##### 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, 2005                                                 
|  
|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                   
|Preferred Share Purchase Rights               |  | New York Stock Exchange                   

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


None


o þ


o þ


þ o


S-K 10-K 10-K. o


12b-2


þ o o


12b-2 o þ






DOCUMENTS INCORPORATED BY REFERENCE












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##### 










TABLE OF CONTENTS


HOLLINGER INTERNATIONAL INC.


2005
FORM 10-K


|                                                                           |  |                                                                                                                      |  |      |    | 
|-------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                           |  |                                                                                                                      |  | Page
|                                                                           |  |                                                                                                                      |  |     
|PART I                                                                    
|Item 1.                                                                    |  | Business                                                                                                             |  |      | 3  | 
|Item 1A.                                                                   |  | Risk Factors                                                                                                         |  |      | 9  | 
|Item 1B.                                                                   |  | Unresolved Staff Comments                                                                                            |  |      | 16 | 
|Item 2.                                                                    |  | Properties                                                                                                           |  |      | 16 | 
|Item 3.                                                                    |  | Legal Proceedings                                                                                                    |  |      | 17 | 
|Item 4.                                                                    |  | Submission of Matters to a Vote of Security
    Holders                                                              |  |      | 32 | 
|                                                                          
|PART II                                                                   
|Item 5.                                                                    |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |  |      | 32 | 
|Item 6                                                                     |  | Selected Financial Data                                                                                              |  |      | 34 | 
|Item 7.                                                                    |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |  |      | 36 | 
|Item 7A.                                                                   |  | Quantitative and Qualitative Disclosures
    about Market Risk                                                       |  |      | 53 | 
|Item 8.                                                                    |  | Financial Statements and Supplementary
    Data                                                                      |  |      | 54 | 
|Item 9.                                                                    |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                             |  |      | 54 | 
|Item 9A.                                                                   |  | Controls and Procedures                                                                                              |  |      | 54 | 
|Item 9B.                                                                   |  | Other Information                                                                                                    |  |      | 56 | 
|                                                                          
|PART III                                                                  
|Item 10.                                                                   |  | Directors and Executive Officers of the
    Registrant                                                               |  |      | 60 | 
|Item 11.                                                                   |  | Executive Compensation                                                                                               |  |      | 60 | 
|Item 12.                                                                   |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |  |      | 60 | 
|Item 13.                                                                   |  | Certain Relationships and Related
    Transactions                                                                   |  |      | 60 | 
|Item 14.                                                                   |  | Principal Accountant Fees and Services                                                                               |  |      | 60 | 
|                                                                          
|PART IV                                                                   
|Item 15.                                                                   |  | Exhibits and Financial Statement
    Schedules                                                                       |  |      | 61 | 
|Agreement                                                                 
|Amended Agreement of Compromise and Release of Outside Director Defendants
|Second Consulting Agreement                                               
|Amended and Restated Employment Agreement                                 
|Separation Agreement                                                      
|Amended and Restated Employment Agreement                                 
|Amended and Restated Employment Agreement                                 
|Amended and Restated Employment Agreement                                 
|Separation Agreement                                                      
|Amended and Restated Deferred Stock Unit Agreement                        
|Release and Settlement Agreement                                          
|Share Purchase Agreement                                                  
|Share Purchase Agreement                                                  
|Share Purchase Agreement                                                  
|Significant Subsidiaries                                                  
|Consent of Independent Registered Public Accounting Firm                  
|Certification of CEO                                                      
|Certification of CFO                                                      
|Certificate of CEO                                                        
|Certificate of CFO                                                        



1



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##### Table of Contents



FORWARD-LOOKING STATEMENTS


10-K 10-K)




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | 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 Securities
    and Exchange Commission (SEC) and other government
    agencies in the United States and Canada principally of matters
    identified by a special committee of independent directors (the
    Special Committee) formed on June 17, 2003 to
    investigate related party transactions and other payments made
    to certain executives of the Company and its controlling
    stockholder, Hollinger Inc., and other affiliates in connection
    with the sale of certain of the Companys assets and other
    transactions. The Company filed with the SEC the full text of
    the report of the Special Committee on such investigation as an
    exhibit to a current report on
    Form 8-K on
    August 31, 2004, as amended by a current report on
    Form 8-K/ A filed
    with the SEC on December 15, 2004 (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 1A  Risk
    Factors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

10-K


2



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##### Table of Contents



10-K





PART I







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

Overview


Chicago Sun-Times,
Post-Tribune, Daily Southtown




General




Business Strategy


Pursue Revenue Growth by Leveraging the Companys
Leading Market Position. The Daily Telegraph, The Sunday Telegraph, The Weekly
Telegraph, telegraph.co.uk, The Spectator Apollo The
Jerusalem Post Chicago Sun-Times.


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


Prudent Asset Management. The Jerusalem


3



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##### Table of Contents



Post


Strong Corporate Governance Practices.


Recent Developments


10-K, Overview, Developments Since December 31,
2005, Significant Transactions in 2005


Sun-Times News Group


Chicago Sun-Times Chicago Sun-Times


Chicago Sun-Times Daily Southtown Star Post-Tribune Naperville Sun


4



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Sources of Revenue. non-U.S.


|                       |  |                         |         |  |      |  |     |      |  |   |         |  |  |  |     |   |  |   |         |  |  |  |     |  
|---------------------- |  | ----------------------- | ------- |  | ---- |  | --- | ---- |  | - | ------- |  |  |  | --- | - |  | - | ------- |  |  |  | --- | -
|                       |  | Year Ended December 31, |        
|                       |  |                         |        
|                       |  | 2005                    |         |  | 2004 |  |     | 2003 | 
|                       |  |                         |         |  |      |  |     |      | 
|                       |  | (Dollars in thousands)  |        
|Advertising            |  | $                       | 357,820 |  |      |  | 78  | %    |  | $ | 362,355 |  |  |  | 78  | % |  | $ | 352,029 |  |  |  | 78  | %
|Circulation            |  |                         | 88,150  |  |      |  | 19  |      |  |   | 90,024  |  |  |  | 19  |   |  |   | 86,532  |  |  |  | 19  |  
|Job printing and other |  |                         | 11,919  |  |      |  | 3   |      |  |   | 12,060  |  |  |  | 3   |   |  |   | 12,228  |  |  |  | 3   |  
|                       |  |                         |         |  |      |  |     |      |  |   |         |  |  |  |     |   |  |  
|Total                  |  | $                       | 457,889 |  |      |  | 100 | %    |  | $ | 464,439 |  |  |  | 100 | % |  | $ | 450,789 |  |  |  | 100 | %
|                       |  |                         |         |  |      |  |     |      |  |   |         |  |  |  |     |   |  |  

Advertising. run-of Chicago
Sun-Times 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


5



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##### Table of Contents





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


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


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


Printing. Chicago Sun-Times Chicago
Sun-Times


Competition.


6



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Chicago Sun-Times Chicago Tribune Chicago Sun-Times


Employees and Labor Relations.




Raw Materials.




Canadian Administrative Group






Employees and Labor Relations.


Investment and Corporate Group




7



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Environmental




Seasonality




Intellectual Property




Available Information




1-800-SEC-0330.


www.hollingerinternational.com. 10-K, 10-Q, 8-K






8



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www.hollingerinternational.com.







|         |             
|-------- | ------------
|Item 1A. | 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.









9



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Receivership and CCAA Proceedings in
Canada Involving the Ravelston Entities.








| |                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------
| | 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.

10-K 10-Q


10



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





| |                                                                            
| | ---------------------------------------------------------------------------
| | 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 revenue is cyclical and dependent upon
    general economic conditions in the Companys target
    markets.



11



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##### Table of Contents







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





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

non-U.S.






| |                                                                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.



12



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





| |                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.





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



13



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

The
Jerusalem Post




| |                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Companys internal control over financial
    reporting is not effective as of December 31, 2005 and
    weaknesses in the Companys internal controls and
    procedures could have a material adverse effect on the
    Company.









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

Chicago
Sun-Times. The Chicago Sun-Times
Circulation Cases. 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.







14



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##### Table of Contents







The Companys controlling
stockholder has taken actions that trigger the Special Monitor
provisions of the Court Order




| |                                                                                                                                                                                                            
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.

start-up, start-up,






| |                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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


15



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|         |                          
|-------- | -------------------------
|Item 1B. | Unresolved Staff Comments








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





| |                     
| | --------------------
| | Sun-Times News Group

Chicago Sun-Times Chicago Sun-Times 15-year Chicago Sun-Times


16



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Post-Tribunes






| |                              
| | -----------------------------
| | Canadian Administrative Group





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








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



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

10-K 10-K).




17



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Chicago Sun-Times,










18



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##### Table of Contents



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





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. v. Black,
et al.




19



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 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


20



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##### Table of Contents









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

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




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

Hollinger International Inc. v.
Hollinger Inc., et al.


21



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7 8






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



 United
States Securities and Exchange Commission v. Hollinger
International Inc.




22



---



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





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

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




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



23



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






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







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



24



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










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

10-K 10-Q






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



25



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

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




26



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 Federal
Indictment of Ravelston and Former Company Officials


27



---



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



28



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

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






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



29



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





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



30



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| |                                                                                   
| | ----------------------------------------------------------------------------------
| | 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. 1:04-cv -GLD-DRH






| |                                                                    
| | -------------------------------------------------------------------
| | Boultbee v. Hollinger International Inc., filed
    August 25, 2005





| |              
| | -------------
| | Other Matters



31



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


editor-in 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





32



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|                       |  |             |       |      |           |   |       |       |  |   |      | 
|---------------------- |  | ----------- | ----- | ---- | --------- | - | ----- | ----- |  | - | ---- | 
|                       |  |             |       | Cash |          
|                       |  | Price Range |       |      | Dividends |  
|                       |  |             |       |      | Paid per  |  
|Calendar Period        |  | High        |       |      | Low       |   |       | Share | 
|                       |  |             |       |      |           |   |       |       | 
|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 | 
|Fourth Quarter         |  |             | 9.84  |      |           |   | 8.45  |       |  |   | 0.05 | 
|2006                   |  |             |       |      |           |   |       |       |  |   |      | 
|Through March 23, 2006 |  | $           | 9.70  |      |           | $ | 8.40  |       |  | $ | 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     |       |                      | 4,211,580 |           |                      | $                    | 8.19                |                      |  |  | 3,047,773 |          
|Equity compensation plans not approved by security holders |       |                      |          |           |                      |                      |                    |                      |  |  |          |          
|                                                           |       |                      |           |           |                      |                      |                     |                      | 
|                                                           | Total |                      |           | 4,211,580 |                      |                      | $                   | 8.19                 |  |  |           | 3,047,773 | 
|                                                           |       |                      |           |           |                      |                      |                     |                      | 



33



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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,                  |        
|                                                                      |                                       |                                          |        
|                                                                      |                                       | 2005                                     |         |         | 2004 |   |          | 2003    |   |   | 2002     |         |   | 2001 |         
|                                                                      |                                       |                                          |         |         |      |   |          |         |   |   |          |         |   |      |         
|                                                                      |                                       | (In thousands, except per share amounts) |        
|Statement of Operations Data(1):                                      |                                       |                                          |         |         |      |   |          |         |   |   |          |         |   |      |          |         |   |   |          |        
|Operating revenue:                                                    |                                       |                                          |         |         |      |   |          |         |   |   |          |         |   |      |          |         |   |   |          |        
|                                                                      | Advertising                           |                                          | $       | 357,820 |      |   | $        | 362,355 |   |   | $        | 352,029 |   |      | $        | 341,262 |   |   | $        | 377,258 |  
|                                                                      | Circulation                           |                                          |         | 88,150  |      |   |          | 90,024  |   |   |          | 86,532  |   |      |          | 89,427  |   |   |          | 107,391 |  
|                                                                      | Job printing                          |                                          |         | 9,194   |      |   |          | 8,648   |   |   |          | 7,903   |   |      |          | 7,237   |   |   |          | 7,956   |  
|                                                                      | Other                                 |                                          |         | 2,725   |      |   |          | 3,412   |   |   |          | 4,325   |   |      |          | 3,852   |   |   |          | 12,047  |  
|                                                                      |                                       |                                          |         |         |      |   |          |         |   |   |          |         |   |      |         
|Total operating revenue                                               |                                       |                                          | 457,889 |         |      |   | 464,439  |         |   |   | 450,789  |         |   |      | 441,778  |         |   |   | 504,652  |        
|Operating costs and expenses                                          |                                       |                                          | 437,486 |         |      |   | 455,341  |         |   |   | 447,106  |         |   |      | 391,553  |         |   |   | 538,063  |        
|Depreciation and amortization(2)                                      |                                       |                                          | 30,721  |         |      |   | 31,109   |         |   |   | 37,683   |         |   |      | 37,975   |         |   |   | 45,156   |        
|                                                                      |                                       |                                          |         |         |      |   |          |         |   |   |          |         |   |      |         
|Operating income (loss)                                               |                                       |                                          | (10,318 | )       |      |   | (22,011  | )       |   |   | (34,000  | )       |   |      | 12,250   |         |   |   | (78,567  | )      
|Interest expense                                                      |                                       |                                          | (909    | )       |      |   | (19,044  | )       |   |   | (29,332  | )       |   |      | (57,295  | )       |   |   | (77,474  | )      
|Amortization of deferred financing costs                              |                                       |                                          | (26     | )       |      |   | (780     | )       |   |   | (1,503   | )       |   |      | (5,585   | )       |   |   | (10,367  | )      
|Interest and dividend income                                          |                                       |                                          | 11,625  |         |      |   | 11,427   |         |   |   | 14,557   |         |   |      | 8,782    |         |   |   | 41,011   |        
|Other income (expense), net(3)                                        |                                       |                                          | (3,839  | )       |      |   | (95,690  | )       |   |   | 51,985   |         |   |      | (180,954 | )       |   |   | (308,588 | )      
|                                                                      |                                       |                                          |         |         |      |   |          |         |   |   |          |         |   |      |         
|Earnings (loss) from continuing operations before income taxes        |                                       |                                          | (3,467  | )       |      |   | (126,098 | )       |   |   | 1,707    |         |   |      | (222,802 | )       |   |   | (433,985 | )      
|Income taxes (benefit)                                                |                                       |                                          | 42,467  |         |      |   | 29,462   |         |   |   | 112,168  |         |   |      | 29,194   |         |   |   | (45,591  | )      
|                                                                      |                                       |                                          |         |         |      |   |          |         |   |   |          |         |   |      |         
|Loss from continuing operations                                       |                                       |                                          | (45,934 | )       |      |   | (155,560 | )       |   |   | (110,461 | )       |   |      | (251,996 | )       |   |   | (388,394 | )      
|                                                                      |                                       |                                          |         |         |      |   |          |         |   |   |          |         |   |      |         
|Earnings from discontinued operations (net of income taxes)           |                                       |                                          | 33,965  |         |      |   | 390,228  |         |   |   | 36,153   |         |   |      | 21,367   |         |   |   | 59,888   |        
|                                                                      |                                       |                                          |         |         |      |   |          |         |   |   |          |         |   |      |         
|Net earnings (loss)                                                   |                                       | $                                        | (11,969 | )       |      | $ | 234,668  |         |   | $ | (74,308  | )       |   | $    | (230,629 | )       |   | $ | (328,506 | )      
|                                                                      |                                       |                                          |         |         |      |   |          |         |   |   |          |         |   |      |         
|Diluted earnings per share:                                           |                                       |                                          |         |         |      |   |          |         |   |   |          |         |   |      |          |         |   |   |          |        
|                                                                      | Loss from continuing operations       |                                          | $       | (0.51   | )    |   | $        | (1.72   | ) |   | $        | (1.27   | ) |      | $        | (2.62   | ) |   | $        | (3.88   | )
|                                                                      | Earnings from discontinued operations |                                          |         | 0.38    |      |   |          | 4.31    |   |   |          | 0.42    |   |      |          | 0.22    |   |   |          | 0.60    |  
|                                                                      |                                       |                                          |         |         |      |   |          |         |   |   |          |         |   |      |         
|                                                                      | Net earnings (loss)(4)                |                                          | $       | (0.13   | )    |   | $        | 2.59    |   |   | $        | (0.85   | ) |      | $        | (2.40   | ) |   | $        | (3.28   | )
|                                                                      |                                       |                                          |         |         |      |   |          |         |   |   |          |         |   |      |         
|Cash dividends per share paid on Class A and Class B
    Common Stock |                                       | $                                        | 5.70    |         |      | $ | 0.20     |         |   | $ | 0.20     |         |   | $    | 0.41     |         |   | $ | 0.55     |        
|                                                                      |                                       |                                          |         |         |      |   |          |         |   |   |          |         |   |      |         

34



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|                       |                                           |                    |   |           |      |  |   |           |   |  |      |           |   |      |   |           |   |  |   |           | 
|---------------------- | ----------------------------------------- | ------------------ | - | --------- | ---- |  | - | --------- | - |  | ---- | --------- | - | ---- | - | --------- | - |  | - | --------- | 
|                       |                                           | As of December 31, |  
|                       |                                           |                    |  
|                       |                                           | 2005               |   |           | 2004 |  |   | 2003      |   |  | 2002 |           |   | 2001 |  
|                       |                                           |                    |   |           |      |  |   |           |   |  |      |           |   |      |  
|                       |                                           | (In thousands)     |  
|Balance Sheet Data(1): |                                           |                    |   |           |      |  |   |           |   |  |      |           |   |      |   |           |   |  |   |          
|                       | Working capital (deficiency)(a)           |                    | $ | (369,572  | )    |  | $ | (153,338  | ) |  | $    | (390,403  | ) |      | $ | (754,307  | ) |  | $ | 92,738    | 
|                       | Total assets(5)                           |                    |   | 1,065,328 |      |  |   | 1,738,898 |   |  |      | 1,785,104 |   |      |   | 2,161,433 |   |  |   | 2,076,958 | 
|                       | Long-term debt, less current installments |                    |   | 919       |      |  |   | 2,053     |   |  |      | 308,144   |   |      |   | 310,105   |   |  |   | 806,512   | 
|                       | Redeemable preferred stock                |                    |   |          |      |  |   |          |   |  |      |          |   |      |   | 8,650     |   |  |   | 8,582     | 
|                       | Total stockholders equity (deficit)      |                    |   | (169,851  | )    |  |   | 152,186   |   |  |      | 4,926     |   |      |   | 117,933   |   |  |   | 345,656   | 

|                              |                                |                         |         |         |      |   |         |          |   |   |         |         |   |      |         |         |   |   |         |         |  
|----------------------------- | ------------------------------ | ----------------------- | ------- | ------- | ---- | - | ------- | -------- | - | - | ------- | ------- | - | ---- | ------- | ------- | - | - | ------- | ------- | -
|                              |                                | Year Ended December 31, |        
|                              |                                |                         |        
|                              |                                | 2005                    |         |         | 2004 |   |         | 2003     |   |   | 2002    |         |   | 2001 |        
|                              |                                |                         |         |         |      |   |         |          |   |   |         |         |   |      |        
|                              |                                | (In thousands)          |        
|Segment Data(1):              |                                |                         |         |         |      |   |         |          |   |   |         |         |   |      |         |         |   |   |         |        
|Operating revenue:            |                                |                         |         |         |      |   |         |          |   |   |         |         |   |      |         |         |   |   |         |        
|                              | Sun-Times News Group           |                         | $       | 457,889 |      |   | $       | 464,439  |   |   | $       | 450,789 |   |      | $       | 441,778 |   |   | $       | 442,884 |  
|                              | Canadian Newspaper Operations  |                         |         |        |      |   |         |         |   |   |         |        |   |      |         |        |   |   |         | 60,954  |  
|                              | U.S. Community Group           |                         |         |        |      |   |         |         |   |   |         |        |   |      |         |        |   |   |         | 814     |  
|                              |                                |                         |         |         |      |   |         |          |   |   |         |         |   |      |        
|Total operating revenue       |                                | $                       | 457,889 |         |      | $ | 464,439 |          |   | $ | 450,789 |         |   | $    | 441,778 |         |   | $ | 504,652 |        
|                              |                                |                         |         |         |      |   |         |          |   |   |         |         |   |      |        
|Operating income (loss):      |                                |                         |         |         |      |   |         |          |   |   |         |         |   |      |         |         |   |   |         |        
|                              | Sun-Times News Group           |                         | $       | 47,608  |      |   | $       | 96,420   |   |   | $       | 24,358  |   |      | $       | 38,640  |   |   | $       | 5,965   |  
|                              | Canadian Administrative Group  |                         |         | (2,619  | )    |   |         | (6,909   | ) |   |         | (12,984 | ) |      |         | (6,805  | ) |   |         | (65,262 | )
|                              | U.S. Community Group           |                         |         |        |      |   |         |         |   |   |         |        |   |      |         |        |   |   |         | (121    | )
|                              | Investment and Corporate Group |                         |         | (55,307 | )    |   |         | (111,522 | ) |   |         | (45,374 | ) |      |         | (19,585 | ) |   |         | (19,149 | )
|                              |                                |                         |         |         |      |   |         |          |   |   |         |         |   |      |        
|Total operating income (loss) |                                | $                       | (10,318 | )       |      | $ | (22,011 | )        |   | $ | (34,000 | )       |   | $    | 12,250  |         |   | $ | (78,567 | )      
|                              |                                |                         |         |         |      |   |         |          |   |   |         |         |   |      |        






|    |  |                                                                                                                                                          
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|(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, 2005 and 2004 and for
    each of the years in the three-year period ended
    December 31, 2005 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, 2003, 2002 and 2001
    and for the years ended December 31, 2002 and 2001 are
    derived from audited consolidated financial statements not
    presented separately herein. The financial data for all periods
    has been revised to reflect discontinued operations treatment of
    the Canadian Newspaper Operations, Telegraph Group and Palestine
    Post Limited (previously reported under the Community Group).
    During 2001, the Company disposed of its remaining
    U.S. Community Group Newspapers and most of its remaining
    Canadian Newspapers.
|   
|(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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

35



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

|                                                                                                   |  |                |        |   |      |   |         |      |  |   |         |   |  |      |          |   |  |   |          |  
|-------------------------------------------------------------------------------------------------- |  | -------------- | ------ | - | ---- | - | ------- | ---- |  | - | ------- | - |  | ---- | -------- | - |  | - | -------- | -
|                                                                                                   |  | 2005           |        |   | 2004 |   |         | 2003 |  |   | 2002    |   |  | 2001 |         
|                                                                                                   |  |                |        |   |      |   |         |      |  |   |         |   |  |      |         
|                                                                                                   |  | (In thousands) |       
|Loss on extinguishment of debt                                                                     |  | $              |       |   |      | $ | (60,381 | )    |  | $ | (37,291 | ) |  | $    | (35,460  | ) |  | $ |         |  
|Write-down of investments                                                                          |  |                | (298   | ) |      |   | (365    | )    |  |   | (7,700  | ) |  |      | (40,150  | ) |  |   | (48,037  | )
|Write-down and expenses related to FDR Collection                                                  |  |                | (795   | ) |      |   |        |      |  |   | (6,796  | ) |  |      |         |   |  |   |         |  
|Gain (loss) on Participation Trust and CanWest Debentures,
    including exchange gains and losses |  |                |       |   |      |   | (22,689 | )    |  |   | 83,681  |   |  |      | 914      |   |  |   | (6,938   | )
|Foreign currency gains (losses), net                                                               |  |                | (2,171 | ) |      |   | 1,634   |      |  |   | 1,285   |   |  |      | (95,337  | ) |  |   | 11,643   |  
|Losses on Total Return Equity Swap                                                                 |  |                |       |   |      |   |        |      |  |   |        |   |  |      | (15,237  | ) |  |   | (73,863  | )
|Loss on sales of publishing interests, net                                                         |  |                |       |   |      |   | (7,900  | )    |  |   | (6,251  | ) |  |      |         |   |  |   | (3,230   | )
|Legal settlement                                                                                   |  |                | (800   | ) |      |   |        |      |  |   |        |   |  |      |         |   |  |   |         |  
|Settlements with former directors and officers                                                     |  |                |       |   |      |   | 1,718   |      |  |   | 31,547  |   |  |      |         |   |  |   |         |  
|Gain (loss) on sale of investments                                                                 |  |                | 2,511  |   |      |   | 1,709   |      |  |   | 2,129   |   |  |      |         |   |  |   | (147,213 | )
|Gain on sale of non-operating assets                                                               |  |                | 31     |   |      |   | 1,090   |      |  |   |        |   |  |      | 4,295    |   |  |   | 1,074    |  
|Write-down of property, plant and equipment                                                        |  |                |       |   |      |   |        |      |  |   | (5,622  | ) |  |      |         |   |  |   | (1,343   | )
|Equity in losses of affiliates, net of dividends received                                          |  |                | (1,752 | ) |      |   | (3,897  | )    |  |   | (2,957  | ) |  |      | (1,265   | ) |  |   | (12,292  | )
|Non-competition payments                                                                         |  |                |       |   |      |   |        |      |  |   |        |   |  |      |         |   |  |   | (6,100   | )
|Other                                                                                              |  |                | (565   | ) |      |   | (6,609  | )    |  |   | (40     | ) |  |      | 1,286    |   |  |   | (22,289  | )
|                                                                                                   |  |                |        |   |      |   |         |      |  |   |         |   |  |      |         
|                                                                                                   |  | $              | (3,839 | ) |      | $ | (95,690 | )    |  | $ | 51,985  |   |  | $    | (180,954 | ) |  | $ | (308,588 | )
|                                                                                                   |  |                |        |   |      |   |         |      |  |   |         |   |  |      |         



|    |                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | The Companys diluted earnings per share is calculated on
    the following diluted number of shares outstanding (in
    thousands): 2005  90,875, 2004   90,486,
    2003  87,311, 2002  96,066 and
    2001  100,128.                                                                
|   
|(5) | Includes goodwill and intangible assets, net of accumulated
    amortization, of $221.1 million at December 31, 2005,
    $225.5 million at December 31, 2004,
    $231.9 million at December 31, 2003,
    $245.3 million at December 31, 2002 and
    $287.7 million at December 31, 2001.






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

General




Overview


Chicago
Sun-Times, Post Tribune, Daily Southtown, Naperville Sun




36



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##### Table of Contents









The
Jerusalem Post






| |                                     
| | ------------------------------------
| | Developments Since December 31, 2005







37



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##### Table of Contents



CanWest Arbitration.








| |                                 
| | --------------------------------
| | Significant Transactions in 2005



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


|                                  |  |                         |         |   |                   |   |        |      |  |   |                       |  |  |   |         |  
|--------------------------------- |  | ----------------------- | ------- | - | ----------------- | - | ------ | ---- |  | - | --------------------- |  |  | - | ------- | -
|                                  |  | Year Ended December 31, |         |   | Incurred Since    |  
|                                  |  |                         |         |   | Inception through |  
|                                  |  | 2005                    |         |   | 2004              |   |        | 2003 |  |   | December 31, 2005 (5) | 
|                                  |  |                         |         |   |                   |   |        |      |  |   |                       | 
|                                  |  | (In thousands)          |        
|Special Committees work(1)       |  | $                       | 19,044  |   |                   | $ | 26,605 |      |  | $ | 7,072                 |  |  | $ | 52,721  |  
|Litigation costs(2)               |  |                         | 3,601   |   |                   |   | 15,522 |      |  |   | 1,446                 |  |  |   | 20,569  |  
|Indemnification fees and costs(3) |  |                         | 23,363  |   |                   |   | 17,997 |      |  |   | 1,629                 |  |  |   | 42,989  |  
|Recoveries(4)                     |  |                         | (32,375 | ) |                   |   |       |      |  |   |                      |  |  |   | (32,375 | )
|                                  |  |                         |         |   |                   |   |        |      |  |   |                       | 
|                                  |  | $                       | 13,633  |   |                   | $ | 60,124 |      |  | $ | 10,147                |  |  | $ | 83,904  |  
|                                  |  |                         |         |   |                   |   |        |      |  |   |                       | 






|    |                                                                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Costs and expenses arising from the Special Committees
    investigation. These amounts include the fees and costs of the
    Special Committees members, counsel, advisors and experts.                                                                                                    
|   
|(2) | Largely represents legal and other professional fees to defend
    the Company in litigation that has arisen as a result of the
    issues the Special Committee has investigated, including costs
    to defend the counterclaims of Hollinger Inc. and Black in the
    Delaware Litigation.

38



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##### Table of Contents





|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Represents amounts the Company has been required to advance in
    fees and costs to indemnified parties, including the indirect
    controlling stockholders and their affiliates and associates who
    are defendants in the litigation largely brought by the Company.                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(4) | Represents recoveries directly resulting from the Special
    Committees activities including approximately
    $30.3 million in a settlement with Torys LLP and
    $2.1 million in recoveries of indemnification payments from
    Black. Excludes settlements with former directors and officers,
    pursuant to a restitution agreement reached in November 2003, of
    approximately $1.7 million and $31.5 million for the
    years ended December 31, 2004 and 2003, respectively, which
    are included in Other income expense, net in the
    Consolidated Statements of Operations. See Note 17, 21(a)
    and 22(a) to the consolidated financial statements.
|   
|(5) | The Special committee was formed on June 17, 2003. These
    amounts represent the cumulative costs of the Special Committee
    investigation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



Legal Proceedings  Black v.
Hollinger International Inc., filed on May 13,
2005.


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




Critical Accounting Policies and Estimates








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

non-U.S.


39



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##### Table of Contents









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





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





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





| |                                                               
| | --------------------------------------------------------------
| | Defined Benefit Pension Plans and Post-Retirement
    Benefits





40



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##### Table of Contents







Results of Operations for the Years ended December 31,
2005, 2004 and 2003




|                         |                                |                         |         |         |      |   |         |          |   |   |         |         |  
|------------------------ | ------------------------------ | ----------------------- | ------- | ------- | ---- | - | ------- | -------- | - | - | ------- | ------- | -
|                         |                                | Year Ended December 31, |        
|                         |                                |                         |        
|                         |                                | 2005                    |         |         | 2004 |   |         | 2003     |  
|                         |                                |                         |         |         |      |   |         |          |  
|                         |                                | (Dollars in thousands)  |        
|Operating revenue:       |                                |                         |         |         |      |   |         |          |   |   |         |        
|                         | Sun-Times News Group           |                         | $       | 457,889 |      |   | $       | 464,439  |   |   | $       | 450,789 |  
|                         |                                |                         |         |         |      |   |         |          |  
|Total operating revenue  |                                | $                       | 457,889 |         |      | $ | 464,439 |          |   | $ | 450,789 |        
|                         |                                |                         |         |         |      |   |         |          |  
|Operating income (loss): |                                |                         |         |         |      |   |         |          |   |   |         |        
|                         | Sun-Times News Group           |                         | $       | 47,608  |      |   | $       | 96,420   |   |   | $       | 24,358  |  
|                         | Canadian Administrative Group  |                         |         | (2,619  | )    |   |         | (6,909   | ) |   |         | (12,984 | )
|                         | Investment and Corporate Group |                         |         | (55,307 | )    |   |         | (111,522 | ) |   |         | (45,374 | )
|                         |                                |                         |         |         |      |   |         |          |  
|Total operating loss     |                                | $                       | (10,318 | )       |      | $ | (22,011 | )        |   | $ | (34,000 | )      
|                         |                                |                         |         |         |      |   |         |          |  

|                                                               |              |                                          |         |         |      |   |          |         |  |   |          |         | 
|-------------------------------------------------------------- | ------------ | ---------------------------------------- | ------- | ------- | ---- | - | -------- | ------- |  | - | -------- | ------- | 
|                                                               |              | Year Ended December 31,                  |        
|                                                               |              |                                          |        
|                                                               |              | 2005                                     |         |         | 2004 |   |          | 2003    | 
|                                                               |              |                                          |         |         |      |   |          |         | 
|                                                               |              | (In thousands, except per share amounts) |        
|Statement of Operations Data:                                  |              |                                          |         |         |      |   |          |         |  |   |          |        
|Operating revenue:                                             |              |                                          |         |         |      |   |          |         |  |   |          |        
|                                                               | Advertising  |                                          | $       | 357,820 |      |   | $        | 362,355 |  |   | $        | 352,029 | 
|                                                               | Circulation  |                                          |         | 88,150  |      |   |          | 90,024  |  |   |          | 86,532  | 
|                                                               | Job printing |                                          |         | 9,194   |      |   |          | 8,648   |  |   |          | 7,903   | 
|                                                               | Other        |                                          |         | 2,725   |      |   |          | 3,412   |  |   |          | 4,325   | 
|                                                               |              |                                          |         |         |      |   |          |         | 
|Total operating revenue                                        |              |                                          | 457,889 |         |      |   | 464,439  |         |  |   | 450,789  |        
|Total operating costs and expenses                             |              |                                          | 468,207 |         |      |   | 486,450  |         |  |   | 484,789  |        
|                                                               |              |                                          |         |         |      |   |          |         | 
|Operating loss                                                 |              |                                          | (10,318 | )       |      |   | (22,011  | )       |  |   | (34,000  | )      
|Interest expense                                               |              |                                          | (909    | )       |      |   | (19,044  | )       |  |   | (29,332  | )      
|Amortization of deferred financing costs                       |              |                                          | (26     | )       |      |   | (780     | )       |  |   | (1,503   | )      
|Interest and dividend income                                   |              |                                          | 11,625  |         |      |   | 11,427   |         |  |   | 14,557   |        
|Other income (expense), net                                    |              |                                          | (3,839  | )       |      |   | (95,690  | )       |  |   | 51,985   |        
|                                                               |              |                                          |         |         |      |   |          |         | 
|Earnings (loss) from continuing operations before income taxes |              |                                          | (3,467  | )       |      |   | (126,098 | )       |  |   | 1,707    |        
|Income taxes                                                   |              |                                          | 42,467  |         |      |   | 29,462   |         |  |   | 112,168  |        
|                                                               |              |                                          |         |         |      |   |          |         | 
|Loss from continuing operations                                |              |                                          | (45,934 | )       |      |   | (155,560 | )       |  |   | (110,461 | )      
|                                                               |              |                                          |         |         |      |   |          |         | 
|Earnings from discontinued operations (net of income taxes)    |              |                                          | 33,965  |         |      |   | 390,228  |         |  |   | 36,153   |        
|                                                               |              |                                          |         |         |      |   |          |         | 
|Net earnings (loss)                                            |              | $                                        | (11,969 | )       |      | $ | 234,668  |         |  | $ | (74,308  | )      
|                                                               |              |                                          |         |         |      |   |          |         | 
|Loss per share from continuing operations                      |              | $                                        | (0.51   | )       |      | $ | (1.72    | )       |  | $ | (1.27    | )      
|                                                               |              |                                          |         |         |      |   |          |         | 
|Net earnings (loss) per share                                  |              | $                                        | (0.13   | )       |      | $ | 2.59     |         |  | $ | (0.85    | )      
|                                                               |              |                                          |         |         |      |   |          |         | 

41



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##### Table of Contents





| |                        
| | -----------------------
| | 2005 Compared with 2004



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





| |                                     
| | ------------------------------------
| | Operating Revenue and Operating Loss





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





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





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





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



42



---



##### Table of Contents







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





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



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





| |                                     
| | ------------------------------------
| | Operating Revenue and Operating Loss



43



---



##### Table of Contents





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

Chicago Sun-Times




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





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





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





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





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



44



---



##### Table of Contents







| |                     
| | --------------------
| | Sun-Times News Group



|                                   |                        |                         |         |         |              |   |         |         |  |   |         |         |  |      |       |      |      |  |       |      |   |  |       |      |  
|---------------------------------- | ---------------------- | ----------------------- | ------- | ------- | ------------ | - | ------- | ------- |  | - | ------- | ------- |  | ---- | ----- | ---- | ---- |  | ----- | ---- | - |  | ----- | ---- | -
|                                   |                        | Year Ended December 31, |        
|                                   |                        |                         |        
|                                   |                        | 2005                    |         |         | 2004         |   |         | 2003    |  |   | 2005    |         |  | 2004 |       |      | 2003 | 
|                                   |                        |                         |         |         |              |   |         |         |  |   |         |         |  |      |       |      |      | 
|                                   |                        | (Dollars in thousands)  |         |         | (Percentage) |  
|Operating revenue:                 |                        |                         |         |         |              |   |         |         |  |   |         |         |  |      |       |      |      |  |       |      |   |  |       |     
|                                   | Advertising            |                         | $       | 357,820 |              |   | $       | 362,355 |  |   | $       | 352,029 |  |      |       | 78.1 | %    |  |       | 78.0 | % |  |       | 78.1 | %
|                                   | Circulation            |                         |         | 88,150  |              |   |         | 90,024  |  |   |         | 86,532  |  |      |       | 19.3 |      |  |       | 19.4 |   |  |       | 19.2 |  
|                                   | Job printing and other |                         |         | 11,919  |              |   |         | 12,060  |  |   |         | 12,228  |  |      |       | 2.6  |      |  |       | 2.6  |   |  |       | 2.7  |  
|                                   |                        |                         |         |         |              |   |         |         |  |   |         |         |  |      |       |      |      | 
|Total operating revenue            |                        |                         | 457,889 |         |              |   | 464,439 |         |  |   | 450,789 |         |  |      | 100.0 |      |      |  | 100.0 |      |   |  | 100.0 |     
|                                   |                        |                         |         |         |              |   |         |         |  |   |         |         |  |      |       |      |      | 
|Operating costs and expenses:      |                        |                         |         |         |              |   |         |         |  |   |         |         |  |      |       |      |      |  |       |      |   |  |       |     
|                                   | Newsprint              |                         |         | 69,244  |              |   |         | 67,823  |  |   |         | 65,109  |  |      |       | 15.1 |      |  |       | 14.6 |   |  |       | 14.4 |  
|                                   | Compensation           |                         |         | 179,135 |              |   |         | 174,009 |  |   |         | 170,483 |  |      |       | 39.1 |      |  |       | 37.5 |   |  |       | 37.8 |  
|                                   | Other operating costs  |                         |         | 131,665 |              |   |         | 95,662  |  |   |         | 155,141 |  |      |       | 28.8 |      |  |       | 20.6 |   |  |       | 34.5 |  
|                                   | Depreciation           |                         |         | 18,180  |              |   |         | 18,673  |  |   |         | 19,344  |  |      |       | 4.0  |      |  |       | 4.0  |   |  |       | 4.3  |  
|                                   | Amortization           |                         |         | 12,057  |              |   |         | 11,852  |  |   |         | 16,354  |  |      |       | 2.6  |      |  |       | 2.5  |   |  |       | 3.6  |  
|                                   |                        |                         |         |         |              |   |         |         |  |   |         |         |  |      |       |      |      | 
|Total operating costs and expenses |                        |                         | 410,281 |         |              |   | 368,019 |         |  |   | 426,431 |         |  |      | 89.6  |      |      |  | 79.2  |      |   |  | 94.6  |     
|                                   |                        |                         |         |         |              |   |         |         |  |   |         |         |  |      |       |      |      | 
|Operating income                   |                        | $                       | 47,608  |         |              | $ | 96,420  |         |  | $ | 24,358  |         |  |      | 10.4  | %    |      |  | 20.8  | %    |   |  | 5.4   | %   
|                                   |                        |                         |         |         |              |   |         |         |  |   |         |         |  |      |       |      |      | 



| |                        
| | -----------------------
| | 2005 Compared with 2004















45



---



##### Table of Contents











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





Chicago Sun-Times



The Chicago Sun-Times Circulation Cases




Chicago Sun-Times




Chicago Sun-Times


46



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##### Table of Contents









| |                              
| | -----------------------------
| | Canadian Administrative Group



|                                   |                               |                         |        |        |      |   |        |       |  |   |         |       | 
|---------------------------------- | ----------------------------- | ----------------------- | ------ | ------ | ---- | - | ------ | ----- |  | - | ------- | ----- | 
|                                   |                               | Year Ended December 31, |       
|                                   |                               |                         |       
|                                   |                               | 2005                    |        |        | 2004 |   |        | 2003  | 
|                                   |                               |                         |        |        |      |   |        |       | 
|                                   |                               | (Dollars in thousands)  |       
|Operating costs and expenses:      |                               |                         |        |        |      |   |        |       |  |   |         |      
|                                   | Compensation                  |                         | $      | (1,249 | )    |   | $      | 2,084 |  |   | $       | 8,097 | 
|                                   | Other operating costs         |                         |        | 3,753  |      |   |        | 4,740 |  |   |         | 4,828 | 
|                                   | Depreciation and amortization |                         |        | 115    |      |   |        | 85    |  |   |         | 59    | 
|                                   |                               |                         |        |        |      |   |        |       | 
|Total operating costs and expenses |                               |                         | 2,619  |        |      |   | 6,909  |       |  |   | 12,984  |      
|                                   |                               |                         |        |        |      |   |        |       | 
|Operating loss                     |                               | $                       | (2,619 | )      |      | $ | (6,909 | )     |  | $ | (12,984 | )    
|                                   |                               |                         |        |        |      |   |        |       | 



| |                        
| | -----------------------
| | 2005 Compared with 2004





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



47



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##### Table of Contents





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



|                                   |                       |                         |         |        |      |   |          |        |  |   |         |        | 
|---------------------------------- | --------------------- | ----------------------- | ------- | ------ | ---- | - | -------- | ------ |  | - | ------- | ------ | 
|                                   |                       | Year Ended December 31, |        
|                                   |                       |                         |        
|                                   |                       | 2005                    |         |        | 2004 |   |          | 2003   | 
|                                   |                       |                         |         |        |      |   |          |        | 
|                                   |                       | (In thousands)          |        
|Operating costs and expenses:      |                       |                         |         |        |      |   |          |        |  |   |         |       
|                                   | Compensation          |                         | $       | 14,110 |      |   | $        | 18,502 |  |   | $       | 10,687 | 
|                                   | Other operating costs |                         |         | 40,828 |      |   |          | 92,521 |  |   |         | 32,761 | 
|                                   | Depreciation          |                         |         | 369    |      |   |          | 499    |  |   |         | 1,926  | 
|                                   |                       |                         |         |        |      |   |          |        | 
|Total operating costs and expenses |                       |                         | 55,307  |        |      |   | 111,522  |        |  |   | 45,374  |       
|                                   |                       |                         |         |        |      |   |          |        | 
|Operating loss                     |                       | $                       | (55,307 | )      |      | $ | (111,522 | )      |  | $ | (45,374 | )     
|                                   |                       |                         |         |        |      |   |          |        | 



| |                        
| | -----------------------
| | 2005 Compared with 2004







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



48



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Liquidity and Capital Resources












|                                               |  |                |         |  |              |   |         | 
|---------------------------------------------- |  | -------------- | ------- |  | ------------ | - | ------- | 
|                                               |  | December 31,   |         |  | December 31, |  
|                                               |  | 2005           |         |  | 2004         |  
|                                               |  |                |         |  |              |  
|                                               |  | (In thousands) |        
|Cash and cash equivalents                      |  | $              | 198,388 |  |              | $ | 274,795 | 
|Short-term investments                         |  |                | 57,650  |  |              |   | 532,050 | 
|                                               |  |                |         |  |              |  
|Total cash and short-term investments          |  | $              | 256,038 |  |              | $ | 806,845 | 
|                                               |  |                |         |  |              |  
|8.625% Senior Notes, matured on March 15, 2005 |  | $              |        |  |              | $ | 5,082   | 
|9% Senior Notes due 2010                       |  |                | 6,000   |  |              |   | 6,000   | 
|Other debt                                     |  |                | 2,067   |  |              |   | 3,251   | 
|                                               |  |                |         |  |              |  
|Total debt                                     |  | $              | 8,067   |  |              | $ | 14,333  | 
|                                               |  |                |         |  |              |  



49



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




|                                      |  |                |         |  |              |   |         | 
|------------------------------------- |  | -------------- | ------- |  | ------------ | - | ------- | 
|                                      |  | December 31,   |         |  | December 31, |  
|                                      |  | 2005           |         |  | 2004         |  
|                                      |  |                |         |  |              |  
|                                      |  | (In thousands) |        
|Classified as current liabilities     |  | $              | 557,012 |  |              | $ | 518,300 | 
|Classified as non-current liabilities |  |                | 363,495 |  |              |   | 349,228 | 
|                                      |  |                |         |  |              |  
|                                      |  | $              | 920,507 |  |              | $ | 867,528 | 
|                                      |  |                |         |  |              |  

non-U.S.






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



50



---



##### Table of Contents







Chicago Sun-Times






| |     
| | ----
| | Debt





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





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





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



51



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





| |                                                   
| | --------------------------------------------------
| | 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) |       
|9% Senior Notes(1)                 |  | $              | 6,000  |           |      | $ | 6,000       |               |  | $           |              |  |          | $       |      |  |  | $ |       | 
|Other long-term debt               |  |                | 2,067  |           |      |   | 1,148       |               |  |             | 916           |  |          |         | 3     |  |  |   |       | 
|Operating leases                   |  |                | 55,653 |           |      |   | 5,935       |               |  |             | 9,449         |  |          |         | 7,818 |  |  |   | 32,451 | 
|                                   |  |                |        |           |      |   |             |               |  |             |               |  |          |         |      
|Total contractual cash obligations |  | $              | 63,720 |           |      | $ | 13,083      |               |  | $           | 10,365        |  |          | $       | 7,821 |  |  | $ | 32,451 | 
|                                   |  |                |        |           |      |   |             |               |  |             |               |  |          |         |      






|    |                                                                                                                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | 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 reflected as Current portion
    of long-term debt in the accompanying Consolidated Balance
    Sheet at December 31, 2005.



Recent Accounting Pronouncements




52



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

Newsprint.


Inflation.


Interest Rates.


Foreign Exchange Rates.


|       |  |                |             |  |                   |   |       | 
|------ |  | -------------- | ----------- |  | ----------------- | - | ----- | 
|       |  | Actual Average |             |  |                  
|       |  | 2005 Rate      |             |  | Increase/Decrease |  
|       |  |                |             |  |                   |  
|       |  | (In thousands) |            
|Canada |  | $              | 0.8260/Cdn. |  |                   | $ | 1,685 | 

Risk Factors  Risks
Related to the Companys Business and the
Industry  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.


53



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

10-K.







|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|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

13a-15(e)


10-K


13a-15(e) 15d-15(e)




|    |                                                                     
|--- | --------------------------------------------------------------------
|(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;                                                                                                                                                                                        
|
| | 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.                                                                                                                                       



54



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Internal Control  Integrated
Framework


Ineffective Control Environment:




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company lacked formal training programs, formal job
    descriptions or policy and procedure manuals to clearly
    communicate managements and employees roles and
    responsibilities in the Companys internal control over
    financial reporting.                                                                                                                                                                                
|
| |  | The review of account reconciliations and journal entries was
    not always performed prior to the filing of the Companys
    interim financial statements.                                                                                                                                                                                                                                                                                 
|
| |  | There were no formal written or consistent policies and
    procedures and an ineffective assignment of authority and
    responsibility for the initiation and processing of transactions
    in key areas. Although certain procedures and controls were
    established, compliance was not effectively monitored, and
    neither employees nor management demonstrated an understanding
    of the purpose or importance of the controls.
|
| |  | The Company did not have formal code of conduct training
    programs or ethics training programs in place. In addition, a
    fraud reporting process had not been formalized.                                                                                                                                                                                                                                                               
|
| |  | The material weaknesses in information technology
    (IT) general controls, described below, weakened the
    Companys control environment.                                                                                                                                                                                                                                                                                               



Ineffective Communication:




| |   |                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company did not have formal policies and procedures in place
    to ensure that potential accounting or disclosure matters
    pertinent to financial reporting, such as the settlement of
    contingencies, were communicated to the Companys
    accounting and finance personnel by others within the Company in
    an appropriate form or timeframe to allow for accurate financial
    reporting.



IT General Controls:


55



---



##### Table of Contents





Income Taxes:






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





| |   |                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------
| |  | The Company completed its strategic enterprise risk assessment
    and incorporated the findings in its strategic plan.





| |   |                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A significant reorganization of the Companys operations
    was initiated, which includes a planned redesign of key
    operational processes in the Company.                              
|
| |  | An internal audit plan has been approved by the Audit Committee,
    and the execution commenced in 2006.                                                                                   
|
| |  | A vice-president of information technology has been hired to
    oversee and restructure all areas of the Companys
    information technology function.                                    
|
| |  | The Company engaged an outside service provider to perform an
    assessment of current anti-fraud activities and to review the
    methods of communication related to anti-fraud measures.
|
| |  | The Companys Audit Committee was reconstituted and all
    three members of the Committee possess significant financial
    expertise.                                                     






|         |                  
|-------- | -----------------
|Item 9B. | Other Information



56



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##### Table of Contents



Report of Independent Registered Public Accounting Firm
















Ineffective Control Environment:




| |   |                                                                                                                                                                                                                                                               
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company lacked formal training programs, formal job
    descriptions or policy and procedure manuals to clearly
    communicate managements and employees roles and
    responsibilities in the Companys internal control over
    financial reporting.
|
| |  | The review of account reconciliations and journal entries was
    not always performed prior to the filing of the Companys
    interim financial statements.                                                                                                 

57



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | There were no formal written or consistent policies and
    procedures and an ineffective assignment of authority and
    responsibility for the initiation and processing of transactions
    in key areas. Although certain procedures and controls were
    established, compliance was not effectively monitored, and
    neither employees nor management demonstrated an understanding
    of the purpose or importance of the controls.
|
| |  | The Company did not have formal code of conduct training
    programs or ethics training programs in place. In addition, a
    fraud reporting process had not been formalized.                                                                                                                                                                                                                                                               
|
| |  | The material weaknesses in information technology
    (IT) general controls, described below, weakened the
    Companys control environment.                                                                                                                                                                                                                                                                                               



Ineffective Communication:




| |   |                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The Company did not have formal policies and procedures in place
    to ensure that potential accounting or disclosure matters
    pertinent to financial reporting, such as the settlement of
    contingencies, were communicated to the Companys
    accounting and finance personnel by others within the Company in
    an appropriate form or timeframe to allow for accurate financial
    reporting.



IT General Controls:


Income Taxes:




58



---



##### Table of Contents









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





59



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##### Table of Contents






PART III







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

S-K,


S-K




www.hollingerinternational.com







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








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

S-K







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

S-K







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



60



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##### Table of Contents






PART IV







|         |                                           
|-------- | ------------------------------------------
|Item 15. | Exhibits and Financial Statement Schedules





| |                                                                      
| | ---------------------------------------------------------------------
| | (1) Consolidated Financial Statements and Supplemental
    Schedules.
|
| | (2) List of Exhibits                                                 



|        |    |                        |  |                                                                                                                                                                                                                                                                                                       |  |                                                                                                                                                
|------- | -- | ---------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        |  |                                                                                                                                                                                                                                                                                                      
|No.     |    | Description of Exhibit |  | Prior Filing                                                                                                                                                                                                                                                                                         
|        |    |                        |  |                                                                                                                                                                                                                                                                                                      
|        | 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.                                   
|        | 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.                                      

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|        |    |                        |  |                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                  
|------- | -- | ---------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        |  |                                                                                                                                                                                                                                          
|No.     |    | Description of Exhibit |  | Prior Filing                                                                                                                                                                                                                             
|        |    |                        |  |                                                                                                                                                                                                                                          
|        | 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                                                                                          |  |                                                                                                                                                                                                                                                                                  
|        | 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                    |  | Amended and Restated Employment Agreement by and between Gordon
    A. Paris and Hollinger International Inc. dated as of
    January 31, 2006                                                                                            |  |                                                                                                                                                                                                                                                                                  
|        | 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                    |  | Separation Agreement between Hollinger International Inc. and
    Paul B. Healy dated December 20, 2005                                                                                                                                   |  |                                                                                                                                                                                                                                                                                  
|        | 10 | .17                    |  | Amended and Restated Employment Agreement by and between James
    R. Van Horn and Hollinger International Inc. dated as of
    January 31, 2006                                                                                          |  |                                                                                                                                                                                                                                                                                  
|        | 10 | .18                    |  | Amended and Restated Employment Agreement by and between John
    Cruickshank and Hollinger International Inc. dated as of
    January 31, 2006                                                                                           |  |                                                                                                                                                                                                                                                                                  

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|        |    |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                 
|------- | -- | ---------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|No.     |    | Description of Exhibit |  | Prior Filing                                                                                                                                                                                                                                                                                                                                                                                                                           
|        |    |                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | 10 | .19                    |  | Amended and Restated Employment Agreement by and between Gregory
    A. Stoklosa and Hollinger International Inc., dated as of
    January 31, 2006                                                                                                                                                                                                                                                                                     |  |                                                                                                                                                 
|        | 10 | .20                    |  | Separation Agreement between Hollinger International Inc. and
    Peter K. Lane dated December 20, 2005                                                                                                                                                                                                                                                                                                                                 |  |                                                                                                                                                 
|        | 10 | .21                    |  | Amended and Restated Deferred Stock Unit Agreement between
    Gordon A. Paris and Hollinger International Inc. dated as of
    January 31, 2006                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                 
|        | 10 | .22                    |  | 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 | .23                    |  | Amended Form of Hollinger International Inc. Deferred Stock Unit
    Agreement                                                                                                                                                                                                                                                                                                                                                          |  | Incorporated by reference to Exhibit 99.2 to Item 1.01
    of Current Report on Form 8-K dated January 25, 2006.                                
|        | 10 | .24                    |  | 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 | .25                    |  | 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 | .26                    |  | Hollinger International Inc. 1999 Stock Incentive Plan                                                                                                                                                                                                                                                                                                                                                                                  |  | Incorporated by reference to Annex A to Report on
    Form DEF 14A dated March 24, 1999.                                                        
|        | 10 | .27                    |  | Hollinger International Inc. 1997 Stock Incentive Plan                                                                                                                                                                                                                                                                                                                                                                                  |  | Incorporated by reference to Annex A to Report on
    Form DEF 14A dated March 28, 1997.                                                        
|        | 10 | .28                    |  | American Publishing Company 1994 Stock Option Plan                                                                                                                                                                                                                                                                                                                                                                                      |  | Incorporated by reference to Exhibit 10.10 to Registration
    Statement on Form S-1 (No. 33-74980).                                            
|        | 10 | .29                    |  | Agreement of Compromise and Release among Cardinal Value Equity
    Partners, L.P., Hollinger International Inc., Dwayne O. Andreas,
    Richard R. Burt, Raymond G. Chambers, Henry A. Kissinger,
    Marie-Josee Kravis, Shmuel Meitar, Robert S. Strauss, A. Alfred
    Taubman, James R. Thompson, Lord Weidenfeld of Chelsea, Leslie
    H. Wexner, Gordon A. Paris, Graham W. Savage and Raymond G.H.
    Seitz dated May 4, 2005 |  | Incorporated by reference to Exhibit 10.1 to Item 1.01
    of Current Report on Form 8-K dated May 5, 2005.                                     
|        | 10 | .30                    |  | Release and Settlement Agreement between Hollinger International
    Inc. and Torys LLP dated December 6, 2005                                                                                                                                                                                                                                                                                                                          |  |                                                                                                                                                 
|        | 10 | .31                    |  | Share Purchase Agreement between HCPH Canadian Newspaper
    Holdings Co., Glacier Ventures International Corp., 6490239
    Canada Inc., Hollinger International Inc. and Jamison Newspapers
    Inc. dated December 19, 2005                                                                                                                                                                                                          |  |                                                                                                                                                 
|        | 10 | .32                    |  | Share Purchase Agreement between Glacier Ventures International
    Corp., HCPH Canadian Newspaper Holdings Co. and Hollinger
    International Inc. dated December 19, 2005                                                                                                                                                                                                                                                            |  |                                                                                                                                                 

63



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|        |    |                        |  |                                                                                                                                                                                                          |  |                                                                                                                 
|------- | -- | ---------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        |  |                                                                                                                                                                                                         
|No.     |    | Description of Exhibit |  | Prior Filing                                                                                                                                                                                            
|        |    |                        |  |                                                                                                                                                                                                         
|        | 10 | .33                    |  | Share Purchase Agreement between 0744062 B.C. Ltd., Glacier
    Ventures International Corp., Hollinger Canadian Publishing
    Holdings Co. and Hollinger International Inc. dated
    January 11, 2006 |  |                                                                                                                 
|        | 10 | .34                    |  | Hollinger International Inc. 2006 Long-Term Incentive Plan                                                                                                                                               |  | Incorporated by reference to Exhibit 99.1 to Item 1.01
    of Current Report on Form 8-K dated January 25, 2006.
|        | 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(a)                                                                                                                                  |  |                                                                                                                 
|        | 31 | .2                     |  | Certification of Chief Financial Officer pursuant to
    Rule 13a-14(a)                                                                                                                                  |  |                                                                                                                 
|        | 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                                                           |  |                                                                                                                 

64



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##### Table of Contents



SIGNATURES


10-K




| |                             
| | ----------------------------
| | 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) |  | March 31, 2006
|                                                  
|/s/ GREGORY A. STOKLOSAGregory A. Stoklosa         |  | Vice President and Chief Financial Officer
    (Principal Financial Officer)                      |  | March 31, 2006
|                                                  
|/s/ THOMAS L. KRAMThomas L. Kram                   |  | Controller and Chief
    Accounting Officer
    (Principal Accounting Officer)                    |  | March 31, 2006
|                                                  
|/s/ JOHN F. BARDJohn F. Bard                       |  | Director                                                                                          |  | March 31, 2006
|                                                  
|/s/ STANLEY M. BECKStanley M. Beck                 |  | Director                                                                                          |  | March 31, 2006
|                                                  
|/s/ RANDALL C. BENSONRandall C. Benson             |  | Director                                                                                          |  | March 31, 2006
|                                                  
|/s/ CYRUS F. FREIDHEIM, JR.Cyrus F. Freidheim, Jr. |  | Director                                                                                          |  | March 31, 2006
|                                                  
|/s/ JOHN M. OBRIENJohn M. OBrien                 |  | Director                                                                                          |  | March 31, 2006
|                                                  
|/s/ GRAHAM W. SAVAGEGraham W. Savage               |  | Director                                                                                          |  | March 31, 2006

65



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|                                           |  |          |  |                |  | 
|------------------------------------------ |  | -------- |  | -------------- |  | 
|Signature                                  |  | Title    |  | Date          
|                                           |  |          |  |               
|                                          
|/s/ RAYMOND G. H. SEITZRaymond G. H. Seitz |  | Director |  | March 31, 2006
|                                          
|/s/ RAYMOND S. TROUBHRaymond S. Troubh     |  | Director |  | March 31, 2006

66



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
















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





67



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


December 31, 2005 and 2004


|                                                                                                                                                          |                                                                                                        |                       |           |         |      |   |           |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | --------------------- | --------- | ------- | ---- | - | --------- | ------- | -
|                                                                                                                                                          |                                                                                                        | 2005                  |           |         | 2004 |  
|                                                                                                                                                          |                                                                                                        |                       |           |         |      |  
|                                                                                                                                                          |                                                                                                        | (In thousands, except |          
|                                                                                                                                                          |                                                                                                        | share data)           |          
|ASSETS                                                                                                                                                   
|Current assets:                                                                                                                                           |                                                                                                        |                       |           |         |      |   |           |        
|                                                                                                                                                          | Cash and cash equivalents                                                                              |                       | $         | 198,388 |      |   | $         | 274,795 |  
|                                                                                                                                                          | Short-term investments                                                                                 |                       |           | 57,650  |      |   |           | 532,050 |  
|                                                                                                                                                          | Accounts receivable, net of allowance for doubtful accounts of
    $11,756 in 2005 and $11,654 in 2004 |                       |           | 90,951  |      |   |           | 88,037  |  
|                                                                                                                                                          | Inventories                                                                                            |                       |           | 12,600  |      |   |           | 11,453  |  
|                                                                                                                                                          | Escrow deposits and restricted cash                                                                    |                       |           | 13,350  |      |   |           | 10,781  |  
|                                                                                                                                                          | Assets of operations to be disposed of                                                                 |                       |           | 21,418  |      |   |           | 130,039 |  
|                                                                                                                                                          | Other current assets                                                                                   |                       |           | 6,785   |      |   |           | 15,061  |  
|                                                                                                                                                          |                                                                                                        |                       |           |         |      |  
|Total current assets                                                                                                                                      |                                                                                                        |                       | 401,142   |         |      |   | 1,062,216 |        
|Loan to affiliate                                                                                                                                         |                                                                                                        |                       | 29,284    |         |      |   | 25,457    |        
|Investments                                                                                                                                               |                                                                                                        |                       | 23,037    |         |      |   | 31,379    |        
|Property, plant and equipment, net of accumulated depreciation                                                                                            |                                                                                                        |                       | 194,354   |         |      |   | 196,467   |        
|Intangible assets, net of accumulated amortization of $38,933 in
    2005 and $34,575 in 2004                                                             |                                                                                                        |                       | 96,981    |         |      |   | 101,339   |        
|Goodwill                                                                                                                                                  |                                                                                                        |                       | 124,104   |         |      |   | 124,166   |        
|Prepaid pension benefit                                                                                                                                   |                                                                                                        |                       | 95,346    |         |      |   | 88,280    |        
|Non-current assets of operations to be disposed of                                                                                                        |                                                                                                        |                       | 73,391    |         |      |   | 82,515    |        
|Other assets                                                                                                                                              |                                                                                                        |                       | 27,689    |         |      |   | 27,079    |        
|                                                                                                                                                          |                                                                                                        |                       |           |         |      |  
|Total assets                                                                                                                                              |                                                                                                        | $                     | 1,065,328 |         |      | $ | 1,738,898 |        
|                                                                                                                                                          |                                                                                                        |                       |           |         |      |  
|                                                                                                                                                         
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)                                                                                                           
|Current liabilities:                                                                                                                                      |                                                                                                        |                       |           |         |      |   |           |        
|                                                                                                                                                          | Current installments of long-term debt                                                                 |                       | $         | 7,148   |      |   | $         | 12,280  |  
|                                                                                                                                                          | Accounts payable and accrued expenses                                                                  |                       |           | 125,007 |      |   |           | 137,030 |  
|                                                                                                                                                          | Dividends payable                                                                                      |                       |           | 4,534   |      |   |           | 231,226 |  
|                                                                                                                                                          | Amounts due to related parties                                                                         |                       |           | 7,987   |      |   |           | 8,173   |  
|                                                                                                                                                          | Income taxes payable and other tax liabilities                                                         |                       |           | 586,734 |      |   |           | 686,940 |  
|                                                                                                                                                          | Liabilities of operations to be disposed of                                                            |                       |           | 12,531  |      |   |           | 16,187  |  
|                                                                                                                                                          | Deferred revenue                                                                                       |                       |           | 11,684  |      |   |           | 11,365  |  
|                                                                                                                                                          |                                                                                                        |                       |           |         |      |  
|Total current liabilities                                                                                                                                 |                                                                                                        |                       | 755,625   |         |      |   | 1,103,201 |        
|Long-term debt, less current installments                                                                                                                 |                                                                                                        |                       | 919       |         |      |   | 2,053     |        
|Deferred income taxes and other tax liabilities                                                                                                           |                                                                                                        |                       | 360,524   |         |      |   | 346,189   |        
|Non-current liabilities of operations to be disposed of                                                                                                   |                                                                                                        |                       | 15,141    |         |      |   | 34,493    |        
|Other liabilities                                                                                                                                         |                                                                                                        |                       | 102,970   |         |      |   | 100,776   |        
|                                                                                                                                                          |                                                                                                        |                       |           |         |      |  
|Total liabilities                                                                                                                                         |                                                                                                        |                       | 1,235,179 |         |      |   | 1,586,712 |        
|                                                                                                                                                          |                                                                                                        |                       |           |         |      |  
|Stockholders equity (deficit):                                                                                                                           |                                                                                                        |                       |           |         |      |   |           |        
|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 2005 and 2004 |                                                                                                        |                       | 880       |         |      |   | 880       |        
|Class B common stock, $0.01 par value. Authorized
    50,000,000 shares; 14,990,000 shares issued and
    outstanding in 2005 and 2004                    |                                                                                                        |                       | 150       |         |      |   | 150       |        
|Additional paid-in capital                                                                                                                                |                                                                                                        |                       | 493,385   |         |      |   | 492,329   |        
|Accumulated other comprehensive income:                                                                                                                   |                                                                                                        |                       |           |         |      |   |           |        
|                                                                                                                                                          | Cumulative foreign currency translation adjustment                                                     |                       |           | 20,095  |      |   |           | 36,069  |  
|                                                                                                                                                          | Unrealized gain (loss) on marketable securities                                                        |                       |           | (820    | )    |   |           | 3,343   |  
|                                                                                                                                                          | Minimum pension liability adjustment                                                                   |                       |           | (18,777 | )    |   |           | (17,956 | )
|Accumulated deficit                                                                                                                                       |                                                                                                        |                       | (515,955  | )       |      |   | (213,820  | )      
|                                                                                                                                                          |                                                                                                        |                       |           |         |      |  
|                                                                                                                                                          |                                                                                                        |                       | (21,042   | )       |      |   | 300,995   |        
|Class A common stock in treasury, at cost 
    12,320,967 shares in 2005 and 2004                                                                        |                                                                                                        |                       | (148,809  | )       |      |   | (148,809  | )      
|                                                                                                                                                          |                                                                                                        |                       |           |         |      |  
|Total stockholders equity (deficit)                                                                                                                      |                                                                                                        |                       | (169,851  | )       |      |   | 152,186   |        
|                                                                                                                                                          |                                                                                                        |                       |           |         |      |  
|Total liabilities and stockholders equity (deficit)                                                                                                      |                                                                                                        | $                     | 1,065,328 |         |      | $ | 1,738,898 |        
|                                                                                                                                                          |                                                                                                        |                       |           |         |      |  



68



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS


For the Years Ended December 31, 2005, 2004 and 2003


|                                                               |                                                                                     |                                       |         |         |      |   |          |         |   |   |          |         |  
|-------------------------------------------------------------- | ----------------------------------------------------------------------------------- | ------------------------------------- | ------- | ------- | ---- | - | -------- | ------- | - | - | -------- | ------- | -
|                                                               |                                                                                     | 2005                                  |         |         | 2004 |   |          | 2003    |  
|                                                               |                                                                                     |                                       |         |         |      |   |          |         |  
|                                                               |                                                                                     | (In thousands, except per share data) |        
|Operating revenue:                                             |                                                                                     |                                       |         |         |      |   |          |         |   |   |          |        
|                                                               | Advertising                                                                         |                                       | $       | 357,820 |      |   | $        | 362,355 |   |   | $        | 352,029 |  
|                                                               | Circulation                                                                         |                                       |         | 88,150  |      |   |          | 90,024  |   |   |          | 86,532  |  
|                                                               | Job printing                                                                        |                                       |         | 9,194   |      |   |          | 8,648   |   |   |          | 7,903   |  
|                                                               | Other                                                                               |                                       |         | 2,725   |      |   |          | 3,412   |   |   |          | 4,325   |  
|                                                               |                                                                                     |                                       |         |         |      |   |          |         |  
|                                                               | Total operating revenue                                                             |                                       |         | 457,889 |      |   |          | 464,439 |   |   |          | 450,789 |  
|Operating costs and expenses:                                  |                                                                                     |                                       |         |         |      |   |          |         |   |   |          |        
|                                                               | Newsprint                                                                           |                                       |         | 69,244  |      |   |          | 67,823  |   |   |          | 65,109  |  
|                                                               | Compensation                                                                        |                                       |         | 191,996 |      |   |          | 194,595 |   |   |          | 189,267 |  
|                                                               | Other operating costs                                                               |                                       |         | 176,246 |      |   |          | 192,923 |   |   |          | 192,730 |  
|                                                               | Depreciation                                                                        |                                       |         | 18,664  |      |   |          | 19,257  |   |   |          | 21,329  |  
|                                                               | Amortization                                                                        |                                       |         | 12,057  |      |   |          | 11,852  |   |   |          | 16,354  |  
|                                                               |                                                                                     |                                       |         |         |      |   |          |         |  
|                                                               | Total operating costs and expenses                                                  |                                       |         | 468,207 |      |   |          | 486,450 |   |   |          | 484,789 |  
|                                                               |                                                                                     |                                       |         |         |      |   |          |         |  
|Operating loss                                                 |                                                                                     |                                       | (10,318 | )       |      |   | (22,011  | )       |   |   | (34,000  | )      
|                                                               |                                                                                     |                                       |         |         |      |   |          |         |  
|Other income (expense):                                        |                                                                                     |                                       |         |         |      |   |          |         |   |   |          |        
|                                                               | Interest expense                                                                    |                                       |         | (909    | )    |   |          | (19,044 | ) |   |          | (29,332 | )
|                                                               | Amortization of deferred financing costs                                            |                                       |         | (26     | )    |   |          | (780    | ) |   |          | (1,503  | )
|                                                               | Interest and dividend income                                                        |                                       |         | 11,625  |      |   |          | 11,427  |   |   |          | 14,557  |  
|                                                               | Other income (expense), net                                                         |                                       |         | (3,839  | )    |   |          | (95,690 | ) |   |          | 51,985  |  
|                                                               |                                                                                     |                                       |         |         |      |   |          |         |  
|Total other income (expense)                                   |                                                                                     |                                       | 6,851   |         |      |   | (104,087 | )       |   |   | 35,707   |        
|                                                               |                                                                                     |                                       |         |         |      |   |          |         |  
|Earnings (loss) from continuing operations before income taxes |                                                                                     |                                       | (3,467  | )       |      |   | (126,098 | )       |   |   | 1,707    |        
|Income taxes                                                   |                                                                                     |                                       | 42,467  |         |      |   | 29,462   |         |   |   | 112,168  |        
|                                                               |                                                                                     |                                       |         |         |      |   |          |         |  
|Loss from continuing operations                                |                                                                                     |                                       | (45,934 | )       |      |   | (155,560 | )       |   |   | (110,461 | )      
|                                                               |                                                                                     |                                       |         |         |      |   |          |         |  
|Discontinued operations (net of income taxes):                 |                                                                                     |                                       |         |         |      |   |          |         |   |   |          |        
|                                                               | Earnings from operations of business segments disposed of and to
    be disposed of |                                       |         | 1,062   |      |   |          | 7,378   |   |   |          | 36,153  |  
|                                                               | Gain from disposal of business segments                                             |                                       |         | 32,903  |      |   |          | 382,850 |   |   |          |        |  
|                                                               |                                                                                     |                                       |         |         |      |   |          |         |  
|                                                               | Earnings from discontinued operations                                               |                                       |         | 33,965  |      |   |          | 390,228 |   |   |          | 36,153  |  
|                                                               |                                                                                     |                                       |         |         |      |   |          |         |  
|Net earnings (loss)                                            |                                                                                     | $                                     | (11,969 | )       |      | $ | 234,668  |         |   | $ | (74,308  | )      
|                                                               |                                                                                     |                                       |         |         |      |   |          |         |  
|Basic and diluted earnings per share:                          |                                                                                     |                                       |         |         |      |   |          |         |   |   |          |        
|                                                               | Weighted average shares outstanding                                                 |                                       |         | 90,875  |      |   |          | 90,486  |   |   |          | 87,311  |  
|                                                               |                                                                                     |                                       |         |         |      |   |          |         |  
|                                                               | Loss from continuing operations                                                     |                                       | $       | (0.51   | )    |   | $        | (1.72   | ) |   | $        | (1.27   | )
|                                                               | Earnings from discontinued operations                                               |                                       |         | 0.38    |      |   |          | 4.31    |   |   |          | 0.42    |  
|                                                               |                                                                                     |                                       |         |         |      |   |          |         |  
|                                                               | Net earnings (loss)                                                                 |                                       | $       | (0.13   | )    |   | $        | 2.59    |   |   | $        | (0.85   | )
|                                                               |                                                                                     |                                       |         |         |      |   |          |         |  



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


For the Years Ended December 31, 2005, 2004 and 2003


|                                                                                                                                                                                                                                                                                                                                     |  |                |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                                                                                                                                                                                                                                                                     |  | 2005           |         |   | 2004 |   |         | 2003 | 
|                                                                                                                                                                                                                                                                                                                                     |  |                |         |   |      |   |         |      | 
|                                                                                                                                                                                                                                                                                                                                     |  | (In thousands) |        
|Net earnings (loss)                                                                                                                                                                                                                                                                                                                  |  | $              | (11,969 | ) |      | $ | 234,668 |      |  | $ | (74,308 | )
|Other comprehensive income (loss):                                                                                                                                                                                                                                                                                                   |  |                |         |   |      |   |         |      |  |   |         |  
|Foreign currency translation adjustments, net of related tax
    provision of $757 (2004  $176; 2003 
    $1,526)                                                                                                                                                                                                                  |  |                | (17,215 | ) |      |   | (24,796 | )    |  |   | (24,275 | )
|Reclassification adjustment for realized foreign exchange losses
    upon the substantial reduction of net investment in foreign
    operations                                                                                                                                                                                      |  |                | 1,241   |   |      |   | 114,111 |      |  |   |        |  
|                                                                                                                                                                                                                                                                                                                                     |  |                |         |   |      |   |         |      | 
|                                                                                                                                                                                                                                                                                                                                     |  |                | (15,974 | ) |      |   | 89,315  |      |  |   | (24,275 | )
|                                                                                                                                                                                                                                                                                                                                     |  |                |         |   |      |   |         |      | 
|Unrealized gain (loss) on marketable securities arising during
    the year, net of a related tax benefit of $616 (2004 
    net of related tax provision of $2,250; 2003  net of
    related tax provision of $3,952 and minority interest of $2,053)                                                                             |  |                | (951    | ) |      |   | 3,993   |      |  |   | 13,872  |  
|Reclassification adjustment for realized gains reclassified out
    of accumulated other comprehensive income (loss), net of related
    tax benefit of $1,851 (2004  net of related tax
    benefit of $3,544 and recovery of $1,665; 2003  net
    of related tax benefit of $842 and recovery of minority interest
    of $193) |  |                | (3,212  | ) |      |   | (11,825 | )    |  |   | (2,003  | )
|                                                                                                                                                                                                                                                                                                                                     |  |                |         |   |      |   |         |      | 
|                                                                                                                                                                                                                                                                                                                                     |  |                | (4,163  | ) |      |   | (7,832  | )    |  |   | 11,869  |  
|                                                                                                                                                                                                                                                                                                                                     |  |                |         |   |      |   |         |      | 
|Minimum pension liability adjustment, net of related tax benefit
    of $1,430 and minority interest of $36 (2004  net of
    related tax provision of $12,665 and recovery of minority
    interest of $119; 2003  net of related tax provision
    of $101 and minority interest of $11)                                         |  |                | (821    | ) |      |   | 28,463  |      |  |   | (1,710  | )
|                                                                                                                                                                                                                                                                                                                                     |  |                |         |   |      |   |         |      | 
|                                                                                                                                                                                                                                                                                                                                     |  |                | (20,958 | ) |      |   | 109,946 |      |  |   | (14,116 | )
|                                                                                                                                                                                                                                                                                                                                     |  |                |         |   |      |   |         |      | 
|Comprehensive income (loss)                                                                                                                                                                                                                                                                                                          |  | $              | (32,927 | ) |      | $ | 344,614 |      |  | $ | (88,424 | )
|                                                                                                                                                                                                                                                                                                                                     |  |                |         |   |      |   |         |      | 



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(DEFICIT)


For the Years Ended December 31, 2005, 2004 and 2003


|                                                                     |  |                |       |   |            |             |         |               |  |   |             |   |  |          |          |   |       |   |          |   |  |   |          |  
|-------------------------------------------------------------------- |  | -------------- | ----- | - | ---------- | ----------- | ------- | ------------- |  | - | ----------- | - |  | -------- | -------- | - | ----- | - | -------- | - |  | - | -------- | -
|                                                                     |  |                |       |   |            | Accumulated |         |               |  |   |             |   | 
|                                                                     |  | Common         |       |   | Additional |             |         | Other         |  |   |             |   |  |          |         
|                                                                     |  | Stock          |       |   | Paid-In    |             |         | Comprehensive |  |   | Accumulated |   |  | Treasury |          |   |      
|                                                                     |  | Class A & B    |       |   | Capital    |             |         | Income (Loss) |  |   | Deficit     |   |  | Stock    |          |   | Total |  
|                                                                     |  |                |       |   |            |             |         |               |  |   |             |   |  |          |          |   |       |  
|                                                                     |  | (In thousands) |      
|Balance at January 1, 2003                                           |  | $              | 1,008 |   |            | $           | 439,242 |               |  | $ | (74,374     | ) |  | $        | (107,983 | ) |       | $ | (139,960 | ) |  | $ | 117,933  |  
|Stock options exercised                                              |  |                | 11    |   |            |             | 12,104  |               |  |   |            |   |  |          |         |   |       |   |         |   |  |   | 12,115   |  
|Stock-based compensation                                             |  |                |      |   |            |             | 6,722   |               |  |   |            |   |  |          |         |   |       |   |         |   |  |   | 6,722    |  
|Dividends payable in cash  Class A and
    Class B, $0.20 per share |  |                |      |   |            |             |        |               |  |   |            |   |  |          | (17,403  | ) |       |   |         |   |  |   | (17,403  | )
|In-kind dividends                                                    |  |                |      |   |            |             | 3,906   |               |  |   |            |   |  |          | (3,906   | ) |       |   |         |   |  |   |         |  
|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   |  
|Purchase of Class A Common Stock                                     |  |                |      |   |            |             |        |               |  |   |            |   |  |          |         |   |       |   | (8,849   | ) |  |   | (8,849   | )
|Redemption of Class A Common Stock                                   |  |                | (20   | ) |            |             | (16,480 | )             |  |   |            |   |  |          |         |   |       |   |         |   |  |   | (16,500  | )
|Net loss                                                             |  |                |      |   |            |             |        |               |  |   |            |   |  |          | (74,308  | ) |       |   |         |   |  |   | (74,308  | )
|                                                                     |  |                |       |   |            |             |         |               |  |   |             |   |  |          |          |   |       |  
|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  |  
|Stock-based compensation                                             |  |                |      |   |            |             | 1,056   |               |  |   |            |   |  |          |         |   |       |   |         |   |  |   | 1,056    |  
|Dividends payable in cash  Class A and
    Class B, $3.20 per share |  |                |      |   |            |             |        |               |  |   |            |   |  |          | (290,166 | ) |       |   |         |   |  |   | (290,166 | )
|Minimum pension liability adjustment                                 |  |                |      |   |            |             |        |               |  |   | (821        | ) |  |          |         |   |       |   |         |   |  |   | (821     | )
|Translation adjustments                                              |  |                |      |   |            |             |        |               |  |   | (15,974     | ) |  |          |         |   |       |   |         |   |  |   | (15,974  | )
|Change in unrealized loss on securities, net                         |  |                |      |   |            |             |        |               |  |   | (4,163      | ) |  |          |         |   |       |   |         |   |  |   | (4,163   | )
|Net loss                                                             |  |                |      |   |            |             |        |               |  |   |            |   |  |          | (11,969  | ) |       |   |         |   |  |   | (11,969  | )
|                                                                     |  |                |       |   |            |             |         |               |  |   |             |   |  |          |          |   |       |  
|Balance at December 31, 2005                                         |  | $              | 1,030 |   |            | $           | 493,385 |               |  | $ | 498         |   |  | $        | (515,955 | ) |       | $ | (148,809 | ) |  | $ | (169,851 | )
|                                                                     |  |                |       |   |            |             |         |               |  |   |             |   |  |          |          |   |       |  



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


For the Years Ended December 31, 2005, 2004 and 2003


|                                                                            |                                                                                                                                 |                                                |          |          |          |   |          |           |          |   |         |          |         |  
|--------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------- | -------- | -------- | -------- | - | -------- | --------- | -------- | - | ------- | -------- | ------- | -
|                                                                            |                                                                                                                                 | 2005                                           |          |          | 2004     |   |          | 2003      |         
|                                                                            |                                                                                                                                 |                                                |          |          |          |   |          |           |         
|                                                                            |                                                                                                                                 | (In thousands)                                 |         
|Cash Flows From Continuing Operating Activities:                            |                                                                                                                                 |                                                |          |          |          |   |          |           |          |   |         |         
|                                                                            | Net earnings (loss)                                                                                                             |                                                | $        | (11,969  | )        |   | $        | 234,668   |          |   | $       | (74,308  | )      
|                                                                            | Earnings from discontinued operations                                                                                           |                                                |          | (33,965  | )        |   |          | (390,228  | )        |   |         | (36,153  | )      
|                                                                            |                                                                                                                                 |                                                |          |          |          |   |          |           |         
|                                                                            | Loss from continuing operations                                                                                                 |                                                |          | (45,934  | )        |   |          | (155,560  | )        |   |         | (110,461 | )      
|                                                                            | Adjustments to reconcile loss from continuing operations to net
    cash provided by (used in) continuing operating activities: |                                                |          |          |          |   |          |           |          |   |         |          |        
|                                                                            | Depreciation and amortization                                                                                                   |                                                |          | 30,721   |          |   |          | 31,109    |          |   |         | 37,683   |        
|                                                                            | Deferred income taxes                                                                                                           |                                                |          | 29,903   |          |   |          | 19,708    |          |   |         | 29,824   |        
|                                                                            | Amortization of deferred financing costs                                                                                        |                                                |          | 26       |          |   |          | 780       |          |   |         | 1,503    |        
|                                                                            | Premium on debt extinguishments                                                                                                 |                                                |          |         |          |   |          | 50,617    |          |   |         | 19,657   |        
|                                                                            | Equity in losses of affiliates, net of dividends received                                                                       |                                                |          | 1,752    |          |   |          | 3,897     |          |   |         | 2,957    |        
|                                                                            | Gain on sales of investments                                                                                                    |                                                |          | (2,511   | )        |   |          | (1,709    | )        |   |         | (2,129   | )      
|                                                                            | Loss (gain) on sales of property, plant and equipment                                                                           |                                                |          | (202     | )        |   |          | (45,918   | )        |   |         | 156      |        
|                                                                            | Write-down of investments                                                                                                       |                                                |          | 298      |          |   |          | 365       |          |   |         | 14,496   |        
|                                                                            | Write-down of property, plant and equipment                                                                                     |                                                |          |         |          |   |          |          |          |   |         | 5,622    |        
|                                                                            | Loss (gain) on Participation Trust and CanWest Debentures                                                                       |                                                |          |         |          |   |          | 22,689    |          |   |         | (83,681  | )      
|                                                                            | Other                                                                                                                           |                                                |          | 1,656    |          |   |          | 15,285    |          |   |         | 25,199   |        
|                                                                            | Changes in current assets and liabilities, net of dispositions:                                                                 |                                                |          |          |          |   |          |           |          |   |         |          |        
|                                                                            |                                                                                                                                 | Accounts receivable                            |          |          | (6,028   | ) |          |           | 7,458    |   |         |          | 7,356   |  
|                                                                            |                                                                                                                                 | Inventories                                    |          |          | (1,147   | ) |          |           | (2,141   | ) |         |          | (528    | )
|                                                                            |                                                                                                                                 | Other current assets                           |          |          | 8,366    |   |          |           | (1,728   | ) |         |          | (2,220  | )
|                                                                            |                                                                                                                                 | Accounts payable and accrued expenses          |          |          | (8,464   | ) |          |           | 24,104   |   |         |          | 11,677  |  
|                                                                            |                                                                                                                                 | Income taxes payable and other tax liabilities |          |          | (142,089 | ) |          |           | 23,839   |   |         |          | 94,891  |  
|                                                                            |                                                                                                                                 | Deferred revenue and other                     |          |          | (8,347   | ) |          |           | (13,232  | ) |         |          | (14,291 | )
|                                                                            |                                                                                                                                 |                                                |          |          |          |   |          |           |         
|Cash provided by (used in) continuing operating activities                  |                                                                                                                                 |                                                | (142,000 | )        |          |   | (20,437  | )         |          |   | 37,711  |         
|                                                                            |                                                                                                                                 |                                                |          |          |          |   |          |           |         
|Cash Flows From Investing Activities:                                       |                                                                                                                                 |                                                |          |          |          |   |          |           |          |   |         |         
|                                                                            | Purchase of property, plant and equipment                                                                                       |                                                |          | (16,626  | )        |   |          | (29,331   | )        |   |         | (7,725   | )      
|                                                                            | Proceeds from sale of property, plant and equipment                                                                             |                                                |          | 281      |          |   |          | 87,207    |          |   |         | 338      |        
|                                                                            | Investments and other non-current assets                                                                                        |                                                |          | (9,174   | )        |   |          | (10,106   | )        |   |         | (19,737  | )      
|                                                                            | Sale (purchase) of short-term investments, net                                                                                  |                                                |          | 474,400  |          |   |          | (512,650  | )        |   |         | (19,400  | )      
|                                                                            | Proceeds on disposal of investments and other assets                                                                            |                                                |          | 4,550    |          |   |          | 57,837    |          |   |         | 12,286   |        
|                                                                            | Proceeds from the sale of newspaper operations, net of cash
    disposed                                                        |                                                |          | 38,677   |          |   |          | 1,204,036 |          |   |         |         |        
|                                                                            | Other                                                                                                                           |                                                |          |         |          |   |          | 588       |          |   |         | 68       |        
|                                                                            |                                                                                                                                 |                                                |          |          |          |   |          |           |         
|Cash provided by (used in) investing activities                             |                                                                                                                                 |                                                | 492,108  |          |          |   | 797,581  |           |          |   | (34,170 | )       
|                                                                            |                                                                                                                                 |                                                |          |          |          |   |          |           |         
|Cash Flows From Financing Activities:                                       |                                                                                                                                 |                                                |          |          |          |   |          |           |          |   |         |         
|                                                                            | Repayment of debt and premium on debt extinguishment                                                                            |                                                |          | (6,304   | )        |   |          | (346,593  | )        |   |         | (525,955 | )      
|                                                                            | Change in borrowings with related parties                                                                                       |                                                |          | (6,966   | )        |   |          | 21,020    |          |   |         | (49,053  | )      
|                                                                            | Escrow deposits and restricted cash                                                                                             |                                                |          | (2,569   | )        |   |          | (10,781   | )        |   |         | 545,952  |        
|                                                                            | Net proceeds from issuance of equity securities                                                                                 |                                                |          |         |          |   |          | 36,946    |          |   |         | 12,115   |        
|                                                                            | Repurchase of common shares                                                                                                     |                                                |          |         |          |   |          |          |          |   |         | (8,849   | )      
|                                                                            | Dividends paid                                                                                                                  |                                                |          | (516,858 | )        |   |          | (17,940   | )        |   |         | (17,403  | )      
|                                                                            | Other                                                                                                                           |                                                |          |         |          |   |          |          |          |   |         | (4,328   | )      
|                                                                            |                                                                                                                                 |                                                |          |          |          |   |          |           |         
|Cash used in financing activities                                           |                                                                                                                                 |                                                | (532,697 | )        |          |   | (317,348 | )         |          |   | (47,521 | )       
|                                                                            |                                                                                                                                 |                                                |          |          |          |   |          |           |         
|Net cash provided by (used in) discontinued operations (See
    Note 1(r)): |                                                                                                                                 |                                                |          |          |          |   |          |           |          |   |         |         
|                                                                            |                                                                                                                                 | Operating cash flows                           |          |          | 54,622   |   |          |           | (49,807  | ) |         |          | 69,641  |  
|                                                                            |                                                                                                                                 | Investing cash flows                           |          |          | (4,680   | ) |          |           | 82,127   |   |         |          | 14,188  |  
|                                                                            |                                                                                                                                 | Financing cash flows                           |          |          | 53,717   |   |          |           | (276,412 | ) |         |          | (77,552 | )
|                                                                            |                                                                                                                                 |                                                |          |          |          |   |          |           |         
|Effect of exchange rate changes on cash                                     |                                                                                                                                 |                                                | 2,523    |          |          |   | 369      |           |          |   | 3,535   |         
|                                                                            |                                                                                                                                 |                                                |          |          |          |   |          |           |         
|Net increase (decrease) in cash and cash equivalents                        |                                                                                                                                 |                                                | (76,407  | )        |          |   | 216,073  |           |          |   | (34,168 | )       
|Cash and cash equivalents at beginning of year                              |                                                                                                                                 |                                                | 274,795  |          |          |   | 58,722   |           |          |   | 92,890  |         
|                                                                            |                                                                                                                                 |                                                |          |          |          |   |          |           |         
|Cash and cash equivalents at end of year                                    |                                                                                                                                 | $                                              | 198,388  |          |          | $ | 274,795  |           |          | $ | 58,722  |         
|                                                                            |                                                                                                                                 |                                                |          |          |          |   |          |           |         



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


For the Years Ended December 31, 2005, 2004 and 2003




|    |                                
|--- | -------------------------------
|(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



|                             |  |                |        |   |      |   |        |      |  |   |        |  
|---------------------------- |  | -------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                             |  | 2005           |        |   | 2004 |   |        | 2003 | 
|                             |  |                |        |   |      |   |        |      | 
|                             |  | (In thousands) |       
|Balance at beginning of year |  | $              | 11,654 |   |      | $ | 14,381 |      |  | $ | 15,792 |  
|Provision                    |  |                | 4,598  |   |      |   | 2,241  |      |  |   | 4,746  |  
|Write-offs                   |  |                | (5,886 | ) |      |   | (7,336 | )    |  |   | (7,364 | )
|Recoveries                   |  |                | 1,390  |   |      |   | 2,368  |      |  |   | 1,207  |  
|                             |  |                |        |   |      |   |        |      | 
|Balance at end of year       |  | $              | 11,756 |   |      | $ | 11,654 |      |  | $ | 14,381 |  
|                             |  |                |        |   |      |   |        |      | 



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

first-in,




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



93-7 11-year






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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)






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





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



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













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





year-to


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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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

AA-rated






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





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





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



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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





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











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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                               |  |                                          |         |   |      |   |          |      |  |   |          |  
|-------------------------------------------------------------- |  | ---------------------------------------- | ------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                               |  | 2005                                     |         |   | 2004 |   |          | 2003 | 
|                                                               |  |                                          |         |   |      |   |          |      | 
|                                                               |  | (In thousands, except per share amounts) |        
|Loss from continuing operations, as reported                   |  | $                                        | (45,934 | ) |      | $ | (155,560 | )    |  | $ | (110,461 | )
|Add: stock-based compensation expense, as reported             |  |                                          | 1,056   |   |      |   | 10,588   |      |  |   | 6,722    |  
|Deduct: pro forma stock-based compensation expense             |  |                                          | (1,845  | ) |      |   | (5,566   | )    |  |   | (9,336   | )
|                                                               |  |                                          |         |   |      |   |          |      | 
|Pro forma loss from continuing operations                      |  | $                                        | (46,723 | ) |      | $ | (150,538 | )    |  | $ | (113,075 | )
|                                                               |  |                                          |         |   |      |   |          |      | 
|Basic loss from continuing operations per share, as reported   |  | $                                        | (0.51   | ) |      | $ | (1.72    | )    |  | $ | (1.27    | )
|Diluted loss from continuing operations per share, as reported |  | $                                        | (0.51   | ) |      | $ | (1.72    | )    |  | $ | (1.27    | )
|Pro forma basic loss from continuing operations per share      |  | $                                        | (0.51   | ) |      | $ | (1.66    | )    |  | $ | (1.30    | )
|Pro forma diluted loss from continuing operations per share    |  | $                                        | (0.51   | ) |      | $ | (1.66    | )    |  | $ | (1.30    | )





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







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





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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






|    |                                         
|--- | ----------------------------------------
|(2) | Dispositions and Discontinued Operations



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










The Jerusalem Post, The Jerusalem


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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Report








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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                   |                               |                         |         |        |      |   |        |        |  |   |        |        | 
|---------------------------------- | ----------------------------- | ----------------------- | ------- | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ | 
|                                   |                               | Year Ended December 31, |        
|                                   |                               |                         |        
|                                   |                               | 2005                    |         |        | 2004 |   |        | 2003   | 
|                                   |                               |                         |         |        |      |   |        |        | 
|                                   |                               | (In thousands)          |        
|Operating revenue:                 |                               |                         |         |        |      |   |        |        |  |   |        |       
|                                   | Advertising                   |                         | $       | 75,246 |      |   | $      | 66,286 |  |   | $      | 58,854 | 
|                                   | Circulation                   |                         |         | 12,908 |      |   |        | 12,504 |  |   |        | 11,688 | 
|                                   | Job printing and other        |                         |         | 12,684 |      |   |        | 10,709 |  |   |        | 10,000 | 
|                                   |                               |                         |         |        |      |   |        |        | 
|Total operating revenue            |                               |                         | 100,838 |        |      |   | 89,499 |        |  |   | 80,542 |       
|                                   |                               |                         |         |        |      |   |        |        | 
|Operating costs and expenses:      |                               |                         |         |        |      |   |        |        |  |   |        |       
|                                   | Newsprint                     |                         |         | 8,624  |      |   |        | 7,640  |  |   |        | 6,810  | 
|                                   | Compensation                  |                         |         | 41,653 |      |   |        | 38,806 |  |   |        | 35,414 | 
|                                   | Other operating costs         |                         |         | 31,404 |      |   |        | 30,422 |  |   |        | 28,815 | 
|                                   | Depreciation and amortization |                         |         | 2,493  |      |   |        | 1,631  |  |   |        | 1,502  | 
|                                   |                               |                         |         |        |      |   |        |        | 
|Total operating costs and expenses |                               |                         | 84,174  |        |      |   | 78,499 |        |  |   | 72,541 |       
|                                   |                               |                         |         |        |      |   |        |        | 
|Operating income                   |                               | $                       | 16,664  |        |      | $ | 11,000 |        |  | $ | 8,001  |       
|                                   |                               |                         |         |        |      |   |        |        | 





|    |                     
|--- | --------------------
|(3) | Other Current Assets





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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |            
|--- | -----------
|(4) | Investments

|                                              |                                           |                |        |        |      |   |        |        | 
|--------------------------------------------- | ----------------------------------------- | -------------- | ------ | ------ | ---- | - | ------ | ------ | 
|                                              |                                           | December 31,   |       
|                                              |                                           |                |       
|                                              |                                           | 2005           |        |        | 2004 |  
|                                              |                                           |                |        |        |      |  
|                                              |                                           | (In thousands) |       
|Available-for-sale securities, at fair value: |                                           |                |        |        |      |   |        |       
|                                              | Equity securities                         |                | $      | 6,265  |      |   | $      | 7,824  | 
|Other non-marketable investments, at cost:    |                                           |                |        |        |      |   |        |       
|                                              | Internet and technology related companies |                |        | 3,089  |      |   |        | 10,401 | 
|                                              | Other                                     |                |        | 11,540 |      |   |        | 11,057 | 
|                                              |                                           |                |        |        |      |  
|                                              |                                           |                | 14,629 |        |      |   | 21,458 |       
|                                              |                                           |                |        |        |      |  
|Equity accounted companies, at equity:        |                                           |                |        |        |      |   |        |       
|                                              | Internet related companies                |                |        | 184    |      |   |        | 305    | 
|                                              | Other                                     |                |        | 1,959  |      |   |        | 1,792  | 
|                                              |                                           |                |        |        |      |  
|                                              |                                           |                | 2,143  |        |      |   | 2,097  |       
|                                              |                                           |                |        |        |      |  
|                                              |                                           | $              | 23,037 |        |      | $ | 31,379 |       
|                                              |                                           |                |        |        |      |  

|                                                                                             |                                       |                |      |        |      |   |       |        |  
|-------------------------------------------------------------------------------------------- | ------------------------------------- | -------------- | ---- | ------ | ---- | - | ----- | ------ | -
|                                                                                             |                                       | December 31,   |     
|                                                                                             |                                       |                |     
|                                                                                             |                                       | 2005           |      |        | 2004 |  
|                                                                                             |                                       |                |      |        |      |  
|                                                                                             |                                       | (In thousands) |     
|Gross unrealized holding gains (losses) on available-for-sale
    securities:                |                                       |                |      |        |      |   |       |       
|                                                                                             | Equity securities                     |                | $    | (1,469 | )    |   | $     | 5,160  |  
|                                                                                             | Less  deferred tax benefit (expense) |                |      | 649    |      |   |       | (1,817 | )
|                                                                                             |                                       |                |      |        |      |  
|Unrealized gain (loss) on available-for-sale securities included
    in stockholders equity |                                       | $              | (820 | )      |      | $ | 3,343 |       
|                                                                                             |                                       |                |      |        |      |  



1 8 1 8




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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)














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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                              
|--- | -----------------------------
|(5) | Property, Plant and Equipment

|                                 |  |                |          |   |      |   |         |  
|-------------------------------- |  | -------------- | -------- | - | ---- | - | ------- | -
|                                 |  | December 31,   |         
|                                 |  |                |         
|                                 |  | 2005           |          |   | 2004 |  
|                                 |  |                |          |   |      |  
|                                 |  | (In thousands) |         
|Land                             |  | $              | 9,819    |   |      | $ | 9,819   |  
|Building and leasehold interests |  |                | 106,891  |   |      |   | 106,761 |  
|Machinery and equipment          |  |                | 192,742  |   |      |   | 172,842 |  
|Construction in progress         |  |                | 2,262    |   |      |   | 6,545   |  
|Less: accumulated depreciation   |  |                | (117,360 | ) |      |   | (99,500 | )
|                                 |  |                |          |   |      |  
|                                 |  | $              | 194,354  |   |      | $ | 196,467 |  
|                                 |  |                |          |   |      |  





|    |                               
|--- | ------------------------------
|(6) | Goodwill and Intangible Assets



|                                           |  |            |         |  
|------------------------------------------ |  | ---------- | ------- | -
|                                           |  | Total      |        
|                                           |  |            |        
|                                           |  | (In        |        
|                                           |  | thousands) |        
|Balance as of January 1, 2004              |  | $          | 124,397 |  
|Adjustments of excess acquisition reserves |  |            | (231    | )
|                                           |  |            |        
|Balance as of December 31, 2004            |  | $          | 124,166 |  
|Adjustments of excess acquisition reserves |  |            | (62     | )
|                                           |  |            |        
|Balance as of December 31, 2005            |  | $          | 124,104 |  
|                                           |  |            |        



|                                         |  |                |         |   |      |   |         |  
|---------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | -
|                                         |  | December 31,   |        
|                                         |  |                |        
|                                         |  | 2005           |         |   | 2004 |  
|                                         |  |                |         |   |      |  
|                                         |  | (In thousands) |        
|Subscriber and advertiser relationships: |  |                |         |   |      |   |         |  
|Gross carrying amount                    |  | $              | 135,914 |   |      | $ | 135,914 |  
|Accumulated amortization                 |  |                | (38,933 | ) |      |   | (34,575 | )
|                                         |  |                |         |   |      |  
|Net book value                           |  | $              | 96,981  |   |      | $ | 101,339 |  
|                                         |  |                |         |   |      |  



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |             
|--- | ------------
|(7) | Other Assets

|                                                                 |  |                |        |  |      |   |        | 
|---------------------------------------------------------------- |  | -------------- | ------ |  | ---- | - | ------ | 
|                                                                 |  | December 31,   |       
|                                                                 |  |                |       
|                                                                 |  | 2005           |        |  | 2004 |  
|                                                                 |  |                |        |  |      |  
|                                                                 |  | (In thousands) |       
|Deferred financing costs                                         |  | $              | 150    |  |      | $ | 176    | 
|Capitalized telemarketing costs, net of accumulated amortization |  |                | 16,203 |  |      |   | 15,408 | 
|Receivable from Bradford Publishing Co. (Note 22(j))             |  |                | 3,430  |  |      |   | 3,430  | 
|Receivable from Horizon Publications Inc. (Note 22(k))           |  |                | 4,700  |  |      |   | 4,700  | 
|Intangible asset  pension (Note 15)                             |  |                | 1,464  |  |      |   | 1,614  | 
|Other                                                            |  |                | 1,742  |  |      |   | 1,751  | 
|                                                                 |  |                |        |  |      |  
|                                                                 |  | $              | 27,689 |  |      | $ | 27,079 | 
|                                                                 |  |                |        |  |      |  



|    |                                      
|--- | -------------------------------------
|(8) | Accounts Payable and Accrued Expenses

|                  |                                                                       |                |         |        |      |   |         |        | 
|----------------- | --------------------------------------------------------------------- | -------------- | ------- | ------ | ---- | - | ------- | ------ | 
|                  |                                                                       | December 31,   |        
|                  |                                                                       |                |        
|                  |                                                                       | 2005           |         |        | 2004 |  
|                  |                                                                       |                |         |        |      |  
|                  |                                                                       | (In thousands) |        
|Accounts payable  |                                                                       | $              | 42,860  |        |      | $ | 48,714  |       
|Accrued expenses: |                                                                       |                |         |        |      |   |         |       
|                  | Labor and benefits                                                    |                |         | 23,261 |      |   |         | 23,818 | 
|                  | Accrued interest                                                      |                |         | 71     |      |   |         | 153    | 
|                  | Accrued restitution and settlement costs  circulation
    matters(a) |                |         | 14,357 |      |   |         | 25,694 | 
|                  | Payable to purchaser of the Telegraph Group(b)                        |                |         |       |      |   |         | 4,051  | 
|                  | Professional fees                                                     |                |         | 23,233 |      |   |         | 15,675 | 
|                  | Other                                                                 |                |         | 21,225 |      |   |         | 18,925 | 
|                  |                                                                       |                |         |        |      |  
|                  |                                                                       | $              | 125,007 |        |      | $ | 137,030 |       
|                  |                                                                       |                |         |        |      |  






|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | As disclosed in Notes 16 and 21, the Companys
    Audit Committee of its Board of Directors (the Audit
    Committee) completed its investigation of circulation
    matters at the Chicago Sun-Times. The Company has reached
    settlements with a majority of its advertisers regarding
    restitution and recognized charges 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 2.                                     

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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |               
|--- | --------------
|(9) | Long-Term Debt

|                                         |                                                 |                |       |       |      |   |        |        | 
|---------------------------------------- | ----------------------------------------------- | -------------- | ----- | ----- | ---- | - | ------ | ------ | 
|                                         |                                                 | December 31,   |      
|                                         |                                                 |                |      
|                                         |                                                 | 2005           |       |       | 2004 |  
|                                         |                                                 |                |       |       |      |  
|                                         |                                                 | (In thousands) |      
|Hollinger International Publishing Inc.: |                                                 |                |       |       |      |   |        |       
|                                         | 8.625% Senior Notes due 2005(a)                 |                | $     |      |      |   | $      | 5,082  | 
|                                         | 9% Senior Notes due 2010(b)                     |                |       | 6,000 |      |   |        | 6,000  | 
|Other debt                               |                                                 |                | 2,067 |       |      |   | 3,251  |       
|                                         |                                                 |                |       |       |      |  
|                                         |                                                 |                | 8,067 |       |      |   | 14,333 |       
|Less:                                    |                                                 |                |       |       |      |   |        |       
|                                         | Current portion included in current liabilities |                |       | 7,148 |      |   |        | 12,280 | 
|                                         |                                                 |                |       |       |      |  
|                                         |                                                 | $              | 919   |       |      | $ | 2,053  |       
|                                         |                                                 |                |       |       |      |  



|               |  |          |   |      |            |              |        |  |        |          |            |              |            |              |  |  |              |  
|-------------- |  | -------- | - | ---- | ---------- | ------------ | ------ |  | ------ | -------- | ---------- | ------------ | ---------- | ------------ |  |  | ------------ | -
|               |  |          |   |      |            |              |        |  |        | Early    |            | Early        |           
|               |  | Interest |   |      |            |              |        |  |        |          | Redemption |              | Redemption |             
|Principal      |  | Rate     |   |      | Issue Date |              | Status |  |        | Maturity |            | Date         |            | Price        | 
|               |  |          |   |      |            |              |        |  |        |          |            |              |            |              | 
|(In thousands) |  |          |   |      |            |              |        |  |        |          |            |             
|$6,000         |  |          | 9 | %(b) |            | December 23, |        |  | Senior |          |            | December 15, |            | December 15, |  |  | 2006- 104.50 | %
|               |  |          |   |      |            | 2002         |        |  |        |          |            | 2010         |            | 2006 or      |  |  | 2007- 102.25 | %
|               |  |          |   |      |            |              |        |  |        |          |            |              |            | thereafter   |  |  | 2008- 100.00 | %



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | 8.625% Senior Notes due 2005 (8.625% Senior
    Notes)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|    |  | On March 15, 2005, the Company retired the
    8.625% Senior Notes upon their maturity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|(b) |  | 9% Senior Notes due 2010                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|    |  | On December 23, 2002, Publishing issued $300.0 million
    of 9% Senior Notes guaranteed by the Company. Net proceeds
    of $291.7 million plus cash on hand and borrowings under
    the Senior Credit Facility were used in January 2003 to retire,
    in their entirety, Publishings outstanding Senior
    Subordinated Notes due 2006 and 2007 (the Senior
    Subordinated Notes), to retire the Companys equity
    forward purchase agreements in December 2002 and to repay
    amounts borrowed under a term facility maturing
    December 31, 2003 with the balance available for general
    corporate purposes.                                                                                                                                                                                                                                                                                                                                                                                       
|   
|    |  | On December 23, 2002, Publishing gave notice of redemption
    to the holders of existing Senior Subordinated Notes. Such notes
    were retired in January 2003. Including early redemption
    premiums and accrued interest, $543.8 million was paid upon
    retirement of the Senior Subordinated Notes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|    |  | On January 22, 2003 and February 6, 2003, Publishing
    entered into interest rate swap agreements to convert
    $150.0 million and $100.0 million, respectively, of
    the 9% Senior Notes to floating rates through
    December 15, 2010, subject to early termination notice. See
    Note 11.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    |  | Approximately $290.6 million, or 97%, of the 9% Senior
    Notes were tendered for retirement on July 30, 2004 and all
    covenants were removed from the untendered notes. The Indentures
    relating to the 9% Senior Notes contained financial
    covenants and negative covenants that limited Publishings
    ability to, among other things, incur indebtedness, pay
    dividends or make other distributions on its capital stock,
    enter into transactions with related companies, and sell assets
    including stock of a restricted subsidiary. In addition,
    $3.4 million in principal of the remaining 9% Senior
    Notes was purchased on the open market for approximately
    $3.9 million and retired during September 2004. The cost of
    these early retirements was $60.4 million, including
    expensing of related deferred financing costs of
    $9.2 million, which is reflected in Other income
    (expense), net in the Consolidated Statement of Operations
    for the year

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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




| |                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------
| | ended December 31, 2004 (See Note 17). See
    Note 11 regarding termination of the related swap
    arrangements.



| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | On March 31, 2005, the Company notified the SEC of the
    termination of the registration of the 9% Senior Notes
    under Section 12(g) of the Securities Exchange Act of 1934
    (the Exchange Act) and the suspension of the
    Companys duty to file reports under Section 13 and
    15(d) of the Exchange Act in respect of the 9% Senior
    Notes. Accordingly, the Company no longer provides supplemental
    condensed consolidating financial information.



|     |  |                |       | 
|---- |  | -------------- | ----- | 
|     |  | (In thousands) |      
|2006 |  | $              | 7,148 | 
|2007 |  |                | 878   | 
|2008 |  |                | 38    | 
|2009 |  |                | 3     | 
|     |  |                |      
|     |  | $              | 8,067 | 
|     |  |                |      





|     |       
|---- | ------
|(10) | Leases





|           |  |                |        | 
|---------- |  | -------------- | ------ | 
|           |  | (In thousands) |       
|2006       |  | $              | 5,935  | 
|2007       |  |                | 4,885  | 
|2008       |  |                | 4,564  | 
|2009       |  |                | 4,384  | 
|2010       |  |                | 3,434  | 
|Thereafter |  |                | 32,451 | 
|           |  |                |       
|           |  | $              | 55,653 | 
|           |  |                |       



|     |                      
|---- | ---------------------
|(11) | Financial Instruments



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





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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                        |  |                |       |  |       |   |       |          |  |   |        |  |  |   |        | 
|----------------------- |  | -------------- | ----- |  | ----- | - | ----- | -------- |  | - | ------ |  |  | - | ------ | 
|                        |  | 2005           |       |  | 2004  |  
|                        |  |                |       |  |       |  
|                        |  | Carrying       |       |  | Fair  |   |       | Carrying |  |   | Fair   | 
|                        |  | Value          |       |  | Value |   |       | Value    |  |   | Value  | 
|                        |  |                |       |  |       |   |       |          |  |   |        | 
|                        |  | (In thousands) |      
|Long-term debt (Note 9) |  | $              | 8,067 |  |       | $ | 7,874 |          |  | $ | 14,333 |  |  | $ | 14,699 | 





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







mark-to




|     |                           
|---- | --------------------------
|(12) | Redeemable Preferred Stock



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|     |                     
|---- | --------------------
|(13) | Stockholders Equity



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





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





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









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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




8-K 8-K/




| |                                
| | -------------------------------
| | Dividends and Dividends Payable









|     |                   
|---- | ------------------
|(14) | Stock Option Plans





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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)














30-day


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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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)




|                                         |  |           |            |   |                  |   |       |  
|---------------------------------------- |  | --------- | ---------- | - | ---------------- | - | ----- | -
|                                         |  | Number of |            |   | Weighted-Average |  
|                                         |  | Options   |            |   | Exercise Price   |  
|                                         |  |           |            |   |                  |  
|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 |  
|Adjustment for special dividends         |  |           | 1,338,824  |   |                  |   | (3.38 | )
|Options granted                          |  |           |           |   |                  |   |      |  
|Options exercised                        |  |           |           |   |                  |   |      |  
|Options forfeited                        |  |           | (367,380   | ) |                  |   | 7.93  |  
|                                         |  |           |            |   |                  |  
|Options outstanding at December 31, 2005 |  |           | 4,211,580  |   |                  | $ | 8.19  |  
|                                         |  |           |            |   |                  |  
|Options exercisable at December 31, 2003 |  |           | 5,684,513  |   |                  | $ | 12.01 |  
|                                         |  |           |            |   |                  |  
|Options exercisable at December 31, 2004 |  |           | 2,652,735  |   |                  | $ | 11.72 |  
|                                         |  |           |            |   |                  |  
|Options exercisable at December 31, 2005 |  |           | 3,952,082  |   |                  | $ | 8.26  |  
|                                         |  |           |            |   |                  |  



|                         |  |                |           |         |                  |  |            |                     |  |                |              |  |  |                  |           |  |  |   |       | 
|------------------------ |  | -------------- | --------- | ------- | ---------------- |  | ---------- | ------------------- |  | -------------- | ------------ |  |  | ---------------- | --------- |  |  | - | ----- | 
|                         |  |                |           |         |                  |  |            | Options Exercisable | 
|                         |  |                |           | Options |                  |  |            |                     |  |               
|                         |  | Number         |           |         | Outstanding      |  |            |                     |  | Number         |              |  | 
|                         |  | Outstanding at |           |         | Weighted-Average |  |            |                     |  | Exercisable at |              |  | 
|                         |  | December 31,   |           |         | Remaining        |  |            | Weighted Average    |  |                | December 31, |  |  | Weighted-Average |          
|Range of Exercise Prices |  | 2005           |           |         | Contractual Life |  |            | Exercise Price      |  |                | 2005         |  |  | Exercise Price   |          
|                         |  |                |           |         |                  |  |            |                     |  |                |              |  |  |                  |          
|$6.69 - $8.67            |  |                | 3,286,817 |         |                  |  | 5.11 years |                     |  | $              | 7.60         |  |  |                  | 3,027,319 |  |  | $ | 7.65  | 
|$10.17 - $11.54          |  |                | 924,763   |         |                  |  | 5.04 years |                     |  | $              | 10.25        |  |  |                  | 924,763   |  |  | $ | 10.25 | 
|                         |  |                |           |         |                  |  |            |                     |  |                |              |  |  |                  |          
|$6.69 - $11.54           |  |                | 4,211,580 |         |                  |  | 5.10 years |                     |  | $              | 8.19         |  |  |                  | 3,952,082 |  |  | $ | 8.26  | 
|                         |  |                |           |         |                  |  |            |                     |  |                |              |  |  |                  |          



|     |                       
|---- | ----------------------
|(15) | Employee Benefit Plans



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





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



94



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








|                                         |  |                |         |   |      |   |         |      |  |   |         |  
|---------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                         |  | 2005           |         |   | 2004 |   |         | 2003 | 
|                                         |  |                |         |   |      |   |         |      | 
|                                         |  | (In thousands) |        
|Service cost                             |  | $              | 2,169   |   |      | $ | 1,805   |      |  | $ | 1,593   |  
|Interest cost                            |  |                | 17,625  |   |      |   | 17,496  |      |  |   | 17,358  |  
|Expected return on plan assets           |  |                | (22,471 | ) |      |   | (19,518 | )    |  |   | (17,029 | )
|Amortization of losses                   |  |                | 3,126   |   |      |   | 4,897   |      |  |   | 5,927   |  
|Special termination benefits (see below) |  |                |        |   |      |   | 154     |      |  |   |        |  
|Amortization of transitional obligation  |  |                | 112     |   |      |   | 121     |      |  |   | 111     |  
|Amortization of prior service costs      |  |                | 190     |   |      |   | 181     |      |  |   | 173     |  
|                                         |  |                |         |   |      |   |         |      | 
|Net periodic benefit cost                |  | $              | 751     |   |      | $ | 5,136   |      |  | $ | 8,133   |  
|                                         |  |                |         |   |      |   |         |      | 

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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                       |  |                |         |   |      |   |         |  
|------------------------------------------------------ |  | -------------- | ------- | - | ---- | - | ------- | -
|                                                       |  | December 31,   |        
|                                                       |  |                |        
|                                                       |  | 2005           |         |   | 2004 |  
|                                                       |  |                |         |   |      |  
|                                                       |  | (In thousands) |        
|Benefit obligation at the beginning of the year        |  | $              | 331,584 |   |      | $ | 310,823 |  
|Service cost                                           |  |                | 2,169   |   |      |   | 1,805   |  
|Interest cost                                          |  |                | 17,625  |   |      |   | 17,496  |  
|Participant contributions                              |  |                | 335     |   |      |   | 285     |  
|Special termination benefits (see below)               |  |                |        |   |      |   | 154     |  
|Net transfer in                                        |  |                |        |   |      |   | 35      |  
|Currency translation differences                       |  |                | 7,704   |   |      |   | 16,432  |  
|Actuarial loss                                         |  |                | 10,883  |   |      |   | 10,298  |  
|Benefits paid                                          |  |                | (28,264 | ) |      |   | (25,744 | )
|                                                       |  |                |         |   |      |  
|Benefit obligation at the end of the year              |  |                | 342,036 |   |      |   | 331,584 |  
|                                                       |  |                |         |   |      |  
|Fair value of plan assets at the beginning of the year |  |                | 323,770 |   |      |   | 282,412 |  
|Actual return on plan assets                           |  |                | 37,488  |   |      |   | 45,774  |  
|Other, including currency translation differences      |  |                | 8,870   |   |      |   | 16,235  |  
|Employer contributions                                 |  |                | 6,097   |   |      |   | 4,808   |  
|Participant contributions                              |  |                | 335     |   |      |   | 285     |  
|Benefits paid                                          |  |                | (28,264 | ) |      |   | (25,744 | )
|                                                       |  |                |         |   |      |  
|Fair value of plan assets at the end of the year       |  |                | 348,296 |   |      |   | 323,770 |  
|                                                       |  |                |         |   |      |  
|Funded status                                          |  |                | 6,260   |   |      |   | (7,814  | )
|Unrecognized net actuarial loss                        |  |                | 67,094  |   |      |   | 73,189  |  
|Unrecognized prior service cost                        |  |                | 1,464   |   |      |   | 1,614   |  
|Unrecognized net transition obligation                 |  |                | 1,147   |   |      |   | 1,259   |  
|                                                       |  |                |         |   |      |  
|Prepaid benefit cost                                   |  | $              | 75,965  |   |      | $ | 68,248  |  
|                                                       |  |                |         |   |      |  

wind-up wind-up




|                                                                                                    |  |                |         |   |      |   |         |  
|--------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | -
|                                                                                                    |  | December 31,   |        
|                                                                                                    |  |                |        
|                                                                                                    |  | 2005           |         |   | 2004 |  
|                                                                                                    |  |                |         |   |      |  
|                                                                                                    |  | (In thousands) |        
|Prepaid pension benefit                                                                             |  | $              | 95,346  |   |      | $ | 88,280  |  
|Accrued benefit liability, included in other liabilities                                            |  |                | (51,863 | ) |      |   | (50,449 | )
|Intangible asset, included in other assets                                                          |  |                | 1,464   |   |      |   | 1,614   |  
|Minimum pension liability adjustment, included in accumulated
    other comprehensive income (loss) |  |                | 31,018  |   |      |   | 28,803  |  
|                                                                                                    |  |                |         |   |      |  
|                                                                                                    |  | $              | 75,965  |   |      | $ | 68,248  |  
|                                                                                                    |  |                |         |   |      |  

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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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







|                                                       |  |                |         |   |      |   |         |  
|------------------------------------------------------ |  | -------------- | ------- | - | ---- | - | ------- | -
|                                                       |  | December 31,   |        
|                                                       |  |                |        
|                                                       |  | 2005           |         |   | 2004 |  
|                                                       |  |                |         |   |      |  
|                                                       |  | (In thousands) |        
|Company pension plans                                  |  | $              | 29,845  |   |      | $ | 27,354  |  
|Canadian Newspaper Operations                          |  |                | 1,173   |   |      |   | 1,449   |  
|Less  Deferred tax benefits                           |  |                | (12,089 | ) |      |   | (10,659 | )
|Less  Canadian Newspaper Operations minority interest |  |                | (152    | ) |      |   | (188    | )
|                                                       |  |                |         |   |      |  
|                                                       |  | $              | 18,777  |   |      | $ | 17,956  |  
|                                                       |  |                |         |   |      |  





|                               |  |                |         |  |      |   |         | 
|------------------------------ |  | -------------- | ------- |  | ---- | - | ------- | 
|                               |  | December 31,   |        
|                               |  |                |        
|                               |  | 2005           |         |  | 2004 |  
|                               |  |                |         |  |      |  
|                               |  | (In thousands) |        
|Projected benefit obligation   |  | $              | 133,635 |  |      | $ | 127,390 | 
|Accumulated benefit obligation |  | $              | 127,873 |  |      | $ | 122,135 | 
|Fair value of plan assets      |  | $              | 77,612  |  |      | $ | 73,996  | 



|                               |  |                |         |  |      |   |         | 
|------------------------------ |  | -------------- | ------- |  | ---- | - | ------- | 
|                               |  | December 31,   |        
|                               |  |                |        
|                               |  | 2005           |         |  | 2004 |  
|                               |  |                |         |  |      |  
|                               |  | (In thousands) |        
|Projected benefit obligation   |  | $              | 208,401 |  |      | $ | 204,194 | 
|Accumulated benefit obligation |  | $              | 207,098 |  |      | $ | 203,164 | 
|Fair value of plan assets      |  | $              | 270,684 |  |      | $ | 249,774 | 

97



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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



|                               |  |              |              |  |      |  |               |      |  |  |              | 
|------------------------------ |  | ------------ | ------------ |  | ---- |  | ------------- | ---- |  |  | ------------ | 
|                               |  | December 31, |             
|                               |  |              |             
|                               |  | 2005         |              |  | 2004 |  |               | 2003 | 
|                               |  |              |              |  |      |  |               |      | 
|Discount rate                  |  |              | 5.50 - 6.25% |  |      |  | 5.75% - 7.0%  |      |  |  | 5.75% - 7.0% | 
|Expected return on plan assets |  |              | 5.25 - 8.25% |  |      |  | 6.25% - 8.25% |      |  |  | 6.5% - 8.25% | 
|Compensation increase          |  |              | 3.0 - 4.0%   |  |      |  | 3.0% - 4.0%   |      |  |  | 3.0% - 4.0%  | 



|                              |  |                  |       |  |      |  |       | 
|----------------------------- |  | ---------------- | ----- |  | ---- |  | ----- | 
|                              |  | Pension Benefits |      
|                              |  |                  |      
|                              |  | 2005             |       |  | 2004 | 
|                              |  |                  |       |  |      | 
|Discount rate                 |  |                  | 5.49% |  |      |  | 5.75% | 
|Rate of compensation increase |  |                  | 3.02% |  |      |  | 3.09% | 



|                                         |  |                  |       |  |      |  |       |      |  |  |       | 
|---------------------------------------- |  | ---------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- | 
|                                         |  | Pension Benefits |      
|                                         |  |                  |      
|                                         |  | 2005             |       |  | 2004 |  |       | 2003 | 
|                                         |  |                  |       |  |      |  |       |      | 
|Discount rate                            |  |                  | 5.49% |  |      |  | 5.75% |      |  |  | 5.84% | 
|Expected long-term return on plan assets |  |                  | 7.23% |  |      |  | 7.21% |      |  |  | 7.25% | 
|Rate of compensation increase            |  |                  | 3.02% |  |      |  | 3.09% |      |  |  | 3.16% | 





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



|                  |       |                |       |        |      |  |       |        | 
|----------------- | ----- | -------------- | ----- | ------ | ---- |  | ----- | ------ | 
|                  |       | Plan Assets at |      
|                  |       | December 31,   |      
|                  |       |                |      
|Asset Category    |       | 2005           |       |        | 2004 | 
|                  |       |                |       |        |      | 
|Equity securities |       |                | 58.0% |        |      |  | 57.5% |       
|Debt securities   |       |                | 35.5% |        |      |  | 37.1% |       
|Other             |       |                | 6.5%  |        |      |  | 5.4%  |       
|                  |       |                |       |        |      | 
|                  | Total |                |       | 100.0% |      |  |       | 100.0% | 
|                  |       |                |       |        |      | 





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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






| |   |                                                                  
| | - | -----------------------------------------------------------------
| |  | 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





|                                          |  |                |       |   |      |   |       |      |  |   |       | 
|----------------------------------------- |  | -------------- | ----- | - | ---- | - | ----- | ---- |  | - | ----- | 
|                                          |  | 2005           |       |   | 2004 |   |       | 2003 | 
|                                          |  |                |       |   |      |   |       |      | 
|                                          |  | (In thousands) |      
|Service cost                              |  | $              | 21    |   |      | $ | 18    |      |  | $ | 14    | 
|Interest cost                             |  |                | 1,325 |   |      |   | 1,273 |      |  |   | 1,273 | 
|Amortization of losses (gains)            |  |                | (907  | ) |      |   | (649  | )    |  |   | 66    | 
|                                          |  |                |       |   |      |   |       |      | 
|Net periodic post-retirement benefit cost |  | $              | 439   |   |      | $ | 642   |      |  | $ | 1,353 | 
|                                          |  |                |       |   |      |   |       |      | 



|                                                                                |  |                |        |   |      |   |        |  
|------------------------------------------------------------------------------- |  | -------------- | ------ | - | ---- | - | ------ | -
|                                                                                |  | December 31,   |       
|                                                                                |  |                |       
|                                                                                |  | 2005           |        |   | 2004 |  
|                                                                                |  |                |        |   |      |  
|                                                                                |  | (In thousands) |       
|Accumulated post-retirement benefit obligation at the beginning
    of the year |  | $              | 35,430 |   |      | $ | 33,259 |  
|Service cost                                                                    |  |                | 21     |   |      |   | 18     |  
|Interest cost                                                                   |  |                | 1,325  |   |      |   | 1,273  |  
|Actuarial gains                                                                 |  |                | 1,176  |   |      |   | 615    |  
|Benefits paid                                                                   |  |                | (2,355 | ) |      |   | (2,169 | )
|Other, including currency translation differences                               |  |                | 1,157  |   |      |   | 2,434  |  
|                                                                                |  |                |        |   |      |  
|Accumulated post-retirement benefit obligation at the end of the
    year       |  | $              | 36,754 |   |      | $ | 35,430 |  
|                                                                                |  |                |        |   |      |  



|                                                                        |  |                |        |  |      |   |        | 
|----------------------------------------------------------------------- |  | -------------- | ------ |  | ---- | - | ------ | 
|                                                                        |  | December 31,   |       
|                                                                        |  |                |       
|                                                                        |  | 2005           |        |  | 2004 |  
|                                                                        |  |                |        |  |      |  
|                                                                        |  | (In thousands) |       
|Unfunded status                                                         |  | $              | 34,145 |  |      | $ | 32,710 | 
|Unrecognized net loss                                                   |  |                | 4,150  |  |      |   | 6,309  | 
|                                                                        |  |                |        |  |      |  
|Accrued post-retirement benefit cost, included in other
    liabilities |  | $              | 38,295 |  |      | $ | 39,019 | 
|                                                                        |  |                |        |  |      |  

99



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                                                 |  |      |      |   |      |  |      |  
|-------------------------------------------------------------------------------- |  | ---- | ---- | - | ---- |  | ---- | -
|                                                                                 |  | 2005 |      |   | 2004 | 
|                                                                                 |  |      |      |   |      | 
|Healthcare cost trend assumed next year                                          |  |      | 8    | % |      |  | 9    | %
|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 |  





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



|          |  |                |         |       |            |   |        | 
|--------- |  | -------------- | ------- | ----- | ---------- | - | ------ | 
|          |  |                |         | Post- |           
|          |  | Pension        |         |       | Retirement |  
|Year      |  | Benefits       |         |       | Benefits   |  
|          |  |                |         |       |            |  
|          |  | (In thousands) |        
|2006      |  | $              | 28,396  |       |            | $ | 2,529  | 
|2007      |  | $              | 28,023  |       |            | $ | 2,568  | 
|2008      |  | $              | 27,625  |       |            | $ | 2,592  | 
|2009      |  | $              | 27,417  |       |            | $ | 2,600  | 
|2010      |  | $              | 26,840  |       |            | $ | 2,602  | 
|2011-2015 |  | $              | 126,979 |       |            | $ | 12,893 | 

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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|     |                      
|---- | ---------------------
|(16) | Other Operating Costs



|                                                              |  |                         |        |   |      |   |         |      |  |   |        | 
|------------------------------------------------------------- |  | ----------------------- | ------ | - | ---- | - | ------- | ---- |  | - | ------ | 
|                                                              |  | Year Ended December 31, |       
|                                                              |  |                         |       
|                                                              |  | 2005                    |        |   | 2004 |   |         | 2003 | 
|                                                              |  |                         |        |   |      |   |         |      | 
|                                                              |  | (In thousands)          |       
|Special Committee and related costs(a)                        |  | $                       | 13,633 |   |      | $ | 60,124  |      |  | $ | 10,147 | 
|Management fees                                               |  |                         |       |   |      |   | 500     |      |  |   | 16,717 | 
|Aircraft costs                                                |  |                         |       |   |      |   | 449     |      |  |   | 3,439  | 
|Restitution and settlement costs  circulation
    matters(b) |  |                         |       |   |      |   | 2,880   |      |  |   | 24,120 | 
|(Gain) loss on sale of assets(c)                              |  |                         | (171   | ) |      |   | (44,828 | )    |  |   | 156    | 
|Write-down of intangible assets (Note 6)                      |  |                         |       |   |      |   | 1,833   |      |  |   |       | 
|Wind-down of aircraft operations                              |  |                         |       |   |      |   |        |      |  |   | 1,445  | 
|Directors and officers insurance fee(d)                       |  |                         |       |   |      |   | 5,400   |      |  |   |       | 
|                                                              |  |                         |        |   |      |   |         |      | 
|                                                              |  | $                       | 13,462 |   |      | $ | 26,358  |      |  | $ | 56,024 | 
|                                                              |  |                         |        |   |      |   |         |      | 



|    |                                    
|--- | -----------------------------------
|(a) | Special Committee and related costs



|                                  |  |                         |         |   |                   |   |        |      |  |   |                      |  |  |   |         |  
|--------------------------------- |  | ----------------------- | ------- | - | ----------------- | - | ------ | ---- |  | - | -------------------- |  |  | - | ------- | -
|                                  |  | Year Ended December 31, |         |   | Incurred Since    |  
|                                  |  |                         |         |   | Inception through |  
|                                  |  | 2005                    |         |   | 2004              |   |        | 2003 |  |   | December 31, 2005(5) | 
|                                  |  |                         |         |   |                   |   |        |      |  |   |                      | 
|                                  |  | (In thousands)          |        
|Special Committees work(1)       |  | $                       | 19,044  |   |                   | $ | 26,605 |      |  | $ | 7,072                |  |  | $ | 52,721  |  
|Litigation costs(2)               |  |                         | 3,601   |   |                   |   | 15,522 |      |  |   | 1,446                |  |  |   | 20,569  |  
|Indemnification fees and costs(3) |  |                         | 23,363  |   |                   |   | 17,997 |      |  |   | 1,629                |  |  |   | 42,989  |  
|Recoveries(4)                     |  |                         | (32,375 | ) |                   |   |       |      |  |   |                     |  |  |   | (32,375 | )
|                                  |  |                         |         |   |                   |   |        |      |  |   |                      | 
|                                  |  | $                       | 13,633  |   |                   | $ | 60,124 |      |  | $ | 10,147               |  |  | $ | 83,904  |  
|                                  |  |                         |         |   |                   |   |        |      |  |   |                      | 






|    |                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Costs and expenses arising from the Special Committees
    investigation. These amounts include the fees and costs of the
    Special Committees members, counsel, advisors and experts.                                                                                                                                                   
|   
|(2) | Largely represents legal and other professional fees to defend
    the Company in litigation that has arisen as a result of the
    issues the Special Committee has investigated, including costs
    to defend the counterclaims of Hollinger Inc. and Black in the
    Delaware Litigation.                                               
|   
|(3) | Represents amounts the Company has been required to advance in
    fees and costs to indemnified parties, including the indirect
    controlling stockholders and their affiliates and associates who
    are defendants in the litigation largely brought by the Company.                                                                   
|   
|(4) | Represents recoveries directly resulting from the Special
    Committees activities including approximately
    $30.3 million in a settlement with Torys LLP and $2.1
    million in recoveries of indemnification payments from Black.
    Excludes settlements with former directors and officers,
    pursuant to a restitution agreement

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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | reached in November 2003, of approximately $1.7 million and
    $31.5 million for the years ended December 31, 2004
    and 2003, respectively. See Note 17, 21(a) and 22(a).
|   
|(5) | The Special Committee was formed on June 17, 2003. These
    amounts represent the cumulative costs of the Special Committee
    investigation.                              



|    |                                                           
|--- | ----------------------------------------------------------
|(b) | Restitution and settlement costs  circulation
    matters

Chicago Sun-Times. Chicago Sun-Times




|    |                              
|--- | -----------------------------
|(c) | (Gain) loss on sale of assets

Chicago Sun-Times Chicago Sun-Times




|    |                                     
|--- | ------------------------------------
|(d) | Directors and officers insurance fee



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|     |                            
|---- | ---------------------------
|(17) | Other Income (Expense), Net

|                                                                                                               |  |                |        |   |      |   |         |      |  |   |         |  
|-------------------------------------------------------------------------------------------------------------- |  | -------------- | ------ | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                                               |  | December 31,   |       
|                                                                                                               |  |                |       
|                                                                                                               |  | 2005           |        |   | 2004 |   |         | 2003 | 
|                                                                                                               |  |                |        |   |      |   |         |      | 
|                                                                                                               |  | (In thousands) |       
|Loss on extinguishment of debt(a)                                                                              |  | $              |       |   |      | $ | (60,381 | )    |  | $ | (37,291 | )
|Write-down of investments                                                                                      |  |                |       |   |      |   | (365    | )    |  |   | (7,700  | )
|Write-down and expenses related to FDR Collection(b)                                                           |  |                | (795   | ) |      |   |        |      |  |   | (6,796  | )
|Gain (loss) on Participation Trust and CanWest Debentures,
    including exchange gains and losses(c) (Note 4) |  |                |       |   |      |   | (22,689 | )    |  |   | 83,681  |  
|Foreign currency gains (losses), net                                                                           |  |                | (2,171 | ) |      |   | 1,634   |      |  |   | 1,285   |  
|Losses on sales of publishing interests, net(d)                                                                |  |                |       |   |      |   | (7,900  | )    |  |   | (6,251  | )
|Legal settlement (Note 21(a))                                                                                  |  |                | (800   | ) |      |   |        |      |  |   |        |  
|Settlements with former directors and officers (Note 22(a))                                                    |  |                |       |   |      |   | 1,718   |      |  |   | 31,547  |  
|Gain on sale of investments                                                                                    |  |                | 2,254  |   |      |   | 1,709   |      |  |   | 2,129   |  
|Write-down of property, plant and equipment(e)                                                                 |  |                |       |   |      |   |        |      |  |   | (5,622  | )
|Equity in losses of affiliates, net of dividends received                                                      |  |                | (1,752 | ) |      |   | (3,897  | )    |  |   | (2,957  | )
|Other                                                                                                          |  |                | (575   | ) |      |   | (5,519  | )    |  |   | (40     | )
|                                                                                                               |  |                |        |   |      |   |         |      | 
|                                                                                                               |  | $              | (3,839 | ) |      | $ | (95,690 | )    |  | $ | 51,985  |  
|                                                                                                               |  |                |        |   |      |   |         |      | 






|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | In 2004, the Company retired $294.0 million of its
    9% Senior Notes and recognized losses, including the
    write-off of deferred financing fees of approximately
    $60.4 million. See Note 9. In January 2003, the
    Company paid premiums of approximately $19.7 million on the
    early redemption of the Senior Subordinated Notes and wrote off
    related deferred financing fees of approximately
    $17.6 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, in 2005 the Company paid
    the State of New York approximately $0.8 million to settle
    a claim that the Company was liable for sales taxes related to
    these acquisitions.                                                                            
|   
|(c) |  | During 2003, the Company recorded foreign exchange
    mark-to-market gains on
    the Participation Trust of $93.5 million. The Company had a
    loss of $22.7 million related to the Participation Trust
    and CanWest Debentures in 2004 (excluding $8.2 million included
    in Earnings from operations of business segments disposed
    of and to be disposed of). This loss was largely due to
    foreign exchange gains recorded in prior years and not
    ultimately realized upon liquidation in 2004. The Company had a
    loss of $9.8 million related to the redemption of
    derivatives related to the CanWest Debentures in 2003. See
    Note 4.
|   
|(d) |  | Amount recorded in 2004 represents adjustments in estimated net
    proceeds to be received related to the sale of publishing
    interests in prior years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   
|(e) |  | Amount recorded in 2003 largely represents write-down of a
    corporate aircraft sold in 2004.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|     |             
|---- | ------------
|(18) | Income Taxes



|                                     |                                                                                                 |                |        |        |      |   |         |         |   |   |         |         | 
|------------------------------------ | ----------------------------------------------------------------------------------------------- | -------------- | ------ | ------ | ---- | - | ------- | ------- | - | - | ------- | ------- | 
|                                     |                                                                                                 | 2005           |        |        | 2004 |   |         | 2003    |  
|                                     |                                                                                                 |                |        |        |      |   |         |         |  
|                                     |                                                                                                 | (In thousands) |       
|Income taxes (benefit) allocated to: |                                                                                                 |                |        |        |      |   |         |         |   |   |         |        
|                                     | Earnings (loss) from continuing operations before income taxes                                  |                | $      | 42,467 |      |   | $       | 29,462  |   |   | $       | 112,168 | 
|                                     | Earnings from discontinued operations                                                           |                |        | 13,778 |      |   |         | 213,424 |   |   |         | 9,470   | 
|                                     | Other comprehensive income (loss)  foreign currency
    translation adjustments                |                |        | 757    |      |   |         | 176     |   |   |         | 1,526   | 
|                                     | Other comprehensive income (loss)  unrealized holding
    gain (loss) on marketable securities |                |        | (2,467 | )    |   |         | (1,294  | ) |   |         | 3,110   | 
|                                     | Other comprehensive income (loss)  minimum pension
    liability adjustment                    |                |        | (1,430 | )    |   |         | 12,665  |   |   |         | 101     | 
|                                     |                                                                                                 |                |        |        |      |   |         |         |  
|                                     |                                                                                                 | $              | 53,105 |        |      | $ | 254,433 |         |   | $ | 126,375 |        
|                                     |                                                                                                 |                |        |        |      |   |         |         |  



|                              |                 |                |        |         |          |   |        |         |   |   |         |         |  
|----------------------------- | --------------- | -------------- | ------ | ------- | -------- | - | ------ | ------- | - | - | ------- | ------- | -
|                              |                 | Current        |        |         | Deferred |   |        | Total   |  
|                              |                 |                |        |         |          |   |        |         |  
|                              |                 | (In thousands) |       
|Year ended December 31, 2005  |                 |                |        |         |          |   |        |         |   |   |         |        
|                              | U.S. federal    |                | $      | (4,279  | )        |   | $      | 22,327  |   |   | $       | 18,048  |  
|                              | Foreign         |                |        | 19,442  |          |   |        | 4,327   |   |   |         | 23,769  |  
|                              | State and local |                |        | (2,599  | )        |   |        | 3,249   |   |   |         | 650     |  
|                              |                 |                |        |         |          |   |        |         |  
|                              |                 | $              | 12,564 |         |          | $ | 29,903 |         |   | $ | 42,467  |        
|                              |                 |                |        |         |          |   |        |         |  
|Year ended December 31, 2004: |                 |                |        |         |          |   |        |         |   |   |         |        
|                              | U.S. federal    |                | $      | (10,873 | )        |   | $      | (4,283  | ) |   | $       | (15,156 | )
|                              | Foreign         |                |        | 25,622  |          |   |        | 24,630  |   |   |         | 50,252  |  
|                              | State and local |                |        | (4,995  | )        |   |        | (639    | ) |   |         | (5,634  | )
|                              |                 |                |        |         |          |   |        |         |  
|                              |                 | $              | 9,754  |         |          | $ | 19,708 |         |   | $ | 29,462  |        
|                              |                 |                |        |         |          |   |        |         |  
|Year ended December 31, 2003: |                 |                |        |         |          |   |        |         |   |   |         |        
|                              | U.S. federal    |                | $      | (8,331  | )        |   | $      | 56,125  |   |   | $       | 47,794  |  
|                              | Foreign         |                |        | 85,461  |          |   |        | (29,831 | ) |   |         | 55,630  |  
|                              | State and local |                |        | 5,214   |          |   |        | 3,530   |   |   |         | 8,744   |  
|                              |                 |                |        |         |          |   |        |         |  
|                              |                 | $              | 82,344 |         |          | $ | 29,824 |         |   | $ | 112,168 |        
|                              |                 |                |        |         |          |   |        |         |  

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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|        |  |                |        |   |      |   |          |      |  |   |         |  
|------- |  | -------------- | ------ | - | ---- | - | -------- | ---- |  | - | ------- | -
|        |  | 2005           |        |   | 2004 |   |          | 2003 | 
|        |  |                |        |   |      |   |          |      | 
|        |  | (In thousands) |       
|U.S.    |  | $              | (6,644 | ) |      | $ | (144,526 | )    |  | $ | 32,087  |  
|Foreign |  |                | 3,177  |   |      |   | 18,428   |      |  |   | (30,380 | )
|        |  |                |        |   |      |   |          |      | 
|        |  | $              | (3,467 | ) |      | $ | (126,098 | )    |  | $ | 1,707   |  
|        |  |                |        |   |      |   |          |      | 



|                                                                                                                                                                        |  |                |         |   |      |   |         |      |  |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                                                                                                        |  | 2005           |         |   | 2004 |   |         | 2003 | 
|                                                                                                                                                                        |  |                |         |   |      |   |         |      | 
|                                                                                                                                                                        |  | (In thousands) |        
|Income tax expense (benefit) at federal statutory rate                                                                                                                  |  | $              | (1,214  | ) |      | $ | (44,134 | )    |  | $ | 597     |  
|Impact of taxation at different foreign rates                                                                                                                           |  |                | 143     |   |      |   | 383     |      |  |   | (909    | )
|U.S. state and local income tax expense (benefit), net of
    federal tax impact                                                                                        |  |                | (550    | ) |      |   | (5,413  | )    |  |   | 1,762   |  
|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 |  |                | (7,431  | ) |      |   | (10,472 | )    |  |   | 1,545   |  
|Provision for tax contingencies, principally related to
    potential non-deductibility of management fees                                                              |  |                | 607     |   |      |   | 6,520   |      |  |   | 61,442  |  
|Reduction of tax contingency accruals due to the resolution of
    uncertainties                                                                                        |  |                | (16,194 | ) |      |   | (10,695 | )    |  |   |        |  
|Interest on tax contingency accruals, net of federal tax benefit
    on a portion thereof                                                                               |  |                | 53,680  |   |      |   | 48,236  |      |  |   | 46,738  |  
|Items non-deductible or non-includible for income tax purposes                                                                                                          |  |                | (2,676  | ) |      |   | 5,906   |      |  |   | 2,962   |  
|U.S. income tax expense (benefit) on intercompany and other
    transactions involving foreign operations                                                               |  |                | 4,621   |   |      |   | 12,290  |      |  |   | (3,797  | )
|Non-U.S. tax impacts related to Telegraph Group,
    principally surrender of tax losses                                                                                |  |                |        |   |      |   | (10,526 | )    |  |   | 12,056  |  
|Increase (decrease) in valuation allowance                                                                                                                              |  |                | 8,894   |   |      |   | 38,639  |      |  |   | (12,269 | )
|Other, net                                                                                                                                                              |  |                | 2,587   |   |      |   | (1,272  | )    |  |   | (2,041  | )
|                                                                                                                                                                        |  |                |         |   |      |   |         |      | 
|Total                                                                                                                                                                   |  | $              | 42,467  |   |      | $ | 29,462  |      |  | $ | 112,168 |  
|                                                                                                                                                                        |  |                |         |   |      |   |         |      | 



|                      |  |                |         |  |      |   |         | 
|--------------------- |  | -------------- | ------- |  | ---- | - | ------- | 
|                      |  | December 31,   |        
|                      |  |                |        
|                      |  | 2005           |         |  | 2004 |  
|                      |  |                |         |  |      |  
|                      |  | (In thousands) |        
|Income taxes payable  |  | $              | 29,722  |  |      | $ | 168,640 | 
|Other tax liabilities |  |                | 557,012 |  |      |   | 518,300 | 
|                      |  |                |         |  |      |  
|                      |  | $              | 586,734 |  |      | $ | 686,940 | 
|                      |  |                |         |  |      |  

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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                                                |  |                |          |   |      |   |          |  
|----------------------------------------------- |  | -------------- | -------- | - | ---- | - | -------- | -
|                                                |  | December 31,   |         
|                                                |  |                |         
|                                                |  | 2005           |          |   | 2004 |  
|                                                |  |                |          |   |      |  
|                                                |  | (In thousands) |         
|Deferred tax liabilities                        |  | $              | 115,613  |   |      | $ | 116,811  |  
|Other tax liabilities                           |  |                | 363,495  |   |      |   | 349,228  |  
|Deferred tax assets, net of valuation allowance |  |                | (118,584 | ) |      |   | (119,850 | )
|                                                |  |                |          |   |      |  
|                                                |  | $              | 360,524  |   |      | $ | 346,189  |  
|                                                |  |                |          |   |      |  





|                                          |                                                                                    |                |         |          |      |   |         |          |  
|----------------------------------------- | ---------------------------------------------------------------------------------- | -------------- | ------- | -------- | ---- | - | ------- | -------- | -
|                                          |                                                                                    | December 31,   |        
|                                          |                                                                                    |                |        
|                                          |                                                                                    | 2005           |         |          | 2004 |  
|                                          |                                                                                    |                |         |          |      |  
|                                          |                                                                                    | (In thousands) |        
|Deferred tax assets attributable to:      |                                                                                    |                |         |          |      |   |         |         
|                                          | Accounts receivable, principally due to allowance for doubtful
    accounts        |                | $       | 2,004    |      |   | $       | 1,968    |  
|                                          | Accrued expenses                                                                   |                |         | 17,500   |      |   |         | 23,961   |  
|                                          | Post-retirement obligation                                                         |                |         | 21,601   |      |   |         | 22,270   |  
|                                          | Investments                                                                        |                |         | 23,966   |      |   |         | 25,893   |  
|                                          | Net operating loss carryforwards                                                   |                |         | 6,820    |      |   |         | 10,292   |  
|                                          | Claims for restitution                                                             |                |         | 58,252   |      |   |         | 58,375   |  
|                                          | U.S. tax benefit related to disposition and liquidation of
    Canadian operations |                |         | 167,532  |      |   |         | 144,355  |  
|                                          | Other                                                                              |                |         | 11,161   |      |   |         | 13,521   |  
|                                          |                                                                                    |                |         |          |      |  
|Deferred tax assets                       |                                                                                    |                | 308,836 |          |      |   | 300,635 |         
|                                          | Less valuation allowance                                                           |                |         | (190,252 | )    |   |         | (180,785 | )
|                                          |                                                                                    |                |         |          |      |  
|Net deferred tax assets                   |                                                                                    | $              | 118,584 |          |      | $ | 119,850 |         
|                                          |                                                                                    |                |         |          |      |  
|Deferred tax liabilities attributable to: |                                                                                    |                |         |          |      |   |         |         
|                                          | Property, plant and equipment, principally due to differences in
    depreciation  |                | $       | 41,216   |      |   | $       | 40,676   |  
|                                          | Pension asset                                                                      |                |         | 30,124   |      |   |         | 28,524   |  
|                                          | Deferred gain on exchange of assets                                                |                |         | 33,277   |      |   |         | 34,291   |  
|                                          | Other                                                                              |                |         | 10,996   |      |   |         | 13,320   |  
|                                          |                                                                                    |                |         |          |      |  
|Deferred tax liabilities                  |                                                                                    | $              | 115,613 |          |      | $ | 116,811 |         
|                                          |                                                                                    |                |         |          |      |  



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


non-U.S.








|     |               
|---- | --------------
|(19) | Loss per Share



|                                                                 |      |                                          |         |   |               |  |        |           |  |   |       |   | 
|---------------------------------------------------------------- | ---- | ---------------------------------------- | ------- | - | ------------- |  | ------ | --------- |  | - | ----- | - | 
|                                                                 |      | Year Ended December 31, 2005             |        
|                                                                 |      |                                          |        
|                                                                 |      | Loss                                     |         |   | Shares        |  |        | Per-Share | 
|                                                                 |      | (Numerator)                              |         |   | (Denominator) |  |        | Amount    | 
|                                                                 |      |                                          |         |   |               |  |        |           | 
|                                                                 |      | (In thousands, except per share amounts) |        
|Basic EPS                                                        |      |                                          |         |   |               |  |        |           |  |   |       |  
|Loss from continuing operations                                  |      | $                                        | (45,934 | ) |               |  | 90,875 |           |  | $ | (0.51 | )
|Effect of dilutive securities:                                   |      |                                          |         |   |               |  |        |           |  |   |       |  
|                                                                 | None |                                          |         |  |               |  |        |          |  |   |       |  | 
|                                                                 |      |                                          |         |   |               |  |        |           | 
|Diluted EPS                                                      |      |                                          |         |   |               |  |        |           |  |   |       |  
|Loss from continuing operations available to common stockholders |      | $                                        | (45,934 | ) |               |  | 90,875 |           |  | $ | (0.51 | )
|                                                                 |      |                                          |         |   |               |  |        |           | 



|                                                                 |  |                                          |          |   |               |  |        |           |  |   |       |  
|---------------------------------------------------------------- |  | ---------------------------------------- | -------- | - | ------------- |  | ------ | --------- |  | - | ----- | -
|                                                                 |  | Year Ended December 31, 2004             |         
|                                                                 |  |                                          |         
|                                                                 |  | Loss                                     |          |   | Shares        |  |        | Per-Share | 
|                                                                 |  | (Numerator)                              |          |   | (Denominator) |  |        | Amount    | 
|                                                                 |  |                                          |          |   |               |  |        |           | 
|                                                                 |  | (In thousands, except per share amounts) |         
|Basic EPS                                                        |  |                                          |          |   |               |  |        |           |  |   |       |  
|Loss from continuing operations                                  |  | $                                        | (155,560 | ) |               |  | 90,486 |           |  | $ | (1.72 | )
|Effect of dilutive securities:                                   |  |                                          |          |   |               |  |        |           |  |   |       |  
|None                                                             |  |                                          |         |   |               |  |       |           |  |   |      |  
|                                                                 |  |                                          |          |   |               |  |        |           | 
|Diluted EPS                                                      |  |                                          |          |   |               |  |        |           |  |   |       |  
|Loss from continuing operations available to common stockholders |  | $                                        | (155,560 | ) |               |  | 90,486 |           |  | $ | (1.72 | )
|                                                                 |  |                                          |          |   |               |  |        |           | 

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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) |         
|Basic EPS                                                        |      |                                          |          |   |               |  |        |           |  |   |       |  
|Loss from continuing operations                                  |      | $                                        | (110,461 | ) |               |  | 87,311 |           |  | $ | (1.27 | )
|Effect of dilutive securities:                                   |      |                                          |          |   |               |  |        |           |  |   |       |  
|                                                                 | None |                                          |          |  |               |  |        |          |  |   |       |  | 
|                                                                 |      |                                          |          |   |               |  |        |           | 
|Diluted EPS                                                      |      |                                          |          |   |               |  |        |           |  |   |       |  
|Loss from continuing operations available to common stockholders |      | $                                        | (110,461 | ) |               |  | 87,311 |           |  | $ | (1.27 | )
|                                                                 |      |                                          |          |   |               |  |        |           | 





|     |                    
|---- | -------------------
|(20) | Segment Information

The Jerusalem Post


Chicago Sun-Times; Daily Southtown Star; Post-Tribune Naperville Sun




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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|                               |  |                              |         |            |                |   |         |           |  |   |         |   |  |   |           |  
|------------------------------ |  | ---------------------------- | ------- | ---------- | -------------- | - | ------- | --------- |  | - | ------- | - |  | - | --------- | -
|                               |  | Year Ended December 31, 2005 |        
|                               |  |                              |        
|                               |  |                              |         | Investment |                |   |        
|                               |  |                              |         | Canadian   |                |   | and     |           |  |  
|                               |  | Sun-Times                    |         |            | Administrative |   |         | Corporate |  |   |        
|                               |  | News Group                   |         |            | Group          |   |         | Group     |  |   | Total   |  
|                               |  |                              |         |            |                |   |         |           |  |   |         |  
|                               |  | (In thousands)               |        
|Total operating revenue        |  | $                            | 457,889 |            |                | $ |        |           |  | $ |        |   |  | $ | 457,889   |  
|                               |  |                              |         |            |                |   |         |           |  |   |         |  
|Depreciation and amortization  |  | $                            | 30,237  |            |                | $ | 115     |           |  | $ | 369     |   |  | $ | 30,721    |  
|                               |  |                              |         |            |                |   |         |           |  |   |         |  
|Operating income (loss)        |  | $                            | 47,608  |            |                | $ | (2,619  | )         |  | $ | (55,307 | ) |  | $ | (10,318   | )
|                               |  |                              |         |            |                |   |         |           |  |   |         |  
|Equity in losses of affiliates |  | $                            | (1,752  | )          |                | $ |        |           |  | $ |        |   |  | $ | (1,752    | )
|                               |  |                              |         |            |                |   |         |           |  |   |         |  
|Total assets(1)                |  | $                            | 520,020 |            |                | $ | 327,184 |           |  | $ | 218,124 |   |  | $ | 1,065,328 |  
|                               |  |                              |         |            |                |   |         |           |  |   |         |  
|Capital expenditures           |  | $                            | 16,375  |            |                | $ | 6       |           |  | $ | 245     |   |  | $ | 16,626    |  
|                               |  |                              |         |            |                |   |         |           |  |   |         |  






|    |                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------
|(1) | Total assets of the Canadian Administrative Group includes
    $94,809 of assets of operations to be disposed of.

|                               |  |                              |         |            |                |   |         |           |  |   |          |   |  |   |           |  
|------------------------------ |  | ---------------------------- | ------- | ---------- | -------------- | - | ------- | --------- |  | - | -------- | - |  | - | --------- | -
|                               |  | Year Ended December 31, 2004 |        
|                               |  |                              |        
|                               |  |                              |         | Investment |                |   |        
|                               |  |                              |         | Canadian   |                |   | and     |           |  |  
|                               |  | Sun-Times                    |         |            | Administrative |   |         | Corporate |  |   |         
|                               |  | News Group                   |         |            | Group          |   |         | Group     |  |   | Total    |  
|                               |  |                              |         |            |                |   |         |           |  |   |          |  
|                               |  | (In thousands)               |        
|Total operating revenue        |  | $                            | 464,439 |            |                | $ |        |           |  | $ |         |   |  | $ | 464,439   |  
|                               |  |                              |         |            |                |   |         |           |  |   |          |  
|Depreciation and amortization  |  | $                            | 30,525  |            |                | $ | 85      |           |  | $ | 499      |   |  | $ | 31,109    |  
|                               |  |                              |         |            |                |   |         |           |  |   |          |  
|Operating income (loss)(1)     |  | $                            | 96,420  |            |                | $ | (6,909  | )         |  | $ | (111,522 | ) |  | $ | (22,011   | )
|                               |  |                              |         |            |                |   |         |           |  |   |          |  
|Equity in losses of affiliates |  | $                            | (2,679  | )          |                | $ |        |           |  | $ | (1,218   | ) |  | $ | (3,897    | )
|                               |  |                              |         |            |                |   |         |           |  |   |          |  
|Total assets(2)                |  | $                            | 521,879 |            |                | $ | 338,295 |           |  | $ | 878,724  |   |  | $ | 1,738,898 |  
|                               |  |                              |         |            |                |   |         |           |  |   |          |  
|Capital expenditures           |  | $                            | 28,981  |            |                | $ | 128     |           |  | $ | 222      |   |  | $ | 29,331    |  
|                               |  |                              |         |            |                |   |         |           |  |   |          |  






|    |                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------
|(1) | Increase in 2004 for the Sun-Times News Group is largely related
    to gain on sale of assets. See Note 16(c).

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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|    |                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------
|(2) | Total assets of the Canadian Administrative Group include
    $212,554 of assets of operations to be disposed of.

|                                          |  |                              |         |            |                |   |         |           |  |   |         |   |  |   |         |  
|----------------------------------------- |  | ---------------------------- | ------- | ---------- | -------------- | - | ------- | --------- |  | - | ------- | - |  | - | ------- | -
|                                          |  | Year Ended December 31, 2003 |        
|                                          |  |                              |        
|                                          |  |                              |         | Investment |                |   |        
|                                          |  |                              |         | Canadian   |                |   | and     |           |  |  
|                                          |  | Sun-Times                    |         |            | Administrative |   |         | Corporate |  |   |        
|                                          |  | News Group                   |         |            | Group          |   |         | Group     |  |   | Total   |  
|                                          |  |                              |         |            |                |   |         |           |  |   |         |  
|                                          |  | (In thousands)               |        
|Total operating revenue                   |  | $                            | 450,789 |            |                | $ |        |           |  | $ |        |   |  | $ | 450,789 |  
|                                          |  |                              |         |            |                |   |         |           |  |   |         |  
|Depreciation and amortization             |  | $                            | 35,698  |            |                | $ | 59      |           |  | $ | 1,926   |   |  | $ | 37,683  |  
|                                          |  |                              |         |            |                |   |         |           |  |   |         |  
|Operating income (loss)(1)                |  | $                            | 24,358  |            |                | $ | (12,984 | )         |  | $ | (45,374 | ) |  | $ | (34,000 | )
|                                          |  |                              |         |            |                |   |         |           |  |   |         |  
|Equity in earnings (losses) of affiliates |  | $                            | (1,854  | )          |                | $ | 206     |           |  | $ | (1,309  | ) |  | $ | (2,957  | )
|                                          |  |                              |         |            |                |   |         |           |  |   |         |  
|Capital expenditures                      |  | $                            | 7,289   |            |                | $ | 142     |           |  | $ | 294     |   |  | $ | 7,725   |  
|                                          |  |                              |         |            |                |   |         |           |  |   |         |  






|    |                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------
|(1) | Sun-Times News Group includes circulation restitution and
    settlement costs of $24.1 million. See Note 16(b).



|     |                              
|---- | -----------------------------
|(21) | Commitments and Contingencies



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



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

10-K 10-K).




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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




Chicago Sun-Times










111



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


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





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. v. Black,
et al.


112



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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 04C-0834.


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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


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


S-42.2, C.-44






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

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




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



114



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HOLLINGER INTERNATIONAL INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


Hollinger International Inc. v. Hollinger
Inc., et al.


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)


 United States Securities and
Exchange Commission v. Hollinger International
Inc.












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



116



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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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

Hollinger International
Inc. v. 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.




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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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







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

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








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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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

10-K 10-Q






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







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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






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







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

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


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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.







| |                                                                                   
| | ----------------------------------------------------------------------------------
| | 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. 1:04-cv-01436-GLD-DRH


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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)








| |                                                                    
| | -------------------------------------------------------------------
| | Boultbee v. Hollinger International Inc., filed
    August 25, 2005





| |              
| | -------------
| | Other Matters

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


editor-in Whyte v. Hollinger International Inc.


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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)










|    |                               
|--- | ------------------------------
|(b) | Guarantees or Indemnifications



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









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





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



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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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









|     |                           
|---- | --------------------------
|(22) | Related-party Transactions



(a)




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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




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




(c)


(d)


(e)


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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)






7 8




(f) National
Post


126



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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)


03-CV-260727CMA1) 03-CV-260727CM).


(g)


(h)


(i)


(j)


(k)


(l)


(m)


127



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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




(n) The National Interest The National Interest The National Interest.


(o)


(p)




(q)


128



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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)




|     |                                     
|---- | ------------------------------------
|(23) | Quarterly Financial Data (Unaudited)



|                                                                              |  |                                       |         |   |         |   |         |         |  |   |         |   |  |   |         | 
|----------------------------------------------------------------------------- |  | ------------------------------------- | ------- | - | ------- | - | ------- | ------- |  | - | ------- | - |  | - | ------- | 
|                                                                              |  | 2005                                  |        
|                                                                              |  |                                       |        
|                                                                              |  | First                                 |         |   | Second  |   |         | Third   |  |   | Fourth  |  
|                                                                              |  | Quarter                               |         |   | Quarter |   |         | Quarter |  |   | Quarter |  
|                                                                              |  |                                       |         |   |         |   |         |         |  |   |         |  
|                                                                              |  | (In thousands, except per share data) |        
|Total operating revenue                                                       |  | $                                     | 109,383 |   |         | $ | 117,718 |         |  | $ | 113,590 |   |  | $ | 117,198 | 
|Operating income (loss)                                                       |  | $                                     | (15,839 | ) |         | $ | (4,165  | )       |  | $ | (7,830  | ) |  | $ | 17,516  | 
|Earnings (loss) from continuing operations                                    |  | $                                     | (20,543 | ) |         | $ | (20,247 | )       |  | $ | (10,652 | ) |  | $ | 5,508   | 
|Net earnings (loss)                                                           |  | $                                     | (18,509 | ) |         | $ | (15,542 | )       |  | $ | (9,124  | ) |  | $ | 31,206  | 
|Earnings (loss) per basic and diluted share from continuing
    operations(1) |  | $                                     | (0.23   | ) |         | $ | (0.22   | )       |  | $ | (0.12   | ) |  | $ | 0.06    | 
|Net earnings (loss) per basic and diluted share(1)                            |  | $                                     | (0.20   | ) |         | $ | (0.17   | )       |  | $ | (0.10   | ) |  | $ | 0.34    | 

|                                             |  |                                       |         |   |         |   |         |         |  |   |         |   |  |   |         |  
|-------------------------------------------- |  | ------------------------------------- | ------- | - | ------- | - | ------- | ------- |  | - | ------- | - |  | - | ------- | -
|                                             |  | 2004                                  |        
|                                             |  |                                       |        
|                                             |  | First                                 |         |   | Second  |   |         | Third   |  |   | Fourth  |  
|                                             |  | Quarter                               |         |   | Quarter |   |         | Quarter |  |   | Quarter |  
|                                             |  |                                       |         |   |         |   |         |         |  |   |         |  
|                                             |  | (In thousands, except per share data) |        
|Total operating revenue                      |  | $                                     | 108,771 |   |         | $ | 120,975 |         |  | $ | 116,009 |   |  | $ | 118,684 |  
|Operating income (loss)                      |  | $                                     | (28,607 | ) |         | $ | (5,868  | )       |  | $ | (18,302 | ) |  | $ | 30,766  |  
|Loss from continuing operations              |  | $                                     | (37,143 | ) |         | $ | (24,024 | )       |  | $ | (39,750 | ) |  | $ | (54,643 | )
|Net earnings (loss)                          |  | $                                     | (26,701 | ) |         | $ | (18,587 | )       |  | $ | 334,938 |   |  | $ | (54,982 | )
|Loss per share from continuing operations(1) |  | $                                     | (0.42   | ) |         | $ | (0.27   | )       |  | $ | (0.44   | ) |  | $ | (0.60   | )
|Net earnings (loss) per basic share(1)       |  | $                                     | (0.30   | ) |         | $ | (0.21   | )       |  | $ | 3.69    |   |  | $ | (0.61   | )
|Net earnings (loss) per diluted share        |  | $                                     | (0.30   | ) |         | $ | (0.21   | )       |  | $ | 3.63    |   |  | $ | (0.61   | )






|    |                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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.



|     |                  
|---- | -----------------
|(24) | Subsequent Events

(a)


(b)


(c)


129