiver and monitor of Ravelston
    Corporation Limited and Ravelston Management Inc.                                                             |                                        |                                                                                                                                                 
|       
|        | 10 | .8 |                        | Amended Agreement of Compromise and Release of Outside Director
    Defendants Conditioned on Entry of Appropriate Order dated
    June 27, 2005                                                                                                                                                      |                                        |                                                                                                                                                 

102



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|        |    |     |                        |                                                                                                                                                                                     |                                        |                                                                                                                                                                                                                                                                                  
|------- | -- | --- | ---------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |     |                        |                                                                                                                                                                                     |                                       
|No.     |    |     | Description of Exhibit |                                                                                                                                                                                     | Prior Filing or Sequential Page Number
|        |    |     |                        |                                                                                                                                                                                     |                                       
|        | 10 | .9  |                        | Release and Settlement Agreement between Peter Y. Atkinson and
    Hollinger International Inc. dated April 27, 2004, as
    amended                                                |                                        | Incorporated by reference to Exhibit 10.20 to Annual Report
    on Form 10-K for the year ended December 31, 2003
    filed on January 18, 2005 and to Exhibit 10.1 to
    Quarterly Report on Form 10-Q for the quarterly period
    ended March 31, 2004 filed on May 19, 2005.
|       
|        | 10 | .10 |                        | Option Exercise and Escrow Agreement between Peter Y. Atkinson
    and Hollinger International Inc. dated as of April 27, 2004                                                      |                                        | Incorporated by reference to Exhibit 10.21 to Annual Report
    on Form 10-K for the year ended December 31, 2003
    filed on January 18, 2005.                                                                                                                                 
|       
|        | 10 | .11 |                        | Consulting Agreement between Peter Y. Atkinson and Hollinger
    International Inc. dated as of April 27, 2004                                                                      |                                        | Incorporated by reference to Exhibit 10.22 to Annual Report
    on Form 10-K for the year ended December 31, 2003
    filed on January 18, 2005.                                                                                                                                 
|       
|        | 10 | .12 |                        | Second Consulting Agreement between Peter Y. Atkinson and
    Hollinger International Inc. dated as of February 23, 2005                                                            |                                        |                                                                                                                                                                                                                                                                                  
|        | 10 | .13 |                        | Compromise Agreement among Hollinger International Inc.,
    Telegraph Group Limited and Daniel William Colson dated
    March 23, 2004                                             |                                        | Incorporated by reference to Exhibit 10.23 to Annual Report
    on Form 10-K for the year ended December 31, 2003
    filed on January 18, 2005.                                                                                                                                 
|       
|        | 10 | .14 |                        | Employment Agreement by and between Gordon A. Paris and
    Hollinger International Inc. dated as of January 1, 2005                                                                |                                        | Incorporated by reference to Exhibit 10.1 to Item 1.01
    of Current Report on Form 8-K dated February 2, 2005.                                                                                                                                                                 
|       
|        | 10 | .15 |                        | Employment Agreement by and between Paul B. Healy and Hollinger
    International Inc. dated as of January 1, 2005                                                                  |                                        | Incorporated by reference to Exhibit 10.2 to Item 1.01
    of Current Report on Form 8-K dated February 2, 2005.                                                                                                                                                                 
|       
|        | 10 | .16 |                        | Employment Agreement by and between James R. Van Horn and
    Hollinger International Inc. dated as of January 1, 2005                                                              |                                        | Incorporated by reference to Exhibit 10.3 to Item 1.01
    of Current Report on Form 8-K dated February 2, 2005.                                                                                                                                                                 
|       
|        | 10 | .17 |                        | Employment Agreement by and between John Cruickshank and
    Hollinger International Inc. dated as of January 1, 2005                                                               |                                        | Incorporated by reference to Exhibit 10.4 to Item 1.01
    of Current Report on Form 8-K dated February 2, 2005.                                                                                                                                                                 
|       
|        | 10 | .18 |                        | Employment Agreement by and between Gregory A. Stoklosa and
    Hollinger International Inc., dated as of March 14, 2005                                                            |                                        | Incorporated by reference to Exhibit 10.1 to Item 1.01
    of Current Report on Form 8-K dated March 17, 2005.                                                                                                                                                                   
|       
|        | 10 | .19 |                        | Deferred Stock Unit Agreement between Gordon A. Paris and
    Hollinger International Inc. dated as of November 16, 2003                                                            |                                        | Incorporated by reference to Exhibit 10.24 to Annual Report
    on Form 10-K for the year ended December 31, 2003
    filed on January 18, 2005.                                                                                                                                 
|       
|        | 10 | .20 |                        | Amendment to Deferred Stock Unit Agreement by and between Gordon
    A. Paris and Hollinger International Inc. dated as of
    January 1, 2005                                      |                                        | Incorporated by reference to Exhibit 10.5 to Item 1.01
    of Current Report on Form 8-K dated February 2, 2005.                                                                                                                                                                 
|       
|        | 10 | .21 |                        | Form of Hollinger International Inc. Deferred Stock Unit
    Agreement                                                                                                              |                                        | Incorporated by reference to Exhibit 99.1 to Item 8.01
    of Current Report on Form 8-K dated February 22, 2005.                                                                                                                                                                
|       
|        | 10 | .22 |                        | Summaries of Principal Terms of 2004 Key Employee Retention Plan
    and Key Employee Severance Program                                                                             |                                        | Incorporated by reference to Exhibit 10.25 to Annual Report
    on Form 10-K for the year ended December 31, 2003
    filed on January 18, 2005.                                                                                                                                 
|       
|        | 10 | .23 |                        | Notice dated April 13, 2004 to Option Plan Participants
    under Hollinger International Inc. 1994 Stock Option Plan, 1997
    Stock Incentive Plan, and 1999 Stock Incentive Plan |                                        | Incorporated by reference to Exhibit 10.26 to Annual Report
    on Form 10-K for the year ended December 31, 2003
    filed on January 18, 2005.                                                                                                                                 
|       
|        | 10 | .24 |                        | Hollinger International Inc. 1999 Stock Incentive Plan                                                                                                                              |                                        | Incorporated by reference to Annex A to Report on Form DEF
    14A dated March 24, 1999.                                                                                                                                                                                         

103



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|        |    |     |                        |                                                                                                                                                |                                        |                                                                                                                
|------- | -- | --- | ---------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------- | ---------------------------------------------------------------------------------------------------------------
|Exhibit |    |     |                        |                                                                                                                                                |                                       
|No.     |    |     | Description of Exhibit |                                                                                                                                                | Prior Filing or Sequential Page Number
|        |    |     |                        |                                                                                                                                                |                                       
|        | 10 | .25 |                        | Hollinger International Inc. 1997 Stock Incentive Plan                                                                                         |                                        | Incorporated by reference to Annex A to Report on Form DEF
    14A dated March 28, 1997.                       
|       
|        | 10 | .26 |                        | American Publishing Company 1994 Stock Option Plan                                                                                             |                                        | Incorporated by reference to Exhibit 10.10 to Registration
    Statement on Form S-1 (No. 33-74980).           
|       
|        | 14 | .1  |                        | Code of Business Conduct and Ethics                                                                                                            |                                        | Incorporated by reference to Exhibit 99.1 to Item 5.5
    of Current Report on Form 8-K dated December 3, 2004.
|       
|        | 21 | .1  |                        | Significant Subsidiaries of Hollinger International Inc.                                                                                       |                                        |                                                                                                                
|       
|        | 23 | .1  |                        | Consent of Independent Registered Public Accounting Firm                                                                                       |                                        |                                                                                                                
|       
|        | 31 | .1  |                        | Certification of Chief Executive Officer pursuant to
    Rule 13a-14                                                                           |                                        |                                                                                                                
|       
|        | 31 | .2  |                        | Certification of Chief Financial Officer pursuant to
    Rule 13a-14                                                                           |                                        |                                                                                                                
|       
|        | 32 | .1  |                        | Certificate of Chief Executive Officer pursuant to
    Rule 13a-14(b) and Section 1350 of Chapter 63 of
    Title 18 of the United States Code |                                        |                                                                                                                
|       
|        | 32 | .2  |                        | Certificate of Chief Financial Officer pursuant to
    Rule 13a-14(b) and Section 1350 of Chapter 63 of
    Title 18 of the United States Code |                                        |                                                                                                                

104



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##### Table of Contents



SIGNATURES






| |                             
| | ----------------------------
| | HOLLINGER INTERNATIONAL INC.
| | (Registrant)                



| |     |                    
| | --- | -------------------
| | By: | /s/ Gordon A. Paris

| |                           
| | --------------------------
| |                           
| | Gordon A. Paris           
| | Chairman and President and
| | Chief Executive Officer   





|                                             |  |                                                                                                   |  |                  |  | 
|-------------------------------------------- |  | ------------------------------------------------------------------------------------------------- |  | ---------------- |  | 
|Signature                                    |  | Title                                                                                             |  | Date            
|                                             |  |                                                                                                   |  |                 
|                                            
|/s/ Gordon A. ParisGordon
    A. Paris       |  | Chairman and President and
    Chief Executive Officer Director
    (Principal Executive Officer) |  | November 2, 2005
|                                            
|/s/ Peter K. LanePeter
    K. Lane           |  | Vice President Chief Financial Officer
    (Principal Financial Officer)                          |  | November 2, 2005
|                                            
|/s/ Thomas L. KramThomas
    L. Kram         |  | Corporate Controller
    (Principal Accounting Officer)                                           |  | November 2, 2005
|                                            
|/s/ Richard R. BurtRichard
    R. Burt       |  | Director                                                                                          |  | November 2, 2005
|                                            
|Daniel
    W. Colson                         |  | Director                                                                                          |  |                 
|                                            
|Cyrus
    F. Friedheim                       |  | Director                                                                                          |  |                 
|                                            
|/s/ Henry A. KissingerHenry
    A. Kissinger |  | Director                                                                                          |  | November 2, 2005
|                                            
|/s/ Shmuel MeitarShmuel
    Meitar           |  | Director                                                                                          |  | November 2, 2005
|                                            
|/s/ John M.
    OBrienJohn
    M. OBrien   |  | Director                                                                                          |  | November 2, 2005

105



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|                                             |  |          |  |                  |  | 
|-------------------------------------------- |  | -------- |  | ---------------- |  | 
|Signature                                    |  | Title    |  | Date            
|                                             |  |          |  |                 
|                                            
|/s/ Richard N. PerleRichard
    N. Perle     |  | Director |  | November 2, 2005
|                                            
|/s/ Graham W. SavageGraham
    W. Savage     |  | Director |  | November 2, 2005
|                                            
|/s/ Raymond G.H. SeitzRaymond
    G.H. Seitz |  | Director |  | November 2, 2005
|                                            
|/s/ James R. ThompsonJames
    R. Thompson   |  | Director |  | November 2, 2005

106



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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


















| |             
| | ------------
| | /s/ KPMG LLP





107



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##### Table of Contents



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


December 31, 2004 and 2003


(In thousands, except share data)


|                                                                                                                                                                                                                                 |                                                                                                        |      |           |          |      |   |           |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | ---- | --------- | -------- | ---- | - | --------- | ------- | -
|                                                                                                                                                                                                                                 |                                                                                                        | 2004 |           |          | 2003 |  
|                                                                                                                                                                                                                                 |                                                                                                        |      |           |          |      |  
|                                                                                                                                                                                                                                 |                                                                                                        |      |           | Restated |     
|                                                                                                                                                                                                                                 |                                                                                                        |      |           | Note 2   |     
|ASSETS                                                                                                                                                                                                                          
|Current assets:                                                                                                                                                                                                                  |                                                                                                        |      |           |          |      |   |           |        
|                                                                                                                                                                                                                                 | Cash and cash equivalents                                                                              |      | $         | 395,926  |      |   | $         | 66,589  |  
|                                                                                                                                                                                                                                 | Short-term investments                                                                                 |      |           | 532,050  |      |   |           | 19,400  |  
|                                                                                                                                                                                                                                 | Accounts receivable, net of allowance for doubtful accounts of
    $13,187 in 2004 and $16,501 in 2003 |      |           | 99,490   |      |   |           | 115,034 |  
|                                                                                                                                                                                                                                 | Inventories                                                                                            |      |           | 12,319   |      |   |           | 10,340  |  
|                                                                                                                                                                                                                                 | Amounts due from related parties                                                                       |      |           |         |      |   |           | 37,424  |  
|                                                                                                                                                                                                                                 | Escrow deposits and restricted cash                                                                    |      |           | 5,789    |      |   |           | 16,718  |  
|                                                                                                                                                                                                                                 | Assets of operations to be disposed of                                                                 |      |           |         |      |   |           | 146,041 |  
|                                                                                                                                                                                                                                 | Other current assets                                                                                   |      |           | 16,642   |      |   |           | 17,312  |  
|                                                                                                                                                                                                                                 |                                                                                                        |      |           |          |      |  
|Total current assets                                                                                                                                                                                                             |                                                                                                        |      | 1,062,216 |          |      |   | 428,858   |        
|Loan to affiliates                                                                                                                                                                                                               |                                                                                                        |      | 25,457    |          |      |   | 22,131    |        
|Investments                                                                                                                                                                                                                      |                                                                                                        |      | 33,184    |          |      |   | 113,988   |        
|Property, plant and equipment, net of accumulated depreciation                                                                                                                                                                   |                                                                                                        |      | 209,303   |          |      |   | 223,991   |        
|Intangible assets, net of accumulated amortization of $34,894 in
    2004 and $44,664 in 2003                                                                                                                                    |                                                                                                        |      | 101,339   |          |      |   | 107,490   |        
|Goodwill                                                                                                                                                                                                                         |                                                                                                        |      | 185,779   |          |      |   | 180,436   |        
|Prepaid pension benefit                                                                                                                                                                                                          |                                                                                                        |      | 94,541    |          |      |   | 88,705    |        
|Non-current assets of operations to be disposed of                                                                                                                                                                               |                                                                                                        |      |          |          |      |   | 490,299   |        
|Deferred financing costs and other assets                                                                                                                                                                                        |                                                                                                        |      | 27,079    |          |      |   | 129,206   |        
|                                                                                                                                                                                                                                 |                                                                                                        |      |           |          |      |  
|Total assets                                                                                                                                                                                                                     |                                                                                                        | $    | 1,738,898 |          |      | $ | 1,785,104 |        
|                                                                                                                                                                                                                                 |                                                                                                        |      |           |          |      |  
|                                                                                                                                                                                                                                
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                                                                                            
|Current liabilities:                                                                                                                                                                                                             |                                                                                                        |      |           |          |      |   |           |        
|                                                                                                                                                                                                                                 | Current installments of long-term debt                                                                 |      | $         | 12,305   |      |   | $         | 2,031   |  
|                                                                                                                                                                                                                                 | Accounts payable and accrued expenses                                                                  |      |           | 146,265  |      |   |           | 143,121 |  
|                                                                                                                                                                                                                                 | Dividends payable                                                                                      |      |           | 231,226  |      |   |           | 4,379   |  
|                                                                                                                                                                                                                                 | Amounts due to related parties                                                                         |      |           | 8,173    |      |   |           | 7,625   |  
|                                                                                                                                                                                                                                 | Income taxes payable and other tax liabilities                                                         |      |           | 689,728  |      |   |           | 462,574 |  
|                                                                                                                                                                                                                                 | Liabilities of operations to be disposed of                                                            |      |           |         |      |   |           | 169,723 |  
|                                                                                                                                                                                                                                 | Deferred revenue                                                                                       |      |           | 15,504   |      |   |           | 16,884  |  
|                                                                                                                                                                                                                                 |                                                                                                        |      |           |          |      |  
|Total current liabilities                                                                                                                                                                                                        |                                                                                                        |      | 1,103,201 |          |      |   | 806,337   |        
|Long-term debt, less current installments                                                                                                                                                                                        |                                                                                                        |      | 2,053     |          |      |   | 308,168   |        
|Deferred income taxes and other tax liabilities                                                                                                                                                                                  |                                                                                                        |      | 348,867   |          |      |   | 294,244   |        
|Non-current liabilities of operations to be disposed of                                                                                                                                                                          |                                                                                                        |      |          |          |      |   | 250,917   |        
|Other liabilities                                                                                                                                                                                                                |                                                                                                        |      | 102,746   |          |      |   | 92,257    |        
|                                                                                                                                                                                                                                 |                                                                                                        |      |           |          |      |  
|Total liabilities                                                                                                                                                                                                                |                                                                                                        |      | 1,556,867 |          |      |   | 1,751,923 |        
|                                                                                                                                                                                                                                 |                                                                                                        |      |           |          |      |  
|Minority interest                                                                                                                                                                                                                |                                                                                                        |      | 29,845    |          |      |   | 28,255    |        
|                                                                                                                                                                                                                                 |                                                                                                        |      |           |          |      |  
|Stockholders equity:                                                                                                                                                                                                            |                                                                                                        |      |           |          |      |   |           |        
|Class A common stock, $0.01 par value. Authorized
    250,000,000 shares; 88,008,022 shares issued and
    75,687,055 shares outstanding in 2004; and
    84,899,751 shares issued and 72,578,784 shares
    outstanding in 2003 |                                                                                                        |      | 880       |          |      |   | 849       |        
|Class B common stock, $0.01 par value. Authorized
    50,000,000 shares; 14,990,000 shares issued and
    outstanding in 2004 and 2003                                                                                           |                                                                                                        |      | 150       |          |      |   | 150       |        
|Additional paid-in capital                                                                                                                                                                                                       |                                                                                                        |      | 492,329   |          |      |   | 444,826   |        
|Accumulated other comprehensive income (loss):                                                                                                                                                                                   |                                                                                                        |      |           |          |      |   |           |        
|                                                                                                                                                                                                                                 | Cumulative foreign currency translation adjustment                                                     |      |           | 36,069   |      |   |           | (53,246 | )
|                                                                                                                                                                                                                                 | Unrealized gain on marketable securities                                                               |      |           | 3,343    |      |   |           | 11,175  |  
|                                                                                                                                                                                                                                 | Minimum pension liability adjustment                                                                   |      |           | (17,956  | )    |   |           | (46,419 | )
|Accumulated deficit                                                                                                                                                                                                              |                                                                                                        |      | (213,820  | )        |      |   | (203,600  | )      
|                                                                                                                                                                                                                                 |                                                                                                        |      |           |          |      |  
|                                                                                                                                                                                                                                 |                                                                                                        |      | 300,995   |          |      |   | 153,735   |        
|Class A common stock in treasury, at cost 
    12,320,967 shares in 2004 and 2003                                                                                                                                               |                                                                                                        |      | (148,809  | )        |      |   | (148,809  | )      
|                                                                                                                                                                                                                                 |                                                                                                        |      |           |          |      |  
|Total stockholders equity                                                                                                                                                                                                       |                                                                                                        |      | 152,186   |          |      |   | 4,926     |        
|                                                                                                                                                                                                                                 |                                                                                                        |      |           |          |      |  
|Total liabilities and stockholders equity                                                                                                                                                                                       |                                                                                                        | $    | 1,738,898 |          |      | $ | 1,785,104 |        
|                                                                                                                                                                                                                                 |                                                                                                        |      |           |          |      |  



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS


For the Years Ended December 31, 2004, 2003 and 2002


(In thousands, except per share data)


|                                                                                         |                                                           |      |          |          |      |   |         |         |   |   |          |          |  
|---------------------------------------------------------------------------------------- | --------------------------------------------------------- | ---- | -------- | -------- | ---- | - | ------- | ------- | - | - | -------- | -------- | -
|                                                                                         |                                                           | 2004 |          |          | 2003 |   |         | 2002    |  
|                                                                                         |                                                           |      |          |          |      |   |         |         |  
|Operating revenues:                                                                      |                                                           |      |          |          |      |   |         |         |   |   |          |         
|                                                                                         | Advertising                                               |      | $        | 428,641  |      |   | $       | 410,883 |   |   | $        | 390,617  |  
|                                                                                         | Circulation                                               |      |          | 102,528  |      |   |         | 98,220  |   |   |          | 100,291  |  
|                                                                                         | Job printing                                              |      |          | 17,194   |      |   |         | 15,698  |   |   |          | 13,819   |  
|                                                                                         | Other                                                     |      |          | 5,575    |      |   |         | 6,530   |   |   |          | 6,677    |  
|                                                                                         |                                                           |      |          |          |      |   |         |         |  
|                                                                                         | Total operating revenues                                  |      |          | 553,938  |      |   |         | 531,331 |   |   |          | 511,404  |  
|Operating costs and expenses:                                                            |                                                           |      |          |          |      |   |         |         |   |   |          |         
|                                                                                         | Newsprint                                                 |      |          | 75,463   |      |   |         | 71,919  |   |   |          | 65,355   |  
|                                                                                         | Compensation                                              |      |          | 233,401  |      |   |         | 224,681 |   |   |          | 207,779  |  
|                                                                                         | Other operating costs                                     |      |          | 223,346  |      |   |         | 221,550 |   |   |          | 179,549  |  
|                                                                                         | Depreciation                                              |      |          | 20,887   |      |   |         | 22,826  |   |   |          | 21,910   |  
|                                                                                         | Amortization                                              |      |          | 11,852   |      |   |         | 16,354  |   |   |          | 17,151   |  
|                                                                                         |                                                           |      |          |          |      |   |         |         |  
|                                                                                         | Total operating costs and expenses                        |      |          | 564,949  |      |   |         | 557,330 |   |   |          | 491,744  |  
|                                                                                         |                                                           |      |          |          |      |   |         |         |  
|Operating income (loss)                                                                  |                                                           |      | (11,011  | )        |      |   | (25,999 | )       |   |   | 19,660   |         
|                                                                                         |                                                           |      |          |          |      |   |         |         |  
|Other income (expense):                                                                  |                                                           |      |          |          |      |   |         |         |   |   |          |         
|                                                                                         | Interest expense                                          |      |          | (19,084  | )    |   |         | (29,377 | ) |   |          | (57,341  | )
|                                                                                         | Amortization of deferred financing costs                  |      |          | (780     | )    |   |         | (1,503  | ) |   |          | (5,585   | )
|                                                                                         | Interest and dividend income                              |      |          | 19,876   |      |   |         | 22,886  |   |   |          | 15,109   |  
|                                                                                         | Other income (expense), net                               |      |          | (116,068 | )    |   |         | 78,110  |   |   |          | (168,086 | )
|                                                                                         |                                                           |      |          |          |      |   |         |         |  
|Total other income (expense)                                                             |                                                           |      | (116,056 | )        |      |   | 70,116  |         |   |   | (215,903 | )       
|                                                                                         |                                                           |      |          |          |      |   |         |         |  
|Earnings (loss) from continuing operations before income taxes
    and minority interest |                                                           |      | (127,067 | )        |      |   | 44,117  |         |   |   | (196,243 | )       
|Income taxes                                                                             |                                                           |      | 35,650   |          |      |   | 128,001 |         |   |   | 37,390   |         
|Minority interest                                                                        |                                                           |      | 1,185    |          |      |   | 5,325   |         |   |   | 2,167    |         
|                                                                                         |                                                           |      |          |          |      |   |         |         |  
|Loss from continuing operations                                                          |                                                           |      | (163,902 | )        |      |   | (89,209 | )       |   |   | (235,800 | )       
|                                                                                         |                                                           |      |          |          |      |   |         |         |  
|Discontinued operations (net of income taxes):                                           |                                                           |      |          |          |      |   |         |         |   |   |          |         
|                                                                                         | Earnings from operations of business segments disposed of |      |          | 15,720   |      |   |         | 14,901  |   |   |          | 5,171    |  
|                                                                                         | Gain from disposal of business segments                   |      |          | 382,850  |      |   |         |        |   |   |          |         |  
|                                                                                         |                                                           |      |          |          |      |   |         |         |  
|                                                                                         | Earnings from discontinued operations                     |      |          | 398,570  |      |   |         | 14,901  |   |   |          | 5,171    |  
|                                                                                         |                                                           |      |          |          |      |   |         |         |  
|Net earnings (loss)                                                                      |                                                           | $    | 234,668  |          |      | $ | (74,308 | )       |   | $ | (230,629 | )       
|                                                                                         |                                                           |      |          |          |      |   |         |         |  
|Basic and diluted earnings per share:                                                    |                                                           |      |          |          |      |   |         |         |   |   |          |         
|                                                                                         | Weighted average shares outstanding                       |      |          | 90,486   |      |   |         | 87,311  |   |   |          | 96,066   |  
|                                                                                         |                                                           |      |          |          |      |   |         |         |  
|                                                                                         | Loss from continuing operations                           |      | $        | (1.81    | )    |   | $       | (1.02   | ) |   | $        | (2.46    | )
|                                                                                         | Earnings from discontinued operations                     |      |          | 4.40     |      |   |         | 0.17    |   |   |          | 0.06     |  
|                                                                                         |                                                           |      |          |          |      |   |         |         |  
|                                                                                         | Net earnings (loss)                                       |      | $        | 2.59     |      |   | $       | (0.85   | ) |   | $        | (2.40    | )
|                                                                                         |                                                           |      |          |          |      |   |         |         |  



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


For the Years Ended December 31, 2004, 2003 and 2002


(In thousands)


|                                                                                                                                                                                                                                                                                                                                                                         |  |      |         |   |      |   |         |      |  |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | -------- | -
|                                                                                                                                                                                                                                                                                                                                                                         |  | 2004 |         |   | 2003 |   |         | 2002 | 
|                                                                                                                                                                                                                                                                                                                                                                         |  |      |         |   |      |   |         |      | 
|Net earnings (loss)                                                                                                                                                                                                                                                                                                                                                      |  | $    | 234,668 |   |      | $ | (74,308 | )    |  | $ | (230,629 | )
|Other comprehensive income (loss):                                                                                                                                                                                                                                                                                                                                       |  |      |         |   |      |   |         |      |  |   |          |  
|Foreign currency translation adjustments, net of a related tax
    provision of $176 (2003  $1,526; 2002 
    $2,374)                                                                                                                                                                                                                                                  |  |      | (24,796 | ) |      |   | (24,275 | )    |  |   | 43,481   |  
|Reclassification adjustment for realized foreign exchange losses
    upon the substantial reduction of net investment in foreign
    operations                                                                                                                                                                                                                          |  |      | 114,111 |   |      |   |        |      |  |   | 78,217   |  
|                                                                                                                                                                                                                                                                                                                                                                         |  |      |         |   |      |   |         |      | 
|                                                                                                                                                                                                                                                                                                                                                                         |  |      | 89,315  |   |      |   | (24,275 | )    |  |   | 121,698  |  
|                                                                                                                                                                                                                                                                                                                                                                         |  |      |         |   |      |   |         |      | 
|Unrealized gain on marketable securities arising during the
    year, net of a related tax provision of $2,250 and minority
    interest of nil (2003  net of a related tax provision
    of $3,952 and minority interest of $2,053; 2002  net
    of a related tax provision of $1,510 and minority interest of
    $615)                                             |  |      | 3,993   |   |      |   | 13,872  |      |  |   | 4,451    |  
|Reclassification adjustment for realized (gains) losses
    reclassified out of accumulated other comprehensive income
    (loss), net of a related tax benefit of $3,544 and recovery of
    minority interest of $1,665 (2003  net of a related
    tax benefit of $842 and recovery on minority interest of $193;
    2002  net of a related tax provision of $530) |  |      | (11,825 | ) |      |   | (2,003  | )    |  |   | 1,301    |  
|                                                                                                                                                                                                                                                                                                                                                                         |  |      |         |   |      |   |         |      | 
|                                                                                                                                                                                                                                                                                                                                                                         |  |      | (7,832  | ) |      |   | 11,869  |      |  |   | 5,752    |  
|                                                                                                                                                                                                                                                                                                                                                                         |  |      |         |   |      |   |         |      | 
|Minimum pension liability adjustment, net of a related tax
    provision of $797 and minority interest of $119
    (2003  net of a related tax provision of $101 and
    minority interest of $11; 2002  net of a related tax
    benefit of $15,852)                                                                                                                  |  |      | 28,463  |   |      |   | (1,710  | )    |  |   | (27,737  | )
|                                                                                                                                                                                                                                                                                                                                                                         |  |      |         |   |      |   |         |      | 
|                                                                                                                                                                                                                                                                                                                                                                         |  |      | 109,946 |   |      |   | (14,116 | )    |  |   | 99,713   |  
|                                                                                                                                                                                                                                                                                                                                                                         |  |      |         |   |      |   |         |      | 
|Comprehensive income (loss)                                                                                                                                                                                                                                                                                                                                              |  | $    | 344,614 |   |      | $ | (88,424 | )    |  | $ | (130,916 | )
|                                                                                                                                                                                                                                                                                                                                                                         |  |      |         |   |      |   |         |      | 



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY


For the Years Ended December 31, 2004, 2003 and 2002


(In thousands)


|                                                                     |  |             |       |   |            |             |         |               |          |   |              |   |  |          |          |        |           |   |          |       |  |   |         |   |  |   |          |  
|-------------------------------------------------------------------- |  | ----------- | ----- | - | ---------- | ----------- | ------- | ------------- | -------- | - | ------------ | - |  | -------- | -------- | ------ | --------- | - | -------- | ----- |  | - | ------- | - |  | - | -------- | -
|                                                                     |  |             |       |   |            | Accumulated |         |               | Retained |   |              |   |  |          |          |       
|                                                                     |  | Common      |       |   | Additional |             |         | Other         |          |   | Earnings     |   |  |          |          | Issued |           |   |         
|                                                                     |  | Stock       |       |   | Paid-In    |             |         | Comprehensive |          |   | (Accumulated |   |  | Treasury |          |        | Shares in |   |          |      
|                                                                     |  | Class A & B |       |   | Capital    |             |         | Income (Loss) |          |   | Deficit)     |   |  | Stock    |          |        | Escrow    |   |          | Total | 
|                                                                     |  |             |       |   |            |             |         |               |          |   |              |   |  |          |          |        |           |   |          |       | 
|                                                                     |  |             |       |   |            |             |         | Restated      |          |   |              |   |  |          | Restated |       
|                                                                     |  |             |       |   |            |             |         | Note 2        |          |   |              |   |  |          | Note 2   |       
|Balance at January 1, 2002                                           |  | $           | 1,118 |   |            | $           | 554,392 |               |          | $ | (174,087     | ) |  | $        | 155,784  |        |           | $ | (132,896 | )     |  | $ | (58,655 | ) |  | $ | 345,656  |  
|Stock options exercised                                              |  |             | 1     |   |            |             | 814     |               |          |   |             |   |  |          |         |        |           |   |         |       |  |   |        |   |  |   | 815      |  
|Class A Common Stock issued                                          |  |             | 3     |   |            |             | 3,429   |               |          |   |             |   |  |          |         |        |           |   |         |       |  |   |        |   |  |   | 3,432    |  
|Dividends payable in cash  Class A and
    Class B, $0.41 per share |  |             |      |   |            |             |        |               |          |   |             |   |  |          | (28,566  | )      |           |   |         |       |  |   |        |   |  |   | (28,566  | )
|Dividends on redeemable preferred stock                              |  |             |      |   |            |             |        |               |          |   |             |   |  |          | (196     | )      |           |   |         |       |  |   |        |   |  |   | (196     | )
|Minimum pension liability adjustment                                 |  |             |      |   |            |             |        |               |          |   | (27,737      | ) |  |          |         |        |           |   |         |       |  |   |        |   |  |   | (27,737  | )
|In-kind dividends                                                    |  |             |      |   |            |             | 4,376   |               |          |   |             |   |  |          | (4,376   | )      |           |   |         |       |  |   |        |   |  |   |         |  
|Translation adjustments                                              |  |             |      |   |            |             | (71     | )             |          |   | 121,698      |   |  |          |         |        |           |   |         |       |  |   |        |   |  |   | 121,627  |  
|Change in unrealized gain on securities, net                         |  |             |      |   |            |             |        |               |          |   | 5,752        |   |  |          |         |        |           |   |         |       |  |   |        |   |  |   | 5,752    |  
|Net loss                                                             |  |             |      |   |            |             |        |               |          |   |             |   |  |          | (230,629 | )      |           |   |         |       |  |   |        |   |  |   | (230,629 | )
|Escrow shares on total return equity swap                            |  |             | 31    |   |            |             | 30,032  |               |          |   |             |   |  |          |         |        |           |   |         |       |  |   | (26,050 | ) |  |   | 4,013    |  
|Payout of Total Return Equity Swap                                   |  |             | (69   | ) |            |             | (72,152 | )             |          |   |             |   |  |          |         |        |           |   |         |       |  |   | 78,079  |   |  |   | 5,858    |  
|Escrow shares cancelled                                              |  |             | (76   | ) |            |             | (82,016 | )             |          |   |             |   |  |          |         |        |           |   | (6,626   | )     |  |   | 6,626   |   |  |   | (82,092  | )
|Transfer to treasury                                                 |  |             |      |   |            |             | 438     |               |          |   |             |   |  |          |         |        |           |   | (438     | )     |  |   |        |   |  |   |         |  
|                                                                     |  |             |       |   |            |             |         |               |          |   |              |   |  |          |          |        |           |   |          |       | 
|Balance at December 31, 2002                                         |  |             | 1,008 |   |            |             | 439,242 |               |          |   | (74,374      | ) |  |          | (107,983 | )      |           |   | (139,960 | )     |  |   |        |   |  |   | 117,933  |  
|Stock options exercised                                              |  |             | 11    |   |            |             | 12,104  |               |          |   |             |   |  |          |         |        |           |   |         |       |  |   |        |   |  |   | 12,115   |  
|Purchase of Class A Common Stock                                     |  |             |      |   |            |             |        |               |          |   |             |   |  |          |         |        |           |   | (8,849   | )     |  |   |        |   |  |   | (8,849   | )
|Stock-based compensation                                             |  |             |      |   |            |             | 6,722   |               |          |   |             |   |  |          |         |        |           |   |         |       |  |   |        |   |  |   | 6,722    |  
|Dividends payable in cash  Class A and
    Class B, $0.20 per share |  |             |      |   |            |             |        |               |          |   |             |   |  |          | (17,403  | )      |           |   |         |       |  |   |        |   |  |   | (17,403  | )
|Minimum pension liability adjustment                                 |  |             |      |   |            |             |        |               |          |   | (1,710       | ) |  |          |         |        |           |   |         |       |  |   |        |   |  |   | (1,710   | )
|Translation adjustments                                              |  |             |      |   |            |             | (668    | )             |          |   | (24,275      | ) |  |          |         |        |           |   |         |       |  |   |        |   |  |   | (24,943  | )
|Change in unrealized gain on securities, net                         |  |             |      |   |            |             |        |               |          |   | 11,869       |   |  |          |         |        |           |   |         |       |  |   |        |   |  |   | 11,869   |  
|Net loss                                                             |  |             |      |   |            |             |        |               |          |   |             |   |  |          | (74,308  | )      |           |   |         |       |  |   |        |   |  |   | (74,308  | )
|In-kind dividends                                                    |  |             |      |   |            |             | 3,906   |               |          |   |             |   |  |          | (3,906   | )      |           |   |         |       |  |   |        |   |  |   |         |  
|Redemption of Class A Common Stock                                   |  |             | (20   | ) |            |             | (16,480 | )             |          |   |             |   |  |          |         |        |           |   |         |       |  |   |        |   |  |   | (16,500  | )
|                                                                     |  |             |       |   |            |             |         |               |          |   |              |   |  |          |          |        |           |   |          |       | 
|Balance at December 31, 2003                                         |  |             | 999   |   |            |             | 444,826 |               |          |   | (88,490      | ) |  |          | (203,600 | )      |           |   | (148,809 | )     |  |   |        |   |  |   | 4,926    |  
|Stock options exercised                                              |  |             | 31    |   |            |             | 36,915  |               |          |   |             |   |  |          |         |        |           |   |         |       |  |   |        |   |  |   | 36,946   |  
|Stock-based compensation                                             |  |             |      |   |            |             | 10,588  |               |          |   |             |   |  |          |         |        |           |   |         |       |  |   |        |   |  |   | 10,588   |  
|Dividends payable in cash  Class A and
    Class B, $2.70 per share |  |             |      |   |            |             |        |               |          |   |             |   |  |          | (244,888 | )      |           |   |         |       |  |   |        |   |  |   | (244,888 | )
|Minimum pension liability adjustment                                 |  |             |      |   |            |             |        |               |          |   | 28,463       |   |  |          |         |        |           |   |         |       |  |   |        |   |  |   | 28,463   |  
|Translation adjustments                                              |  |             |      |   |            |             |        |               |          |   | 89,315       |   |  |          |         |        |           |   |         |       |  |   |        |   |  |   | 89,315   |  
|Change in unrealized gain on securities, net                         |  |             |      |   |            |             |        |               |          |   | (7,832       | ) |  |          |         |        |           |   |         |       |  |   |        |   |  |   | (7,832   | )
|Net earnings                                                         |  |             |      |   |            |             |        |               |          |   |             |   |  |          | 234,668  |        |           |   |         |       |  |   |        |   |  |   | 234,668  |  
|                                                                     |  |             |       |   |            |             |         |               |          |   |              |   |  |          |          |        |           |   |          |       | 
|Balance at December 31, 2004                                         |  | $           | 1,030 |   |            | $           | 492,329 |               |          | $ | 21,456       |   |  | $        | (213,820 | )      |           | $ | (148,809 | )     |  | $ |        |   |  | $ | 152,186  |  
|                                                                     |  |             |       |   |            |             |         |               |          |   |              |   |  |          |          |        |           |   |          |       | 



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


For the Years Ended December 31, 2004, 2003 and 2002


(In thousands)


|                                                           |                                                                                                                                 |                                                |          |           |         |   |         |          |         |   |          |          |         |  
|---------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------- | -------- | --------- | ------- | - | ------- | -------- | ------- | - | -------- | -------- | ------- | -
|                                                           |                                                                                                                                 | 2004                                           |          |           | 2003    |   |         | 2002     |        
|                                                           |                                                                                                                                 |                                                |          |           |         |   |         |          |        
|Cash Flows From Continuing Operating Activities:           |                                                                                                                                 |                                                |          |           |         |   |         |          |         |   |          |         
|                                                           | Net earnings (loss)                                                                                                             |                                                | $        | 234,668   |         |   | $       | (74,308  | )       |   | $        | (230,629 | )      
|                                                           | Earnings from discontinued operations                                                                                           |                                                |          | (398,570  | )       |   |         | (14,901  | )       |   |          | (5,171   | )      
|                                                           |                                                                                                                                 |                                                |          |           |         |   |         |          |        
|                                                           | Loss from continuing operations                                                                                                 |                                                |          | (163,902  | )       |   |         | (89,209  | )       |   |          | (235,800 | )      
|                                                           | Adjustments to reconcile loss from continuing operations to net
    cash provided by (used in) continuing operating activities: |                                                |          |           |         |   |         |          |         |   |          |          |        
|                                                           | Depreciation and amortization                                                                                                   |                                                |          | 32,739    |         |   |         | 39,180   |         |   |          | 39,061   |        
|                                                           | Deferred income taxes                                                                                                           |                                                |          | 19,708    |         |   |         | 41,964   |         |   |          | 54,983   |        
|                                                           | Amortization of deferred financing costs                                                                                        |                                                |          | 780       |         |   |         | 1,503    |         |   |          | 5,585    |        
|                                                           | Minority interest                                                                                                               |                                                |          | 1,185     |         |   |         | 5,325    |         |   |          | 2,167    |        
|                                                           | Premium on debt extinguishments                                                                                                 |                                                |          | 50,617    |         |   |         | 19,657   |         |   |          | 27,126   |        
|                                                           | Equity in losses of affiliates, net of dividends received                                                                       |                                                |          | 3,321     |         |   |         | 2,373    |         |   |          | 907      |        
|                                                           | Loss (gain) on sales of investments                                                                                             |                                                |          | (1,709    | )       |   |         | (3,578   | )       |   |          |         |        
|                                                           | Loss (gain) on sales of property, plant and equipment                                                                           |                                                |          | (45,915   | )       |   |         | 156      |         |   |          | (5,375   | )      
|                                                           | Write-down of investments                                                                                                       |                                                |          | 365       |         |   |         | 14,496   |         |   |          | 40,536   |        
|                                                           | Write-down of property, plant and equipment                                                                                     |                                                |          |          |         |   |         | 5,622    |         |   |          |         |        
|                                                           | Loss (gain) on Participation Trust and CanWest Debentures                                                                       |                                                |          | 30,859    |         |   |         | (112,504 | )       |   |          | (2,627   | )      
|                                                           | Non-cash portion of losses on Total Return Equity Swap                                                                          |                                                |          |          |         |   |         |         |         |   |          | 9,106    |        
|                                                           | Non-cash portion of foreign currency loss, net                                                                                  |                                                |          | 1,866     |         |   |         | 7,810    |         |   |          | 79,079   |        
|                                                           | Non-cash interest income                                                                                                        |                                                |          | (7,967    | )       |   |         | (8,110   | )       |   |          | (5,888   | )      
|                                                           | Other                                                                                                                           |                                                |          | 2,868     |         |   |         | 19,446   |         |   |          | (23,976  | )      
|                                                           | Changes in current assets and liabilities, net of dispositions:                                                                 |                                                |          |           |         |   |         |          |         |   |          |          |        
|                                                           |                                                                                                                                 | Accounts receivable                            |          |           | 23,206  |   |         |          | 14,955  |   |          |          | 18,185  |  
|                                                           |                                                                                                                                 | Inventories                                    |          |           | (1,971  | ) |         |          | (651    | ) |          |          | 9,393   |  
|                                                           |                                                                                                                                 | Prepaid expenses and other current assets      |          |           | (2,493  | ) |         |          | (2,323  | ) |          |          | (464    | )
|                                                           |                                                                                                                                 | Accounts payable and accrued expenses          |          |           | 22,364  |   |         |          | 8,918   |   |          |          | (41,481 | )
|                                                           |                                                                                                                                 | Income taxes payable and other tax liabilities |          |           | 30,229  |   |         |          | 96,650  |   |          |          | 7,282   |  
|                                                           |                                                                                                                                 | Deferred revenue and other                     |          |           | (12,820 | ) |         |          | (13,987 | ) |          |          | 8,963   |  
|                                                           |                                                                                                                                 |                                                |          |           |         |   |         |          |        
|Cash provided by (used in) continuing operating activities |                                                                                                                                 |                                                | (16,670  | )         |         |   | 47,693  |          |         |   | (13,238  | )       
|                                                           |                                                                                                                                 |                                                |          |           |         |   |         |          |        
|Cash Flows From Investing Activities:                      |                                                                                                                                 |                                                |          |           |         |   |         |          |         |   |          |         
|                                                           | Purchase of property, plant and equipment                                                                                       |                                                |          | (31,571   | )       |   |         | (9,314   | )       |   |          | (17,932  | )      
|                                                           | Proceeds from sale of property, plant and equipment                                                                             |                                                |          | 87,207    |         |   |         | 338      |         |   |          | 10,063   |        
|                                                           | Investments and other non-current assets                                                                                        |                                                |          | (12,019   | )       |   |         | (26,197  | )       |   |          | (11,401  | )      
|                                                           | Purchase of short-term investments, net                                                                                         |                                                |          | (512,650  | )       |   |         | (19,400  | )       |   |          |         |        
|                                                           | Proceeds on disposal of investments and other assets                                                                            |                                                |          | 143,706   |         |   |         | 31,929   |         |   |          | 915      |        
|                                                           | Proceeds from the sale of newspaper operations, net of cash
    disposed                                                        |                                                |          | 1,204,036 |         |   |         |         |         |   |          |         |        
|                                                           | Other                                                                                                                           |                                                |          | 589       |         |   |         | 68       |         |   |          | 1,869    |        
|                                                           |                                                                                                                                 |                                                |          |           |         |   |         |          |        
|Cash provided by (used in) investing activities            |                                                                                                                                 |                                                | 879,298  |           |         |   | (22,576 | )        |         |   | (16,486  | )       
|                                                           |                                                                                                                                 |                                                |          |           |         |   |         |          |        
|Cash Flows From Financing Activities:                      |                                                                                                                                 |                                                |          |           |         |   |         |          |         |   |          |         
|                                                           | Repayment of debt and premium on debt extinguishment                                                                            |                                                |          | (346,618  | )       |   |         | (525,955 | )       |   |          | (369,204 | )      
|                                                           | Proceeds from bank and other debt                                                                                               |                                                |          |          |         |   |         |         |         |   |          | 315,000  |        
|                                                           | Proceeds from issuance of notes                                                                                                 |                                                |          |          |         |   |         |         |         |   |          | 300,000  |        
|                                                           | Payment of debt issue costs                                                                                                     |                                                |          |          |         |   |         |         |         |   |          | (15,704  | )      
|                                                           | Cash settlement of Total Return Equity Swap                                                                                     |                                                |          |          |         |   |         |         |         |   |          | (100,000 | )      
|                                                           | Change in borrowings with related parties                                                                                       |                                                |          | 21,020    |         |   |         | (49,053  | )       |   |          | 26,298   |        
|                                                           | Escrow deposits and restricted cash                                                                                             |                                                |          | 10,929    |         |   |         | 529,234  |         |   |          | (533,404 | )      
|                                                           | Net proceeds from issuance of equity securities                                                                                 |                                                |          | 36,946    |         |   |         | 12,115   |         |   |          | 4,247    |        
|                                                           | Repurchase of common shares                                                                                                     |                                                |          |          |         |   |         | (8,849   | )       |   |          |         |        
|                                                           | Dividends paid                                                                                                                  |                                                |          | (17,940   | )       |   |         | (17,403  | )       |   |          | (28,762  | )      
|                                                           | Other                                                                                                                           |                                                |          |          |         |   |         | (4,328   | )       |   |          | (1,767   | )      
|                                                           |                                                                                                                                 |                                                |          |           |         |   |         |          |        
|Cash used in financing activities                          |                                                                                                                                 |                                                | (295,663 | )         |         |   | (64,239 | )        |         |   | (403,296 | )       
|                                                           |                                                                                                                                 |                                                |          |           |         |   |         |          |        
|Net cash provided by (used in) discontinued operations     |                                                                                                                                 |                                                | (246,370 | )         |         |   | 3,852   |          |         |   | 56,460   |         
|                                                           |                                                                                                                                 |                                                |          |           |         |   |         |          |        
|                                                           |                                                                                                                                 | Effect of exchange rate changes on cash        |          |           | 8,742   |   |         |          | 6,049   |   |          |          | 5,906   |  
|                                                           |                                                                                                                                 |                                                |          |           |         |   |         |          |        
|Net increase (decrease) in cash and cash equivalents       |                                                                                                                                 |                                                | 329,337  |           |         |   | (29,221 | )        |         |   | (370,654 | )       
|Cash and cash equivalents at beginning of year             |                                                                                                                                 |                                                | 66,589   |           |         |   | 95,810  |          |         |   | 466,464  |         
|                                                           |                                                                                                                                 |                                                |          |           |         |   |         |          |        
|Cash and cash equivalents at end of year                   |                                                                                                                                 | $                                              | 395,926  |           |         | $ | 66,589  |          |         | $ | 95,810   |         
|                                                           |                                                                                                                                 |                                                |          |           |         |   |         |          |        



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


For the Years Ended December 31, 2004, 2003 and 2002




|    |                                
|--- | -------------------------------
|(1) | Significant Accounting Policies



|    |                        
|--- | -----------------------
|(a) | Description of Business





|    |                                             
|--- | --------------------------------------------
|(b) | Principles of Presentation and Consolidation







|    |                 
|--- | ----------------
|(c) | Use of Estimates





|    |                                            
|--- | -------------------------------------------
|(d) | Cash Equivalents and Short-Term Investments





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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                                                
|--- | ---------------------------------------------------------------
|(e) | Accounts Receivable, Net of Allowance for Doubtful
    Accounts



|                             |  |                |        |   |      |   |        |      |  |   |        |  
|---------------------------- |  | -------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                             |  | 2004           |        |   | 2003 |   |        | 2002 | 
|                             |  |                |        |   |      |   |        |      | 
|                             |  | (In thousands) |       
|Balance at beginning of year |  | $              | 16,501 |   |      | $ | 17,766 |      |  | $ | 13,560 |  
|Provision                    |  |                | 1,884  |   |      |   | 4,885  |      |  |   | 10,120 |  
|Write-offs                   |  |                | (7,718 | ) |      |   | (7,884 | )    |  |   | (7,561 | )
|Recoveries                   |  |                | 2,369  |   |      |   | 1,207  |      |  |   | 1,698  |  
|Other                        |  |                | 151    |   |      |   | 527    |      |  |   | (51    | )
|                             |  |                |        |   |      |   |        |      | 
|Balance at end of year       |  | $              | 13,187 |   |      | $ | 16,501 |      |  | $ | 17,766 |  
|                             |  |                |        |   |      |   |        |      | 



|    |            
|--- | -----------
|(f) | Inventories





|    |                  
|--- | -----------------
|(g) | Long-Lived Assets









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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |            
|--- | -----------
|(h) | Derivatives





|    |            
|--- | -----------
|(i) | Investments













|    |                                     
|--- | ------------------------------------
|(j) | Goodwill and Other Intangible Assets







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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




The Jerusalem Post The Jerusalem Post






|    |                         
|--- | ------------------------
|(k) | Deferred Financing Costs





|    |                                                 
|--- | ------------------------------------------------
|(l) | Pension Plans and Other Post-retirement Benefits



| |        
| | -------
| | General











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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                   
| | ----------------------------------
| | Long-Term Rate of Return on Assets









| |              
| | -------------
| | Discount Rate







|    |             
|--- | ------------
|(m) | Income Taxes





|    |                    
|--- | -------------------
|(n) | Revenue Recognition



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |                             
|--- | ----------------------------
|(o) | Foreign Currency Translation





|    |                          
|--- | -------------------------
|(p) | Earnings (Loss) Per Share





|    |                         
|--- | ------------------------
|(q) | Stock-based Compensation











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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                               |  |                                 |          |   |      |   |         |      |  |   |          |  
|-------------------------------------------------------------- |  | ------------------------------- | -------- | - | ---- | - | ------- | ---- |  | - | -------- | -
|                                                               |  | 2004                            |          |   | 2003 |   |         | 2002 | 
|                                                               |  |                                 |          |   |      |   |         |      | 
|                                                               |  | (In thousands, except per share |         
|                                                               |  | amounts)                        |         
|Loss from continuing operations, as reported                   |  | $                               | (163,902 | ) |      | $ | (89,209 | )    |  | $ | (235,800 | )
|Add: stock-based compensation expense, as reported             |  |                                 | 10,588   |   |      |   | 6,722   |      |  |   |         |  
|Deduct: pro forma stock-based compensation expense             |  |                                 | (5,566   | ) |      |   | (9,336  | )    |  |   | (3,551   | )
|                                                               |  |                                 |          |   |      |   |         |      | 
|Pro forma loss from continuing operations                      |  | $                               | (158,880 | ) |      | $ | (91,823 | )    |  | $ | (239,351 | )
|                                                               |  |                                 |          |   |      |   |         |      | 
|Basic loss from continuing operations per share, as reported   |  | $                               | (1.81    | ) |      | $ | (1.02   | )    |  | $ | (2.46    | )
|Diluted loss from continuing operations per share, as reported |  | $                               | (1.81    | ) |      | $ | (1.02   | )    |  | $ | (2.46    | )
|Pro forma basic loss from continuing operations per share      |  | $                               | (1.76    | ) |      | $ | (1.05   | )    |  | $ | (2.49    | )
|Pro forma diluted loss from continuing operations per share    |  | $                               | (1.76    | ) |      | $ | (1.05   | )    |  | $ | (2.49    | )





|    |                  
|--- | -----------------
|(r) | Reclassifications





|    |                              
|--- | -----------------------------
|(s) | New Accounting Pronouncements





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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |            
|--- | -----------
|(2) | Restatement





|                                                |  |                |           |        |             |   |           |  
|----------------------------------------------- |  | -------------- | --------- | ------ | ----------- | - | --------- | -
|                                                |  |                |           | Before |            
|                                                |  | Restated       |           |        | Restatement |  
|                                                |  |                |           |        |             |  
|                                                |  | (In thousands) |          
|Income taxes payable and other tax liabilities  |  | $              | 462,574   |        |             | $ | 439,409   |  
|Total current liabilities                       |  |                | 806,337   |        |             |   | 783,172   |  
|Deferred income taxes and other tax liabilities |  |                | 294,244   |        |             |   | 285,559   |  
|Total liabilities                               |  |                | 1,751,923 |        |             |   | 1,720,073 |  
|Accumulated deficit                             |  |                | (203,600  | )      |             |   | (171,750  | )
|Total stockholders equity                      |  |                | 4,926     |        |             |   | 36,776    |  
|Total liabilities and stockholders equity      |  |                | 1,785,104 |        |             |   | 1,785,104 |  



|                                                                                                                                                  |  |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | -------- | -
|Income taxes payable and other tax liabilities after giving
    effect to discontinued operations(a)                                              |  | $ | 439,409  |  
|Additional income taxes and related interest largely resulting
    from additional gain on sale of assets and newspaper operations
    in 1999(b) |  | $ | 23,165   |  
|                                                                                                                                                  |  |   |         
|Restated income taxes payable and other tax liabilities                                                                                           |  | $ | 462,574  |  
|                                                                                                                                                  |  |   |         
|Deferred income taxes and other tax liabilities after giving
    effect to discontinued operations(a)                                             |  | $ | 285,559  |  
|Additional income taxes and related interest largely resulting
    from additional gain on sale of assets and newspaper operations
    in 1999(b) |  |   | 8,685    |  
|                                                                                                                                                  |  |   |         
|Restated deferred income taxes and other tax liabilities                                                                                          |  | $ | 294,244  |  
|                                                                                                                                                  |  |   |         
|Accumulated deficit as previously reported                                                                                                        |  | $ | (171,750 | )
|Additional income taxes and related interest largely resulting
    from additional gain on sale of assets and newspaper operations
    in 1999(b) |  |   | (31,850  | )
|                                                                                                                                                  |  |   |         
|Restated accumulated deficit                                                                                                                      |  | $ | (203,600 | )
|                                                                                                                                                  |  |   |         

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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                                                                                  |  |              |         |   |            |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | - | ---------- | - | ------- | -
|                                                                                                                                                  |  | December 31, |         |   | January 1, |  
|                                                                                                                                                  |  | 2002         |         |   | 2002       |  
|                                                                                                                                                  |  |              |         |   |            |  
|Total stockholders equity as previously reported                                                                                                 |  | $            | 149,783 |   |            | $ | 377,506 |  
|Additional income taxes and related interest largely resulting
    from additional gain on sale of assets and newspaper operations
    in 1999(b) |  |              | (31,850 | ) |            |   | (31,850 | )
|                                                                                                                                                  |  |              |         |   |            |  
|Restated total stockholders equity                                                                                                               |  | $            | 117,933 |   |            | $ | 345,656 |  
|                                                                                                                                                  |  |              |         |   |            |  






|    |  |                                                                                                                                                                                                                                                                                                                                                                          
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | The financial statements for all periods presented have been
    revised to reflect discontinued operations treatment, in
    accordance with SFAS No. 144, resulting from the sale of
    certain operations as described in Note 3.                                                                                                                                    
|   
|(b) |  | The errors and expected adjustments relate to the Companys
    U.S. federal tax returns for 1998 and 1999. The increased
    tax liability largely represents additional income taxes and
    related interest (net of applicable tax benefits) resulting
    principally from errors in computing the gain on sale of assets
    and newspaper operations sold in 1999.



|    |                                         
|--- | ----------------------------------------
|(3) | Dispositions and Discontinued Operations



The Daily
Telegraph, The Sunday Telegraph, The Weekly Telegraph,
telegraph.co.uk The Spectator Apollo






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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                   |                               |                         |         |         |      |   |         |         |  |   |         |         | 
|---------------------------------- | ----------------------------- | ----------------------- | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                                   |                               | Year Ended December 31, |        
|                                   |                               |                         |        
|                                   |                               | 2004(a)                 |         |         | 2003 |   |         | 2002    | 
|                                   |                               |                         |         |         |      |   |         |         | 
|                                   |                               | (In thousands)          |        
|Operating revenues:                |                               |                         |         |         |      |   |         |         |  |   |         |        
|                                   | Advertising                   |                         | $       | 211,320 |      |   | $       | 319,358 |  |   | $       | 316,295 | 
|                                   | Circulation                   |                         |         | 118,016 |      |   |         | 173,327 |  |   |         | 140,802 | 
|                                   | Job printing and other        |                         |         | 17,464  |      |   |         | 26,790  |  |   |         | 24,430  | 
|                                   |                               |                         |         |         |      |   |         |         | 
|Total operating revenues           |                               |                         | 346,800 |         |      |   | 519,475 |         |  |   | 481,527 |        
|                                   |                               |                         |         |         |      |   |         |         | 
|Operating costs and expenses:      |                               |                         |         |         |      |   |         |         |  |   |         |        
|                                   | Newsprint                     |                         |         | 49,759  |      |   |         | 75,402  |  |   |         | 80,668  | 
|                                   | Compensation                  |                         |         | 72,007  |      |   |         | 107,487 |  |   |         | 94,092  | 
|                                   | Other operating costs         |                         |         | 179,697 |      |   |         | 279,588 |  |   |         | 245,325 | 
|                                   | Depreciation and amortization |                         |         | 6,102   |      |   |         | 14,339  |  |   |         | 12,732  | 
|                                   |                               |                         |         |         |      |   |         |         | 
|Total operating costs and expenses |                               |                         | 307,565 |         |      |   | 476,816 |         |  |   | 432,817 |        
|                                   |                               |                         |         |         |      |   |         |         | 
|Operating income                   |                               | $                       | 39,235  |         |      | $ | 42,659  |         |  | $ | 48,710  |        
|                                   |                               |                         |         |         |      |   |         |         | 






|    |  |                                              
|--- |  | ---------------------------------------------
|(a) |  | Operating results are presented for 7 months.







The Jerusalem Post, The Jerusalem Report


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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |                     
|--- | --------------------
|(4) | Other Current Assets







|    |            
|--- | -----------
|(5) | Investments

|                                              |                                           |                |        |        |      |   |         |        | 
|--------------------------------------------- | ----------------------------------------- | -------------- | ------ | ------ | ---- | - | ------- | ------ | 
|                                              |                                           | December 31,   |       
|                                              |                                           |                |       
|                                              |                                           | 2004           |        |        | 2003 |  
|                                              |                                           |                |        |        |      |  
|                                              |                                           | (In thousands) |       
|Available-for-sale securities, at fair value: |                                           |                |        |        |      |   |         |       
|                                              | Equity securities                         |                | $      | 9,287  |      |   | $       | 4,404  | 
|                                              | CanWest debentures                        |                |        |       |      |   |         | 69,484 | 
|                                              |                                           |                |        |        |      |  
|                                              |                                           |                | 9,287  |        |      |   | 73,888  |       
|                                              |                                           |                |        |        |      |  
|Other non-marketable investments, at cost:    |                                           |                |        |        |      |   |         |       
|                                              | Internet and technology related companies |                |        | 10,401 |      |   |         | 13,923 | 
|                                              | Other                                     |                |        | 11,078 |      |   |         | 10,719 | 
|                                              |                                           |                |        |        |      |  
|                                              |                                           |                | 21,479 |        |      |   | 24,642  |       
|                                              |                                           |                |        |        |      |  
|Equity accounted companies, at equity:        |                                           |                |        |        |      |   |         |       
|                                              | Internet related companies                |                |        | 615    |      |   |         | 8,720  | 
|                                              | Other                                     |                |        | 1,803  |      |   |         | 6,738  | 
|                                              |                                           |                |        |        |      |  
|                                              |                                           |                | 2,418  |        |      |   | 15,458  |       
|                                              |                                           |                |        |        |      |  
|                                              |                                           | $              | 33,184 |        |      | $ | 113,988 |       
|                                              |                                           |                |        |        |      |  

|                                                                                      |                             |                |       |        |      |   |        |        |  
|------------------------------------------------------------------------------------- | --------------------------- | -------------- | ----- | ------ | ---- | - | ------ | ------ | -
|                                                                                      |                             | December 31,   |      
|                                                                                      |                             |                |      
|                                                                                      |                             | 2004           |       |        | 2003 |  
|                                                                                      |                             |                |       |        |      |  
|                                                                                      |                             | (In thousands) |      
|Gross unrealized holding gains on available-for-sale securities:                      |                             |                |       |        |      |   |        |       
|                                                                                      | CanWest debentures          |                | $     |       |      |   | $      | 14,588 |  
|                                                                                      | Equity securities           |                |       | 5,160  |      |   |        | 1,363  |  
|                                                                                      |                             |                |       |        |      |  
|                                                                                      |                             |                | 5,160 |        |      |   | 15,951 |       
|                                                                                      | Less  deferred tax benefit |                |       | (1,817 | )    |   |        | (3,111 | )
|                                                                                      | Less  minority interest    |                |       |       |      |   |        | (1,665 | )
|                                                                                      |                             |                |       |        |      |  
|Unrealized gain on available-for-sale securities included in
    stockholders equity |                             | $              | 3,343 |        |      | $ | 11,175 |       
|                                                                                      |                             |                |       |        |      |  



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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


1 8


1 8












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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












|    |                              
|--- | -----------------------------
|(6) | Property, Plant and Equipment

|                                 |  |                |          |   |      |   |          |  
|-------------------------------- |  | -------------- | -------- | - | ---- | - | -------- | -
|                                 |  | December 31,   |         
|                                 |  |                |         
|                                 |  | 2004           |          |   | 2003 |  
|                                 |  |                |          |   |      |  
|                                 |  | (In thousands) |         
|Land                             |  | $              | 11,775   |   |      | $ | 23,940   |  
|Building and leasehold interests |  |                | 114,987  |   |      |   | 119,166  |  
|Machinery and equipment          |  |                | 200,389  |   |      |   | 215,057  |  
|Construction in progress         |  |                | 6,545    |   |      |   | 3,488    |  
|Less: accumulated depreciation   |  |                | (124,393 | ) |      |   | (137,660 | )
|                                 |  |                |          |   |      |  
|                                 |  | $              | 209,303  |   |      | $ | 223,991  |  
|                                 |  |                |          |   |      |  



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                               
|--- | ------------------------------
|(7) | Goodwill and Intangible Assets



|                                           |  |                |         |          |           |   |        |              |  |   |         |  
|------------------------------------------ |  | -------------- | ------- | -------- | --------- | - | ------ | ------------ |  | - | ------- | -
|                                           |  |                |         | Canadian |           |   |       
|                                           |  | Chicago        |         |          | Newspaper |   |        | Consolidated | 
|                                           |  | Group          |         |          | Group     |   |        | Total        | 
|                                           |  |                |         |          |           |   |        |              | 
|                                           |  | (In thousands) |        
|Balance as of January 1, 2003              |  | $              | 128,054 |          |           | $ | 45,229 |              |  | $ | 173,283 |  
|Adjustments of excess acquisition reserves |  |                | (3,657  | )        |           |   |       |              |  |   | (3,657  | )
|Acquisition                                |  |                |        |          |           |   | 709    |              |  |   | 709     |  
|Foreign currency translation               |  |                |        |          |           |   | 10,101 |              |  |   | 10,101  |  
|                                           |  |                |         |          |           |   |        |              | 
|Balance as of December 31, 2003            |  | $              | 124,397 |          |           | $ | 56,039 |              |  | $ | 180,436 |  
|Adjustments of excess acquisition reserves |  |                | (231    | )        |           |   |       |              |  |   | (231    | )
|Acquisition                                |  |                |        |          |           |   | 1,346  |              |  |   | 1,346   |  
|Foreign currency translation               |  |                |        |          |           |   | 4,228  |              |  |   | 4,228   |  
|                                           |  |                |         |          |           |   |        |              | 
|Balance as of December 31, 2004            |  | $              | 124,166 |          |           | $ | 61,613 |              |  | $ | 185,779 |  
|                                           |  |                |         |          |           |   |        |              | 







|                                        |  |                   |         |  |              |   |        |          |  |   |         | 
|--------------------------------------- |  | ----------------- | ------- |  | ------------ | - | ------ | -------- |  | - | ------- | 
|                                        |  | December 31, 2004 |        
|                                        |  |                   |        
|                                        |  | Gross             |         |  |             
|                                        |  | Carrying          |         |  | Accumulated  |   |        | Net Book | 
|                                        |  | Amount            |         |  | Amortization |   |        | Value    | 
|                                        |  |                   |         |  |              |   |        |          | 
|                                        |  | (In thousands)    |        
|Subscriber and advertiser relationships |  | $                 | 136,233 |  |              | $ | 34,894 |          |  | $ | 101,339 | 
|                                        |  |                   |         |  |              |   |        |          | 

|                                        |  |                   |         |  |              |   |        |          |  |   |         | 
|--------------------------------------- |  | ----------------- | ------- |  | ------------ | - | ------ | -------- |  | - | ------- | 
|                                        |  | December 31, 2003 |        
|                                        |  |                   |        
|                                        |  | Gross             |         |  |             
|                                        |  | Carrying          |         |  | Accumulated  |   |        | Net Book | 
|                                        |  | Amount            |         |  | Amortization |   |        | Value    | 
|                                        |  |                   |         |  |              |   |        |          | 
|                                        |  | (In thousands)    |        
|Non-competition agreements              |  | $                 | 14,000  |  |              | $ | 13,792 |          |  | $ | 208     | 
|Subscriber and advertiser relationships |  |                   | 138,154 |  |              |   | 30,872 |          |  |   | 107,282 | 
|                                        |  |                   |         |  |              |   |        |          | 
|                                        |  | $                 | 152,154 |  |              | $ | 44,664 |          |  | $ | 107,490 | 
|                                        |  |                   |         |  |              |   |        |          | 

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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |                                          
|--- | -----------------------------------------
|(8) | Deferred Financing Costs and Other Assets

|                                                                             |  |                |        |  |      |   |         | 
|---------------------------------------------------------------------------- |  | -------------- | ------ |  | ---- | - | ------- | 
|                                                                             |  | December 31,   |       
|                                                                             |  |                |       
|                                                                             |  | 2004           |        |  | 2003 |  
|                                                                             |  |                |        |  |      |  
|                                                                             |  | (In thousands) |       
|Unrealized foreign exchange gain on Participation Trust
    (Notes 5 and 12) |  | $              |       |  |      | $ | 92,106  | 
|Deferred financing costs                                                     |  |                | 176    |  |      |   | 10,117  | 
|Capitalized telemarketing costs, net of accumulated amortization             |  |                | 15,408 |  |      |   | 14,411  | 
|Receivable from Bradford Publishing Co. (Note 24(k))                         |  |                | 3,430  |  |      |   | 3,430   | 
|Receivable from Horizon Publications Inc. (Note 24(l))                       |  |                | 4,700  |  |      |   | 4,859   | 
|Intangible asset  pension (Note 17)                                         |  |                | 1,614  |  |      |   | 1,700   | 
|Other                                                                        |  |                | 1,751  |  |      |   | 2,583   | 
|                                                                             |  |                |        |  |      |  
|                                                                             |  | $              | 27,079 |  |      | $ | 129,206 | 
|                                                                             |  |                |        |  |      |  



|    |                                      
|--- | -------------------------------------
|(9) | Accounts Payable and Accrued Expenses

|                  |                                                                       |                |         |        |      |   |         |        | 
|----------------- | --------------------------------------------------------------------- | -------------- | ------- | ------ | ---- | - | ------- | ------ | 
|                  |                                                                       | December 31,   |        
|                  |                                                                       |                |        
|                  |                                                                       | 2004           |         |        | 2003 |  
|                  |                                                                       |                |         |        |      |  
|                  |                                                                       | (In thousands) |        
|Accounts payable  |                                                                       | $              | 61,655  |        |      | $ | 72,148  |       
|Accrued expenses: |                                                                       |                |         |        |      |   |         |       
|                  | Labor and benefits                                                    |                |         | 24,444 |      |   |         | 24,256 | 
|                  | Accrued interest                                                      |                |         | 153    |      |   |         | 3,751  | 
|                  | Accrued restitution and settlement costs  circulation
    matters(a) |                |         | 25,694 |      |   |         | 24,120 | 
|                  | Payable to purchaser of the Telegraph Group(b)                        |                |         | 4,051  |      |   |         |       | 
|                  | Professional fees                                                     |                |         | 15,675 |      |   |         | 6,961  | 
|                  | Other(c)                                                              |                |         | 14,593 |      |   |         | 11,885 | 
|                  |                                                                       |                |         |        |      |  
|                  |                                                                       | $              | 146,265 |        |      | $ | 143,121 |       
|                  |                                                                       |                |         |        |      |  






|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | As disclosed in Notes 18 and 23, the Companys
    Audit Committee completed its investigation of circulation
    matters at the Chicago Sun-Times. The Company has reached
    a settlement or tentative settlement with a majority of its
    advertisers regarding restitution and has accrued costs of
    $2.9 million and $24.1 million for the years ended
    December 31, 2004 and 2003, respectively.                                                                                                                                                                           
|   
|(b) |  | On February 15, 2005, the Company made a payment totaling
    $1.7 million to the purchaser of the Telegraph Group. The
    payment was comprised of approximately $4.1 million accrued
    for a working capital adjustment partially offset by
    approximately $2.4 million in receivables related to the
    partial surrender of tax losses to be utilized by the Telegraph
    Group. See Note 3.                                                                                                                                                                                  
|   
|(c) |  | Certain amounts previously included in accrued expenses,
    amounting to $40.6 million at December 31, 2003, have
    been reclassified and offset against accounts receivable to
    conform with the financial statement presentation at
    December 31, 2004. These amounts relate to items which are
    the subject of arbitration proceedings, between the Company and
    CanWest. The procedures for the arbitration are expected to
    result in a single net settlement and the Company has offset the
    accrued expenses against the related receivables. See
    Note 23.

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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|     |               
|---- | --------------
|(10) | Long-Term Debt

|                                         |                                                                                     |                |        |        |      |   |         |         | 
|---------------------------------------- | ----------------------------------------------------------------------------------- | -------------- | ------ | ------ | ---- | - | ------- | ------- | 
|                                         |                                                                                     | December 31,   |       
|                                         |                                                                                     |                |       
|                                         |                                                                                     | 2004           |        |        | 2003 |  
|                                         |                                                                                     |                |        |        |      |  
|                                         |                                                                                     | (In thousands) |       
|Hollinger International Publishing Inc.: |                                                                                     |                |        |        |      |   |         |        
|                                         | 8.625% Senior Notes due 2005(a)                                                     |                | $      | 5,082  |      |   | $       | 5,082   | 
|                                         | 9% Senior Notes due 2010(b)                                                         |                |        | 6,000  |      |   |         | 300,000 | 
|Community Group:                         |                                                                                     |                |        |        |      |   |         |        
|                                         | Amounts due under non-interest bearing non-competition
    agreements due 2005-2007 |                |        | 361    |      |   |         | 750     | 
|                                         | Other due 2005-2009 (at varying interest rates up to 9%)                            |                |        | 709    |      |   |         | 1,088   | 
|Other debt                               |                                                                                     |                | 2,206  |        |      |   | 3,279   |        
|                                         |                                                                                     |                |        |        |      |  
|                                         |                                                                                     |                | 14,358 |        |      |   | 310,199 |        
|Less:                                    |                                                                                     |                |        |        |      |   |         |        
|                                         | Current portion included in current liabilities                                     |                |        | 12,305 |      |   |         | 2,031   | 
|                                         |                                                                                     |                |        |        |      |  
|                                         |                                                                                     | $              | 2,053  |        |      | $ | 308,168 |        
|                                         |                                                                                     |                |        |        |      |  



|               |  |          |       |      |            |                   |        |        |          |                   |            |                            |            |                                       
|-------------- |  | -------- | ----- | ---- | ---------- | ----------------- | ------ | ------ | -------- | ----------------- | ---------- | -------------------------- | ---------- | --------------------------------------
|               |  |          |       |      |            |                   |        |        |          | Early             |            | Early                     
|               |  | Interest |       |      |            |                   |        |        |          |                   | Redemption |                            | Redemption
|Principal      |  | Rate     |       |      | Issue Date |                   | Status |        | Maturity |                   | Date       |                            | Price     
|               |  |          |       |      |            |                   |        |        |          |                   |            |                            |           
|(In thousands) |  |          |       |      |            |                   |        |        |          |                   |            |                           
|$5,082         |  |          | 8.625 | %(a) |            | March 18, 1997    |        | Senior |          | March 15, 2005    |            | None                       |            |                                      
|$6,000         |  |          | 9     | %(b) |            | December 23, 2002 |        | Senior |          | December 15, 2010 |            | December 15, 2006 or after |            | 2006-104.50% 2007-102.25% 2008-100.00%






|    |  |                                                         
|--- |  | --------------------------------------------------------
|(a) |  | 8.625% Senior Notes due 2005 (8.625% Senior
    Notes)



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |  |                         
|--- |  | ------------------------
|(b) |  | 9% Senior Notes due 2010













|    |  |                                            
|--- |  | -------------------------------------------
|(c) |  | Senior Subordinated Notes due 2006 and 2007







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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |  |      
|--- |  | -----
|(d) |  | Other



|           |  |                |        | 
|---------- |  | -------------- | ------ | 
|           |  | (In thousands) |       
|2005       |  | $              | 12,305 | 
|2006       |  |                | 1,159  | 
|2007       |  |                | 853    | 
|2008       |  |                | 38     | 
|2009       |  |                | 3      | 
|Thereafter |  |                |       | 
|           |  |                |       
|           |  | $              | 14,358 | 
|           |  |                |       



| |  |                                                                                                          
| |  | ---------------------------------------------------------------------------------------------------------
| |  | Interest paid in 2004, 2003 and 2002 was $14.9 million,
    $66.1 million and $65.2 million respectively.



|     |       
|---- | ------
|(11) | Leases





|           |  |                |        | 
|---------- |  | -------------- | ------ | 
|           |  | (In thousands) |       
|2005       |  | $              | 5,459  | 
|2006       |  |                | 6,672  | 
|2007       |  |                | 5,608  | 
|2008       |  |                | 5,257  | 
|2009       |  |                | 5,257  | 
|Thereafter |  |                | 38,624 | 
|           |  |                |       
|           |  | $              | 66,877 | 
|           |  |                |       



|     |                      
|---- | ---------------------
|(12) | Financial Instruments



|    |            
|--- | -----------
|(a) | Fair Values





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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                             |  |                |        |  |       |   |        |          |  |   |         |   |  |   |         |  
|-------------------------------------------- |  | -------------- | ------ |  | ----- | - | ------ | -------- |  | - | ------- | - |  | - | ------- | -
|                                             |  | 2004           |        |  | 2003  |  
|                                             |  |                |        |  |       |  
|                                             |  | Carrying       |        |  | Fair  |   |        | Carrying |  |   | Fair    |  
|                                             |  | Value          |        |  | Value |   |        | Value    |  |   | Value   |  
|                                             |  |                |        |  |       |   |        |          |  |   |         |  
|                                             |  | (In thousands) |       
|Long-term debt (Note 10)                     |  | $              | 14,358 |  |       | $ | 14,722 |          |  | $ | 310,199 |   |  | $ | 329,682 |  
|Interest rate swaps  liability (Note 10)    |  |                |       |  |       |   |       |          |  |   | (5,631  | ) |  |   | (5,631  | )
|Foreign currency obligation  asset (Note 8) |  |                |       |  |       |   |       |          |  |   | 92,106  |   |  |   | 92,106  |  





|    |                       
|--- | ----------------------
|(b) | Derivative instruments









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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|     |                  
|---- | -----------------
|(13) | Minority Interest

|                            |  |                |        |  |      |   |        | 
|--------------------------- |  | -------------- | ------ |  | ---- | - | ------ | 
|                            |  | December 31,   |       
|                            |  |                |       
|                            |  | 2004           |        |  | 2003 |  
|                            |  |                |        |  |      |  
|                            |  | (In thousands) |       
|Common shares of subsidiary |  | $              | 3,591  |  |      | $ | 2,839  | 
|Partnership units           |  |                | 26,254 |  |      |   | 25,416 | 
|                            |  |                |        |  |      |  
|                            |  | $              | 29,845 |  |      | $ | 28,255 | 
|                            |  |                |        |  |      |  





|     |                           
|---- | --------------------------
|(14) | Redeemable Preferred Stock









|     |                     
|---- | --------------------
|(15) | Stockholders Equity



| |                
| | ---------------
| | Preferred Stock





| |                                 
| | --------------------------------
| | Class A and Class B Common Stock



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                
| | -------------------------------
| | Shareholder Rights Plan (SRP)













| |          
| | ---------
| | Dividends



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|     |                   
|---- | ------------------
|(16) | Stock Option Plans













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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                         |  |           |            |   |                  |   |       | 
|---------------------------------------- |  | --------- | ---------- | - | ---------------- | - | ----- | 
|                                         |  | Number of |            |   | Weighted-Average |  
|                                         |  | Options   |            |   | Exercise Price   |  
|                                         |  |           |            |   |                  |  
|Options outstanding at December 31, 2001 |  |           | 8,412,401  |   |                  | $ | 12.26 | 
|Options granted                          |  |           | 2,227,000  |   |                  |   | 11.14 | 
|Options exercised                        |  |           | (75,375    | ) |                  |   | 10.81 | 
|Options forfeited                        |  |           | (168,688   | ) |                  |   | 12.64 | 
|                                         |  |           |            |   |                  |  
|Options outstanding at December 31, 2002 |  |           | 10,395,338 |   |                  |   | 12.03 | 
|Options granted                          |  |           | 2,055,100  |   |                  |   | 9.45  | 
|Options exercised                        |  |           | (1,085,450 | ) |                  |   | 11.22 | 
|Options forfeited                        |  |           | (1,690,875 | ) |                  |   | 11.73 | 
|                                         |  |           |            |   |                  |  
|Options outstanding at December 31, 2003 |  |           | 9,674,113  |   |                  |   | 11.62 | 
|Options granted                          |  |           |           |   |                  |   |      | 
|Options exercised                        |  |           | (3,108,277 | ) |                  |   | 11.89 | 
|Options forfeited                        |  |           | (3,325,700 | ) |                  |   | 11.45 | 
|                                         |  |           |            |   |                  |  
|Options outstanding at December 31, 2004 |  |           | 3,240,136  |   |                  | $ | 11.54 | 
|                                         |  |           |            |   |                  |  
|Options exercisable at December 31, 2002 |  |           | 4,739,994  |   |                  | $ | 11.85 | 
|                                         |  |           |            |   |                  |  
|Options exercisable at December 31, 2003 |  |           | 5,684,513  |   |                  | $ | 12.01 | 
|                                         |  |           |            |   |                  |  
|Options exercisable at December 31, 2004 |  |           | 2,652,735  |   |                  | $ | 11.72 | 
|                                         |  |           |            |   |                  |  



|                  |  |                |           |  |                     |            |                  |                     |                |              |  |  |                  |  |  |   |       | 
|----------------- |  | -------------- | --------- |  | ------------------- | ---------- | ---------------- | ------------------- | -------------- | ------------ |  |  | ---------------- |  |  | - | ----- | 
|                  |  |                |           |  |                     |            |                  | Options Exercisable |               
|                  |  |                |           |  |                     |            |                  |                     |               
|                  |  | Number         |           |  | Options Outstanding |            |                  |                     | Number         |              |  | 
|                  |  | Outstanding at |           |  | Weighted-Average    |            |                  |                     | Exercisable at |              |  | 
|Range of Exercise |  | December 31,   |           |  | Remaining           |            | Weighted Average |                     |                | December 31, |  |  | Weighted-Average | 
|Prices            |  | 2004           |           |  | Contractual Life    |            | Exercise Price   |                     |                | 2004         |  |  | Exercise Price   | 
|                  |  |                |           |  |                     |            |                  |                     |                |              |  |  |                  | 
|$ 9.45 - $13.00   |  |                | 2,562,011 |  |                     | 6.07 years |                  | $                   | 10.76          |              |  |  | 2,060,985        |  |  | $ | 10.92 | 
|$14.37 - $16.31   |  |                | 678,125   |  |                     | 6.04 years |                  | $                   | 14.49          |              |  |  | 591,750          |  |  | $ | 14.51 | 
|                  |  |                |           |  |                     |            |                  |                     |                |              |  |  |                  | 
|$ 9.45 - $16.31   |  |                | 3,240,136 |  |                     | 6.06 years |                  | $                   | 11.54          |              |  |  | 2,652,735        |  |  | $ | 11.72 | 
|                  |  |                |           |  |                     |            |                  |                     |                |              |  |  |                  | 



|     |                       
|---- | ----------------------
|(17) | Employee Benefit Plans



| |                           
| | --------------------------
| | Defined Contribution Plans





| |                      
| | ---------------------
| | Defined Benefit Plans





136



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                         |  |                |         |   |      |   |         |      |  |   |         |  
|---------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                         |  | 2004           |         |   | 2003 |   |         | 2002 | 
|                                         |  |                |         |   |      |   |         |      | 
|                                         |  | (In thousands) |        
|Service cost                             |  | $              | 1,864   |   |      | $ | 1,646   |      |  | $ | 1,486   |  
|Interest cost                            |  |                | 18,283  |   |      |   | 18,141  |      |  |   | 17,208  |  
|Expected return on plan assets           |  |                | (20,547 | ) |      |   | (17,915 | )    |  |   | (19,421 | )
|Amortization of losses                   |  |                | 5,175   |   |      |   | 6,250   |      |  |   | 2,445   |  
|Special termination benefits (see below) |  |                | 154     |   |      |   |        |      |  |   |        |  
|Amortization of transitional obligation  |  |                | 121     |   |      |   | 111     |      |  |   |        |  
|Amortization of prior service costs      |  |                | 181     |   |      |   | 173     |      |  |   | 273     |  
|                                         |  |                |         |   |      |   |         |      | 
|Net periodic benefit cost                |  | $              | 5,231   |   |      | $ | 8,406   |      |  | $ | 1,991   |  
|                                         |  |                |         |   |      |   |         |      | 



|                                                       |  |                |         |   |      |   |         |  
|------------------------------------------------------ |  | -------------- | ------- | - | ---- | - | ------- | -
|                                                       |  | December 31,   |        
|                                                       |  |                |        
|                                                       |  | 2004           |         |   | 2003 |  
|                                                       |  |                |         |   |      |  
|                                                       |  | (In thousands) |        
|Benefit obligation at the beginning of the year        |  | $              | 325,070 |   |      | $ | 270,070 |  
|Service cost                                           |  |                | 1,864   |   |      |   | 1,646   |  
|Interest cost                                          |  |                | 18,283  |   |      |   | 18,141  |  
|Participant contributions                              |  |                | 305     |   |      |   | 281     |  
|Curtailment loss                                       |  |                |        |   |      |   | 1,531   |  
|Special termination benefits (see below)               |  |                | 154     |   |      |   |        |  
|Net transfer in                                        |  |                | 35      |   |      |   | 4,483   |  
|Currency translation differences                       |  |                | 17,491  |   |      |   | 43,116  |  
|Actuarial loss                                         |  |                | 10,772  |   |      |   | 12,547  |  
|Benefits paid                                          |  |                | (27,051 | ) |      |   | (26,745 | )
|                                                       |  |                |         |   |      |  
|Benefit obligation at the end of the year              |  |                | 346,923 |   |      |   | 325,070 |  
|                                                       |  |                |         |   |      |  
|Fair value of plan assets at the beginning of the year |  |                | 297,898 |   |      |   | 235,887 |  
|Actual return on plan assets                           |  |                | 48,639  |   |      |   | 43,258  |  
|Other, including currency translation differences      |  |                | 17,508  |   |      |   | 40,789  |  
|Employer contributions                                 |  |                | 4,808   |   |      |   | 3,180   |  
|Participant contributions                              |  |                | 305     |   |      |   | 281     |  
|Net transfer in                                        |  |                |        |   |      |   | 1,248   |  
|Benefits paid                                          |  |                | (27,051 | ) |      |   | (26,745 | )
|                                                       |  |                |         |   |      |  
|Fair value of plan assets at the end of the year       |  |                | 342,107 |   |      |   | 297,898 |  
|                                                       |  |                |         |   |      |  
|Funded status                                          |  |                | (4,816  | ) |      |   | (27,172 | )
|Unrecognized net actuarial loss                        |  |                | 76,451  |   |      |   | 93,674  |  
|Unrecognized prior service cost                        |  |                | 1,614   |   |      |   | 1,700   |  
|Currency translation differences                       |  |                |        |   |      |   | (17     | )
|Unrecognized net transition obligation                 |  |                | 1,259   |   |      |   | 1,371   |  
|                                                       |  |                |         |   |      |  
|Prepaid benefit cost                                   |  | $              | 74,508  |   |      | $ | 69,556  |  
|                                                       |  |                |         |   |      |  



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|                                                                                                    |  |                |         |   |      |   |         |  
|--------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | -
|                                                                                                    |  | December 31,   |        
|                                                                                                    |  |                |        
|                                                                                                    |  | 2004           |         |   | 2003 |  
|                                                                                                    |  |                |         |   |      |  
|                                                                                                    |  | (In thousands) |        
|Prepaid pension benefit                                                                             |  | $              | 94,541  |   |      | $ | 88,705  |  
|Accrued benefit liability, included in other liabilities                                            |  |                | (50,450 | ) |      |   | (45,789 | )
|Intangible asset, included in deferred financing costs and other
    assets                         |  |                | 1,614   |   |      |   | 1,700   |  
|Minimum pension liability adjustment, included in accumulated
    other comprehensive income (loss) |  |                | 28,803  |   |      |   | 30,649  |  
|Less: discontinued operations                                                                       |  |                |        |   |      |   | (5,709  | )
|                                                                                                    |  |                |         |   |      |  
|                                                                                                    |  | $              | 74,508  |   |      | $ | 69,556  |  
|                                                                                                    |  |                |         |   |      |  



| |                        
| | -----------------------
| | Discontinued Operations





|                             |  |                |         |   |      |   |         |  
|---------------------------- |  | -------------- | ------- | - | ---- | - | ------- | -
|                             |  | December 31,   |        
|                             |  |                |        
|                             |  | 2004           |         |   | 2003 |  
|                             |  |                |         |   |      |  
|                             |  | (In thousands) |        
|Company pension plans        |  | $              | 28,803  |   |      | $ | 30,649  |  
|Joint venture pension plans  |  |                |        |   |      |   | 39,163  |  
|                             |  |                |         |   |      |  
|                             |  |                | 28,803  |   |      |   | 69,812  |  
|Less  Deferred tax benefits |  |                | (10,659 | ) |      |   | (23,324 | )
|Less  Minority interest     |  |                | (188    | ) |      |   | (69     | )
|                             |  |                |         |   |      |  
|                             |  | $              | 17,956  |   |      | $ | 46,419  |  
|                             |  |                |         |   |      |  



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                               |  |                |         |  |      |   |         | 
|------------------------------ |  | -------------- | ------- |  | ---- | - | ------- | 
|                               |  | December 31,   |        
|                               |  |                |        
|                               |  | 2004           |         |  | 2003 |  
|                               |  |                |         |  |      |  
|                               |  | (In thousands) |        
|Projected benefit obligation   |  | $              | 127,390 |  |      | $ | 117,470 | 
|Accumulated benefit obligation |  | $              | 122,135 |  |      | $ | 112,910 | 
|Fair value of plan assets      |  | $              | 73,996  |  |      | $ | 71,166  | 



|                               |  |                |         |  |      |   |         | 
|------------------------------ |  | -------------- | ------- |  | ---- | - | ------- | 
|                               |  | December 31,   |        
|                               |  |                |        
|                               |  | 2004           |         |  | 2003 |  
|                               |  |                |         |  |      |  
|                               |  | (In thousands) |        
|Projected benefit obligation   |  | $              | 219,533 |  |      | $ | 207,600 | 
|Accumulated benefit obligation |  | $              | 218,284 |  |      | $ | 205,116 | 
|Fair value of plan assets      |  | $              | 268,111 |  |      | $ | 226,732 | 



| |            
| | -----------
| | Assumptions



|                               |  |              |               |  |      |  |               |      |  |  |               | 
|------------------------------ |  | ------------ | ------------- |  | ---- |  | ------------- | ---- |  |  | ------------- | 
|                               |  | December 31, |              
|                               |  |              |              
|                               |  | 2004         |               |  | 2003 |  |               | 2002 | 
|                               |  |              |               |  |      |  |               |      | 
|Discount rate                  |  |              | 5.75% -  7.0% |  |      |  | 5.75% -  7.0% |      |  |  | 6.25% -  7.0% | 
|Expected return on plan assets |  |              | 6.25% - 8.25% |  |      |  | 6.5% - 8.25%  |      |  |  | 6.5% - 8.25%  | 
|Compensation increase          |  |              | 3.0% -  4.0%  |  |      |  | 3.0% -  4.0%  |      |  |  | 2.5% -  4.5%  | 



|                              |  |                  |       |  |      |  |       | 
|----------------------------- |  | ---------------- | ----- |  | ---- |  | ----- | 
|                              |  | Pension Benefits |      
|                              |  |                  |      
|                              |  | 2004             |       |  | 2003 | 
|                              |  |                  |       |  |      | 
|Discount rate                 |  |                  | 5.75% |  |      |  | 5.84% | 
|Rate of compensation increase |  |                  | 3.09% |  |      |  | 3.16% | 



|                                         |  |                  |       |  |      |  |       |      |  |  |       | 
|---------------------------------------- |  | ---------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                                         |  | Pension Benefits |      
|                                         |  |                  |      
|                                         |  | 2004             |       |  | 2003 |  |       | 2002 | 
|                                         |  |                  |       |  |      |  |       |      | 
|Discount rate                            |  |                  | 5.75% |  |      |  | 5.84% |      |  |  | 6.40% | 
|Expected long-term return on plan assets |  |                  | 7.21% |  |      |  | 7.25% |      |  |  | 7.29% | 
|Rate of compensation increase            |  |                  | 3.09% |  |      |  | 3.16% |      |  |  | 3.45% | 



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                    
| | -------------------
| | Pension Plan Assets



|                  |       |                |      |       |      |  |      |       |  
|----------------- | ----- | -------------- | ---- | ----- | ---- |  | ---- | ----- | -
|                  |       | Plan Assets at |     
|                  |       | December 31,   |     
|                  |       |                |     
|Asset Category    |       | 2004           |      |       | 2003 | 
|                  |       |                |      |       |      | 
|Equity securities |       |                | 57.5 | %     |      |  | 48.9 | %    
|Debt securities   |       |                | 37.1 | %     |      |  | 44.0 | %    
|Other             |       |                | 5.4  | %     |      |  | 7.1  | %    
|                  |       |                |      |       |      | 
|                  | Total |                |      | 100.0 | %    |  |      | 100.0 | %
|                  |       |                |      |       |      | 









| |   |                                                                  
| | - | -----------------------------------------------------------------
| |  | Historically competitive investment return and risks;            
|
| |  | Stability and financial soundness of companies offering funds;   
|
| |  | Desirability of offering funds run by different
    managers; and
|
| |  | Managers investment philosophy and style.                       





| |                                             
| | --------------------------------------------
| | Post-retirement and Post-employment Benefits





|                                          |  |                |       |   |      |   |       |      |  |   |       |  
|----------------------------------------- |  | -------------- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | -
|                                          |  | 2004           |       |   | 2003 |   |       | 2002 | 
|                                          |  |                |       |   |      |   |       |      | 
|                                          |  | (In thousands) |      
|Service cost                              |  | $              | 97    |   |      | $ | 77    |      |  | $ | 85    |  
|Interest cost                             |  |                | 1,370 |   |      |   | 1,354 |      |  |   | 1,783 |  
|Amortization of losses (gains)            |  |                | (624  | ) |      |   | 160   |      |  |   | (318  | )
|                                          |  |                |       |   |      |   |       |      | 
|Net periodic post-retirement benefit cost |  | $              | 843   |   |      | $ | 1,591 |      |  | $ | 1,550 |  
|                                          |  |                |       |   |      |   |       |      | 

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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                |  |                |        |   |      |   |        |  
|------------------------------------------------------------------------------- |  | -------------- | ------ | - | ---- | - | ------ | -
|                                                                                |  | December 31,   |       
|                                                                                |  |                |       
|                                                                                |  | 2004           |        |   | 2003 |  
|                                                                                |  |                |        |   |      |  
|                                                                                |  | (In thousands) |       
|Accumulated post-retirement benefit obligation at the beginning
    of the year |  | $              | 35,236 |   |      | $ | 36,799 |  
|Service cost                                                                    |  |                | 97     |   |      |   | 77     |  
|Interest cost                                                                   |  |                | 1,370  |   |      |   | 1,354  |  
|Actuarial gains (losses)                                                        |  |                | 724    |   |      |   | (8,498 | )
|Benefits paid                                                                   |  |                | (2,184 | ) |      |   | (1,931 | )
|Other, including currency translation differences                               |  |                | 2,602  |   |      |   | 7,435  |  
|                                                                                |  |                |        |   |      |  
|Accumulated post-retirement benefit obligation at the end of the
    year       |  | $              | 37,845 |   |      | $ | 35,236 |  
|                                                                                |  |                |        |   |      |  



|                                                                        |  |                |        |  |      |   |        | 
|----------------------------------------------------------------------- |  | -------------- | ------ |  | ---- | - | ------ | 
|                                                                        |  | December 31,   |       
|                                                                        |  |                |       
|                                                                        |  | 2004           |        |  | 2003 |  
|                                                                        |  |                |        |  |      |  
|                                                                        |  | (In thousands) |       
|Unfunded status                                                         |  | $              | 35,125 |  |      | $ | 32,492 | 
|Unrecognized net loss                                                   |  |                | 5,864  |  |      |   | 7,029  | 
|                                                                        |  |                |        |  |      |  
|Accrued post-retirement benefit cost, included in other
    liabilities |  | $              | 40,989 |  |      | $ | 39,521 | 
|                                                                        |  |                |        |  |      |  



|                                                                                 |  |      |      |   |      |  |      |  
|-------------------------------------------------------------------------------- |  | ---- | ---- | - | ---- |  | ---- | -
|                                                                                 |  | 2004 |      |   | 2003 | 
|                                                                                 |  |      |      |   |      | 
|Healthcare cost trend assumed next year                                          |  |      | 9    | % |      |  | 10   | %
|Rate to which the cost trend is assumed to decline (the ultimate
    trend rate) |  |      | 5    | % |      |  | 5    | %
|Year that rate reaches ultimate trend rate                                       |  |      | 2009 |   |      |  | 2009 |  



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                   
| | ----------------------------------
| | Pension and Other Benefit Payments



|          |  |                |         |       |            |   |        | 
|--------- |  | -------------- | ------- | ----- | ---------- | - | ------ | 
|          |  |                |         | Post- |           
|          |  | Pension        |         |       | Retirement |  
|Year      |  | Benefits       |         |       | Benefits   |  
|          |  |                |         |       |            |  
|          |  | (In thousands) |        
|2005      |  | $              | 28,132  |       |            | $ | 2,883  | 
|2006      |  | $              | 27,897  |       |            | $ | 2,948  | 
|2007      |  | $              | 27,510  |       |            | $ | 2,993  | 
|2008      |  | $              | 27,160  |       |            | $ | 3,021  | 
|2009      |  | $              | 26,833  |       |            | $ | 3,031  | 
|2010-2014 |  | $              | 128,147 |       |            | $ | 15,099 | 



|     |                      
|---- | ---------------------
|(18) | Other Operating Costs



|                                                              |  |                         |         |   |      |   |        |      |  |   |        |  
|------------------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                              |  | Year Ended December 31, |        
|                                                              |  |                         |        
|                                                              |  | 2004                    |         |   | 2003 |   |        | 2002 | 
|                                                              |  |                         |         |   |      |   |        |      | 
|                                                              |  | (In thousands)          |        
|Special Committee and related costs(a)                        |  | $                       | 60,124  |   |      | $ | 10,147 |      |  | $ |       |  
|Management fees                                               |  |                         | 500     |   |      |   | 16,717 |      |  |   | 14,324 |  
|Aircraft costs                                                |  |                         | 449     |   |      |   | 3,439  |      |  |   | 2,737  |  
|Restitution and settlement costs  circulation
    matters(b) |  |                         | 2,880   |   |      |   | 24,120 |      |  |   |       |  
|(Gain) loss on sale of assets(c)                              |  |                         | (44,825 | ) |      |   | 156    |      |  |   | (2,784 | )
|New Chicago plant pre-operating costs                         |  |                         |        |   |      |   |       |      |  |   | 450    |  
|Write-down of intangible assets (Note 7)                      |  |                         | 1,833   |   |      |   |       |      |  |   |       |  
|Wind-down of aircraft operations (Note 4)                     |  |                         |        |   |      |   | 1,445  |      |  |   |       |  
|Directors and officers insurance fee(d)                       |  |                         | 5,400   |   |      |   |       |      |  |   |       |  
|                                                              |  |                         |         |   |      |   |        |      | 
|                                                              |  | $                       | 26,361  |   |      | $ | 56,024 |      |  | $ | 14,727 |  
|                                                              |  |                         |         |   |      |   |        |      | 






|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Special Committee and related costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|    |  | On June 17, 2003, the Company established the Special
    Committee to investigate, among other things, certain
    allegations regarding various related party transactions,
    including allegations described in a beneficial ownership report
    on Schedule 13D filed with the SEC by Tweedy,
    Browne & Company LLC (Tweedy Browne), an
    unaffiliated stockholder of the Company, on May 19, 2003,
    as amended on June 11, 2003. The Special Committee
    delivered its report to the U.S. District Court for the
    Northern District of Illinois. For the years ended
    December 31, 2004 and 2003, the Company had incurred costs
    of $60.1 million and $10.1 million, respectively, as a
    result of the investigation conducted by the Special Committee
    and related litigation involving current and former directors
    and former officers of the Company. See Note 23(a). These
    costs consist primarily of legal and other professional costs.
    The legal fees include those incurred directly by the Special
    Committee in its investigation, the costs of litigation
    initiated by the Special Committee on behalf of the Company,
    costs to defend the Company from litigation that has arisen as a
    result of the issues the Special Committee was asked to
    investigate and fees

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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  | advanced by the Company as a result of the indemnification of
    current and former officers and directors pursuant to this
    undertaking amounting to $18.0 million and
    $1.6 million in 2004 and 2003, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(b) |  | Restitution and settlement costs  circulation
    matters                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|    |  | On October 5, 2004, the Companys Audit Committee
    announced the results of an internal review into practices that
    resulted in the overstatement of circulation figures for the
    Chicago Sun-Times. The Chicago Sun-Timesannounced
    a plan to make restitution to its advertisers. To cover the
    estimated cost of restitution and settlement of related
    lawsuits, the Company recorded pre-tax charges of
    $2.9 million and $24.1 million for the years ended
    December 31, 2004 and 2003, respectively. See
    Note 23(a).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(c) |  | (Gain) loss on sale of assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|    |  | On June 21, 2004, the Company entered into an agreement to
    sell its 50% interest in the joint venture for the development
    of the property on which a portion of the Chicago Sun-Timesoperations was then situated. Immediately prior to the sale
    of the interest in the joint venture, the Company contributed to
    the joint venture its property in downtown Chicago where the
    Chicago Sun-Timeshad conducted its editorial, pre-press,
    marketing, sales and administrative activities. Under the terms
    of the agreement, the Company received $4.0 million upon
    entering into the agreement and the balance of approximately
    $66.7 million, net of closing costs and adjustments, was
    received in cash at closing on October 15, 2004. As a
    result, the Company recognized a gain before taxes of
    approximately $44.2 million for the year ended
    December 31, 2004. The Company attributes a majority of the
    value received upon the sale to the land contributed to the
    joint venture.
|   
|(d) |  | Directors and officers insurance fee                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|    |  | During the year ended December 31, 2004, the Company paid a
    fee of $5.4 million in respect of its directors and
    officers insurance policy to obtain additional coverage for the
    Companys directors and officers relating to periods prior
    to 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



|     |                            
|---- | ---------------------------
|(19) | Other Income (Expense), Net

|                                                                                                              |  |                |          |   |      |   |         |      |  |   |          |  
|------------------------------------------------------------------------------------------------------------- |  | -------------- | -------- | - | ---- | - | ------- | ---- |  | - | -------- | -
|                                                                                                              |  | December 31,   |         
|                                                                                                              |  |                |         
|                                                                                                              |  | 2004           |          |   | 2003 |   |         | 2002 | 
|                                                                                                              |  |                |          |   |      |   |         |      | 
|                                                                                                              |  | (In thousands) |         
|Loss on extinguishment of debt (Note 10)                                                                      |  | $              | (60,381  | ) |      | $ | (37,291 | )    |  | $ | (35,460  | )
|Write-down of investments(a)                                                                                  |  |                | (365     | ) |      |   | (7,700  | )    |  |   | (40,536  | )
|Write-down of FDR Collection(b)                                                                               |  |                |         |   |      |   | (6,796  | )    |  |   |         |  
|Gain (loss) on Participation Trust and CanWest Debentures,
    including exchange gains and losses(c)(Note 5) |  |                | (30,859  | ) |      |   | 112,504 |      |  |   | 2,627    |  
|Foreign currency gains (losses), net(d)                                                                       |  |                | (222     | ) |      |   | (1,167  | )    |  |   | (82,142  | )
|Losses on Total Return Equity Swap(e)                                                                         |  |                |         |   |      |   |        |      |  |   | (15,237  | )
|Losses on sales of publishing interests, net(f)                                                               |  |                | (19,007  | ) |      |   | (6,251  | )    |  |   |         |  
|Settlements with former directors and officers (Note 24(a))                                                   |  |                | 1,718    |   |      |   | 31,547  |      |  |   |         |  
|Gain on sale of investments                                                                                   |  |                | 1,709    |   |      |   | 3,578   |      |  |   |         |  
|Gain on sale of non-operating assets                                                                          |  |                | 1,090    |   |      |   |        |      |  |   | 2,591    |  
|Write-down of property, plant and equipment (Note 4)                                                          |  |                |         |   |      |   | (5,622  | )    |  |   |         |  
|Equity in losses of affiliates, net of dividends received                                                     |  |                | (3,321   | ) |      |   | (2,373  | )    |  |   | (907     | )
|Other                                                                                                         |  |                | (6,430   | ) |      |   | (2,319  | )    |  |   | 978      |  
|                                                                                                              |  |                |          |   |      |   |         |      | 
|                                                                                                              |  | $              | (116,068 | ) |      | $ | 78,110  |      |  | $ | (168,086 | )
|                                                                                                              |  |                |          |   |      |   |         |      | 

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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)







|    |                                                                                                                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | During 2002, a number of valuation provisions were made to the
    investment portfolio, primarily related to internet and
    technology interests, resulting in a net write-down of
    investments of $40.5 million. No investment valuation
    provision with respect to an individual investment in any year
    exceeded $10.0 million.



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | The Company has made several acquisitions of papers and other
    memorabilia of President Franklin Delano Roosevelt (the
    FDR Collection). In 2003, the Company recorded an
    impairment in the value of the FDR Collection of
    $6.8 million. The U.S. National Archives has asserted
    an ownership claim to a portion of the collection known as the
    Grace Tully Collection. In addition, it is possible that the
    State of New York would assert a claim that the Company is
    liable for sales taxes related to these acquisitions.                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(c) |  | During 2004, 2003 and 2002, the Company recorded foreign
    exchange mark-to-market gains on the Participation Trust of
    $nil, $122.3 million and $2.6 million, respectively.
    The Company had a loss of $30.9 million on the settlement
    of the Participation Trust and CanWest Debentures in 2004. This
    loss was largely due to foreign exchange gains recorded in prior
    years and not ultimately realized. The Company had a loss of
    $9.8 million related to the redemption of CanWest
    Debentures in 2003. See Note 5.                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|(d) |  | During March 2002, the Company significantly reduced its
    investment in the Canadian Newspaper Group. Substantial Canadian
    dollar cash balances were distributed to the Company, converted
    to United States dollars and used to reduce long-term debt
    (Note 10). As a result of the substantial reduction of the
    Companys net investment in the Canadian Newspaper Group,
    foreign exchange losses in the amount of $78.2 million have
    been included in net loss in 2002. These foreign exchange losses
    had accumulated since the Companys original investment in
    the Canadian Newspaper Group and, until realized through the
    substantial reduction of the Companys net investment, had
    been included in the Accumulated other comprehensive
    income (loss) component of Stockholders Equity.                                                                                                                                                     
|   
|(e) |  | At December 31, 2000, the Company had Total Return Equity
    Swap arrangements with four banks pursuant to which the banks
    had purchased 14,109,905 shares of the Companys
    Class A Common Stock at an average price of $14.17. The
    Company had the option, quarterly, up to and including
    September 30, 2000 to buy the shares from the banks at the
    same cost or to have the banks resell those shares in the open
    market. These arrangements were extended from time to time for
    periods ultimately ending between February 28, 2003 and
    June 30, 2003. In the event the banks resold the shares,
    any gain or loss realized by the banks would be for the
    Companys account. Under the arrangements, until the
    Company purchased the shares or the banks resold the shares,
    dividends paid on shares belonged to the Company and the Company
    paid interest to the banks, based on their purchase price at the
    rate of LIBOR plus a spread.
|   
|    |  | At December 31, 2001, the Company had two Total Return
    Equity Swap arrangements remaining with banks for a total of
    $100.0 million. Of that total, $10.0 million was
    prepaid during the course of 2002 from available cash on hand.
    In October 2002, a further $50.0 million was prepaid using
    the proceeds from borrowings in that month. In December 2002,
    these arrangements were terminated and the balance of
    $40.0 million then owing by the Company was paid from
    borrowings under debt agreements. The excess of the
    $100.0 million cash paid over the approximately
    $27.8 million in losses accrued on such contracts at
    termination was recorded as a reduction in additional paid-in
    capital.                                                                                                                                                                                                                                              
|   
|    |  | The losses resulting from marking these arrangements to market
    together with the interest and fees paid to the banks during the
    year ended December 31, 2002 totaled $15.2 million.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|    |  | The Total Return Equity Swap arrangements were originally
    entered into as a structure for the repurchase of the
    Companys shares over an extended time frame based on a
    price fixed at the outset of the arrangement. The Company does
    not presently intend to enter into further similar arrangements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(f) |  | Amount recorded in 2004 represents adjustments in estimated net
    proceeds to be received related to the sale of publishing
    interests in prior years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|     |             
|---- | ------------
|(20) | Income Taxes



|                                     |                                                                                                 |                |         |         |      |   |         |         |   |   |        |         |  
|------------------------------------ | ----------------------------------------------------------------------------------------------- | -------------- | ------- | ------- | ---- | - | ------- | ------- | - | - | ------ | ------- | -
|                                     |                                                                                                 | 2004           |         |         | 2003 |   |         | 2002    |  
|                                     |                                                                                                 |                |         |         |      |   |         |         |  
|                                     |                                                                                                 | (In thousands) |        
|Income taxes (benefit) allocated to: |                                                                                                 |                |         |         |      |   |         |         |   |   |        |        
|                                     | Earnings (loss) from continuing operations before income taxes
    and minority interest        |                | $       | 35,650  |      |   | $       | 128,001 |   |   | $      | 37,390  |  
|                                     | Earnings from discontinued operations                                                           |                |         | 207,236 |      |   |         | (6,363  | ) |   |        | 12,742  |  
|                                     | Other comprehensive income (loss)  foreign currency
    translation adjustments                |                |         | 176     |      |   |         | 1,526   |   |   |        | 2,374   |  
|                                     | Other comprehensive income (loss)  unrealized holding
    gain (loss) on marketable securities |                |         | (1,294  | )    |   |         | 3,110   |   |   |        | 2,040   |  
|                                     | Other comprehensive income (loss)  minimum pension
    liability adjustment                    |                |         | 797     |      |   |         | 101     |   |   |        | (15,852 | )
|                                     |                                                                                                 |                |         |         |      |   |         |         |  
|                                     |                                                                                                 | $              | 242,565 |         |      | $ | 126,375 |         |   | $ | 38,694 |        
|                                     |                                                                                                 |                |         |         |      |   |         |         |  



|                              |                 |                |         |         |          |   |        |         |   |   |         |         |  
|----------------------------- | --------------- | -------------- | ------- | ------- | -------- | - | ------ | ------- | - | - | ------- | ------- | -
|                              |                 | Current        |         |         | Deferred |   |        | Total   |  
|                              |                 |                |         |         |          |   |        |         |  
|                              |                 | (In thousands) |        
|Year ended December 31, 2004  |                 |                |         |         |          |   |        |         |   |   |         |        
|                              | U.S. federal    |                | $       | (5,561  | )        |   | $      | (4,283  | ) |   | $       | (9,844  | )
|                              | Foreign         |                |         | 26,498  |          |   |        | 24,630  |   |   |         | 51,128  |  
|                              | State and local |                |         | (4,995  | )        |   |        | (639    | ) |   |         | (5,634  | )
|                              |                 |                |         |         |          |   |        |         |  
|                              |                 | $              | 15,942  |         |          | $ | 19,708 |         |   | $ | 35,650  |        
|                              |                 |                |         |         |          |   |        |         |  
|Year ended December 31, 2003: |                 |                |         |         |          |   |        |         |   |   |         |        
|                              | U.S. federal    |                | $       | (5,744  | )        |   | $      | 56,125  |   |   | $       | 50,381  |  
|                              | Foreign         |                |         | 86,567  |          |   |        | (17,691 | ) |   |         | 68,876  |  
|                              | State and local |                |         | 5,214   |          |   |        | 3,530   |   |   |         | 8,744   |  
|                              |                 |                |         |         |          |   |        |         |  
|                              |                 | $              | 86,037  |         |          | $ | 41,964 |         |   | $ | 128,001 |        
|                              |                 |                |         |         |          |   |        |         |  
|Year ended December 31, 2002: |                 |                |         |         |          |   |        |         |   |   |         |        
|                              | U.S. federal    |                | $       | (29,820 | )        |   | $      | 11,357  |   |   | $       | (18,463 | )
|                              | Foreign         |                |         | 22,106  |          |   |        | 40,065  |   |   |         | 62,171  |  
|                              | State and local |                |         | (9,879  | )        |   |        | 3,561   |   |   |         | (6,318  | )
|                              |                 |                |         |         |          |   |        |         |  
|                              |                 | $              | (17,593 | )       |          | $ | 54,983 |         |   | $ | 37,390  |        
|                              |                 |                |         |         |          |   |        |         |  



|        |  |                |          |   |      |   |        |      |  |   |          |  
|------- |  | -------------- | -------- | - | ---- | - | ------ | ---- |  | - | -------- | -
|        |  | 2004           |          |   | 2003 |   |        | 2002 | 
|        |  |                |          |   |      |   |        |      | 
|        |  | (In thousands) |         
|U.S.    |  | $              | (144,526 | ) |      | $ | 32,087 |      |  | $ | (119,825 | )
|Foreign |  |                | 17,459   |   |      |   | 12,030 |      |  |   | (76,418  | )
|        |  |                |          |   |      |   |        |      | 
|        |  | $              | (127,067 | ) |      | $ | 44,117 |      |  | $ | (196,243 | )
|        |  |                |          |   |      |   |        |      | 

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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                                                                                                        |  |                |         |   |      |   |         |      |  |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                                                                                                        |  | 2004           |         |   | 2003 |   |         | 2002 | 
|                                                                                                                                                                        |  |                |         |   |      |   |         |      | 
|                                                                                                                                                                        |  | (In thousands) |        
|Income tax expense (benefit) at federal statutory rate                                                                                                                  |  | $              | (44,474 | ) |      | $ | 15,440  |      |  | $ | (68,685 | )
|Impact of taxation at different foreign rates                                                                                                                           |  |                | 1,599   |   |      |   | (2,506  | )    |  |   | (1,556  | )
|U.S. state and local income tax expense (benefit), net of
    federal tax impact                                                                                        |  |                | (5,413  | ) |      |   | 1,762   |      |  |   | (1,402  | )
|Settlement of state tax matters, net of federal tax benefit                                                                                                             |  |                |        |   |      |   | 4,082   |      |  |   |        |  
|Tax impacts of the disposition and liquidation of Canadian
    operations, including book and tax basis differences, foreign
    exchange differences and related items |  |                | (10,472 | ) |      |   | 1,545   |      |  |   | 38,880  |  
|Provision for tax contingencies, principally related to
    potential non-deductibility of management fees                                                              |  |                | (3,151  | ) |      |   | 61,442  |      |  |   | 5,176   |  
|Interest on tax contingency accruals, net of federal tax benefit
    on a portion thereof                                                                               |  |                | 47,212  |   |      |   | 46,738  |      |  |   | 40,157  |  
|Items non-deductible or non-includible for income tax purposes                                                                                                          |  |                | 5,906   |   |      |   | 2,962   |      |  |   | 2,415   |  
|Exclusion from taxable income of net losses and interest related
    to Total Return Equity Swap                                                                        |  |                |        |   |      |   |        |      |  |   | 5,302   |  
|U.S. income tax expense (benefit) on intercompany and other
    transactions involving foreign operations                                                               |  |                | 17,602  |   |      |   | (1,210  | )    |  |   | (452    | )
|Non-U.S. tax impacts related to Telegraph Group,
    principally surrender of tax losses                                                                                |  |                | (10,526 | ) |      |   | 12,056  |      |  |   |        |  
|Increase (decrease) in valuation allowance                                                                                                                              |  |                | 38,639  |   |      |   | (12,269 | )    |  |   | 17,374  |  
|Other, net                                                                                                                                                              |  |                | (1,272  | ) |      |   | (2,041  | )    |  |   | 181     |  
|                                                                                                                                                                        |  |                |         |   |      |   |         |      | 
|Total                                                                                                                                                                   |  | $              | 35,650  |   |      | $ | 128,001 |      |  | $ | 37,390  |  
|                                                                                                                                                                        |  |                |         |   |      |   |         |      | 



|                      |  |                |         |          |      |   |         | 
|--------------------- |  | -------------- | ------- | -------- | ---- | - | ------- | 
|                      |  | December 31,   |        
|                      |  |                |        
|                      |  | 2004           |         |          | 2003 |  
|                      |  |                |         |          |      |  
|                      |  |                |         | Restated |     
|                      |  |                |         | Note 2   |     
|                      |  | (In thousands) |        
|Income taxes payable  |  | $              | 171,428 |          |      | $ | 6,975   | 
|Other tax liabilities |  |                | 518,300 |          |      |   | 455,599 | 
|                      |  |                |         |          |      |  
|                      |  | $              | 689,728 |          |      | $ | 462,574 | 
|                      |  |                |         |          |      |  

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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                |  |                |          |          |      |   |          |  
|----------------------------------------------- |  | -------------- | -------- | -------- | ---- | - | -------- | -
|                                                |  | December 31,   |         
|                                                |  |                |         
|                                                |  | 2004           |          |          | 2003 |  
|                                                |  |                |          |          |      |  
|                                                |  |                |          | Restated |     
|                                                |  |                |          | Note 2   |     
|                                                |  | (In thousands) |         
|Deferred tax liabilities                        |  | $              | 119,489  |          |      | $ | 146,631  |  
|Other tax liabilities                           |  |                | 349,228  |          |      |   | 301,896  |  
|Deferred tax assets, net of valuation allowance |  |                | (119,850 | )        |      |   | (154,283 | )
|                                                |  |                |          |          |      |  
|                                                |  | $              | 348,867  |          |      | $ | 294,244  |  
|                                                |  |                |          |          |      |  





|                                          |                                                                                    |                |         |          |      |   |         |          |  
|----------------------------------------- | ---------------------------------------------------------------------------------- | -------------- | ------- | -------- | ---- | - | ------- | -------- | -
|                                          |                                                                                    | December 31,   |        
|                                          |                                                                                    |                |        
|                                          |                                                                                    | 2004           |         |          | 2003 |  
|                                          |                                                                                    |                |         |          |      |  
|                                          |                                                                                    |                |         | Restated |     
|                                          |                                                                                    |                |         | Note 2   |     
|                                          |                                                                                    | (In thousands) |        
|Deferred tax assets attributable to:      |                                                                                    |                |         |          |      |   |         |         
|                                          | Accounts receivable, principally due to allowance for doubtful
    accounts        |                | $       | 1,968    |      |   | $       | 2,766    |  
|                                          | Accrued expenses                                                                   |                |         | 23,961   |      |   |         | 25,178   |  
|                                          | Post-retirement obligation                                                         |                |         | 22,270   |      |   |         | 20,931   |  
|                                          | Investments                                                                        |                |         | 25,893   |      |   |         | 26,697   |  
|                                          | Net operating loss carryforwards                                                   |                |         | 10,292   |      |   |         | 9,955    |  
|                                          | Claims for restitution                                                             |                |         | 58,375   |      |   |         | 58,127   |  
|                                          | U.S. tax benefit related to disposition and liquidation of
    Canadian operations |                |         | 144,355  |      |   |         | 132,851  |  
|                                          | Other                                                                              |                |         | 13,521   |      |   |         | 19,366   |  
|                                          |                                                                                    |                |         |          |      |  
|Deferred tax assets                       |                                                                                    |                | 300,635 |          |      |   | 295,871 |         
|                                          | Less valuation allowance                                                           |                |         | (180,785 | )    |   |         | (141,588 | )
|                                          |                                                                                    |                |         |          |      |  
|Net deferred tax assets                   |                                                                                    | $              | 119,850 |          |      | $ | 154,283 |         
|                                          |                                                                                    |                |         |          |      |  
|Deferred tax liabilities attributable to: |                                                                                    |                |         |          |      |   |         |         
|                                          | Property, plant and equipment, principally due to differences in
    depreciation  |                | $       | 40,676   |      |   | $       | 39,044   |  
|                                          | Pension asset                                                                      |                |         | 28,524   |      |   |         | 28,189   |  
|                                          | Foreign exchange basis differences                                                 |                |         | 695      |      |   |         | 19,802   |  
|                                          | Deferred gain on exchange of assets                                                |                |         | 34,291   |      |   |         | 41,829   |  
|                                          | Other                                                                              |                |         | 15,303   |      |   |         | 17,767   |  
|                                          |                                                                                    |                |         |          |      |  
|Deferred tax liabilities                  |                                                                                    | $              | 119,489 |          |      | $ | 146,631 |         
|                                          |                                                                                    |                |         |          |      |  

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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)












|     |               
|---- | --------------
|(21) | Loss per Share



|                                                                 |      |                                          |          |   |               |  |        |           |  |   |       |   | 
|---------------------------------------------------------------- | ---- | ---------------------------------------- | -------- | - | ------------- |  | ------ | --------- |  | - | ----- | - | 
|                                                                 |      | Year Ended December 31, 2004             |         
|                                                                 |      |                                          |         
|                                                                 |      | Loss                                     |          |   | Shares        |  |        | Per-Share | 
|                                                                 |      | (Numerator)                              |          |   | (Denominator) |  |        | Amount    | 
|                                                                 |      |                                          |          |   |               |  |        |           | 
|                                                                 |      | (In thousands, except per share amounts) |         
|Basic EPS                                                        |      |                                          |          |   |               |  |        |           |  |   |       |  
|Loss from continuing operations                                  |      | $                                        | (163,902 | ) |               |  | 90,486 |           |  | $ | (1.81 | )
|Effect of dilutive securities:                                   |      |                                          |          |   |               |  |        |           |  |   |       |  
|                                                                 | None |                                          |          |  |               |  |        |          |  |   |       |  | 
|                                                                 |      |                                          |          |   |               |  |        |           | 
|Diluted EPS                                                      |      |                                          |          |   |               |  |        |           |  |   |       |  
|Loss from continuing operations available to common stockholders |      | $                                        | (163,902 | ) |               |  | 90,486 |           |  | $ | (1.81 | )
|                                                                 |      |                                          |          |   |               |  |        |           | 

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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                 |                          |                                          |         |   |               |  |        |           |  |   |       |   | 
|---------------------------------------------------------------- | ------------------------ | ---------------------------------------- | ------- | - | ------------- |  | ------ | --------- |  | - | ----- | - | 
|                                                                 |                          | Year Ended December 31, 2003             |        
|                                                                 |                          |                                          |        
|                                                                 |                          | Loss                                     |         |   | Shares        |  |        | Per-Share | 
|                                                                 |                          | (Numerator)                              |         |   | (Denominator) |  |        | Amount    | 
|                                                                 |                          |                                          |         |   |               |  |        |           | 
|                                                                 |                          | (In thousands, except per share amounts) |        
|Loss from continuing operations                                  |                          | $                                        | (89,209 | ) |               |  |        |           |  |   |       |  
|Deduct dividends:                                                |                          |                                          |         |   |               |  |        |           |  |   |       |  
|                                                                 | Series E Preferred Stock |                                          |         |  |               |  |        |           |  |   |       |   | 
|                                                                 |                          |                                          |         |   |               |  |        |           | 
|Basic EPS                                                        |                          |                                          |         |   |               |  |        |           |  |   |       |  
|Loss from continuing operations available to common stockholders |                          |                                          | (89,209 | ) |               |  | 87,311 |           |  | $ | (1.02 | )
|Effect of dilutive securities:                                   |                          |                                          |         |   |               |  |        |           |  |   |       |  
|                                                                 | None                     |                                          |         |  |               |  |        |          |  |   |       |  | 
|                                                                 |                          |                                          |         |   |               |  |        |           | 
|Diluted EPS                                                      |                          |                                          |         |   |               |  |        |           |  |   |       |  
|Loss from continuing operations available to common stockholders |                          | $                                        | (89,209 | ) |               |  | 87,311 |           |  | $ | (1.02 | )
|                                                                 |                          |                                          |         |   |               |  |        |           | 



|                                                                 |                          |                                          |          |      |               |  |        |           |  |   |       |   | 
|---------------------------------------------------------------- | ------------------------ | ---------------------------------------- | -------- | ---- | ------------- |  | ------ | --------- |  | - | ----- | - | 
|                                                                 |                          | Year Ended December 31, 2002             |         
|                                                                 |                          |                                          |         
|                                                                 |                          | Loss                                     |          |      | Shares        |  |        | Per-Share | 
|                                                                 |                          | (Numerator)                              |          |      | (Denominator) |  |        | Amount    | 
|                                                                 |                          |                                          |          |      |               |  |        |           | 
|                                                                 |                          | (In thousands, except per share amounts) |         
|Loss from continuing operations                                  |                          | $                                        | (235,800 | )    |               |  |        |           |  |   |       |  
|Deduct dividends:                                                |                          |                                          |          |      |               |  |        |           |  |   |       |  
|                                                                 | Series E Preferred Stock |                                          |          | (196 | )             |  |        |           |  |   |       |   | 
|                                                                 |                          |                                          |          |      |               |  |        |           | 
|Basic EPS                                                        |                          |                                          |          |      |               |  |        |           |  |   |       |  
|Loss from continuing operations available to common stockholders |                          |                                          | (235,996 | )    |               |  | 96,066 |           |  | $ | (2.46 | )
|Effect of dilutive securities:                                   |                          |                                          |          |      |               |  |        |           |  |   |       |  
|                                                                 | None                     |                                          |          |     |               |  |        |          |  |   |       |  | 
|                                                                 |                          |                                          |          |      |               |  |        |           | 
|Diluted EPS                                                      |                          |                                          |          |      |               |  |        |           |  |   |       |  
|Loss from continuing operations available to common stockholders |                          | $                                        | (235,996 | )    |               |  | 96,066 |           |  | $ | (2.46 | )
|                                                                 |                          |                                          |          |      |               |  |        |           | 





|     |                    
|---- | -------------------
|(22) | Segment Information

Chicago Sun-Times, Post Tribune, Daily Southtown


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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




The Jerusalem Post






|                                          |  |                              |         |            |           |   |         |           |  |   |          |   |  |   |           |  
|----------------------------------------- |  | ---------------------------- | ------- | ---------- | --------- | - | ------- | --------- |  | - | -------- | - |  | - | --------- | -
|                                          |  | Year Ended December 31, 2004 |        
|                                          |  |                              |        
|                                          |  |                              |         | Investment |           |   |        
|                                          |  |                              |         | Canadian   |           |   | and     |           |  |  
|                                          |  | Chicago                      |         |            | Newspaper |   |         | Corporate |  |   |         
|                                          |  | Group                        |         |            | Group     |   |         | Group     |  |   | Total    |  
|                                          |  |                              |         |            |           |   |         |           |  |   |          |  
|                                          |  | (In thousands)               |        
|Total operating revenues                  |  | $                            | 464,439 |            |           | $ | 89,499  |           |  | $ |         |   |  | $ | 553,938   |  
|                                          |  |                              |         |            |           |   |         |           |  |   |          |  
|Depreciation and amortization             |  | $                            | 30,525  |            |           | $ | 1,715   |           |  | $ | 499      |   |  | $ | 32,739    |  
|                                          |  |                              |         |            |           |   |         |           |  |   |          |  
|Operating income (loss)(1)                |  | $                            | 96,420  |            |           | $ | 4,091   |           |  | $ | (111,522 | ) |  | $ | (11,011   | )
|                                          |  |                              |         |            |           |   |         |           |  |   |          |  
|Equity in earnings (losses) of affiliates |  | $                            | (2,679  | )          |           | $ | 576     |           |  | $ | (1,218   | ) |  | $ | (3,321    | )
|                                          |  |                              |         |            |           |   |         |           |  |   |          |  
|Total assets                              |  | $                            | 521,879 |            |           | $ | 338,295 |           |  | $ | 878,724  |   |  | $ | 1,738,898 |  
|                                          |  |                              |         |            |           |   |         |           |  |   |          |  
|Capital expenditures                      |  | $                            | 28,981  |            |           | $ | 2,368   |           |  | $ | 222      |   |  | $ | 31,571    |  
|                                          |  |                              |         |            |           |   |         |           |  |   |          |  






|    |                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------
|(1) | Increase in 2004 for the Chicago Group is largely related to
    gain on sale of assets. See Note 18 (c).

|                                          |  |                              |         |            |           |   |         |           |  |   |         |   |  |   |           |  
|----------------------------------------- |  | ---------------------------- | ------- | ---------- | --------- | - | ------- | --------- |  | - | ------- | - |  | - | --------- | -
|                                          |  | Year Ended December 31, 2003 |        
|                                          |  |                              |        
|                                          |  |                              |         | Investment |           |   |        
|                                          |  |                              |         | Canadian   |           |   | and     |           |  |  
|                                          |  | Chicago                      |         |            | Newspaper |   |         | Corporate |  |   |        
|                                          |  | Group                        |         |            | Group     |   |         | Group(2)  |  |   | Total   |  
|                                          |  |                              |         |            |           |   |         |           |  |   |         |  
|                                          |  | (In thousands)               |        
|Total operating revenues                  |  | $                            | 450,789 |            |           | $ | 80,542  |           |  | $ |        |   |  | $ | 531,331   |  
|                                          |  |                              |         |            |           |   |         |           |  |   |         |  
|Depreciation and amortization             |  | $                            | 35,698  |            |           | $ | 1,556   |           |  | $ | 1,926   |   |  | $ | 39,180    |  
|                                          |  |                              |         |            |           |   |         |           |  |   |         |  
|Operating income (loss)(1)                |  | $                            | 24,358  |            |           | $ | (4,983  | )         |  | $ | (45,374 | ) |  | $ | (25,999   | )
|                                          |  |                              |         |            |           |   |         |           |  |   |         |  
|Equity in earnings (losses) of affiliates |  | $                            | (1,854  | )          |           | $ | 790     |           |  | $ | (1,309  | ) |  | $ | (2,373    | )
|                                          |  |                              |         |            |           |   |         |           |  |   |         |  
|Total assets                              |  | $                            | 541,765 |            |           | $ | 301,364 |           |  | $ | 941,975 |   |  | $ | 1,785,104 |  
|                                          |  |                              |         |            |           |   |         |           |  |   |         |  
|Capital expenditures                      |  | $                            | 7,289   |            |           | $ | 1,731   |           |  | $ | 294     |   |  | $ | 9,314     |  
|                                          |  |                              |         |            |           |   |         |           |  |   |         |  






|    |                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Decrease in 2003 for the Chicago Group is largely related to
    restitution and settlement costs to circulation matters. See
    Note 18 (b).
|   
|(2) | Total assets includes $636,340 of assets of operations to be
    disposed of.                                                                 

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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                          |  |                              |         |            |           |   |        |           |  |   |         |   |  |   |         |  
|----------------------------------------- |  | ---------------------------- | ------- | ---------- | --------- | - | ------ | --------- |  | - | ------- | - |  | - | ------- | -
|                                          |  | Year Ended December 31, 2002 |        
|                                          |  |                              |        
|                                          |  |                              |         | Investment |           |   |       
|                                          |  |                              |         | Canadian   |           |   | and    |           |  |  
|                                          |  | Chicago                      |         |            | Newspaper |   |        | Corporate |  |   |        
|                                          |  | Group                        |         |            | Group     |   |        | Group     |  |   | Total   |  
|                                          |  |                              |         |            |           |   |        |           |  |   |         |  
|                                          |  | (In thousands)               |        
|Total operating revenues                  |  | $                            | 441,778 |            |           | $ | 69,626 |           |  | $ |        |   |  | $ | 511,404 |  
|                                          |  |                              |         |            |           |   |        |           |  |   |         |  
|Depreciation and amortization             |  | $                            | 35,998  |            |           | $ | 1,301  |           |  | $ | 1,762   |   |  | $ | 39,061  |  
|                                          |  |                              |         |            |           |   |        |           |  |   |         |  
|Operating income (loss)                   |  | $                            | 38,640  |            |           | $ | 605    |           |  | $ | (19,585 | ) |  | $ | 19,660  |  
|                                          |  |                              |         |            |           |   |        |           |  |   |         |  
|Equity in earnings (losses) of affiliates |  | $                            | (1,266  | )          |           | $ | 359    |           |  | $ |        |   |  | $ | (907    | )
|                                          |  |                              |         |            |           |   |        |           |  |   |         |  
|Capital expenditures                      |  | $                            | 15,500  |            |           | $ | 2,275  |           |  | $ | 157     |   |  | $ | 17,932  |  
|                                          |  |                              |         |            |           |   |        |           |  |   |         |  



|     |                              
|---- | -----------------------------
|(23) | Commitments and Contingencies



|    |           
|--- | ----------
|(a) | Litigation



| |                                                                    
| | -------------------------------------------------------------------
| | Overview of Investigation of Certain Related Party
    Transactions





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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Chicago Sun-Times








 Hollinger International
Inc. v. Conrad M. Black, Hollinger Inc., and 504468 N.B.
Inc.




152



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


 Other
Actions.


 Hollinger International Inc. v.
Ravelston, RMI and Hollinger Inc.






| |                                               
| | ----------------------------------------------
| | Overview of Corporate Review Committee Actions

 Hollinger International
Inc. v. Conrad M. Black, Hollinger Inc. and 504468 N.B.
Inc.




| |                                  
| | ---------------------------------
| | Stockholder Derivative Litigation



Cardinal Value Equity Partners, L.P. Black,
et al.




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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Hollinger Inc. v. American Home Assurance
Company and Chubb Insurance Company of Canada






 Litigation Involving Controlling
Stockholder, Senior Management and Directors.




| |                          
| | -------------------------
| | Stockholder Class Actions

In re Hollinger Inc. Securities Litigation Chicago Sun-Times In re
Hollinger International Inc. Securities Litigation


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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |                         
| | ------------------------
| | Tweedy Browne Litigation





| |                                                                                  
| | ---------------------------------------------------------------------------------
| | Litigation Involving Controlling Stockholder, Senior
    Management and Directors

Hollinger International Inc. Hollinger
Inc., et al.


155



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




7 8






| |                                                                                          
| | -----------------------------------------------------------------------------------------
| | Hollinger International Inc. v. Conrad M. Black,
    Hollinger Inc., and 504468 N.B. Inc.





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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)














| |                                               
| | ----------------------------------------------
| | Hollinger Inc. v. Hollinger International Inc.





| |                                                                   
| | ------------------------------------------------------------------
| | Black v. Hollinger International Inc., filed on
    March 18, 2004



157



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                                                  
| | -----------------------------------------------------------------
| | Black v. Hollinger International Inc., filed on
    April 5, 2004

Hollinger International
Inc. Hollinger Inc., et al.  Litigation Involving Controlling
Stockholder, Senior Management and Directors.




| |                                                                 
| | ----------------------------------------------------------------
| | Black v. Hollinger International Inc., filed on
    May 13, 2005



Hollinger
International Inc. v. Conrad Black, Hollinger Inc., and
504468 N.B. Inc.








| |                                                                      
| | ---------------------------------------------------------------------
| | Hollinger International Inc. v. Ravelston, RMI and
    Hollinger Inc.



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






Black v. Hollinger
International Inc., filed on April 5, 2004




| |                         
| | ------------------------
| | Black v. Breeden, et al.

Hollinger
International Inc. v. Conrad M. Black, Hollinger Inc. and
504468 N. B. Inc.




159



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |                                                                                     
| | ------------------------------------------------------------------------------------
| | United States Securities and Exchange Commission v.
    Hollinger International Inc.







| |                                                                                
| | -------------------------------------------------------------------------------
| | United States Securities and Exchange Commission v.
    Conrad M. Black, et al.





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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










| |                                        
| | ---------------------------------------
| | The Chicago Sun-Times Circulation Cases

Chicago Sun-Times. Chicago Sun-Times Chicago Sun-Times


Central Furniture, Inc. Hollinger International,
Inc. and Chicago Sun-Times, Inc. Ronald Freeman d/b/a Professional Weight Clinic Inc. Hollinger International, Inc. and Chicago Sun-Times,
Inc. Card & Party
Mart II Ltd. Hollinger International Inc. and
Chicago Sun-Times, Inc. Geier
Enterprises, Inc. Chicago Sun-Times, Inc. and
Hollinger International, Inc. California Floor Coverings d/b/a Olympic Carpet Chicago Sun-Times, Inc. BNB
Land Venture, Inc. Chicago Sun-Times, Inc., Hollinger
International Publishing Inc. and Docs 1-5 Gleason & McMaster LLC Chicago Sun-Times, Inc. and Hollinger International Inc. James Rolshouse & Associates
PLLC Hollinger International Inc. Chicago
Sun-Times, Inc. and The Sun-Times Co. Mark Triffler Oldsmobile, Inc. et al. Hollinger International Inc. and Chicago Sun-Times, Inc. In re: Chicago
Sun-Times Circulation Litigation International Profit Assocs., Inc. Chicago Sun-Times, Inc. and Hollinger International Inc. Business Pro Communications, Inc. Hollinger Inc.,
Hollinger International Inc. and The Sun-Times Co.


161



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


In re: Chicago Sun-Times Circulation
Litigation Chicago Sun-Times Chicago Sun-Times


First Federal Auto Auction, Inc. Chicago Sun-Times, Inc., Hollinger International Inc. and F.
David Radler American Mattress, Inc. Hollinger International
Inc. and Chicago Sun-Times, Inc. National Foundation for Abused and
Neglected Children, Inc. Chicago Sun-Times, Inc.,
Hollinger International Inc. and F. David Radler Joe Rizza Lincoln Mercury,
Inc. et al. Chicago Sun-Times, Inc. Chicago
Sun-Times, Inc. Oral Sekendur Mancaris Chrysler-Jeep-Dodge of Des Plaines,
Inc; Mancaris of Orland Park, Inc.; Mancaris
Chrysler Jeep of Crestwood, Inc.; and Mancaris Chrysler
Jeep, Inc. v. Chicago Sun-Times, Inc. AJEs the Salon, Inc. The Sun-Times, Co., Hollinger International Inc. and
F. David Radler National Foundation for Abused and
Neglected Children, Inc. American Mattress


Chicago Sun-Times Chicago Sun-Times.


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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Chicago Sun-Times




| |                    
| | -------------------
| | CanWest Arbitration





| |                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | CanWest and The National Post Company v. Hollinger Inc.,
    Hollinger International Inc., the Ravelston Corporation Limited
    and Ravelston Management Inc.

National Post (CanWest Arbitration)






| |                                                                                   
| | ----------------------------------------------------------------------------------
| | Wells Fargo Bank Northwest, N.A. v. Sugra (Bermuda)
    Limited and Hollinger Inc.

Wells Fargo Bank Northwest, N.A. v. Sugra
(Bermuda) Limited and Hollinger Inc.


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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |                                                                                            
| | -------------------------------------------------------------------------------------------
| | Hollinger Inc. v. American Home Assurance Company and
    Chubb Insurance Company of Canada





| |              
| | -------------
| | Other Actions



164



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


See  Litigation
Involving Controlling Stockholder, Senior Management and
Directors.


National Post Whyte v. Hollinger International Inc.










|    |           
|--- | ----------
|(b) | Guarantees





| |                     
| | --------------------
| | (i)     Dispositions



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |                           
| | --------------------------
| | (ii)     Letters of Credit





| |                
| | ---------------
| | (iii)     Other





|    |                           
|--- | --------------------------
|(c) | Canadian Ownership Matters









|     |                           
|---- | --------------------------
|(24) | Related-party Transactions



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




(a)




(b)  Hollinger International
Inc. v. Ravelston, RMI and Hollinger Inc.






(c)


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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




(d)


(e)




7 8


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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






(f) National Post


(g)


(h)


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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




(i)


(j)


(k)


(l)


(m)


(n)


(o) The National Interest The National Interest. The
National Interest.


(p)


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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




(q)




|     |                                                           
|---- | ----------------------------------------------------------
|(25) | Supplemental Condensed Consolidating Financial Information







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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                                                                         |                                          |                              |          |          |            |   |         |              |   |   |              |          |   |   |          |          |  
|---------------------------------------------------------------------------------------- | ---------------------------------------- | ---------------------------- | -------- | -------- | ---------- | - | ------- | ------------ | - | - | ------------ | -------- | - | - | -------- | -------- | -
|                                                                                         |                                          | Year Ended December 31, 2004 |         
|                                                                                         |                                          |                              |         
|                                                                                         |                                          | Hollinger                    |          |          |           
|                                                                                         |                                          | International                |          |          |           
|                                                                                         |                                          | Inc.                         |          |          | Publishing |   |         | Eliminations |   |   | Consolidated |         
|                                                                                         |                                          |                              |          |          |            |   |         |              |   |   |              |         
|                                                                                         |                                          | (In thousands)               |         
|Operating revenues:                                                                      |                                          |                              |          |          |            |   |         |              |   |   |              |          |   |   |          |         
|                                                                                         | Advertising                              |                              | $        |         |            |   | $       |             |   |   | $            | 428,641  |   |   | $        | 428,641  |  
|                                                                                         | Circulation                              |                              |          |         |            |   |         |             |   |   |              | 102,528  |   |   |          | 102,528  |  
|                                                                                         | Job printing                             |                              |          |         |            |   |         |             |   |   |              | 17,194   |   |   |          | 17,194   |  
|                                                                                         | Other                                    |                              |          |         |            |   |         |             |   |   |              | 5,575    |   |   |          | 5,575    |  
|                                                                                         |                                          |                              |          |          |            |   |         |              |   |   |              |         
|Total operating revenues                                                                 |                                          |                              |         |          |            |   |        |              |   |   | 553,938      |          |   |   | 553,938  |         
|Operating costs and expenses:                                                            |                                          |                              |          |          |            |   |         |              |   |   |              |          |   |   |          |         
|                                                                                         | Newsprint                                |                              |          |         |            |   |         |             |   |   |              | 75,463   |   |   |          | 75,463   |  
|                                                                                         | Compensation                             |                              |          | 10,589   |            |   |         | 7,910        |   |   |              | 214,902  |   |   |          | 233,401  |  
|                                                                                         | Other operating costs                    |                              |          | 64,281   |            |   |         | 23,030       |   |   |              | 136,035  |   |   |          | 223,346  |  
|                                                                                         | Depreciation                             |                              |          |         |            |   |         | 493          |   |   |              | 20,394   |   |   |          | 20,887   |  
|                                                                                         | Amortization                             |                              |          |         |            |   |         |             |   |   |              | 11,852   |   |   |          | 11,852   |  
|                                                                                         |                                          |                              |          |          |            |   |         |              |   |   |              |         
|Total operating costs and expenses                                                       |                                          |                              | 74,870   |          |            |   | 31,433  |              |   |   | 458,646      |          |   |   | 564,949  |         
|                                                                                         |                                          |                              |          |          |            |   |         |              |   |   |              |         
|Operating income (loss)                                                                  |                                          |                              | (74,870  | )        |            |   | (31,433 | )            |   |   | 95,292       |          |   |   | (11,011  | )       
|                                                                                         |                                          |                              |          |          |            |   |         |              |   |   |              |         
|Other income (expense):                                                                  |                                          |                              |          |          |            |   |         |              |   |   |              |          |   |   |          |         
|                                                                                         | Interest expense                         |                              |          | (122     | )          |   |         | (18,580      | ) |   |              | (382     | ) |   |          | (19,084  | )
|                                                                                         | Amortization of deferred financing costs |                              |          |         |            |   |         | (780         | ) |   |              |         |   |   |          | (780     | )
|                                                                                         | Interest and dividend income (expense)   |                              |          | 17,091   |            |   |         | 31,515       |   |   |              | (28,730  | ) |   |          | 19,876   |  
|                                                                                         | Other income (expense), net              |                              |          | (127,320 | )          |   |         | 338,992      |   |   |              | (327,740 | ) |   |          | (116,068 | )
|                                                                                         |                                          |                              |          |          |            |   |         |              |   |   |              |         
|Total other income (expense)                                                             |                                          |                              | (110,351 | )        |            |   | 351,147 |              |   |   | (356,852     | )        |   |   | (116,056 | )       
|                                                                                         |                                          |                              |          |          |            |   |         |              |   |   |              |         
|Earnings (loss) from continuing operations before income taxes
    and minority interest |                                          |                              | (185,221 | )        |            |   | 319,714 |              |   |   | (261,560     | )        |   |   | (127,067 | )       
|Income taxes (benefit)                                                                   |                                          |                              | (21,319  | )        |            |   | (31,912 | )            |   |   | 88,881       |          |   |   | 35,650   |         
|Minority interest                                                                        |                                          |                              |         |          |            |   |        |              |   |   | 1,185        |          |   |   | 1,185    |         
|                                                                                         |                                          |                              |          |          |            |   |         |              |   |   |              |         
|Earnings (loss) from continuing operations                                               |                                          |                              | (163,902 | )        |            |   | 351,626 |              |   |   | (351,626     | )        |   |   | (163,902 | )       
|                                                                                         |                                          |                              |          |          |            |   |         |              |   |   |              |         
|Discontinued operations (net of income taxes):                                           |                                          |                              |          |          |            |   |         |              |   |   |              |          |   |   |          |         
|Earnings from operations of business segments disposed of                                |                                          |                              | 15,720   |          |            |   |        |              |   |   |             |          |   |   | 15,720   |         
|Gain from disposal of business segments                                                  |                                          |                              | 382,850  |          |            |   |        |              |   |   |             |          |   |   | 382,850  |         
|                                                                                         |                                          |                              |          |          |            |   |         |              |   |   |              |         
|Earnings from discontinued operations                                                    |                                          |                              | 398,570  |          |            |   |        |              |   |   |             |          |   |   | 398,570  |         
|                                                                                         |                                          |                              |          |          |            |   |         |              |   |   |              |         
|Net earnings (loss)                                                                      |                                          | $                            | 234,668  |          |            | $ | 351,626 |              |   | $ | (351,626     | )        |   | $ | 234,668  |         
|                                                                                         |                                          |                              |          |          |            |   |         |              |   |   |              |         

172



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                                                                         |                                          |                              |         |         |            |   |          |              |   |   |              |         |   |   |         |         |  
|---------------------------------------------------------------------------------------- | ---------------------------------------- | ---------------------------- | ------- | ------- | ---------- | - | -------- | ------------ | - | - | ------------ | ------- | - | - | ------- | ------- | -
|                                                                                         |                                          | Year Ended December 31, 2003 |        
|                                                                                         |                                          |                              |        
|                                                                                         |                                          | Hollinger                    |         |         |           
|                                                                                         |                                          | International                |         |         |           
|                                                                                         |                                          | Inc.                         |         |         | Publishing |   |          | Eliminations |   |   | Consolidated |        
|                                                                                         |                                          |                              |         |         |            |   |          |              |   |   |              |        
|                                                                                         |                                          | (In thousands)               |        
|Operating revenues:                                                                      |                                          |                              |         |         |            |   |          |              |   |   |              |         |   |   |         |        
|                                                                                         | Advertising                              |                              | $       |        |            |   | $        |             |   |   | $            | 410,883 |   |   | $       | 410,883 |  
|                                                                                         | Circulation                              |                              |         |        |            |   |          |             |   |   |              | 98,220  |   |   |         | 98,220  |  
|                                                                                         | Job printing                             |                              |         |        |            |   |          |             |   |   |              | 15,698  |   |   |         | 15,698  |  
|                                                                                         | Other                                    |                              |         |        |            |   |          |             |   |   |              | 6,530   |   |   |         | 6,530   |  
|                                                                                         |                                          |                              |         |         |            |   |          |              |   |   |              |        
|Total operating revenues                                                                 |                                          |                              |        |         |            |   |         |              |   |   | 531,331      |         |   |   | 531,331 |        
|Operating costs and expenses:                                                            |                                          |                              |         |         |            |   |          |              |   |   |              |         |   |   |         |        
|                                                                                         | Newsprint                                |                              |         |        |            |   |          |             |   |   |              | 71,919  |   |   |         | 71,919  |  
|                                                                                         | Compensation                             |                              |         | 6,722   |            |   |          | 3,954        |   |   |              | 214,005 |   |   |         | 224,681 |  
|                                                                                         | Other operating costs                    |                              |         | 10,703  |            |   |          | 36,338       |   |   |              | 174,509 |   |   |         | 221,550 |  
|                                                                                         | Depreciation                             |                              |         |        |            |   |          | 1,312        |   |   |              | 21,514  |   |   |         | 22,826  |  
|                                                                                         | Amortization                             |                              |         |        |            |   |          |             |   |   |              | 16,354  |   |   |         | 16,354  |  
|                                                                                         |                                          |                              |         |         |            |   |          |              |   |   |              |        
|Total operating costs and expenses                                                       |                                          |                              | 17,425  |         |            |   | 41,604   |              |   |   | 498,301      |         |   |   | 557,330 |        
|                                                                                         |                                          |                              |         |         |            |   |          |              |   |   |              |        
|Operating income (loss)                                                                  |                                          |                              | (17,425 | )       |            |   | (41,604  | )            |   |   | 33,030       |         |   |   | (25,999 | )      
|                                                                                         |                                          |                              |         |         |            |   |          |              |   |   |              |        
|Other income (expense):                                                                  |                                          |                              |         |         |            |   |          |              |   |   |              |         |   |   |         |        
|                                                                                         | Interest expense                         |                              |         |        |            |   |          | (29,163      | ) |   |              | (214    | ) |   |         | (29,377 | )
|                                                                                         | Amortization of deferred financing costs |                              |         |        |            |   |          | (1,503       | ) |   |              |        |   |   |         | (1,503  | )
|                                                                                         | Interest and dividend income (expense)   |                              |         | 10,334  |            |   |          | 25,796       |   |   |              | (13,244 | ) |   |         | 22,886  |  
|                                                                                         | Other income (expense), net              |                              |         | (49,991 | )          |   |          | (68,924      | ) |   |              | 197,025 |   |   |         | 78,110  |  
|                                                                                         |                                          |                              |         |         |            |   |          |              |   |   |              |        
|Total other income (expense)                                                             |                                          |                              | (39,657 | )       |            |   | (73,794  | )            |   |   | 183,567      |         |   |   | 70,116  |        
|                                                                                         |                                          |                              |         |         |            |   |          |              |   |   |              |        
|Earnings (loss) from continuing operations before income taxes
    and minority interest |                                          |                              | (57,082 | )       |            |   | (115,398 | )            |   |   | 216,597      |         |   |   | 44,117  |        
|Income taxes                                                                             |                                          |                              | 32,127  |         |            |   | 8,025    |              |   |   | 87,849       |         |   |   | 128,001 |        
|Minority interest                                                                        |                                          |                              |        |         |            |   |         |              |   |   | 5,325        |         |   |   | 5,325   |        
|                                                                                         |                                          |                              |         |         |            |   |          |              |   |   |              |        
|Earnings (loss) from continuing operations                                               |                                          |                              | (89,209 | )       |            |   | (123,423 | )            |   |   | 123,423      |         |   |   | (89,209 | )      
|                                                                                         |                                          |                              |         |         |            |   |          |              |   |   |              |        
|Discontinued operations (net of income taxes):                                           |                                          |                              |         |         |            |   |          |              |   |   |              |         |   |   |         |        
|Earnings from operations of business segments disposed of                                |                                          |                              | 14,901  |         |            |   |         |              |   |   |             |         |   |   | 14,901  |        
|                                                                                         |                                          |                              |         |         |            |   |          |              |   |   |              |        
|Net earnings (loss)                                                                      |                                          | $                            | (74,308 | )       |            | $ | (123,423 | )            |   | $ | 123,423      |         |   | $ | (74,308 | )      
|                                                                                         |                                          |                              |         |         |            |   |          |              |   |   |              |        

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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                                                                         |                                          |                              |          |          |            |   |          |              |   |   |              |         |   |   |          |          |  
|---------------------------------------------------------------------------------------- | ---------------------------------------- | ---------------------------- | -------- | -------- | ---------- | - | -------- | ------------ | - | - | ------------ | ------- | - | - | -------- | -------- | -
|                                                                                         |                                          | Year Ended December 31, 2002 |         
|                                                                                         |                                          |                              |         
|                                                                                         |                                          | Hollinger                    |          |          |           
|                                                                                         |                                          | International                |          |          |           
|                                                                                         |                                          | Inc.                         |          |          | Publishing |   |          | Eliminations |   |   | Consolidated |        
|                                                                                         |                                          |                              |          |          |            |   |          |              |   |   |              |        
|                                                                                         |                                          | (In thousands)               |         
|Operating revenues:                                                                      |                                          |                              |          |          |            |   |          |              |   |   |              |         |   |   |          |         
|                                                                                         | Advertising                              |                              | $        |         |            |   | $        |             |   |   | $            | 390,617 |   |   | $        | 390,617  |  
|                                                                                         | Circulation                              |                              |          |         |            |   |          |             |   |   |              | 100,291 |   |   |          | 100,291  |  
|                                                                                         | Job printing                             |                              |          |         |            |   |          |             |   |   |              | 13,819  |   |   |          | 13,819   |  
|                                                                                         | Other                                    |                              |          |         |            |   |          |             |   |   |              | 6,677   |   |   |          | 6,677    |  
|                                                                                         |                                          |                              |          |          |            |   |          |              |   |   |              |        
|Total operating revenues                                                                 |                                          |                              |         |          |            |   |         |              |   |   | 511,404      |         |   |   | 511,404  |         
|Operating costs and expenses:                                                            |                                          |                              |          |          |            |   |          |              |   |   |              |         |   |   |          |         
|                                                                                         | Newsprint                                |                              |          |         |            |   |          |             |   |   |              | 65,355  |   |   |          | 65,355   |  
|                                                                                         | Compensation                             |                              |          |         |            |   |          | 3,162        |   |   |              | 204,617 |   |   |          | 207,779  |  
|                                                                                         | Other operating costs                    |                              |          | 420      |            |   |          | 22,881       |   |   |              | 156,248 |   |   |          | 179,549  |  
|                                                                                         | Depreciation                             |                              |          |         |            |   |          | 1,297        |   |   |              | 20,613  |   |   |          | 21,910   |  
|                                                                                         | Amortization                             |                              |          |         |            |   |          |             |   |   |              | 17,151  |   |   |          | 17,151   |  
|                                                                                         |                                          |                              |          |          |            |   |          |              |   |   |              |        
|Total operating costs and expenses                                                       |                                          |                              | 420      |          |            |   | 27,340   |              |   |   | 463,984      |         |   |   | 491,744  |         
|                                                                                         |                                          |                              |          |          |            |   |          |              |   |   |              |        
|Operating income (loss)                                                                  |                                          |                              | (420     | )        |            |   | (27,340  | )            |   |   | 47,420       |         |   |   | 19,660   |         
|                                                                                         |                                          |                              |          |          |            |   |          |              |   |   |              |        
|Other income (expense):                                                                  |                                          |                              |          |          |            |   |          |              |   |   |              |         |   |   |          |         
|                                                                                         | Interest expense                         |                              |          | (1,209   | )          |   |          | (53,121      | ) |   |              | (3,011  | ) |   |          | (57,341  | )
|                                                                                         | Amortization of deferred financing costs |                              |          |         |            |   |          | (5,585       | ) |   |              |        |   |   |          | (5,585   | )
|                                                                                         | Interest and dividend income             |                              |          | 1,375    |            |   |          | 1,918        |   |   |              | 11,816  |   |   |          | 15,109   |  
|                                                                                         | Other income (expense), net              |                              |          | (256,056 | )          |   |          | (136,660     | ) |   |              | 224,630 |   |   |          | (168,086 | )
|                                                                                         |                                          |                              |          |          |            |   |          |              |   |   |              |        
|Total other income (expense)                                                             |                                          |                              | (255,890 | )        |            |   | (193,448 | )            |   |   | 233,435      |         |   |   | (215,903 | )       
|                                                                                         |                                          |                              |          |          |            |   |          |              |   |   |              |        
|Earnings (loss) from continuing operations before income taxes
    and minority interest |                                          |                              | (256,310 | )        |            |   | (220,788 | )            |   |   | 280,855      |         |   |   | (196,243 | )       
|Income taxes (benefit)                                                                   |                                          |                              | (20,510  | )        |            |   | (30,545  | )            |   |   | 88,445       |         |   |   | 37,390   |         
|Minority interest                                                                        |                                          |                              |         |          |            |   |         |              |   |   | 2,167        |         |   |   | 2,167    |         
|                                                                                         |                                          |                              |          |          |            |   |          |              |   |   |              |        
|Earnings (loss) from continuing operations                                               |                                          |                              | (235,800 | )        |            |   | (190,243 | )            |   |   | 190,243      |         |   |   | (235,800 | )       
|                                                                                         |                                          |                              |          |          |            |   |          |              |   |   |              |        
|Discontinued operations (net of income taxes):                                           |                                          |                              |          |          |            |   |          |              |   |   |              |         |   |   |          |         
|Earnings from operations of business segments disposed of                                |                                          |                              | 5,171    |          |            |   |         |              |   |   |             |         |   |   | 5,171    |         
|                                                                                         |                                          |                              |          |          |            |   |          |              |   |   |              |        
|Net earnings (loss)                                                                      |                                          | $                            | (230,629 | )        |            | $ | (190,243 | )            |   | $ | 190,243      |         |   | $ | (230,629 | )       
|                                                                                         |                                          |                              |          |          |            |   |          |              |   |   |              |        

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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                                               |                                                             |                         |         |         |            |   |           |              |   |   |              |            |   |   |           |         | 
|-------------------------------------------------------------- | ----------------------------------------------------------- | ----------------------- | ------- | ------- | ---------- | - | --------- | ------------ | - | - | ------------ | ---------- | - | - | --------- | ------- | 
|                                                               |                                                             | As of December 31, 2004 |        
|                                                               |                                                             |                         |        
|                                                               |                                                             | Hollinger               |         |         |           
|                                                               |                                                             | International           |         |         |           
|                                                               |                                                             | Inc.                    |         |         | Publishing |   |           | Eliminations |   |   | Consolidated |           
|                                                               |                                                             |                         |         |         |            |   |           |              |   |   |              |           
|                                                               |                                                             | (In thousands)          |        
|ASSETS                                                        
|Current assets:                                                |                                                             |                         |         |         |            |   |           |              |   |   |              |            |   |   |           |        
|                                                               | Cash and cash equivalents                                   |                         | $       | 1,313   |            |   | $         | 229,386      |   |   | $            | 165,227    |   |   | $         | 395,926 | 
|                                                               | Short-term investments                                      |                         |         | 34,600  |            |   |           | 497,450      |   |   |              |           |   |   |           | 532,050 | 
|                                                               | Accounts receivable, net of allowance for doubtful accounts |                         |         | 42      |            |   |           | 93           |   |   |              | 99,355     |   |   |           | 99,490  | 
|                                                               | Inventories                                                 |                         |         |        |            |   |           |             |   |   |              | 12,319     |   |   |           | 12,319  | 
|                                                               | Amounts due from related parties                            |                         |         |        |            |   |           | 428,192      |   |   |              | (428,192   | ) |   |           |        | 
|                                                               | Intercompany accounts receivable                            |                         |         | 180,063 |            |   |           | 183,285      |   |   |              | (363,348   | ) |   |           |        | 
|                                                               | Escrow deposits and restricted cash                         |                         |         | 248     |            |   |           | 539          |   |   |              | 5,002      |   |   |           | 5,789   | 
|                                                               | Other current assets                                        |                         |         | 6       |            |   |           | 2,733        |   |   |              | 13,903     |   |   |           | 16,642  | 
|                                                               |                                                             |                         |         |         |            |   |           |              |   |   |              |           
|Total current assets                                           |                                                             |                         | 216,272 |         |            |   | 1,341,678 |              |   |   | (495,734     | )          |   |   | 1,062,216 |        
|Loan to affiliates                                             |                                                             |                         | 25,457  |         |            |   |          |              |   |   |             |            |   |   | 25,457    |        
|Investments                                                    |                                                             |                         | 654,998 |         |            |   | 1,076,867 |              |   |   | (1,698,681   | )          |   |   | 33,184    |        
|Property, plant and equipment, net of accumulated depreciation |                                                             |                         |        |         |            |   | 763       |              |   |   | 208,540      |            |   |   | 209,303   |        
|Intangible assets, net of accumulated amortization             |                                                             |                         |        |         |            |   |          |              |   |   | 101,339      |            |   |   | 101,339   |        
|Goodwill                                                       |                                                             |                         |        |         |            |   |          |              |   |   | 185,779      |            |   |   | 185,779   |        
|Prepaid pension benefit                                        |                                                             |                         |        |         |            |   |          |              |   |   | 94,541       |            |   |   | 94,541    |        
|Deferred financing costs and other assets                      |                                                             |                         |        |         |            |   | 2,442     |              |   |   | 24,637       |            |   |   | 27,079    |        
|                                                               |                                                             |                         |         |         |            |   |           |              |   |   |              |           
|Total assets                                                   |                                                             | $                       | 896,727 |         |            | $ | 2,421,750 |              |   | $ | (1,579,579   | )          |   | $ | 1,738,898 |        
|                                                               |                                                             |                         |         |         |            |   |           |              |   |   |              |           
|                                                              
|LIABILITIES AND STOCKHOLDERS EQUITY                          
|Current liabilities:                                           |                                                             |                         |         |         |            |   |           |              |   |   |              |            |   |   |           |        
|                                                               | Current installments of long-term debt                      |                         | $       |        |            |   | $         | 11,082       |   |   | $            | 1,223      |   |   | $         | 12,305  | 
|                                                               | Accounts payable and accrued expenses                       |                         |         | 13,380  |            |   |           | 8,262        |   |   |              | 124,623    |   |   |           | 146,265 | 
|                                                               | Dividends payable                                           |                         |         | 231,226 |            |   |           |             |   |   |              |           |   |   |           | 231,226 | 
|                                                               | Amounts due to related parties                              |                         |         |        |            |   |           |             |   |   |              | 8,173      |   |   |           | 8,173   | 
|                                                               | Intercompany accounts payable                               |                         |         | 466,368 |            |   |           | 1,734,783    |   |   |              | (2,201,151 | ) |   |           |        | 
|                                                               | Income taxes payable and other tax liabilities              |                         |         | 50,201  |            |   |           | (92,829      | ) |   |              | 732,356    |   |   |           | 689,728 | 
|                                                               | Deferred revenue                                            |                         |         |        |            |   |           |             |   |   |              | 15,504     |   |   |           | 15,504  | 
|                                                               |                                                             |                         |         |         |            |   |           |              |   |   |              |           
|Total current liabilities                                      |                                                             |                         | 761,175 |         |            |   | 1,661,298 |              |   |   | (1,319,272   | )          |   |   | 1,103,201 |        
|Long-term debt, less current installments                      |                                                             |                         |        |         |            |   |          |              |   |   | 2,053        |            |   |   | 2,053     |        
|Deferred income taxes and other tax liabilities                |                                                             |                         | (16,634 | )       |            |   | 85,056    |              |   |   | 280,445      |            |   |   | 348,867   |        
|Other liabilities                                              |                                                             |                         |        |         |            |   |          |              |   |   | 102,746      |            |   |   | 102,746   |        
|                                                               |                                                             |                         |         |         |            |   |           |              |   |   |              |           
|Total liabilities                                              |                                                             |                         | 744,541 |         |            |   | 1,746,354 |              |   |   | (934,028     | )          |   |   | 1,556,867 |        
|                                                               |                                                             |                         |         |         |            |   |           |              |   |   |              |           
|Minority interest                                              |                                                             |                         |        |         |            |   |          |              |   |   | 29,845       |            |   |   | 29,845    |        
|                                                               |                                                             |                         |         |         |            |   |           |              |   |   |              |           
|Stockholders equity:                                          |                                                             |                         |         |         |            |   |           |              |   |   |              |            |   |   |           |        
|Total stockholders equity                                     |                                                             |                         | 152,186 |         |            |   | 675,396   |              |   |   | (675,396     | )          |   |   | 152,186   |        
|                                                               |                                                             |                         |         |         |            |   |           |              |   |   |              |           
|Total liabilities and stockholders equity                     |                                                             | $                       | 896,727 |         |            | $ | 2,421,750 |              |   | $ | (1,579,579   | )          |   | $ | 1,738,898 |        
|                                                               |                                                             |                         |         |         |            |   |           |              |   |   |              |           

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##### Table of Contents



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                                               |                                                             |                         |         |         |            |   |           |              |   |   |              |            |   |   |           |         | 
|-------------------------------------------------------------- | ----------------------------------------------------------- | ----------------------- | ------- | ------- | ---------- | - | --------- | ------------ | - | - | ------------ | ---------- | - | - | --------- | ------- | 
|                                                               |                                                             | As of December 31, 2003 |        
|                                                               |                                                             |                         |        
|                                                               |                                                             | Hollinger               |         |         |           
|                                                               |                                                             | International           |         |         |           
|                                                               |                                                             | Inc.                    |         |         | Publishing |   |           | Eliminations |   |   | Consolidated |           
|                                                               |                                                             |                         |         |         |            |   |           |              |   |   |              |           
|                                                               |                                                             | (In thousands)          |        
|ASSETS                                                        
|Current assets:                                                |                                                             |                         |         |         |            |   |           |              |   |   |              |            |   |   |           |        
|                                                               | Cash and cash equivalents                                   |                         | $       | 14,528  |            |   | $         | 26,727       |   |   | $            | 25,334     |   |   | $         | 66,589  | 
|                                                               | Short-term investments                                      |                         |         | 19,400  |            |   |           |             |   |   |              |           |   |   |           | 19,400  | 
|                                                               | Accounts receivable, net of allowance for doubtful accounts |                         |         | 267     |            |   |           | 86           |   |   |              | 114,681    |   |   |           | 115,034 | 
|                                                               | Inventories                                                 |                         |         |        |            |   |           |             |   |   |              | 10,340     |   |   |           | 10,340  | 
|                                                               | Amounts due from related parties                            |                         |         | 37,424  |            |   |           | 257,989      |   |   |              | (257,989   | ) |   |           | 37,424  | 
|                                                               | Intercompany accounts receivable                            |                         |         | 16,365  |            |   |           | 180,137      |   |   |              | (196,502   | ) |   |           |        | 
|                                                               | Escrow deposits and restricted cash                         |                         |         |        |            |   |           |             |   |   |              | 16,718     |   |   |           | 16,718  | 
|                                                               | Assets of operations to be disposed of                      |                         |         |        |            |   |           |             |   |   |              | 146,041    |   |   |           | 146,041 | 
|                                                               | Other current assets                                        |                         |         | 15      |            |   |           | 2,543        |   |   |              | 14,754     |   |   |           | 17,312  | 
|                                                               |                                                             |                         |         |         |            |   |           |              |   |   |              |           
|Total current assets                                           |                                                             |                         | 87,999  |         |            |   | 467,482   |              |   |   | (126,623     | )          |   |   | 428,858   |        
|Loan to affiliates                                             |                                                             |                         | 22,131  |         |            |   |          |              |   |   |             |            |   |   | 22,131    |        
|Investments                                                    |                                                             |                         | 189,097 |         |            |   | 1,280,811 |              |   |   | (1,355,920   | )          |   |   | 113,988   |        
|Property, plant and equipment, net of accumulated depreciation |                                                             |                         |        |         |            |   | 907       |              |   |   | 223,084      |            |   |   | 223,991   |        
|Intangible assets, net of accumulated amortization             |                                                             |                         |        |         |            |   |          |              |   |   | 107,490      |            |   |   | 107,490   |        
|Goodwill                                                       |                                                             |                         |        |         |            |   |          |              |   |   | 180,436      |            |   |   | 180,436   |        
|Prepaid pension benefit                                        |                                                             |                         |        |         |            |   |          |              |   |   | 88,705       |            |   |   | 88,705    |        
|Non-current assets of operations to be disposed of             |                                                             |                         |        |         |            |   |          |              |   |   | 490,299      |            |   |   | 490,299   |        
|Deferred financing costs and other assets                      |                                                             |                         | 69,746  |         |            |   | 13,547    |              |   |   | 45,913       |            |   |   | 129,206   |        
|                                                               |                                                             |                         |         |         |            |   |           |              |   |   |              |           
|Total assets                                                   |                                                             | $                       | 368,973 |         |            | $ | 1,762,747 |              |   | $ | (346,616     | )          |   | $ | 1,785,104 |        
|                                                               |                                                             |                         |         |         |            |   |           |              |   |   |              |           
|                                                              
|LIABILITIES AND STOCKHOLDERS EQUITY                          
|Current liabilities:                                           |                                                             |                         |         |         |            |   |           |              |   |   |              |            |   |   |           |        
|                                                               | Current installments of long-term debt                      |                         | $       |        |            |   | $         |             |   |   | $            | 2,031      |   |   | $         | 2,031   | 
|                                                               | Accounts payable and accrued expenses                       |                         |         | 4,019   |            |   |           | 7,311        |   |   |              | 131,791    |   |   |           | 143,121 | 
|                                                               | Dividend payable                                            |                         |         | 4,379   |            |   |           |             |   |   |              |           |   |   |           | 4,379   | 
|                                                               | Intercompany accounts payable                               |                         |         | 293,516 |            |   |           | 1,190,870    |   |   |              | (1,484,386 | ) |   |           |        | 
|                                                               | Amounts due to related parties                              |                         |         |        |            |   |           |             |   |   |              | 7,625      |   |   |           | 7,625   | 
|                                                               | Income taxes payable and other tax liabilities              |                         |         | 57,448  |            |   |           | (29,956      | ) |   |              | 435,082    |   |   |           | 462,574 | 
|                                                               | Liabilities of operations to be disposed of                 |                         |         |        |            |   |           |             |   |   |              | 169,723    |   |   |           | 169,723 | 
|                                                               | Deferred revenue                                            |                         |         |        |            |   |           |             |   |   |              | 16,884     |   |   |           | 16,884  | 
|                                                               |                                                             |                         |         |         |            |   |           |              |   |   |              |           
|Total current liabilities                                      |                                                             |                         | 359,362 |         |            |   | 1,168,225 |              |   |   | (721,250     | )          |   |   | 806,337   |        
|Long-term debt, less current installments                      |                                                             |                         |        |         |            |   | 310,713   |              |   |   | (2,545       | )          |   |   | 308,168   |        
|Deferred income taxes and other tax liabilities                |                                                             |                         | 4,685   |         |            |   | 116,968   |              |   |   | 172,591      |            |   |   | 294,244   |        
|Non-current liabilities of operations to be disposed of        |                                                             |                         |        |         |            |   |          |              |   |   | 250,917      |            |   |   | 250,917   |        
|Other liabilities                                              |                                                             |                         |        |         |            |   |          |              |   |   | 92,257       |            |   |   | 92,257    |        
|                                                               |                                                             |                         |         |         |            |   |           |              |   |   |              |           
|Total liabilities                                              |                                                             |                         | 364,047 |         |            |   | 1,595,906 |              |   |   | (208,030     | )          |   |   | 1,751,923 |        
|Minority interest                                              |                                                             |                         |        |         |            |   |          |              |   |   | 28,255       |            |   |   | 28,255    |        
|Stockholders equity:                                          |                                                             |                         |         |         |            |   |           |              |   |   |              |            |   |   |           |        
|Total stockholders equity                                     |                                                             |                         | 4,926   |         |            |   | 166,841   |              |   |   | (166,841     | )          |   |   | 4,926     |        
|                                                               |                                                             |                         |         |         |            |   |           |              |   |   |              |           
|Total liabilities and stockholders equity                     |                                                             | $                       | 368,973 |         |            | $ | 1,762,747 |              |   | $ | (346,616     | )          |   | $ | 1,785,104 |        
|                                                               |                                                             |                         |         |         |            |   |           |              |   |   |              |           

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##### Table of Contents



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                                                                                                                               |                                                                  |                              |          |          |            |   |          |              |   |   |              |           |   |   |          |           |  
|---------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ---------------------------- | -------- | -------- | ---------- | - | -------- | ------------ | - | - | ------------ | --------- | - | - | -------- | --------- | -
|                                                                                                                                               |                                                                  | Year Ended December 31, 2004 |         
|                                                                                                                                               |                                                                  |                              |         
|                                                                                                                                               |                                                                  | Hollinger                    |          |          |           
|                                                                                                                                               |                                                                  | International                |          |          |           
|                                                                                                                                               |                                                                  | Inc.                         |          |          | Publishing |   |          | Eliminations |   |   | Consolidated |          
|                                                                                                                                               |                                                                  |                              |          |          |            |   |          |              |   |   |              |          
|                                                                                                                                               |                                                                  | (In thousands)               |         
|Cash Flows From Continuing Operating Activities:                                                                                               |                                                                  |                              |          |          |            |   |          |              |   |   |              |           |   |   |          |          
|Net earnings (loss)                                                                                                                            |                                                                  | $                            | 234,668  |          |            | $ | 351,626  |              |   | $ | (351,626     | )         |   | $ | 234,668  |          
|Earnings from discontinued operations                                                                                                          |                                                                  |                              | (398,570 | )        |            |   |         |              |   |   |             |           |   |   | (398,570 | )        
|                                                                                                                                               |                                                                  |                              |          |          |            |   |          |              |   |   |              |          
|Earnings (loss) from continuing operations                                                                                                     |                                                                  |                              | (163,902 | )        |            |   | 351,626  |              |   |   | (351,626     | )         |   |   | (163,902 | )        
|Adjustments to reconcile earnings (loss) from continuing
    operations to net cash provided by (used in) continuing
    operating activities: |                                                                  |                              |          |          |            |   |          |              |   |   |              |           |   |   |          |          
|                                                                                                                                               | Depreciation and amortization                                    |                              |          |         |            |   |          | 493          |   |   |              | 32,246    |   |   |          | 32,739    |  
|                                                                                                                                               | Amortization of deferred financing costs                         |                              |          |         |            |   |          | 780          |   |   |              |          |   |   |          | 780       |  
|                                                                                                                                               | Minority interest                                                |                              |          |         |            |   |          |             |   |   |              | 1,185     |   |   |          | 1,185     |  
|                                                                                                                                               | Premium on debt extinguishments                                  |                              |          |         |            |   |          | 50,617       |   |   |              |          |   |   |          | 50,617    |  
|                                                                                                                                               | Gain on sales of property, plant and equipment                   |                              |          |         |            |   |          |             |   |   |              | (45,915   | ) |   |          | (45,915   | )
|                                                                                                                                               | Loss on Participation Trust and CanWest Debentures               |                              |          |         |            |   |          |             |   |   |              | 30,859    |   |   |          | 30,859    |  
|                                                                                                                                               | Non-cash interest income                                         |                              |          |         |            |   |          |             |   |   |              | (7,967    | ) |   |          | (7,967    | )
|                                                                                                                                               | Write-down of investments                                        |                              |          | 365      |            |   |          |             |   |   |              |          |   |   |          | 365       |  
|                                                                                                                                               | Other                                                            |                              |          | (236,324 | )          |   |          | 282,815      |   |   |              | (20,437   | ) |   |          | 26,054    |  
|Changes in current assets and liabilities, net of dispositions                                                                                 |                                                                  |                              | 228,948  |          |            |   | (39,494  | )            |   |   | (130,939     | )         |   |   | 58,515   |          
|                                                                                                                                               |                                                                  |                              |          |          |            |   |          |              |   |   |              |          
|Cash provided by (used in) continuing operating activities                                                                                     |                                                                  |                              | (170,913 | )        |            |   | 646,837  |              |   |   | (492,594     | )         |   |   | (16,670  | )        
|                                                                                                                                               |                                                                  |                              |          |          |            |   |          |              |   |   |              |          
|Cash Flows From Investing Activities:                                                                                                          |                                                                  |                              |          |          |            |   |          |              |   |   |              |           |   |   |          |          
|                                                                                                                                               | Purchase of property, plant and equipment                        |                              |          |         |            |   |          | (349         | ) |   |              | (31,222   | ) |   |          | (31,571   | )
|                                                                                                                                               | Investments and other non-current assets                         |                              |          | (330     | )          |   |          |             |   |   |              | (11,689   | ) |   |          | (12,019   | )
|                                                                                                                                               | Purchase of short-term investments, net                          |                              |          | (15,200  | )          |   |          | (497,450     | ) |   |              |          |   |   |          | (512,650  | )
|                                                                                                                                               | Proceeds on disposal of investments and other assets             |                              |          | 2,750    |            |   |          | 2,511        |   |   |              | 138,445   |   |   |          | 143,706   |  
|                                                                                                                                               | Proceeds from sale of property, plant and equipment              |                              |          |         |            |   |          |             |   |   |              | 87,207    |   |   |          | 87,207    |  
|                                                                                                                                               | Proceeds from sale of newspaper operations, net of cash disposed |                              |          |         |            |   |          |             |   |   |              | 1,204,036 |   |   |          | 1,204,036 |  
|                                                                                                                                               | Other                                                            |                              |          |         |            |   |          |             |   |   |              | 589       |   |   |          | 589       |  
|                                                                                                                                               |                                                                  |                              |          |          |            |   |          |              |   |   |              |          
|Cash provided by (used in) investing activities                                                                                                |                                                                  |                              | (12,780  | )        |            |   | (495,288 | )            |   |   | 1,387,366    |           |   |   | 879,298  |          
|                                                                                                                                               |                                                                  |                              |          |          |            |   |          |              |   |   |              |          
|Cash Flows From Financing Activities:                                                                                                          |                                                                  |                              |          |          |            |   |          |              |   |   |              |           |   |   |          |          
|                                                                                                                                               | Repayment of debt and premium on debt extinguishment             |                              |          |         |            |   |          | (344,617     | ) |   |              | (2,001    | ) |   |          | (346,618  | )
|                                                                                                                                               | Escrow deposits and restricted cash                              |                              |          |         |            |   |          |             |   |   |              | 10,929    |   |   |          | 10,929    |  
|                                                                                                                                               | Net proceeds from issuance of equity securities                  |                              |          | 36,946   |            |   |          |             |   |   |              |          |   |   |          | 36,946    |  
|                                                                                                                                               | Change in borrowings with related parties                        |                              |          | 151,472  |            |   |          | 407,727      |   |   |              | (538,179  | ) |   |          | 21,020    |  
|                                                                                                                                               | Dividends paid                                                   |                              |          | (17,940  | )          |   |          | (12,000      | ) |   |              | 12,000    |   |   |          | (17,940   | )
|                                                                                                                                               |                                                                  |                              |          |          |            |   |          |              |   |   |              |          
|Cash provided by (used in) financing activities                                                                                                |                                                                  |                              | 170,478  |          |            |   | 51,110   |              |   |   | (517,251     | )         |   |   | (295,663 | )        
|                                                                                                                                               |                                                                  |                              |          |          |            |   |          |              |   |   |              |          
|                                                                                                                                               | Net cash used in discontinued operations                         |                              |          |         |            |   |          |             |   |   |              | (246,370  | ) |   |          | (246,370  | )
|                                                                                                                                               |                                                                  |                              |          |          |            |   |          |              |   |   |              |          
|                                                                                                                                               | Effect of exchange rate changes on cash                          |                              |          |         |            |   |          |             |   |   |              | 8,742     |   |   |          | 8,742     |  
|                                                                                                                                               |                                                                  |                              |          |          |            |   |          |              |   |   |              |          
|                                                                                                                                               | Net increase (decrease) in cash and cash equivalents             |                              |          | (13,215  | )          |   |          | 202,659      |   |   |              | 139,893   |   |   |          | 329,337   |  
|Cash and cash equivalents at beginning of year                                                                                                 |                                                                  |                              | 14,528   |          |            |   | 26,727   |              |   |   | 25,334       |           |   |   | 66,589   |          
|                                                                                                                                               |                                                                  |                              |          |          |            |   |          |              |   |   |              |          
|Cash and cash equivalents at end of year                                                                                                       |                                                                  | $                            | 1,313    |          |            | $ | 229,386  |              |   | $ | 165,227      |           |   | $ | 395,926  |          
|                                                                                                                                               |                                                                  |                              |          |          |            |   |          |              |   |   |              |          

177



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##### Table of Contents



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                                                                                                                               |                                                      |                              |         |         |            |   |          |              |   |   |              |          |   |   |         |          |  
|---------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ---------------------------- | ------- | ------- | ---------- | - | -------- | ------------ | - | - | ------------ | -------- | - | - | ------- | -------- | -
|                                                                                                                                               |                                                      | Year Ended December 31, 2003 |        
|                                                                                                                                               |                                                      |                              |        
|                                                                                                                                               |                                                      | Hollinger                    |         |         |           
|                                                                                                                                               |                                                      | International                |         |         |           
|                                                                                                                                               |                                                      | Inc.                         |         |         | Publishing |   |          | Eliminations |   |   | Consolidated |         
|                                                                                                                                               |                                                      |                              |         |         |            |   |          |              |   |   |              |         
|                                                                                                                                               |                                                      | (In thousands)               |        
|Cash Flows From Continuing Operating Activities:                                                                                               |                                                      |                              |         |         |            |   |          |              |   |   |              |          |   |   |         |         
|Net earnings (loss)                                                                                                                            |                                                      | $                            | (74,308 | )       |            | $ | (123,423 | )            |   | $ | 123,423      |          |   | $ | (74,308 | )       
|Earnings from discontinued operations                                                                                                          |                                                      |                              | (14,901 | )       |            |   |         |              |   |   |             |          |   |   | (14,901 | )       
|                                                                                                                                               |                                                      |                              |         |         |            |   |          |              |   |   |              |         
|Earnings (loss) from continuing operations                                                                                                     |                                                      |                              | (89,209 | )       |            |   | (123,423 | )            |   |   | 123,423      |          |   |   | (89,209 | )       
|Adjustments to reconcile earnings (loss) from continuing
    operations to net cash provided by (used in) continuing
    operating activities: |                                                      |                              |         |         |            |   |          |              |   |   |              |          |   |   |         |         
|                                                                                                                                               | Depreciation and amortization                        |                              |         |        |            |   |          | 1,312        |   |   |              | 37,868   |   |   |         | 39,180   |  
|                                                                                                                                               | Amortization of deferred financing costs             |                              |         |        |            |   |          | 1,503        |   |   |              |         |   |   |         | 1,503    |  
|                                                                                                                                               | Minority interest                                    |                              |         |        |            |   |          |             |   |   |              | 5,325    |   |   |         | 5,325    |  
|                                                                                                                                               | Premium on debt extinguishments                      |                              |         |        |            |   |          | 19,657       |   |   |              |         |   |   |         | 19,657   |  
|                                                                                                                                               | Loss on sale of property, plant and equipment        |                              |         |        |            |   |          |             |   |   |              | 156      |   |   |         | 156      |  
|                                                                                                                                               | Gain on Participation Trust and CanWest Debentures   |                              |         |        |            |   |          |             |   |   |              | (112,504 | ) |   |         | (112,504 | )
|                                                                                                                                               | Non-cash interest income                             |                              |         |        |            |   |          |             |   |   |              | (8,110   | ) |   |         | (8,110   | )
|                                                                                                                                               | Other                                                |                              |         | (1,314  | )          |   |          | 96,327       |   |   |              | (6,880   | ) |   |         | 88,133   |  
|Changes in current assets and liabilities, net of dispositions                                                                                 |                                                      |                              | 7,319   |         |            |   | (42,347  | )            |   |   | 138,590      |          |   |   | 103,562 |         
|                                                                                                                                               |                                                      |                              |         |         |            |   |          |              |   |   |              |         
|Cash provided by (used in) continuing operating activities                                                                                     |                                                      |                              | (83,204 | )       |            |   | (46,971  | )            |   |   | 177,868      |          |   |   | 47,693  |         
|                                                                                                                                               |                                                      |                              |         |         |            |   |          |              |   |   |              |         
|Cash Flows From Investing Activities:                                                                                                          |                                                      |                              |         |         |            |   |          |              |   |   |              |          |   |   |         |         
|                                                                                                                                               | Purchase of property, plant and equipment            |                              |         |        |            |   |          | (106         | ) |   |              | (9,208   | ) |   |         | (9,314   | )
|                                                                                                                                               | Investments and other non-current assets             |                              |         | (3,966  | )          |   |          | (1,620       | ) |   |              | (20,611  | ) |   |         | (26,197  | )
|                                                                                                                                               | Purchase of short-term investments, net              |                              |         | (19,400 | )          |   |          |             |   |   |              |         |   |   |         | (19,400  | )
|                                                                                                                                               | Proceeds on disposal of investments and other assets |                              |         | 1,612   |            |   |          |             |   |   |              | 30,317   |   |   |         | 31,929   |  
|                                                                                                                                               | Proceeds from sale of property, plant and equipment  |                              |         |        |            |   |          |             |   |   |              | 338      |   |   |         | 338      |  
|                                                                                                                                               | Other                                                |                              |         |        |            |   |          |             |   |   |              | 68       |   |   |         | 68       |  
|                                                                                                                                               |                                                      |                              |         |         |            |   |          |              |   |   |              |         
|Cash provided by (used in) investing activities                                                                                                |                                                      |                              | (21,754 | )       |            |   | (1,726   | )            |   |   | 904          |          |   |   | (22,576 | )       
|                                                                                                                                               |                                                      |                              |         |         |            |   |          |              |   |   |              |         
|Cash Flows From Financing Activities:                                                                                                          |                                                      |                              |         |         |            |   |          |              |   |   |              |          |   |   |         |         
|                                                                                                                                               | Repayment of debt and premium on debt extinguishment |                              |         |        |            |   |          | (524,563     | ) |   |              | (1,392   | ) |   |         | (525,955 | )
|                                                                                                                                               | Escrow deposits and restricted cash                  |                              |         |        |            |   |          | 545,952      |   |   |              | (16,718  | ) |   |         | 529,234  |  
|                                                                                                                                               | Net proceeds from issuance of equity securities      |                              |         | 12,115  |            |   |          |             |   |   |              |         |   |   |         | 12,115   |  
|                                                                                                                                               | Change in borrowings with related parties            |                              |         | 93,873  |            |   |          | 39,471       |   |   |              | (182,397 | ) |   |         | (49,053  | )
|                                                                                                                                               | Repurchase of common shares                          |                              |         | (8,849  | )          |   |          |             |   |   |              |         |   |   |         | (8,849   | )
|                                                                                                                                               | Dividends paid                                       |                              |         | (17,403 | )          |   |          |             |   |   |              |         |   |   |         | (17,403  | )
|                                                                                                                                               | Other                                                |                              |         |        |            |   |          | 3,170        |   |   |              | (7,498   | ) |   |         | (4,328   | )
|                                                                                                                                               |                                                      |                              |         |         |            |   |          |              |   |   |              |         
|Cash provided by (used in) financing activities                                                                                                |                                                      |                              | 79,736  |         |            |   | 64,030   |              |   |   | (208,005     | )        |   |   | (64,239 | )       
|                                                                                                                                               |                                                      |                              |         |         |            |   |          |              |   |   |              |         
|                                                                                                                                               | Net cash provided by discontinued operations         |                              |         |        |            |   |          |             |   |   |              | 3,852    |   |   |         | 3,852    |  
|                                                                                                                                               |                                                      |                              |         |         |            |   |          |              |   |   |              |         
|                                                                                                                                               | Effect of exchange rate changes on cash              |                              |         |        |            |   |          |             |   |   |              | 6,049    |   |   |         | 6,049    |  
|                                                                                                                                               |                                                      |                              |         |         |            |   |          |              |   |   |              |         
|                                                                                                                                               | Net increase (decrease) in cash and cash equivalents |                              |         | (25,222 | )          |   |          | 15,333       |   |   |              | (19,332  | ) |   |         | (29,221  | )
|Cash and cash equivalents at beginning of year                                                                                                 |                                                      |                              | 39,750  |         |            |   | 11,394   |              |   |   | 44,666       |          |   |   | 95,810  |         
|                                                                                                                                               |                                                      |                              |         |         |            |   |          |              |   |   |              |         
|Cash and cash equivalents at end of year                                                                                                       |                                                      | $                            | 14,528  |         |            | $ | 26,727   |              |   | $ | 25,334       |          |   | $ | 66,589  |         
|                                                                                                                                               |                                                      |                              |         |         |            |   |          |              |   |   |              |         

178



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##### Table of Contents



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


|                                                                                                                                               |                                                        |                              |          |          |            |   |          |              |   |   |              |          |   |   |          |          |  
|---------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------ | ---------------------------- | -------- | -------- | ---------- | - | -------- | ------------ | - | - | ------------ | -------- | - | - | -------- | -------- | -
|                                                                                                                                               |                                                        | Year Ended December 31, 2002 |         
|                                                                                                                                               |                                                        |                              |         
|                                                                                                                                               |                                                        | Hollinger                    |          |          |           
|                                                                                                                                               |                                                        | International                |          |          |           
|                                                                                                                                               |                                                        | Inc.                         |          |          | Publishing |   |          | Eliminations |   |   | Consolidated |         
|                                                                                                                                               |                                                        |                              |          |          |            |   |          |              |   |   |              |         
|                                                                                                                                               |                                                        | (In thousands)               |         
|Cash Flows From Continuing Operating Activities:                                                                                               |                                                        |                              |          |          |            |   |          |              |   |   |              |          |   |   |          |         
|Net earnings (loss)                                                                                                                            |                                                        | $                            | (230,629 | )        |            | $ | (190,243 | )            |   | $ | 190,243      |          |   | $ | (230,629 | )       
|Earnings from discontinued operations                                                                                                          |                                                        |                              | (5,171   | )        |            |   |         |              |   |   |             |          |   |   | (5,171   | )       
|                                                                                                                                               |                                                        |                              |          |          |            |   |          |              |   |   |              |         
|Earnings (loss) from continuing operations                                                                                                     |                                                        |                              | (235,800 | )        |            |   | (190,243 | )            |   |   | 190,243      |          |   |   | (235,800 | )       
|Adjustments to reconcile earnings (loss) from continuing
    operations to net cash provided by (used in) continuing
    operating activities: |                                                        |                              |          |          |            |   |          |              |   |   |              |          |   |   |          |         
|                                                                                                                                               | Depreciation and amortization                          |                              |          |         |            |   |          | 1,297        |   |   |              | 37,764   |   |   |          | 39,061   |  
|                                                                                                                                               | Amortization of deferred financing costs               |                              |          |         |            |   |          | 5,585        |   |   |              |         |   |   |          | 5,585    |  
|                                                                                                                                               | Minority interest                                      |                              |          |         |            |   |          |             |   |   |              | 2,167    |   |   |          | 2,167    |  
|                                                                                                                                               | Premium on debt extinguishments                        |                              |          |         |            |   |          | 27,126       |   |   |              |         |   |   |          | 27,126   |  
|                                                                                                                                               | Gain on sales of property, plant and equipment         |                              |          |         |            |   |          |             |   |   |              | (5,375   | ) |   |          | (5,375   | )
|                                                                                                                                               | Write-down of investments                              |                              |          | 13,225   |            |   |          | 10,000       |   |   |              | 17,311   |   |   |          | 40,536   |  
|                                                                                                                                               | Gain on Participation Trust and CanWest Debentures     |                              |          |         |            |   |          |             |   |   |              | (2,627   | ) |   |          | (2,627   | )
|                                                                                                                                               | Non-cash portion of losses on Total Return Equity Swap |                              |          | 9,106    |            |   |          |             |   |   |              |         |   |   |          | 9,106    |  
|                                                                                                                                               | Non-cash interest income                               |                              |          |         |            |   |          |             |   |   |              | (5,888   | ) |   |          | (5,888   | )
|                                                                                                                                               | Other                                                  |                              |          | 293,809  |            |   |          | 140,890      |   |   |              | (323,706 | ) |   |          | 110,993  |  
|Changes in current assets and liabilities, net of dispositions                                                                                 |                                                        |                              | (79,684  | )        |            |   | (29,022  | )            |   |   | 110,584      |          |   |   | 1,878    |         
|                                                                                                                                               |                                                        |                              |          |          |            |   |          |              |   |   |              |         
|Cash provided by (used in) continuing operating activities                                                                                     |                                                        |                              | 656      |          |            |   | (34,367  | )            |   |   | 20,473       |          |   |   | (13,238  | )       
|                                                                                                                                               |                                                        |                              |          |          |            |   |          |              |   |   |              |         
|Cash Flows From Investing Activities:                                                                                                          |                                                        |                              |          |          |            |   |          |              |   |   |              |          |   |   |          |         
|                                                                                                                                               | Purchase of property, plant and equipment              |                              |          |         |            |   |          | (1,542       | ) |   |              | (16,390  | ) |   |          | (17,932  | )
|                                                                                                                                               | Investments and other non-current assets               |                              |          | (1,145   | )          |   |          |             |   |   |              | (10,256  | ) |   |          | (11,401  | )
|                                                                                                                                               | Proceeds on disposal of investments and other assets   |                              |          |         |            |   |          | 602,200      |   |   |              | (601,285 | ) |   |          | 915      |  
|                                                                                                                                               | Proceeds from sale of property, plant and equipment    |                              |          |         |            |   |          |             |   |   |              | 10,063   |   |   |          | 10,063   |  
|Other                                                                                                                                          |                                                        |                              |         |          |            |   |         |              |   |   | 1,869        |          |   |   | 1,869    |         
|                                                                                                                                               |                                                        |                              |          |          |            |   |          |              |   |   |              |         
|Cash provided by (used in) investing activities                                                                                                |                                                        |                              | (1,145   | )        |            |   | 600,658  |              |   |   | (615,999     | )        |   |   | (16,486  | )       
|                                                                                                                                               |                                                        |                              |          |          |            |   |          |              |   |   |              |         
|Cash Flows From Financing Activities:                                                                                                          |                                                        |                              |          |          |            |   |          |              |   |   |              |          |   |   |          |         
|                                                                                                                                               | Repayment of debt and premium on debt extinguishment   |                              |          | (50,000  | )          |   |          | (317,138     | ) |   |              | (2,066   | ) |   |          | (369,204 | )
|                                                                                                                                               | Proceeds from bank and other debt                      |                              |          | 50,000   |            |   |          |             |   |   |              | 265,000  |   |   |          | 315,000  |  
|                                                                                                                                               | Proceeds from issuance of notes                        |                              |          |         |            |   |          | 300,000      |   |   |              |         |   |   |          | 300,000  |  
|                                                                                                                                               | Payment of debt issue costs                            |                              |          |         |            |   |          |             |   |   |              | (15,704  | ) |   |          | (15,704  | )
|                                                                                                                                               | Escrow deposits and restricted cash                    |                              |          | 7,548    |            |   |          | (540,952     | ) |   |              |         |   |   |          | (533,404 | )
|                                                                                                                                               | Net proceeds from issuance of equity securities        |                              |          | 4,247    |            |   |          |             |   |   |              |         |   |   |          | 4,247    |  
|                                                                                                                                               | Change in borrowings with related parties              |                              |          | 91,568   |            |   |          | 14,175       |   |   |              | (79,445  | ) |   |          | 26,298   |  
|                                                                                                                                               | Cash settlement of Total Return Equity Swap            |                              |          | (100,000 | )          |   |          |             |   |   |              |         |   |   |          | (100,000 | )
|                                                                                                                                               | Dividends paid                                         |                              |          | (28,762  | )          |   |          | (100,000     | ) |   |              | 100,000  |   |   |          | (28,762  | )
|                                                                                                                                               | Other                                                  |                              |          | 1,391    |            |   |          | (12,315      | ) |   |              | 9,157    |   |   |          | (1,767   | )
|                                                                                                                                               |                                                        |                              |          |          |            |   |          |              |   |   |              |         
|Cash provided by (used in) financing activities                                                                                                |                                                        |                              | (24,008  | )        |            |   | (656,230 | )            |   |   | 276,942      |          |   |   | (403,296 | )       
|                                                                                                                                               |                                                        |                              |          |          |            |   |          |              |   |   |              |         
|                                                                                                                                               | Net cash provided by discontinued operations           |                              |          |         |            |   |          |             |   |   |              | 56,460   |   |   |          | 56,460   |  
|                                                                                                                                               |                                                        |                              |          |          |            |   |          |              |   |   |              |         
|                                                                                                                                               | Effect of exchange rate changes on cash                |                              |          |         |            |   |          |             |   |   |              | 5,906    |   |   |          | 5,906    |  
|                                                                                                                                               |                                                        |                              |          |          |            |   |          |              |   |   |              |         
|                                                                                                                                               | Net decrease in cash and cash equivalents              |                              |          | (24,497  | )          |   |          | (89,939      | ) |   |              | (256,218 | ) |   |          | (370,654 | )
|Cash and cash equivalents at beginning of year                                                                                                 |                                                        |                              | 64,247   |          |            |   | 101,333  |              |   |   | 300,884      |          |   |   | 466,464  |         
|                                                                                                                                               |                                                        |                              |          |          |            |   |          |              |   |   |              |         
|Cash and cash equivalents at end of year                                                                                                       |                                                        | $                            | 39,750   |          |            | $ | 11,394   |              |   | $ | 44,666       |          |   | $ | 95,810   |         
|                                                                                                                                               |                                                        |                              |          |          |            |   |          |              |   |   |              |         

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##### Table of Contents



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|     |                                     
|---- | ------------------------------------
|(26) | Quarterly Financial Data (Unaudited)



|                                             |  |                                       |         |   |         |   |         |         |  |   |         |   |  |   |         |  
|-------------------------------------------- |  | ------------------------------------- | ------- | - | ------- | - | ------- | ------- |  | - | ------- | - |  | - | ------- | -
|                                             |  | 2004                                  |        
|                                             |  |                                       |        
|                                             |  | First                                 |         |   | Second  |   |         | Third   |  |   | Fourth  |  
|                                             |  | Quarter                               |         |   | Quarter |   |         | Quarter |  |   | Quarter |  
|                                             |  |                                       |         |   |         |   |         |         |  |   |         |  
|                                             |  | (In thousands, except per share data) |        
|Total operating revenues                     |  | $                                     | 128,375 |   |         | $ | 143,619 |         |  | $ | 137,642 |   |  | $ | 144,302 |  
|Operating income (loss)                      |  |                                       | (27,109 | ) |         |   | (2,293  | )       |  |   | (15,270 | ) |  |   | 33,661  |  
|Loss from continuing operations              |  |                                       | (38,589 | ) |         |   | (16,787 | )       |  |   | (29,592 | ) |  |   | (78,934 | )
|Net earnings (loss)                          |  |                                       | (26,701 | ) |         |   | (18,587 | )       |  |   | 334,938 |   |  |   | (54,982 | )
|Loss per share from continuing operations(1) |  |                                       | (0.43   | ) |         |   | (0.19   | )       |  |   | (0.32   | ) |  |   | (0.87   | )
|Net earnings (loss) per share(1)             |  |                                       | (0.30   | ) |         |   | (0.21   | )       |  |   | 3.72    |   |  |   | (0.62   | )

|                                                        |  |                                       |         |   |         |   |         |         |  |   |         |   |  |   |          |  
|------------------------------------------------------- |  | ------------------------------------- | ------- | - | ------- | - | ------- | ------- |  | - | ------- | - |  | - | -------- | -
|                                                        |  | 2003                                  |        
|                                                        |  |                                       |        
|                                                        |  | First                                 |         |   | Second  |   |         | Third   |  |   | Fourth  |  
|                                                        |  | Quarter                               |         |   | Quarter |   |         | Quarter |  |   | Quarter |  
|                                                        |  |                                       |         |   |         |   |         |         |  |   |         |  
|                                                        |  | (In thousands, except per share data) |        
|Total operating revenues                                |  | $                                     | 123,050 |   |         | $ | 138,418 |         |  | $ | 130,633 |   |  | $ | 139,230  |  
|Operating income (loss)                                 |  |                                       | (1,360  | ) |         |   | 11,535  |         |  |   | (1,906  | ) |  |   | (34,268  | )
|Earnings (loss) from continuing operations              |  |                                       | (3,682  | ) |         |   | 27,257  |         |  |   | (11,456 | ) |  |   | (101,328 | )
|Net earnings (loss)                                     |  |                                       | 1,214   |   |         |   | 22,362  |         |  |   | (8,134  | ) |  |   | (89,750  | )
|Earnings (loss) per share from continuing operations(1) |  |                                       | (0.04   | ) |         |   | 0.31    |         |  |   | (0.13   | ) |  |   | (1.16    | )
|Net earnings (loss) per share(1)                        |  |                                       | 0.01    |   |         |   | 0.26    |         |  |   | (0.10   | ) |  |   | (1.03    | )






|    |                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Earnings (loss) per share is computed independently for each of
    the quarters presented. Therefore, the sum of the quarterly
    earnings (loss) per share does not necessarily equal the total
    for the year.



|     |                  
|---- | -----------------
|(27) | Subsequent Events





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##### Table of Contents



HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Cardinal Value Equity Partners,
L.P. Black, et al.




181