<PAGE>   1


                                UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549
                                  Form 10-K

              ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
                     THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended DECEMBER 29, 1996      Commission file number 1-7553

                             KNIGHT-RIDDER, INC.
           (Exact name of registrant as specified in its charter)


         A Florida corporation                       NO. 38-0723657
    (State or other jurisdiction of        (I.R.S. Employer Identification No.)
     incorporation or organization)


                 One Herald Plaza             Miami, Florida 33132
                    (Address of principal executive offices)

       Registrant's telephone number, including area code (305) 376-3800

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


         Title of each class           Name of each exchange on which registered
Common Stock, $.02 1/12 Par Value            New York Stock Exchange
                                             Frankfurt Stock Exchange


         Securities registered pursuant to Section 12(g) of the Act:
                                    none

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes  X  No 
                                               ---    ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ ]

State the aggregate market value of the voting stock held by non-affiliates of
the registrant. (The aggregate market value is computed by reference to the
price at which the stock was sold as of March 2, 1997:$3,696,014,903.

Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date: March 2, 1997 -
92,981,507 one class Common Stock, $.02 1/12 Par Value

                      DOCUMENTS INCORPORATED BY REFERENCE

(1)   Portions of definitive Proxy Statement dated March 6, 1997, in connection
      with the Annual Meeting of Shareholders to be held on April 15, 1997, are
      incorporated into Part III.
(2)   Portions of the Company's Form 10-K filed March 20, 1996 are incorporated
      into Part IV.
(3)   Portions of the Company's Form 10-K filed March 24, 1995 are incorporated
      into Part IV.
(4)   Portions of the Company's Form 10-K filed March 23, 1994 are incorporated
      into Part IV.
(5)   Portions of the Company's Form 10-K filed in March 1981 are incorporated
      into Part IV.
(6)   Rights Agreement filed July 9, 1996 on Form 8-A is incorporated into Part
      IV.
(7)   Registration Statement No. 33-28010 on Form S-3 is incorporated into Part
      IV.

                                      1
<PAGE>   2



                      Table of Contents for 1996 Form 10-K
<TABLE>
<CAPTION>

                                                                                            Page
PART I                                                                                      ----
<S>       <C>                                                                              <C>
Item 1.   Business                                                                           3-9
                                                                
Item 2.   Properties                                                                         3-9
                                                                
Item 3.   Legal Proceedings                                                                    9
                                                                
Item 4.   Submission of Matters to a Vote of Security Holders                                  9
                                                                
PART II                                                         
                                                                
Item 5.   Market for Registrant's Common Equity and Related Stockholder
          Matters                                                                          10-11

Item 6.   Selected Financial Data                                                          12-14
                                                                              
Item 7.   Management's Discussion and Analysis of Financial Condition 
          and Results of Operations                                                        15-22
                                                                              
Item 8.   Financial Statements and Supplementary Data                                      23-38
                                                                              
Item 9.   Changes in and Disagreements with Accountants on Accounting                         39
          and Financial Disclosure        


PART III

Item 10.  Directors and Executive Officers of the Registrant                               39-41

Item 11.  Executive Compensation                                                              41

Item 12.  Security Ownership of Certain Beneficial Owners and Management                      41

Item 13.  Certain Relationships and Related Transactions                                      41


PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K                  41-42

SIGNATURES                                                                                 43-45

SCHEDULES                                                                                     47

EXHIBITS                                                                                   48-53
</TABLE>

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PART I
ITEM 1. AND 2. BUSINESS/PROPERTIES

THE COMPANY

    Knight-Ridder, Inc., was formed in 1974 by a merger between Knight 
Newspapers, Inc., and Ridder Publications, Inc. 

    In 1903, Charles Landon Knight purchased the Akron Beacon Journal. Knight 
Newspapers was founded by John S. Knight, who inherited the Beacon Journal from
his father in 1933. Ridder Publications was founded in 1892 when Herman Ridder 
acquired the German-language Staats-Zeitung in New York. Both groups 
flourished, each taking its stock public in 1969. The merger created a company 
with operations coast to coast. 

    Knight-Ridder Information, Inc., (formerly Dialog Information Services, 
Inc.), was acquired in 1988. Technimetrics was acquired in 1994. 

    Knight-Ridder, Inc., was incorporated in Ohio in 1974. Headquartered in 
Miami, the company was reincorporated in Florida in 1976.


CORPORATE HEADQUARTERS/EMPLOYEES

The company is headquartered in Miami, Fla., and employs nearly 24,000 people
worldwide.

BUSINESS SEGMENT INFORMATION


<TABLE>
<CAPTION>
(In thousands of dollars)                                         1996            1995            1994
                                                               -----------     -----------     -----------
<S>                                                            <C>             <C>             <C>        
OPERATING REVENUE
  Newspapers ...............................................   $ 2,374,224     $ 2,250,182     $ 2,134,922
  Business Information Services ............................       400,619         501,652         514,039
                                                               -----------     -----------     -----------
                                                               $ 2,774,843     $ 2,751,834     $ 2,648,961
                                                               ===========     ===========     ===========

OPERATING INCOME
  Newspapers ...............................................   $   379,585     $   281,146     $   350,856
  Business Information Services ............................         1,785          12,022          23,110
  Corporate ................................................       (46,452)        (52,884)        (42,705)
                                                               -----------     -----------     -----------
                                                               $   334,918     $   240,284     $   331,261
                                                               ===========     ===========     ===========

OPERATING PROFIT MARGIN
  Newspapers ...............................................          16.0%           12.5%           16.4%
  Business Information Services ............................            .4%            2.4%            4.5%


DEPRECIATION AND AMORTIZATION
  Newspapers ...............................................   $   117,612     $    96,051     $    94,927
  Business Information Services ............................        45,404          52,871          52,714
  Corporate ................................................         3,035           2,690           1,686
                                                               -----------     -----------     -----------
                                                               $   166,051     $   151,612     $   149,327
                                                               ===========     ===========     ===========

IDENTIFIABLE ASSETS
  Newspapers ...............................................   $ 1,951,771     $ 1,948,894     $ 1,553,160
  Business Information Services ............................       472,389         600,040         589,147
  Corporate ................................................       476,150         456,776         304,882
                                                               -----------     -----------     -----------
                                                               $ 2,900,310     $ 3,005,710     $ 2,447,189
                                                               ===========     ===========     ===========

CAPITAL EXPENDITURES
  Newspapers ...............................................   $   108,253     $    73,560     $    32,896
  Business Information Services ............................        14,109          29,577          33,470
  Corporate ................................................         4,224          17,888             744
                                                               -----------     -----------     -----------
                                                               $   126,586     $   121,025     $    67,110
                                                               ===========     ===========     ===========
FULL-TIME EQUIVALENT EMPLOYEES (FTES)(1)
  Newspapers (2) ...........................................        18,395          19,242          18,441
  Business Information Services ............................         1,682           2,312           2,568
  Corporate ................................................           186             215             190
                                                               -----------     -----------     -----------
                                                                    20,263          21,769          21,199
                                                               ===========     ===========     ===========
</TABLE>

(1)  Previously reported FTEs have been restated to be consistent with 
     measurement guidelines currently in use.
(2)  FTEs for 1995 and 1996 include 1,133 and 1,130, respectively, for Contra 
     Costa newspapers, acquired Oct. 31, 1995.


                                      3
<PAGE>   4

                   Source of Knight-Ridder Operating Revenue


<TABLE>
<CAPTION>
                                                          1996    1995    1994
                                                           ---     ---     ---
<S>                                                        <C>     <C>     <C> 
The Philadelphia Inquirer and
  Philadelphia Daily News .............................     18%     18%     17%
The Miami Herald ......................................     11      12      12
San Jose Mercury News .................................     10      10       9
Detroit Free Press (1) ................................      7       7       9
The Charlotte Observer ................................      6       5       5
Saint Paul Pioneer Press ..............................      4       4       4
Contra Costa Newspapers (2) ...........................      4       1
Akron Beacon Journal ..................................      3       3       3
All other newspapers ..................................     23      22      22
Business Information Services .........................     14      18      19
                                                           ---     ---     ---
                                                           100%    100%    100%
                                                           ===     ===     ===
</TABLE>

(1) Knight-Ridder portion of Detroit Newspapers
(2) Contra Costa Newspapers was acquired on Oct. 31, 1995.

NEWSPAPERS


         Knight-Ridder's Newspaper Division had 31 daily newspapers and 10
nondaily newspapers at the end of 1996.

         Newspaper operating revenue is derived primarily from the sale of
newspaper advertising. Due to seasonal factors such as heavier retail selling
during the winter and spring holiday seasons, advertising income fluctuates
significantly throughout the year. Consecutive quarterly results are not uniform
or comparable and are not indicative of the results over an entire year.

         Each of Knight-Ridder's newspapers is operated on a substantially
autonomous basis by local management appointed by corporate headquarters in
Miami. Each newspaper is free to manage its own news coverage, set its own
editorial policies and establish most business practices. Basic business
policies, however, are set by the corporate staff in Miami. Editorial services
and quality control also are provided by the corporate staff.

         Each newspaper is served by the company-owned news bureau in
Washington, D.C. A supplemental news service provided by KRT Information
Services, a partnership between Knight-Ridder and Tribune Co., distributes
editorial material produced by all Knight-Ridder newspapers and by 18 foreign
correspondents. The service also distributes editorial computer graphics and
deadline photos via the Knight-Ridder-owned PressLink Online.

         All of the company's newspapers compete for advertising and readers'
time and attention with broadcast, satellite and cable television, online and
other computer services, radio, magazines, nondaily suburban newspapers, free
shoppers, billboards and direct mail. In many cases, the newspapers also compete
with other newspapers published in nearby cities and towns. With the exception
of papers published in Detroit, Fort Wayne and St. Paul, company-owned
newspapers are the only daily and Sunday papers of general circulation published
in their communities.

         The newspapers rely on local sales operations for local retail and
classified advertising. The larger papers are assisted by Newspapers First and
by the Newspaper National Network, a sales force created by a group of some 50
major newspapers, in obtaining national or general advertising.

         The table above presents the relative percentage contributions by
individual papers to the company's overall operating revenue in 1996, 1995 and
1994. The percentage contributions of each paper to operating revenue are not
necessarily indicative of contributions to operating profit.

                                   Newsprint

         Newsprint is the primary raw material used in publishing newspapers,
and in 1996 Knight-Ridder was one of the largest consumers in the United States.
Approximately 17.1% of the company's total operating expenses during the year
were for newsprint. Purchases are made under long-term agreements with a number
of newsprint producers. Knight-Ridder purchases approximately 70% of its annual
consumption from United States mills, with the remainder purchased from Canada.
In the opinion of management, sources are adequate to meet current demands.

                                      4
<PAGE>   5

         Approximately 84% of the newsprint consumed by the company contained
some recycled content; the average content was 47% recycled fiber.

         Global newsprint supply and demand issues will continue to contribute
to pricing volatility for the foreseeable future. Newsprint prices in 1997 are
expected to increase in the spring with another price increase late this year
being considered.

         Knight-Ridder is a one-third partner with Cox Newspapers, Inc., and
Media General, Inc., in Southeast Paper Manufacturing Co., a newsprint mill in
Dublin, Ga. The mill's full capacity is 445,000 metric tonnes, using recycled
newsprint as the principal raw material and coal as the primary energy source.
Knight-Ridder also owns a 13.5% equity share of Ponderay Newsprint Company in
Usk, Wash., which produces more than 220,000 metric tonnes annually.
Knight-Ridder purchased approximately 129,000 metric tonnes from Southeast and
about 56,000 metric tonnes from Ponderay in 1996.

                                   Properties

         The company has daily newspaper printing and publishing facilities in
30 cities located in 16 states. These production facilities vary in size from
7,300 square feet at the Florida Keys Keynoter operation in Marathon, Fla., to
2.8 million square feet in Philadelphia. In total, the company's newspaper
facilities occupy about 9.0 million square feet. Approximately 1.9 million of
the total square feet is leased from others. Virtually all the owned property is
owned in fee. The company owns substantially all of its production equipment,
although certain office equipment is leased. The company also owns land for
future expansion in Columbus and Macon, Ga., Detroit and San Jose.

         Knight-Ridder newspaper companies are maintained in excellent operating
condition and are suitable for present and foreseeable publishing operations.
During the three years ended Dec. 29, 1996, the company spent approximately
$214.7 million for capital additions and improvements to its existing
properties.

                                   Technology

         Efforts to improve the quality of products continued during 1996. The
company installed new publishing systems in Duluth, Contra Costa, Columbia, Gary
and Grand Forks. Systems installations are under way in San Jose, Akron and
Philadelphia. Enhancements were made to Collier-Jackson circulation software.
Conversion to the Cyborg Human Resources System was largely completed in 1996.

         The Charlotte Observer completed installation of its second new
Flexographic press in 1996.

         Major press replacement projects have begun at The Miami Herald and in
Akron. Significant renovations are under way at the business and editorial 
offices in Detroit and Philadelphia.

         New publishing systems have been approved for Boulder, Biloxi, Myrtle 
Beach, Macon and Milledgeville for installation in 1997. A $2.8 million press 
replacement project has been approved for Duluth for mid-1997.

                           General Advertising Sales

         Knight-Ridder newspapers depend most heavily on three agents for the
sale of general advertising.

         Newspapers First, an advertising sales cooperative, is the primary
sales representative for the larger Knight-Ridder newspapers, Detroit Newspapers
and several leading independents. It allows a customer to place an ad in a
combination of newspapers.

         Newspaper National Network (NNN), Knight-Ridder's second general sales
agent, was established in 1994 as a three-year experiment in focused national
selling on behalf of the newspaper industry. Showing substantial success, it has
been renewed for another three years. It represents all the Knight-Ridder
newspapers, plus more than 500 others. Like Newspapers First, it makes the
purchase of newspaper advertising a "one-stop shopping" prospect.

         Sawyer, Ferguson and Walker, Inc., a private company, sells
sales-representative services for Knight-Ridder's medium to small markets and
helps with regional retail advertising sales.

                                      5
<PAGE>   6

            The Philadelphia Inquirer and Philadelphia Daily News

1996 Revenue was $505.7 Million.  Philadelphia Newspapers, Inc. (PNI),
publisher of The Philadelphia Inquirer and Philadelphia Daily News, met its
profitability goals for 1996 and finished the year well-positioned to address
the challenges  of 1997, despite significant changes in the retail market. May
Department Stores Co., which in 1995 acquired the John Wanamaker stores, in
1996 acquired the family-owned Strawbridge & Clothier, one of the Philadelphia
region's oldest, most-distinguished retail chains. The stores are being
operated under the name Strawbridge.

         The nine-county Philadelphia Metropolitan market remains attractive,
featuring a diverse economy, including the state's largest manufacturing center,
more than 80 higher education institutions and an extensive hospital and health
care industry.

                               The Miami Herald

1996 Revenue was $314.9 Million.  The Miami Herald, Florida's largest
newspaper, is sold primarily in Dade, Broward and Monroe counties. Its
International Satellite edition is distributed in 29 countries in Latin America
and the Caribbean.

         El Nuevo Herald, an award-winning Spanish-language newspaper, (102,150
daily and 127,877 Sunday), is available to Herald subscribers for a 7-cent daily
delivery charge or through single-copy sales.

         Retail development continued at a rapid pace in 1996, including the
expansion of The Falls shopping center with more than 50 new stores, new retail
development in South Beach featuring stores such as The Gap and Banana Republic,
the opening of Pembroke Crossing in Broward and new retailers on Coral Gables'
Miracle Mile. Retailers who opened new stores in South Florida include
BrandsMart, Macy's and Target.

         In 1996, The Herald continued technological changes, including the
installation of new presses, the introduction of online services in English and
Spanish, satellite distribution of the International edition and a major
database marketing initiative. The Herald also extended the reach of two of its
Spanish-language publications, adding nonsubscriber distribution to "Viernes,"
el Nuevo Herald's Friday entertainment section, and to "Vida Social," a tabloid
society magazine.

         The Miami-Fort Lauderdale population is expected to grow 32.1% between
1995 and 2015; U.S. average is 19.4%.

                            San Jose Mercury News

1996 Revenue was $284.6 Million. The San Jose Mercury News serves California's
fourth-largest metro area, better known as Silicon Valley. The area's robust
economy has been fueled by the growth of technology companies, particularly
computer software, hardware and Internet-related businesses. In large part
because of the heavy recruitment needs of such companies, the Mercury News has
enjoyed strong classified revenue, which increased 15.7% over last year,
excluding the 53rd week in 1995.

         Mercury Center, the newspaper's pioneering online publication launched
in 1993, added new features to its growing family of information services. Among
them are Talent Scout, Good Morning Silicon Valley, Digital High and VoterLink.
The acclaimed site (www.sjmercury.com) received a record number of visits in
1996, more than doubling readership during the year. Editor & Publisher named
Mercury Center the best newspaper on the Web at the 1996 Interactive Newspaper
Awards.

         In 1996, the Mercury News introduced "Nuevo Mundo," a publication for
the area's Spanish-speaking audience; the region is the nation's fourth-largest
Hispanic market. "Nuevo Mundo" has been well received, gaining advertisers such
as JCPenney, Macy's and Montgomery Ward.

         The population of the San Jose Metropolitan Statistical Area (MSA),
which includes only Santa Clara County, is expected to grow 22.9% between 1995
and 2015; the U.S. average is 19.4%.

                                      6
<PAGE>   7

                              Detroit Free Press

1996 Revenue was $182.1 Million(1). The Detroit Free Press is the largest
newspaper in Michigan. The combined Sunday edition, The Detroit News and
Free Press, ranks seventh in circulation in the nation.

         The two newspapers are published by Detroit Newspapers (DN), an agency
combining the business operations of the two newspapers. This joint operating
agency (JOA) was formed in 1989. The profits (or losses) are split equally
between the two partners, Knight-Ridder, Inc., and Gannett Co., Inc. The Free
Press is an a.m. paper, the News is p.m. On weekends, they publish combined
editions.

         Detroit is the nation's sixth-largest market, and in normal times will
generate approximately $450 million in revenue from its two newspapers.

         This past year and 1995 were not normal times. On July 13, 1995,
several unions struck DN. The issue was "featherbedding," the unions' resistance
to trimming redundant staff in distribution. Approximately 2,500 employees
walked out. DN continued to publish.

         In February 1997, the six striking newspaper unions made an
unconditional offer to return to work. Circulation, as of the unaudited Audit
Bureau of Circulations report for the six months ended Sept. 30, 1996, was at
approximately 67% of its pre-strike level for both daily and Sunday. Advertising
revenue, which also has gained strength despite union intimidation of many
advertisers, was at nearly 85% of the December 1994 level.

         The operating loss in Detroit narrowed in 1996 and the fourth quarter
was profitable. The company expects to be profitable on a full-year basis in
1997.

(1) Knight-Ridder portion of Detroit Newspapers.  Under the joint operating
    agreement, Knight-Ridder reports 50% of total revenue for the Detroit
    Free Press and the Detriot News.

                            The Charlotte Observer

1996 Revenue was $157.6 Million. The Charlotte Observer, the
largest-circulation  daily in North and South Carolina, is sold primarily in a
15-county region across the two states. The Observer enjoyed strong
advertising growth in 1996, with retail revenue up 8.0%, general up 19.0% and
classified up 13.1% over last year, excluding the 53rd week in 1995.

         Population in the Charlotte Metropolitan Statistical Area (MSA) is
expected to grow 27.2% between 1995 and 2015, compared with the U.S. average of
19.4%.

         The Observer in 1996 completed a $35 million press conversion to expand
color capacity and provide 100% Flexographic printing.


BUSINESS INFORMATION SERVICES


Knight-Ridder Business Information Services (BIS) produces, distributes and
facilitates the use of finance, general business, science, technology,
transportation and other information by global business and professional users.
BIS represented 14.4% of total Knight-Ridder operating revenue in 1996. At
year-end 1996, BIS consisted of two operations:

                       Knight-Ridder Information, Inc.
                 (formerly Dialog Information Services, Inc.)

Provides services to global business and professional information librarians
and end-users interested in:

BUSINESS AND FINANCE - CHEMICALS - ENERGY AND ENVIRONMENT - FOOD AND 
AGRICULTURE - GOVERNMENT AND REGULATIONS - INTELLECTUAL PROPERTY - MEDICINE - 
NEWS AND MEDIA - LEGAL - PHARMACEUTICALS - REFERENCE - SOCIAL SCIENCES - 
TECHNOLOGY


                                      7


<PAGE>   8

         Knight-Ridder Information serves nearly 130,000 subscribers worldwide.

         Principal products are the DIALOG(R), DataStar(SM) and Infomart Dialog
online services; the KR OnDisc(TM) CD-ROM product series; and KR SourceOne(SM),
a full-service document delivery service. In addition, Knight-Ridder
Information's end-user product line includes KR BusinessBase(R), KR
ScienceBase(R), Custom Dialog(TM)/KR QuickStart(TM), Alerts and KR ProBase(TM).

         The DIALOG and DataStar online services and products provide access to
more than 750 online databases and 80 CD-ROM products and the full text of more
than 4,000 leading publications covering science and technology, general
business (products and markets, people, company fundamentals), legal issues and
news.

         Knight-Ridder Information subscribers are business and professional
information specialists and end-users interested in scientific research,
competitive intelligence, technology, industry and market developments and
general business and financial information. Customers include business
executives, research chemists, engineers, lawyers, physicians and educators.

         During 1996, more than 70 new databases were added to DIALOG and
DataStar. The Knight-Ridder Information collection represents one of the largest
combined database installations in the information industry, with a content
totaling more than nine terabytes. The databases include information from other
Knight-Ridder companies and 11 Knight-Ridder newspapers.

         Several companies compete with Knight-Ridder Information, including
Reed-Elsevier's Lexis(R)-Nexis(R), Scientific and Technical Information Network
(STN), offered by the American Chemical Society, and a number of niche services.

                                Technimetrics

Provides services to global corporate investor relations and marketing
executives, investment banks and investment fund managers interested in:

INSTITUTIONAL SHAREHOLDING INFORMATION - IDENTIFYING INVESTMENT EXECUTIVES BY 
AREA OF FOCUS - BUSINESS INFORMATION (COMPANY AND PEOPLE)

         This diversified information services company specializes in the
creation and development of global financial and marketing research and related
consulting services.

         Technimetrics focuses its attention on four core proprietary databases:

         INSTITUTIONAL INVESTORS DATABASE provides detailed intelligence on the
people and firms that conduct business in the institutional marketplace. It
includes information on the equity and fixed income influentials - portfolio
managers, security analysts and research directors throughout the world. It
focuses on their industry specialization, individual investment style and
geographic area of expertise.

         SHAREHOLDER DATABASE tracks the ebb and flow of data involving share
ownership of public companies. It is the complete resource for global
shareholding data and includes information on more than 48,000 issues, 12,000
equity portfolios and holdings of more than 5,000 money management institutions
around the world. Information is derived from proprietary Technimetrics
research, public company proxies, SEC filings, global mutual fund portfolios, UK
unit and investment trusts and overseas stock exchanges.

         FINEX DATABASE provides complete business profiles of more than 350,000
corporate executives in 60,000 public and private organizations worldwide by
functional responsibility. It contains the most targeted and focused information
available that is designed specifically for marketing and sales
business-to-business applications.

         STOCKBROKER DATABASE provides information on more than 65,000
registered stockbrokers and branch managers at the leading brokerage firms in
North America.

         Technimetrics specializes in supplying information that is customized
to suit many different client requirements. Data are delivered through numerous
distribution channels, including the Internet, a wide variety of electronic
media and third-party vendors.  Technimetrics continues to enhance its 
proprietary investor relations software application, which set the industry 
standard when it was introduced in 1986.

                                      8
<PAGE>   9

         The company also offers highly sophisticated consulting programs,
including international investor relations, stock surveillance and
communications management services, to more than 1,500 clients in corporations
and brokerage firms around the world.

         This was a banner year for Technimetrics. It greatly enhanced its
position in all its target markets through developing alternative delivery
channels via the Internet; acquiring Grabill-Bloom, the premier stock
surveillance firm in the United States; developing alliances with PR Newswire
and DataStar to broaden the reach and scope of its information; and creating new
products and services within its investor relations unit that allow greater
access to key shareholding information.

                                   Properties

         BIS maintains production and sales facilities throughout the world. The
343,786 square feet of office and production capacity currently utilized is
leased under operating leases that expire between 1997 and 2006. During the
three years ended Dec. 29, 1996, BIS spent approximately $77.2 million for
capital additions and improvements to its existing properties.  The existing BIS
facilities are adequate for present and future needs.

                                   Technology

         KNIGHT-RIDDER INFORMATION, INC.: During 1996, Knight-Ridder Information
reinforced its commitment to information professionals by announcing Web
interfaces to both its flagship DIALOG and DataStar online services. Scheduled
for launch in early 1997, DIALOG(R) Web will provide searchers with the 
extensive content, power, precision, and full functionality of DIALOG in the 
environment of the World Wide Web. DataStar(SM) Web, already released in 
Europe, is also scheduled to be unveiled in the U.S. in 1997. Researchers will 
be able to access the Web versions of both services through their Internet 
browsers.

         A redesigned second generation of KR BusinessBase, Knight-Ridder
Information's Windows(R)-based application for business professionals, was also
launched successfully in 1996. It provides instant access to vital business
information on more than 13 million public and private companies worldwide by
company, market, product or topic. This powerful business intelligence tool puts
more than 60 databases and over 5,500 trade and professional journals at the
users' fingertips.

         This year, Knight-Ridder Information received several accolades for its
high technological standards. Its full-service document delivery arm, KR
SourceOne, was honored for its state-of-the-art document image order management
system with the first Internet & Electronic Commerce Award for Internet
Infrastructure from InformationWeek magazine and the Gartner Group.

         In addition, Info World magazine acknowledged the sophistication of KR
ScienceBase, naming Knight-Ridder Information No. 1 in its list of 100 companies
that are most innovative in their use of client/server technology.

         TECHNIMETRICS: In 1996, a key advancement provided customer access via
the Internet to download proprietary Technimetrics data to their Internet
browsers. Technimetrics also developed networked client-server applications with
daily online update capabilities to be available early in 1997.


ITEM 3.     LEGAL PROCEEDINGS

         In 1990, a verdict was rendered against the company's subsidiary,
Philadelphia Newspapers, Inc. (PNI), publisher of The Philadelphia Inquirer and
Philadelphia Daily News, in a libel action entitled Sprague v. Philadelphia
Newspapers, Inc., for $2.5 million in compensatory damages and $31.5 million in
punitive damages.  On April 1, 1996, the libel action was settled.  The
settlement had no material impact on earnings.

         Various libel actions and environmental and other legal proceedings
that have arisen in the ordinary course of business are pending against the
company and its subsidiaries.  In the opinion of management, the ultimate
liability to the company and its subsidiaries as a result of these legal
proceedings will not be material to the financial position or results of
operations.


ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         No matters were submitted to the vote of security holders of
Knight-Ridder, Inc. during the three months ended December 29, 1996.



                                      9
<PAGE>   10

PART II

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

                                       KRI STOCK

         Knight-Ridder common stock is listed on the New York Stock Exchange and
the Frankfurt Stock Exchange under the symbol KRI.

         The stock also is traded on exchanges in Philadelphia, Chicago, Boston,
San Francisco, Los Angeles and Cincinnati and through the Intermarket Trading
System.  Options are traded on the Philadelphia Exchange.

         Knight-Ridder Stock split two-for-one in 1996, 1983 and 1978. Knight
Newspapers, Inc., stock split two-for-one in 1972. The company's 93.3 million
shares are held in all 50 states by 11,066 shareholders of record.

                         MARKET PRICE OF COMMON STOCK

The last closing price of the company's common stock prior to the preparation
of this report was $39.75 on March 2, 1997. The number of shareholders of
record at Dec. 29, 1996, was 11,066.

The average stock trading volume per day for the years 1996, 1995 and 1994 was
181,305, 132,300 and 126,900, respectively. The following table presents the
company's common stock market data*:

<TABLE>
<CAPTION>
                                    1996                    1995                   1994
                             --------------------    -------------------     -------------------
Quarter                       High         Low        High        Low         High        Low
                             -------     --------    -------     -------     -------     -------
<S>                          <C>         <C>         <C>         <C>         <C>         <C>
1st .....................    36 1/16     29 7/8      28 1/16     25 1/8      30 1/2      27 7/16
2nd .....................    38 7/16     32 11/16    28 7/8      26 3/16     30 1/8      26
3rd .....................    38          32 7/16     29 9/16     27 5/8      27 5/16     24 3/4
4th .....................    42          35 3/8      33 5/16     28 1/8      26 1/4      23 1/4
</TABLE>


* Amounts have been restated to reflect a two-for-one stock split in the form of
  a 100% common stock dividend, effected July 31, 1996.

                           TREASURY STOCK PURCHASES

The table below is a summary of treasury stock purchases since 1986:

<TABLE>
<CAPTION>
                               Shares        Cost
                             Purchased*     (000s)
                             ----------    --------
<S>                          <C>           <C>
1996 .......................  6,219,100    $221,768
1995 ....................... 11,508,600     319,363
1994 .......................  5,044,600     136,977
1993 .......................  1,500,000      40,693
1992 .......................
1991 .......................
1990 .......................  5,325,400     129,909
1989 .......................  5,522,200     131,885
1988 .......................  9,099,200     198,279
1987 .......................  2,000,000      38,728
1986 .......................
</TABLE>

* Amounts have been restated to reflect a two-for-one stock split in the form of
  a 100% common stock dividend, effected July 31, 1996.




                                      10
<PAGE>   11


                              QUARTERLY OPERATIONS

The company's largest source of revenue, retail advertising, is seasonal and
tends to fluctuate with retail sales in markets served. Historically, retail
advertising is higher in the second and fourth quarters. General advertising,
while not as seasonal as retail, is lower during the summer months. Classified
advertising revenue has in the past been a reflection of the overall economy and
has not been significantly affected by seasonal trends. The following table
summarizes the company's quarterly results of operations (in thousands, except
per share data):

<TABLE>
<CAPTION>
                                                                                    QUARTER
                                                               -----------------------------------------------------
Description                                                     First         Second         Third           Fourth
                                                               --------      --------      ---------        --------
<S>                                                            <C>           <C>           <C>              <C>
1996
  Operating revenue .....................................      $697,661      $716,982      $653,796         $706,404
  Operating income ......................................        50,612        80,450        71,614          132,242
  Net income ............................................        23,518        42,352       126,257(a)        75,746(b)
  Net income per common and
    common equivalent share (1),(2) .....................           .24           .43          1.31(a)           .79(b)
  Dividends declared per common share (2) ...............           .18 1/2       .20           .20                 (c)

1995
  Operating revenue .....................................      $674,599      $687,455      $637,994         $751,786
  Operating income ......................................        71,007        84,714        19,081           65,482
  Income before cumulative effect of change
    in accounting principle .............................        35,673        94,120(d)      6,590           30,999
  Cumulative effect of change in accounting
    principle for contributions .........................        (7,320)
  Net income ............................................        28,353        94,120(d)      6,590           30,999
  Net income per common and
    common equivalent share (2):
      Income before cumulative effect of change
        in accounting principle .........................           .34           .94(d)        .07              .32
      Cumulative effect of change
        in accounting principle for contributions .......          (.07)
      Net income ........................................           .27           .94(d)        .07              .32
  Dividends declared per common share (2) ...............           .18 1/2       .18 1/2       .18 1/2          .18 1/2

1994
  Operating revenue .....................................      $630,863      $661,550      $642,613         $713,935
  Operating income ......................................        64,810        95,286        75,277           95,888
  Net income ............................................        30,372        50,121        37,243           53,164
  Net income per common and common
    equivalent share (1), (2) ...........................           .27           .46           .35              .50
  Dividends declared per common share (2) ...............           .17 1/2       .18 1/2(e)    .18 1/2          .18 1/2
</TABLE>

(1)      Amounts do not total to the annual earnings per share because each
         quarter and the year are calculated separately based on average
         outstanding shares during that period.
(2)      Amounts have been restated to reflect a two-for-one stock split in the
         form of a 100% common stock dividend, effected July 31, 1996.
(a)      Includes the gain on the sale of KRF.
(b)      Includes the after-tax gain on the sale of Netscape, net of adjustments
         to the carrying value of certain investments ($.07 per share).
(c)      The Board of Directors declared a $.20 per share dividend on Jan. 28,
         1997. The quarterly dividend usually paid in January was paid on Feb.
         24, 1997, to shareholders of record as of the close of business on Feb.
         12, 1997.
(d)      Includes the after-tax $53.8 million ($.54 per share) gain on the sale
         of the JoC.
(e)      The second quarter ended June 26, 1994. These dividends were declared
         June 28, 1994, and recorded in the third quarter.



                                      11
<PAGE>   12
Item 6. SELECTED FINANCIAL DATA

11-YEAR FINANCIAL HIGHLIGHTS

(In thousands, except per share data and ratios)

The following data were compiled from the consolidated financial statements of
Knight-Ridder, Inc., and subsidiaries. The consolidated financial statements and
related notes and discussions for the year ended Dec. 29, 1996, (Items 7 and 8)
should be read in order to obtain a better understanding of this data.

<TABLE>
<CAPTION>                                      
----------------------------------------------------------------------------------------------------------------------------
                                                     Compound                                                                   
                                                    Growth Rate                                                                 
                                                  ----------------   Dec. 29        Dec. 31       Dec. 25          Dec. 26         
                                                  5-Year   10-Year    1996           1995           1994             1993          
                                                  ------   ------- ----------     ----------     ----------       ----------       
SUMMARY OF OPERATIONS                                                                                                              
<S>                                                <C>      <C>    <C>            <C>            <C>              <C>              
Operating Revenue                                                                                                                  
  Newspapers                                                                                                                       
    Advertising..................................   4.6%     3.0%  $1,793,424     $1,672,970     $1,583,373       $1,481,631       
    Circulation..................................   2.7      4.1      501,826        495,315        484,581          474,420       
    Other........................................  17.6     12.0       78,974         81,897         66,968           56,772       
                                                                   ----------     ----------     ----------       ----------       
      Total Newspapers...........................   4.5      3.4    2,374,224      2,250,182      2,134,922        2,012,823       
  Business Information Services..................   2.5     16.2      400,619        501,652        514,039          438,525       
  Other..........................................                                                                                  
                                                                   ----------     ----------     ----------       ----------       
      Total Operating Revenue....................   4.2      4.4    2,774,843      2,751,834      2,648,961        2,451,348       
                                                                   ----------     ----------     ----------       ----------       
Operating Costs                                                                                                                    
  Labor, newsprint and other operating costs.....   3.8      4.5    2,273,874      2,359,938      2,168,373        2,024,733       
  Depreciation and amortization..................   6.0      7.3      166,051        151,612        149,327          141,758       
                                                                   ----------     ----------     ----------       ----------       
      Total Operating Costs......................   3.9      4.6    2,439,925      2,511,550      2,317,700        2,166,491       
                                                                   ----------     ----------     ----------       ----------       
Operating Income.................................   6.6      2.6      334,918        240,284        331,261          284,857       
  Interest expense...............................   1.3      8.2      (73,296)       (59,572)       (44,585)         (45,112)      
  Other, net (1).................................  41.7     26.1      204,986        107,084          3,394            3,656       
  Income taxes, net..............................  20.5      5.8     (198,735)      (120,414)      (119,170)         (95,312)      
                                                                   ----------     ----------     ----------       ----------       
Income from continuing operations................  15.2      7.3      267,873        167,382        170,900          148,089       
Discontinued broadcast operations (2)............                                                                                  
Cumulative effect of changes in accounting                                                                                         
  principles (3).................................                                     (7,320)                                      
                                                                   ----------     ----------     ----------       ----------       
Net Income (1)...................................  15.2      6.7   $  267,873     $  160,062     $  170,900       $  148,089       
                                                                   ==========     ==========     ==========       ==========       
Operating income percentage (profit margin)......                        12.1%           8.7%          12.5%            11.6%      
--------------------------------------------------------------------------------- -------------- ---------------  -----------      
SHARE DATA (4)                                                                                                                     
  Average number of common and                                                                                                     
    common equivalent shares outstanding.........                      97,420        100,196        108,551          110,663       
  Income per common and common equivalent share                                                                                    
    Continuing operations........................  16.7      9.2   $     2.75     $     1.67     $     1.57       $     1.34       
    Discontinued broadcast operations (2)                                                                                          
    Cumulative effect of changes                                                                                                   
      in accounting principles (3)...............                                       (.07)                                      
    Net income (1)...............................  16.7      8.6         2.75           1.60           1.57             1.34       
  Dividends declared per common share (5)........  (3.5)     2.5          .58 1/2        .74            .73              .70       
  Common stock price                                                                                                               
    High.........................................                          42             33 5/16        30  1/2          32   1/2 
    Low..........................................                          29 7/8         25 1/8         23  1/4          25  5/16 
    Close........................................                          39 1/4         31 1/4         25  7/16         29 11/16 
  Shareholders' equity per common share..........   2.5      5.4   $    12.12     $    11.43     $    11.58       $    11.33       
  Price/earnings ratio (6).......................                      21.1:1         27.7:1         16.2:1           22.2:1       
---------------------------------------------------------------------------------------------------------------------------------  
OTHER FINANCIAL DATA                                                                                                               
  Common stock acquired..........................                  $  221,768     $  319,363     $  136,977       $   40,693       
  Payment of cash dividends......................                      74,262         74,377         77,942           76,787       
  Ratio of earnings to fixed charges (7).........                       5.4:1          4.3:1          5.2:1            4.5:1       
  At Year End                                                                                                                      
    Total assets.................................                   2,900,310      3,005,710      2,447,189        2,431,432       
    Long-term debt (excluding current maturities)                     771,335      1,000,721        411,504          410,388       
    Total debt...................................                     821,335      1,013,850        411,504          451,075       
    Shareholders' equity.........................                   1,131,508      1,110,970      1,224,654        1,243,169       
    Return on average shareholders' equity (8)...                        23.9           14.3           13.9             12.2       
    Current ratio................................                       1.0:1          1.1:1          1.0:1            1.0:1       
    Total debt/total capital ratio...............                        42.1%          47.7%          25.2%            26.6%      
</TABLE>

                                      12
<PAGE>   13

<TABLE>
<CAPTION>                                      
------------------------------------------------------------------------------------------------------------------------------------
                                                      Dec. 27        Dec. 29        Dec. 30         Dec. 31         Dec. 31         
                                                       1992           1991            1990            1989            1988          
                                                    ----------      ----------     ----------      ----------      ----------      
SUMMARY OF OPERATIONS                                                                                                              
<S>                                                 <C>             <C>            <C>             <C>             <C>             
Operating Revenue                                                                                                                  
  Newspapers                                                                                                                       
    Advertising...................................  $1,444,144      $1,429,661     $1,556,932      $1,577,449      $1,523,030      
    Circulation...................................     460,014         439,029        403,188         385,214         370,898      
    Other.........................................      39,932          35,127         31,981          32,212          29,743      
                                                    ----------      ----------     ----------      ----------      ----------      
                                                                                                                                   
      Total Newspapers............................   1,944,090       1,903,817      1,992,101       1,994,875       1,923,671      
  Business Information Services...................     385,439         354,361        332,628         289,585         159,659      
  Other...........................................                                                                                 
                                                    ----------      ----------     ----------      ----------      ----------      
                                                                                                                                   
      Total Operating Revenue.....................   2,329,529       2,258,178      2,324,729       2,284,460       2,083,330      
                                                    ----------      ----------     ----------      ----------      ----------      
Operating Costs                                                                                                                    
  Labor, newsprint and other operating costs......   1,922,797       1,890,850      1,896,331       1,838,656       1,707,991      
  Depreciation and amortization...................     128,221         124,055        127,772         123,810         104,576      
                                                    ----------      ----------     ----------      ----------      ----------      
      Total Operating Costs.......................   2,051,018       2,014,905      2,024,103       1,962,466       1,812,567      
                                                    ----------      ----------     ----------      ----------      ----------      
Operating Income..................................     278,511         243,273        300,626         321,994         270,763      
  Interest expense................................     (52,375)        (68,843)       (71,803)        (84,622)        (62,465)     
  Other, net (1)..................................      13,580          35,940         17,119          57,381          26,515      
  Income taxes, net...............................     (93,630)        (78,302)       (96,897)       (114,917)        (88,038)     
                                                    ----------      ----------     ----------      ----------      ----------      
                                                                                                                                   
Income from continuing operations.................     146,086         132,068        149,045         179,836         146,775      
Discontinued broadcast operations (2).............                                                     67,366           9,608      
Cumulative effect of changes in accounting                                                                                         
  principles (3)..................................    (105,200)                                                                    
                                                    ----------      ----------     ----------      ----------      ----------      
Net Income (1)....................................  $   40,886      $  132,068     $  149,045      $  247,202      $  156,383      
                                                    ==========      ==========     ==========      ==========      ==========      
                                                                                                                                   
Operating income percentage (profit margin).......        12.0%          10.8%          12.9%           14.1%           13.0%      
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                   
SHARE DATA (4)                                                                                                                     
  Average number of common and                                                                                                     
    common equivalent shares outstanding..........     110,356         103,594        101,366         104,878         113,406      
  Income per common and common equivalent share                                                                                    
    Continuing operations.........................  $     1.32      $     1.27         $ 1.47      $     1.72      $     1.29      
    Discontinued broadcast operations (2)                                                                 .64             .09      
    Cumulative effect of changes                                                                                                   
      in accounting principles (3)................        (.95)                                                                    
    Net income (1)................................         .37            1.27           1.47            2.36            1.38      
  Dividends declared per common share (5).........         .70             .70            .67             .62 1/4         .57   1/4
  Common stock price                                                                                                               
    High..........................................          32 1/16         28 3/4         29             29 3/16          23   7/8
    Low...........................................          25  3/8         21 7/8         18   1/2       21 7/16          17   7/8
    Close.........................................          29 1/16         25 3/8         22 15/16       29 3/16          22 11/16
  Shareholders' equity per common share...........  $    10.75      $    10.72     $     9.05      $    8.92       $     7.74   
  Price/earnings ratio (6)........................      21.9:1          19.9:1         15.6:1         20.4:1           17.5:1      
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                   
OTHER FINANCIAL DATA                                                                                                               
  Common stock acquired...........................                                 $  129,909      $  131,885      $  198,279      
  Payment of cash dividends.......................  $   75,992      $   71,087         66,422          63,260          62,990      
  Ratio of earnings to fixed charges (7)..........       3.9:1           2.9:1          3.4:1           3.6:1           3.7:1      
  At Year End                                                                                                                      
    Total assets..................................   2,458,059       2,332,751      2,270,459       2,134,626       2,357,040      
    Long-term debt (excluding current maturities).     495,941         556,797        803,914         660,900         727,043      
    Total debt....................................     560,245         606,840        823,958         712,940       1,037,075      
    Shareholders' equity..........................   1,181,812       1,148,620        894,913         917,145         821,625      
    Return on average shareholders' equity (8)....        12.5            12.9           16.5            28.4            18.2      
    Current ratio.................................       1.1:1           1.1:1          1.2:1           1.2:1           1.1:1      
    Total debt/total capital ratio................        32.2%           34.6%          47.9%           43.7%           55.8%     
</TABLE>

                                      13
<PAGE>   14
<TABLE>
<CAPTION>
                                                              Dec. 31           Dec. 31
                                                               1987              1986
SUMMARY OF OPERATIONS                                        ----------        ----------
<S>                                                         <C>                <C>
Operating Revenue
  Newspapers
    Advertising........................................     $ 1,464,447        $1,332,820     
    Circulation........................................         357,553           334,670     
    Other..............................................          28,578            25,362     
                                                            -----------        ----------     
      Total Newspapers.................................       1,850,578         1,692,852     
  Business Information Services........................          99,260            88,904     
  Other................................................          18,344            26,338     
                                                            -----------        ----------     
      Total Operating Revenue..........................       1,968,182         1,808,094     
                                                            -----------        ----------     
Operating Costs                                                                               
  Labor, newsprint and other operating costs...........       1,580,664         1,467,543     
  Depreciation and amortization........................          92,425            81,901     
                                                            -----------        ----------     
      Total Operating Costs............................       1,673,089         1,549,444     
                                                            -----------        ----------     
Operating Income.......................................         295,093           258,650     
  Interest expense.....................................         (49,583)          (33,248)    
  Other, net (1).......................................          20,061            20,172     
  Income taxes, net....................................        (116,837)         (113,000)    
                                                            -----------        ----------     
Income from continuing operations......................         148,734           132,574     
Discontinued broadcast operations (2)                             6,429             7,465     
Cumulative effect of changes in accounting 
   principles (3) .....................................
                                                            -----------        ----------     
Net Income (1).........................................     $   155,163        $  140,039     
                                                            ===========        ==========                                 
Operating income percentage (profit margin)............            15.0%             14.3%   
                                                                                              
SHARE DATA (4)                                                                                
  Average number of common and                                                                
    common equivalent shares outstanding...............         117,292           116,404     
  Income per common and common equivalent share                                               
    Continuing operations..............................      $     1.27        $     1.14     
    Discontinued broadcast operations (2)..............             .05               .06     
    Cumulative effect of changes                                                              
      in accounting principles (3)                                                            
    Net income (1).....................................            1.32              1.20     
  Dividends declared per common share (5)..............             .51  1/2          .45   1/2   
  Common stock price                                                                          
    High...............................................              30  5/8           28 15/16  
    Low................................................              16  5/8           18   3/4  
    Close..............................................              20 1/16           23  7/16 
  Shareholders' equity per common share................      $     7.93        $     7.14     
  Price/earnings ratio (6).............................          15.1:1            19.5:1     
                                                                                              
OTHER FINANCIAL DATA                                                                          
  Common stock acquired................................      $   38,728                       
  Payment of cash dividends............................          57,426        $   49,877     
  Ratio of earnings to fixed charges (7)...............           5.1:1             6.4:1     
  At Year End                                                                                 
    Total assets.......................................       1,919,875         1,906,459     
    Long-term debt (excluding current maturities)......         508,203           620,389     
    Total debt.........................................         553,235           668,261     
    Shareholders' equity...............................         901,498           815,982     
    Return on average shareholders' equity (8).........            18.1              18.5     
    Current ratio......................................           1.2:1             1.2:1     
    Total debt/total capital ratio.....................            38.0%             45.0%   
</TABLE>
Notes:
(1) Other, net and Net Income include the gain from the sale of Knight-Ridder
    Financial in 1996, the gain from the sale of the Journal of Commerce in 1995
    and the gain from the sale of the Pasadena Star-News in 1989.
(2) Results of operations of the company's Broadcast Division (sold in 1989) and
    the gain on the sale of broadcast assets are presented as "discontinued
    broadcast operations."
(3) For 1995, the cumulative effect of change in accounting principle represents
    an adjustment from the implementation of FAS 116 - Accounting For
    Contributions Received and Contributions Made. For 1992, the cumulative
    effect of changes in accounting principles represents adjustments from the
    implementation of FAS 109 - Accounting for Income Taxes and FAS 106 -
    Accounting for Postretirement Benefits Other Than Pensions.
(4) Amounts have been restated to reflect a two-for-one stock split in the form
    of a 100% stock dividend, effected July 31, 1996.
(5) The Board of Directors declared a $0.20 per share dividend on Jan. 28, 
    1997.  The quarterly dividend usually paid in January was paid in February.
(6) Price/earnings ratio is computed by dividing closing market price by
    earnings from continuing operations for the trailing 12-month period. 1995
    and 1992 earnings exclude the effects of changes in accounting principles.
    Earnings also exclude the gain from the sale of Knight-Ridder Financial in
    1996, the gain from the sale of the Journal of Commerce in 1995 and the gain
    from the sale of the Pasadena Star-News in 1989.
(7) The ratio of earnings to fixed charges is computed by dividing earnings (as
    adjusted for fixed charges and undistributed equity income from
    unconsolidated subsidiaries) by fixed charges for the period. Fixed charges
    include the interest on debt (before capitalized interest), the interest
    component of rental expense, the proportionate share of interest expense on
    guaranteed debt of certain equity-method investees and on debt of 50%-owned
    companies.
(8) Return on average shareholders' equity is computed by dividing net income
    before the cumulative effect of changes in accounting principles in years
    1995 and 1992, including the results of discontinued operations in years 
    1986 through 1989, by average shareholders' equity. Average shareholders' 
    equity is the average of shareholders' equity on the first day and the
    last day of the fiscal year.

                                      14
<PAGE>   15
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
        AND RESULTS OF OPERATIONS


                     Glossary of Newspaper Advertising Terms

      The following definitions may be helpful when reading Management's
Discussion and Analysis of Operations. 

RETAIL Display advertising from local merchants, such as department and grocery 
stores, selling goods and services to the public. 
GENERAL Display advertising by national advertisers that promote products or 
brand names on a nationwide basis. 
CLASSIFIED Small, locally placed ads listed together and organized by category, 
such as real estate sales, employment opportunities or automobile sales, and 
display-type advertisements in these categories.
FULL-RUN Advertising appearing in all editions of a newspaper.
PART-RUN Advertising appearing in select editions or zones of a newspaper's
market. Part-run advertising is translated into full-run equivalent linage
(referred to as factored) based on the ratio of the circulation in a particular
zone to the total circulation of a newspaper. 
RUN-OF-PRESS (ROP) All advertising printed on Knight-Ridder presses and 
appearing within a newspaper. 
PREPRINT Advertising supplements prepared by advertisers and inserted into a 
newspaper.

      Knight-Ridder is a communications company engaged in newspaper
publishing, news and information services, electronic retrieval services and
graphics and photo services.
      In 1996, the gross revenue from these businesses was about $2.8
billion. The company is also involved in other newspaper businesses, newsprint
manufacturing and cable television (mostly sold in January 1997) through
business arrangements, including joint ventures and partnerships. 

      Newspaper revenue is derived principally from advertising and newspaper 
copy sales.  Newspaper advertising currently accounts for about 65% of
consolidated revenue. This revenue comes from the three basic categories of 
advertising - retail, general and classified - discussed below.

      Newspaper advertising volume is categorized as either run-of-press (ROP)
or preprint. Volume for ROP advertising is measured in terms of either
full-run or part-run advertising linage and reported in six-column inches. A
six-column inch consists of one inch of advertising in one column of a
newspaper page when that page is divided into six columns of equal size. By
using part-run advertising, advertisers can direct their messages to selected
market segments.

      Circulation revenue results from the sale of newspapers.
Circulation of daily and Sunday newspapers currently accounts for 18% of
consolidated revenue. It is reported at the net wholesale price for newspapers
delivered or sold by independent contractors and at the retail price for
newspapers delivered or sold by employees.

      Other newspaper revenue comes from  alternate delivery services,
commercial job printing, niche publications, book publishing, audiotext, online
services, newsprint waste sales, newspaper trucking services and other
miscellaneous sources. 

      BUSINESS INFORMATION SERVICES (BIS) revenue includes operations of
Knight-Ridder Information, Inc. (KRII), and Technimetrics. Prior to July 1996,
BIS revenue included Knight-Ridder Financial (KRF). KRF was sold on July 26,
1996, to Global Financial Information for $275 million. Prior to April 1995, BIS
revenue included the Journal of Commerce (JoC). The JoC was sold on April 3,
1995, to the Economist Group of London for $115 million.

      KRII principal products include DIALOG(R), DataStar(SM) and
Infomart/DIALOG online services; the KR OnDisc(TM) CD-ROM product series; and KR
SourceOne(SM), a full-service document delivery service. In addition, KRII's
end-user product line includes KRBusinessBase(R), KR ScienceBase(R), Custom
DIALOG(TM)/KRQuickStart(TM), Alerts and KRProBase(TM). KRII serves customers in 
more than 150 countries and offers more than 750 online databases. Subscribers
are charged according to the amount of time they spend online, information 
procured and which databases they access.

      Technimetrics is a leading publisher of investor information and global
investment listings of business executives and professionals. Technimetrics'
information is used by investor relations and marketing professionals in
America's leading corporations for communication programs, audience targeting
and direct marketing. 




                                      15
<PAGE>   16
                            Results of Operations

SUMMARY OF OPERATIONS. A summary of the company's operations, certain share data
and other financial data for the past 11 years is provided in Item 6. Compound
growth rates for the past five- and 10-year periods are also included, if
applicable. A review of this summary and of the supplemental information in Item
1 will provide a better understanding of the following discussion and analysis
of operating results and of the financial statements as a whole. The
supplemental information contains financial data for the company's operations by
business segment and includes discussions of the company's largest newspapers
and information regarding the company's properties, technology and the raw
materials used in operations.

RESULTS OF OPERATIONS: 1996 VS. 1995. Earnings per share were $2.75, up $1.08
from the $1.67 reported in 1995, prior to the $.07 cumulative effect adjustment
recorded in 1995. The $2.75 includes an $.89 gain on the sale of Knight-Ridder
Financial (KRF) and a $.07 gain on the sale of our Netscape investment, net of
adjustments in the carrying value of certain investments. The $1.67 includes a
$.54 gain on the sale of the Journal of Commerce (JoC) on April 3, 1995.
Excluding these gains from their respective periods, EPS for 1996 was $1.79,
which was up $.66 from $1.13 earned in 1995. These results were a record for
Knight-Ridder.

      Operating income in 1996 was $334.9 million, up $94.6 million, or 39.4%, 
from 1995. The results include Detroit, which was rebuilding throughout the year
from a strike that began on July 13, 1995. (In February 1997, the six striking
newspaper unions in Detroit made an unconditional offer to return to work.) They
also include full-year results for Contra Costa Newspapers (CCN), which was
purchased on Oct. 31, 1995. And, finally, they reflect a 52-week year for 1996
as opposed to a 53-week year for 1995, an anomaly of our fiscal-year reporting
convention. On a pro forma basis for CCN (that is, full-year results for 1995,
including the period in which the company did not own CCN), but excluding
Detroit from both years and the 53rd week from 1995, operating income was up
$62.6 million, or 22.2%, from 1995. 

      Total company revenue of $2.8 billion was up 0.8% from 1995 despite the 
absence of KRF. On a pro forma basis for CCN, but excluding Detroit, KRF and 
JoC results and the 53rd week from 1995, total operating revenue was up 4.2%.

NEWSPAPERS. The Newspaper Division's operating income was $379.6 million, up
$98.4 million, or 35.0%, from $281.1 million in 1995. The increase was due to a
7.2% increase in total advertising revenue from 1995 and improvement in
operating profit in Philadelphia, Detroit and other large markets. For the year,
on a pro forma basis for CCN, and including Detroit, the Newspaper Division
operating profit margin was 16.0%, up from 12.5% in 1995. On a pro forma basis
for CCN, but excluding Detroit and the 53rd week, operating income was up 20.8%
from 1995.

      Newspaper advertising revenue increased by $120.5 million, or 7.2%, in
1996 on a full-run ROP linage increase of 10.0%. On a pro forma basis for CCN,
but excluding Detroit and the 53rd week (comparable basis), total advertising
revenue improved by 5.2% from 1995. The following table summarizes the
percentage change in revenue and full-run ROP from 1995 as reported in our
financial statements, as well as results on a pro forma basis for CCN, but
excluding Detroit:

<TABLE>
<CAPTION>
                                                       PRO FORMA
                                                CONTRA COSTA NEWSPAPERS
                                                 BUT EXCLUDING DETROIT
                                               -------------------------

                                    % CHANGE                  % CHANGE
ADVERTISING           % CHANGE    IN FULL-RUN   %CHANGE IN    FULL-RUN
CATEGORY             IN REVENUE    ROP LINAGE   IN REVENUE*  ROP LINAGE
------------------------------------------------------------------------
<S>                      <C>          <C>         <C>          <C>
Retail ........           1.7          4.7        (0.3)        (4.6)
General........           8.9         21.5         7.5          5.0
Classified.....          13.2         14.3        10.9          4.3
 Total.........           7.2         10.0         5.2          0.1
</TABLE>

*Excludes the 53rd week from 1995 results.

      Retail advertising revenue improved by $14.0 million, or 1.7%, from 1995
on a 4.7% increase in full-run ROP linage. On a comparable basis, retail
advertising revenue decreased 0.3% from 1995, primarily as a result of
department store consolidations in Philadelphia and Northern California. If you
were to calculate the increase excluding these markets and Detroit, and
compare the rest of the markets on a 52-week basis, retail would have been up 
1.9%.

      General advertising revenue was up $16.3 million, or 8.9%, from the prior
year, with an increase in full-run ROP linage of 21.5%. On a comparable basis,
general advertising revenue was up 7.5%.

                                      16
<PAGE>   17
      Classified revenue improved by $90.2 million, or 13.2%, on a 14.3%
increase in full-run ROP volume from 1995. Employment advertising revenue, up
22.8% for the year, was the strength of our classified revenue performance. On a
comparable basis, classified advertising revenue was up 10.9%. Philadelphia and
San Jose contributed over half of the classified revenue improvement.

      Circulation revenue improved by $6.5 million, or 1.3%, on an average daily
circulation decrease of 217,957 copies, or 5.9%, and an average Sunday
circulation decrease of 307,088 copies, or 6.0%. The circulation copy decline
reflects the impact of the Detroit strike.

      Other newspaper revenue decreased $2.9 million, or 3.6%, during 1996,
partly due to the decline of newsprint waste sales and one less week in the
fiscal year. 

BUSINESS INFORMATION SERVICES.  Operating revenue was $400.6 million in 1996, 
down from $501.7 million in 1995, reflecting the absence of revenue as a result
of the KRF and JoC sales. Excluding KRF and JoC, operating revenue would have
been up 5.4% from 1995, mostly due to acquisitions.

      Operating income was $1.8 million, down from $12.0 million in 1995. The
decline in division operating income was due to the ongoing investment to put
KRII products on the World Wide Web. 

EXPENSES. Labor and employee benefits costs were down $45.0 million, or 4.0%, 
with a 6.9% decrease in the work force. Excluding Detroit and KRF, the work 
force decreased by 4.1%. The decrease in labor and employee benefits costs was 
due primarily to the reduction in the work force, the fourth quarter 1995 charge
for buyouts and separation costs and the impact of the 53rd week. These 
reductions were partly offset by an increase in the average wage per employee 
of 3.4% (excluding Detroit, CCN and KRF).

      Newsprint, ink and supplements costs increased by $25.4 million, or 5.7%,
due to an 11.5% increase in the average cost per tonne of newsprint offset by a
4.0% decrease in newsprint consumption from the prior year.

      Depreciation and amortization increased $14.4 million, or 9.5%, due mostly
to the acquisition of CCN. 

      Other operating costs decreased 8.5% from 1995. On a  pro forma basis
for CCN but excluding Detroit and KRF, other operating costs were up 0.3% from
the prior year.

NON-OPERATING ITEMS. Net interest expense increased $10.9 million, or 22.5%,
from 1995, due primarily to higher debt levels. The average debt balance for 
the year increased $325.2 million from 1995, due largely to the $221.8 million
repurchase of 6.2 million shares in 1996 and the $360 million acquisition of 
CCN in the fourth quarter of 1995.

      Equity in earnings of unconsolidated companies and joint ventures
increased by $9.2 million during 1996 due to earnings improvements from our
newsprint mill investments, which benefited from the rise in newsprint prices.

      The "Other, net" line of the non-operating section increased $86.9
million over 1995, mostly as a result of the 1996 $155.9 million pretax gain on
the sale of KRF and the $12.5 million pretax gain on the sale of our investment
in Netscape, net of the reduction in the carrying values of certain other
investments. 

INCOME TAXES. The effective income tax rate for 1996 was 42.6%, up
from 41.8% in 1995. The increase was due to the sale of KRF, which was taxed in
a high tax rate jurisdiction, as well as a change in the distribution of income
to states with higher income tax rates. 

RESULTS OF OPERATIONS: 1995 VS. 1994 Earnings per share, prior to the $.07 
cumulative effect adjustment related to the mandated change in accounting for 
charitable contributions, was $1.67, up $.10, or 6.4%, from $1.57 per share in 
1994. The gain on the sale of the JoC of $.54 per share was recognized in the 
second quarter of 1995.

      Operating income in 1995 was $240.3 million, down from $331.3 million in
1994 on a $102.9 million, or 3.9%, increase in revenue. Operating income as a
percentage of revenue was 8.7%, compared with 12.5% in 1994. The decline in
operating income from 1994 was due primarily to:

       - A $72.7 million decline from Detroit's prior year operating  profit,
as a result of the strike that began on July 13, 1995.

       - A nearly 40% increase in the cost of newsprint from 1994, which
resulted in a $105.9 million expense increase.

       - Charges related to buyout and separation expenses of about $20 
million, of which $17 million was charged in the fourth quarter of 1995.

      Excluding the Detroit operations and buyout and separation charges from
both years, operating income would have been down 1.2% from 1994. 



                                      17
<PAGE>   18
      NEWSPAPERS. The Newspaper Division's operating income was $281.1
million, down  from $350.9 million in 1994 due to the impact of the Detroit
strike, the  increase in the cost of newsprint from 1994 and fourth quarter
charges related  to buyout and separation expenses. Excluding Detroit operations
and buyout and  separation charges, operating income would have been up 3.8%
from 1994.

      Newspaper advertising revenue increased by $89.6 million, or 5.7%, in 1995
on a full-run ROP linage increase of 2.8%. 1995 results reflect: reduction in
revenue due to the Detroit strike, two months of revenue recorded for Contra
Costa Newspapers, Inc. (CCN), acquired on Oct. 31, 1995, and an additional week
of revenue (53 weeks vs. 52 weeks) in 1995. Excluding the impact of these items
from 1995 results, newspaper advertising revenue would have increased by 5.8%.
The following table summarizes the percentage change in revenue and full-run ROP
from 1994 as reported in our financial statements, as well as results excluding
Detroit and CCN:

<TABLE>
<CAPTION>
                                                   EXCLUDING DETROIT AND
                                                 CONTRA COSTA NEWSPAPERS
                                                ---------------------------
                                      % CHANGE                  % CHANGE
                         % CHANGE    IN FULL-RUN  % CHANGE     IN FULL-RUN
ADVERTISING CATEGORY    IN REVENUE   ROP LINAGE  IN REVENUE     ROP LINAGE
---------------------------------------------------------------------------
<S>                        <C>         <C>          <C>          <C>
Retail........              1.9        (0.6)         3.8         (2.4)
General.......             (1.1)        2.9          0.6          1.3
Classified....             12.6         6.7         14.3          5.4
 Total........              5.7         2.8          7.5          1.3
</TABLE>

      Retail advertising revenue improved $15.3 million, or 1.9%, from 1994 on a
0.6% decrease in full-run ROP linage. The increase in average rates and preprint
revenue offset the decrease in full-run ROP linage.

      General  advertising  revenue was $182.5 million,  down from the $184.5 
million reported in 1994, with an increase in full-run ROP linage of 2.9%.

      Classified revenue improved by $76.3 million, or 12.6%, on a 6.7% increase
in full-run ROP volume. San Jose contributed nearly half of the classified
revenue improvement. Employment advertising revenue, up 24.6% for the year, was
the strength of our classified revenue performance.

      Circulation revenue improved by $10.7 million, or 2.2%, on an average
daily circulation increase of 52,866 copies, or 1.5%, and an average Sunday
circulation increase of 10,754 copies, or 0.2%. Circulation copies reflect the
impact of the Detroit strike, offset by additional circulation from the recently
acquired CCN.

      Other newspaper revenue increased $14.9 million, or 22.3%, during 1995,
due primarily to increased revenue from newsprint waste sales, commercial
printing and other lines of business developed to augment the revenue of our
core newspaper business. 

BUSINESS INFORMATION SERVICES. Operating revenue was $501.7 million in 1995, 
down from $514.0 million in 1994, as a result of the April 3 sale of the JoC. 
Excluding the impact of the JoC and acquisitions, operating revenue would have
been up 5.3% from 1994.

      Operating income was $12.0 million, down from $23.1 million in 1994.  The
decline in division operating income was due to the absence of the JoC since
March 1995 and buyout and separation charges recorded in 1995.  Excluding the
JoC, severance costs and acquisitions, operating income would have been down
$2.4 million from 1994. 

      EXPENSES. Labor and employee benefits costs were up $38.6 million, or
3.5%, with a 2.7% increase in the work force.  The increase in the work force
was due to the CCN acquisition. The increase in labor and employee benefits
costs was due primarily to a fourth quarter charge for buyouts and separation
costs, the impact of the 53rd week and the addition of CCN. This was partly
offset by a decrease in labor costs as a result of the Detroit strike.  The
average wage per employee, excluding severance, Detroit and CCN, increased
3.0% from 1994.

      Newsprint, ink and supplements costs increased by $110.9 million, or
33.0%, due to a nearly 40% increase in the average cost of newsprint, offset by
a 0.2% decrease in newsprint consumption from the prior year.

      Depreciation and amortization increased $2.3 million, or 1.5%, due mostly
to the acquisition of CCN. 




                                      18
<PAGE>   19
      Other operating costs increased 5.7% from 1994, due primarily to 
strike-related costs in Detroit and volume-related increases in BIS royalties 
and exchange fees.

      NON-OPERATING ITEMS. Net interest expense increased $10.5 million, or
27.6%, from 1994, due primarily to higher debt levels.  The average debt
balance for the year increased $146.0 million from 1994, due largely to the
$319.4 million repurchase of 11.5 million shares in 1995 and the $360 million
acquisition of CCN in the fourth quarter of 1995.

      Equity in earnings of unconsolidated companies and joint ventures
increased by $13.2 million during 1995 due to earnings improvements from our
newsprint mill investments, which benefited from the rise in newsprint prices.

      The "Other, net" line of the non-operating section increased $84.7 million
over 1994, mostly as a result of the $92.7 million pretax gain on the sale of
the JoC, which was partially offset by the reduction in the carrying values of
certain investments.

      INCOME TAXES. The effective income tax rate for 1995 was 41.8%, up from
41.1% in 1994.  The increase was due mostly to a change in the distribution of
income to states with higher income tax rates. 

      OTHER. In the first quarter of 1995, the company adopted Financial
Accounting Standard (FAS) 116 Accounting for Contributions Received and
Contributions Made. Under the new standard, unconditional promises, including
multi-year promises, are recognized in the period in which the promise is
made. The adoption of FAS 116 resulted in a $7.3 million charge (net of tax)
to  operations, or $.07 per share, and was recorded as a cumulative effect 
adjustment.

      Shareholders' equity reflects unrealized gains on investments, net of tax,
of $42.9 million. This represents the unrealized gains on investments available
for sale that are carried on the balance sheet at fair market value, with the
unrealized gains (net of tax) reported as a separate component of shareholders'
equity in accordance with FAS 115 - Accounting For Certain Investments in Debt
and Equity Securities. Related amounts prior to 1995 were not material. 

      RESULTS OF OPERATIONS: 1994 VS. 1993 Earnings per share were $1.57, up
$.23,  or 17.2%, from $1.34 per share in 1993.

      Operating income increased 16.3% on an 8.1% increase in revenue in 1994.
Operating income as a percentage of revenue was 12.5%, compared with 11.6% in
1993. 

      NEWSPAPERS. The Newspaper Division's operating income increased $52.1
million, or 17.4%, to $350.9 million. The increase resulted from a 6.1% revenue
improvement that was partially offset by fourth quarter charges related to
buyout and separation costs and nonrecurring charges for litigation and
environmental matters.

      Overall, newspaper advertising revenue increased by $101.7 million, or 
6.9%, in 1994 on a full-run ROP linage increase of 3.1%.

      Retail advertising revenue improved $26.4 million, or 3.4%. The
improvement resulted from a 0.3% increase in full-run ROP linage, increases in
full-run ROP average rates and preprint revenue.

      General advertising revenue increased by $15.7 million, or 9.3%, from 
1993 on an 11.1% increase in full-run ROP general linage, partially offset
by a decrease in preprint revenue.

      Classified revenue improved by $59.7 million, or 10.9%, on a 5.5% increase
in full-run ROP volume and a 4.9% increase in full-run average rates. Most of
the increase was due to the strength of employment advertising, which was up
23.4% for the year and 32.1% in the last quarter.

      Circulation revenue increased $10.2 million, or 2.1%, despite a decline in
the average number of copies. Morning circulation declined 41,600 copies, or
1.3%, and afternoon circulation declined 10,900 copies, or 2.4%. Sunday
circulation declined 45,300 copies, or 0.9%.

      Other newspaper revenue increased $10.2 million, or 18.0%, during 1994,
due primarily to increased revenue from lines of business developed to augment
the revenue of our core newspaper business. 

BUSINESS INFORMATION SERVICES. In 1994, BIS contributed 19.4% of consolidated 
revenue, compared with 17.9% in 1993. Excluding the impact of acquisitions, 
revenue would have been up almost 9%. Operating income was $23.1 million, down
$295,000, or 1.3%, from 1993 on a 17.2% increase in revenue. The decline in 
divisional operating income resulted from a fourth quarter KRII separation 
charge.




                                      19
<PAGE>   20
EXPENSES. Labor and employee benefits costs were up $65.2 million, or 6.4%, with
a 1.4% increase in the work force resulting from expansion and acquisitions in
the BIS Division, which was partly offset by work force reductions in the
Newspaper Division. Other factors in the increase were a 4.4% increase in the
average labor and employee benefits cost and a fourth quarter charge for buyouts
and separation charges.

      Newsprint, ink and supplements costs increased by $859,000, or 0.3%, 
due to a 1.7% increase in consumption and a slight decrease in average 
newsprint prices from 1993.

      Depreciation and amortization expense increased 5.3%, or $7.6 million, due
to BIS expansion and acquisitions.

      Other operating costs increased 11.7% from 1993 due partly to increases 
in volume-related BIS royalty and exchange fee expenses and other cost 
increases related to BIS expansion and acquisitions.  A fourth quarter charge 
for environmental and litigation matters accounted for part of the increase. 

      Non-Operating Items.  Net interest expense decreased $1.2 million, or 
3.2%, from 1993, due primarily to lower debt levels. 

      Income Taxes.  The effective income tax rate for 1994 was 41.1%, up from
39.2% in 1993.  The increase was mostly due to 1993 favorable adjustments of
tax reserves resulting from the resolution of federal and state tax issues for
prior years.

                                  A Look Ahead

      We are optimistic about continued profit growth for the company's 
newspapers, with expected advertising increases in the low-single digits. In 
February 1997, the six striking newspaper unions in Detroit made an 
unconditional offer to return to work. Before that announcement, we were
anticipating that it would be profitable on a full-year basis in 1997 and we
continue in that belief. We believe Newspaper Division margins will continue to
improve, most notably in Detroit and Philadelphia.

      The average price of newsprint for 1997 is expected to be about 15% lower
than in 1996, even with the impact of a possible price increase in the spring.

      For BIS, we anticipate only slight profitability, as a result of the
ongoing reinvestments we are making in KRII to make more of its products
available on the World Wide Web.

      The company expects to continue its share repurchase program in 1997.
There are approximately 5.4 million shares remaining under the current
authorization for 6 million shares.

      Certain statements contained herein and in other sections of this report
are forward-looking statements. These are based on management's current
knowledge of factors affecting Knight-Ridder's business. Actual results could
differ materially from those currently anticipated. Investors are cautioned that
such forward-looking statements involve risk and uncertainty, including, but not
limited to, the effects of international, national and local economies on
revenue, negotiations and relations with labor unions, unforeseen changes to
newsprint prices, the effects of acquisitions and the evolution of the Internet.

               Recent Acquisitions/Investment History/Divestitures

      In January 1997, the company and Tele-Communications, Inc., closed on
the previously announced sale of the company's interest in all but one of their
jointly owned cable investments. The remaining systems, including Kentucky,
account for a small portion of the original investment.  That sale is expected
to close later. The company expects to report an after-tax gain on the
transaction of between $130 million and $150 million. The company expects the
total sale to yield, net after-tax proceeds, between $270 million and $280
million. 

      In July 1996, the company sold Knight-Ridder Financial (KRF) to Global 
Financial Information Corporation for $275 million.  The after-tax gain on the 
sale of KRF was $86.3 million.

      In July 1996, Technimetrics, Inc., purchased Grabill-Bloom, Inc., a stock
surveillance firm that helps companies track their shareholders on a real-time
basis.

      Also during 1996, the company made strategic investments in PointCast,
Inc., Zip2 Corp. and Frost & Sullivan. 





                                      20
<PAGE>   21
      In October 1995, the company acquired 100% of the outstanding shares of 
Lesher Communications, Inc., (Lesher) for $360 million. Lesher, based in Walnut 
Creek, Calif., publishes four daily newspapers in contiguous Contra Costa and 
eastern  Alameda County markets in the East Bay area of Northern California.
Lesher was renamed Contra Costa Newspapers, Inc. (CCN), in November 1995.

      Also in October 1995, the company acquired a 100% interest in The CARL
Corporation, a leading provider of library automation services. The company also
acquired a 100% interest in The UnCover Company, a partnership of The CARL
Corporation and Blackwell Limited.

      In August 1995, the company acquired a minority investment in Teltech
Resource Network Corporation, the leading independent provider of technical
information research, analysis and consulting services to U.S. industry.

      In March 1995, Knight-Ridder, Inc., Tribune Co., Cox Newspapers, Inc., and
Advance Publications, Inc., purchased PRC Realty Systems, Inc., currently
operating under the name of Interealty. Each of the four purchasing companies
owns an equal interest in Interealty, which produces software systems for the
real estate industry.

      Also during 1995, the company made strategic investments in Netscape
Communications Corporation (that investment was sold during 1996), New Century
Network, InfiNet, Destination Florida and CareerPath.

      In April 1995, the company sold the JoC to the Economist Group of London
for $115 million. The after-tax gain on the sale of the JoC was $53.8 million.

      In January 1994, the company acquired Technimetrics, a leading publisher
of investor information and business executive and global investment
professional listings.

                            Capital Spending Program

      The company's capital spending program includes normal replacements,
productivity improvements, capacity increases, building construction and
expansion and printing press equipment.  Over the past three years, expenditures
have totaled $314.7 million for these items.

      A large portion of the 1996 expenditures is for the Miami press project
that began in 1995.  The $112.0 million press expansion is expected to be
completed in 1998.  Another large component of 1996 expenditures is the $27.2
million replacement of three existing presses at Akron with new equipment and
refurbished Flexographic equipment.  That project also is expected to be 
completed in 1998.

      Also included in capital expenditures is the Charlotte press project that
began in 1994. The $35.0 million press expansion was completed during 1996, when
the second of two new presses became operational. The $29.5 million renovation
of the Philadelphia Broad Street facility began in 1995 and is expected to
continue through 1998.

      Investment in our BIS Division during 1996 included mainframe computer 
equipment enhancements of $3.5 million at KRII.

                        Financial Position and Liquidity

      1996 VS. 1995 The principal change in the company's financial position
during 1996 was the application of some KRF after-tax sale proceeds toward the
repurchase of 6.2 million shares for $221.8 million and the reduction of debt by
$193 million. The total-debt-to-total-capital ratio decreased to 42.1%, from
47.7% in 1995. Standard & Poor's and Moody's continue to rate the company's
commercial paper A1+ and P1 and long-term bonds AA- and A1, respectively.

      Average outstanding commercial paper during the year was $495.0 million,
with an average effective interest rate of 5.5%. During 1996, the company's
revolving credit and term loan agreement, which backs up the commercial paper
program, was decreased from $800 million to $650 million.  At year-end 1996,
commercial paper outstanding was $366.5 million and aggregate unused credit
lines were $283.5 million.

      During 1996, net cash provided by operating activities increased $105.4
million to $273.1 million.  The increase was attributed to higher earnings,
reflecting the KRF gain and improvements in Detroit's and Philadelphia's
operations, and other changes in working capital.

      Cash and short-term investments were $22.9 million at the end of 1996, a
$3.1 million decrease from last year.  The ratio of current assets to current
liabilities was 1.0:1 at year end vs. 1.1:1 at the end of 1995.




                                      21
<PAGE>   22
      The company's operations have historically generated strong positive cash
flow, which, along with the company's commercial paper program, revolving credit
lines and ability to issue public debt, has provided adequate liquidity to meet
the company's short-term and long-term cash requirements, including requirements
for acquisitions.

      Various libel actions and environmental and other legal proceedings that
have arisen in the ordinary course of business are pending against the company
and its subsidiaries. In the opinion of management, the ultimate liability to
the company and its subsidiaries as a result of these actions will not be
material.

      1995 VS. 1994 The principal changes in the company's financial
position during 1995 were an increase of $602.3 million of debt in connection
with the $360 million CCN acquisition and the $319.4 million  repurchase of
11.5 million shares of the company's common stock.  In early 1995, the
company sold the JoC for $115 million.  The after-tax proceeds offset other  
debt increases.  The total-debt-to-total-capital ratio increased to 47.7% in
1995, up from 25.2% in 1994.

      Average outstanding commercial paper during the year was $263.8 million,
with an average effective interest rate of 5.9%. During 1995, the company's
revolving credit and term loan agreement, which backs up the commercial paper
program, was increased from $500 million to $800 million. At year-end 1995,
commercial paper outstanding was $563.2 million and aggregate unused credit
lines were $236.8 million.

      In December 1995, the company issued $100 million principal amount of
6.30% senior notes due Dec. 15, 2005. 

      During 1995, net cash provided by operating activities decreased
$201.4 million to $167.7 million.  After excluding the gain on the sale of
JoC, the decrease was attributed to lower earnings as a result of the Detroit
strike, newsprint price increases, severance costs and other changes in
working capital. 

      Cash and short-term investments were $26.0 million at the end of 1995, a
$16.8 million increase from last year.  The ratio of current assets to current
liabilities was 1.1:1 at year end vs. 1.0:1 at the end of 1994.

      1994 VS. 1993 During 1994, net cash provided by operating activities
increased $39.1 million, to $369.1 million. The increase was attributed to
higher earnings and increased distributions from investees.  The ratio of
current assets to current liabilities was 1.0:1 at year end.  
     
      Cash and short-term investments were $9.3 million at the end of 1994, 
a $13.8 million decrease from 1993. 

      During 1994, the company repurchased 5.0 million of its shares for an 
aggregate price of $137.0 million.  

      In January 1994, $40.0 million in 9.05% notes payable matured.  Total 
debt at year-end 1994 was $39.6 million less than in 1993.  As a result, the
total-debt-to-total-capital ratio decreased from 26.6% in 1993 to 25.2% in
1994.  

      Average outstanding commercial paper during the year was $101.0 million 
with an average effective interest rate of 4.0%.  At year-end 1994, commercial
paper outstanding was $54.9 million and aggregate unused credit lines were
$445.1 million.

                            Effect of Changing Prices

      The Consumer Price Index, a widely used measure of the impact of changing
prices, has increased only moderately in recent years, up between 2% and 6% each
year since 1990. Historically, when inflation was at higher levels, the impact
on the company's operations was not significant.

      The principal effect of inflation on the company's operating results is to
increase reported costs. In both of its business segments, subject to normal
competitive conditions, the company generally has demonstrated the ability to
raise sales prices to offset these cost increases.




                                      22
<PAGE>   23

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Quarterly Operations in Item 5 and Schedule II, Valuation and Qualifying
Accounts


CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
                                                                              Dec. 29      Dec. 31      Dec. 25
(In thousands of dollars, except share data)                                   1996         1995         1994
                                                                            ----------   ----------   -----------
ASSETS

CURRENT ASSETS
<S>                                                                         <C>          <C>          <C>    
  Cash, including short-term cash investments of $50
   in 1996, $50 in 1995 and $150 in 1994 ................................   $   22,880   $   26,012   $    9,253
  Accounts receivable, net of allowances of $12,685
   in 1996, $14,348 in 1995 and $13,728 in 1994 .........................      356,079      339,264      317,687
  Inventories ...........................................................       42,941       73,349       39,555
  Prepaid expense .......................................................       90,314       21,543       20,354
  Other current assets ..................................................       53,513       42,754       35,955
                                                                            ----------   ----------   ----------
        Total Current Assets ............................................      565,727      502,922      422,804
                                                                            ----------   ----------   ----------

INVESTMENTS AND OTHER ASSETS
  Equity in unconsolidated companies and joint ventures .................      330,267      321,658      293,205
  Other .................................................................      184,413      285,666      190,515
                                                                            ----------   ----------   ----------
        Total Investments and Other Assets ..............................      514,680      607,324      483,720
                                                                            ----------   ----------   ----------

PROPERTY, PLANT AND EQUIPMENT
  Land and improvements .................................................       77,526       80,616       66,950
  Buildings and improvements ............................................      392,477      401,093      383,696
  Equipment .............................................................    1,079,593    1,223,838    1,209,360
  Construction and equipment installations in progress ..................      110,590       57,644       17,099
                                                                            ----------   ----------   ----------
                                                                             1,660,186    1,763,191    1,677,105
  Less accumulated depreciation .........................................      757,722      831,544      844,593
                                                                            ----------   ----------   ----------
        Net Property, Plant and Equipment ...............................      902,464      931,647      832,512
                                                                            ----------   ----------   ----------
EXCESS OF COST OVER NET ASSETS ACQUIRED
  Less accumulated amortization of $223,200 in 1996,
    $205,608 in 1995 and $182,402 in 1994 ...............................      917,439      963,817      708,153
                                                                            ----------   ----------   ----------
        Total ...........................................................   $2,900,310   $3,005,710   $2,447,189
                                                                            ==========   ==========   ==========
</TABLE>


See "Notes to Consolidated Financial Statements."





                                      23
<PAGE>   24

<TABLE>
<CAPTION>
                                                                                Dec. 29      Dec. 31     Dec. 25
(In thousands of dollars, except share data)                                     1996         1995         1994
                                                                              ----------   ----------   ----------

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
<S>                                                                           <C>          <C>          <C>  
  Accounts payable ........................................................   $  223,962   $  127,532   $  136,817
  Accrued expenses and other liabilities ..................................      103,730      105,317       98,993
  Accrued compensation and amounts withheld from employees ................       96,426      101,357       96,917
  Federal and state income taxes ..........................................                       195        1,368
  Deferred revenue ........................................................       70,452       72,134       66,953
  Dividends payable .......................................................                    17,978       19,593
  Short-term borrowings and current portion of long-term debt .............       50,000       13,129
                                                                              ----------   ----------   ----------
        Total Current Liabilities .........................................      544,570      437,642      420,641
                                                                              ----------   ----------   ----------

NONCURRENT LIABILITIES
  Long-term debt ..........................................................      771,335    1,000,721      411,504
  Deferred federal and state income taxes .................................      174,019      165,045      138,611
  Postretirement benefits other than pensions .............................      159,267      169,672      166,682
  Employment benefits and other noncurrent liabilities ....................      117,353      120,817       84,264
                                                                              ----------   ----------   ----------
        Total Noncurrent Liabilities ......................................    1,221,974    1,456,255      801,061
                                                                              ----------   ----------   ----------


MINORITY INTERESTS IN
  CONSOLIDATED SUBSIDIARIES ...............................................        2,258          843          833
                                                                              ----------   ----------   ----------

COMMITMENTS AND CONTINGENCIES (Note J)

SHAREHOLDERS' EQUITY
  Common stock, $.02 1/12 par value; shares authorized - 250,000,000; shares
    issued - 93,340,652 in 1996, 97,196,308 in 1995 and 105,785,440
     in 1994 ..............................................................        1,945        2,025        2,204
  Additional capital ......................................................      308,320      295,360      326,392
  Retained earnings .......................................................      819,572      770,643      896,058
  Unrealized gains on investments .........................................        1,671       42,942
                                                                              ----------   ----------   ----------
        Total Shareholders' Equity ........................................    1,131,508    1,110,970    1,224,654
                                                                              ----------   ----------   ----------
        Total .............................................................   $2,900,310   $3,005,710   $2,447,189
                                                                              ==========   ==========   ==========
</TABLE>




                                      24
<PAGE>   25

CONSOLIDATED STATEMENT OF INCOME


<TABLE>
<CAPTION>
                                                                                          Year Ended
                                                                           -----------------------------------------
                                                                             Dec. 29        Dec. 31        Dec. 25
(In thousands of dollars, except per share data)                              1996           1995           1994
                                                                           -----------    -----------     ----------
<S>                                                                        <C>            <C>             <C>
OPERATING REVENUE
  Newspapers
    Advertising
      Retail ...........................................................   $   821,768    $   807,758    $   792,476
      General ..........................................................       198,797        182,516        184,469
      Classified .......................................................       772,859        682,696        606,428
                                                                           -----------    -----------    -----------
        Total ..........................................................     1,793,424      1,672,970      1,583,373
    Circulation ........................................................       501,826        495,315        484,581
    Other ..............................................................        78,974         81,897         66,968
                                                                           -----------    -----------    -----------
        Total Newspapers ...............................................     2,374,224      2,250,182      2,134,922
  Business Information Services ........................................       400,619        501,652        514,039
                                                                           -----------    -----------    -----------
        Total Operating Revenue ........................................     2,774,843      2,751,834      2,648,961
                                                                           -----------    -----------    -----------

OPERATING COSTS
  Labor and employee benefits ..........................................     1,083,026      1,127,979      1,089,417
  Newsprint, ink and supplements .......................................       472,207        446,841        335,902
  Other operating costs ................................................       718,641        785,118        743,054
  Depreciation and amortization ........................................       166,051        151,612        149,327
                                                                           -----------    -----------    -----------
        Total Operating Costs ..........................................     2,439,925      2,511,550      2,317,700
                                                                           -----------    -----------    -----------
OPERATING INCOME .......................................................       334,918        240,284        331,261
                                                                           -----------    -----------    -----------

OTHER INCOME (EXPENSE)
  Interest expense .....................................................       (73,296)       (59,572)       (44,585)
  Interest expense capitalized .........................................         6,397          1,889            474
  Interest income ......................................................         7,459          9,142          6,070
  Equity in earnings of unconsolidated companies and joint ventures ....        29,868         20,661          7,412
  Minority interests in earnings of consolidated subsidiaries ..........        (9,419)        (8,348)        (9,650)
  Other, net (Note H) ..................................................       170,681         83,740           (912)
                                                                           -----------    -----------    -----------
        Total ..........................................................       131,690         47,512        (41,191)
                                                                           -----------    -----------    -----------
Income before income taxes .............................................       466,608        287,796        290,070
Income taxes ...........................................................       198,735        120,414        119,170
                                                                           -----------    -----------    -----------

INCOME BEFORE CUMULATIVE EFFECT OF
  CHANGE IN ACCOUNTING PRINCIPLE .......................................       267,873        167,382        170,900
Cumulative effect of change in accounting principle for contributions ..                       (7,320)
                                                                           -----------    -----------    -----------
        Net Income .....................................................   $   267,873    $   160,062    $   170,900
                                                                           ===========    ===========    ===========

EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
  Income before cumulative effect of change in accounting principle ....   $      2.75    $      1.67    $      1.57
  Cumulative effect of change in accounting principle for contributions.                         (.07)
                                                                            ----------     ----------     ---------- 
        Net Income .....................................................   $      2.75    $      1.60    $      1.57
                                                                           ===========    ===========    ===========
AVERAGE COMMON AND COMMON EQUIVALENT SHARES
  OUTSTANDING (IN OOOS) ................................................        97,420        100,196        108,551
                                                                           ===========    ===========    ===========
</TABLE>

See "Notes to Consolidated Financial Statements."




                                      25
<PAGE>   26

CONSOLIDATED STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                         Year Ended
                                                                            -------------------------------------
                                                                             Dec. 29        Dec. 31      Dec. 25
(In thousands of dollars)                                                     1996           1995         1994
                                                                            ---------    -----------    ---------
CASH PROVIDED BY (REQUIRED FOR) OPERATING ACTIVITIES
<S>                                                                         <C>          <C>            <C>
 Net income .............................................................   $ 267,873    $   160,062    $ 170,900
  Noncash items deducted from (included in) income:
    Cumulative effect of change in accounting principle .................                      7,320
    Depreciation ........................................................     107,116        104,786      105,776
    Amortization of excess of cost over net assets acquired .............      30,388         23,708       21,857
    Amortization of other assets ........................................      28,547         23,118       21,694
    Provision for noncurrent deferred taxes .............................      38,860          4,504        2,632
    Earnings of investees in excess of distributions ....................     (21,293)       (16,250)      (7,538)
    Gains on sales of subsidiaries (Note H) .............................    (155,886)       (92,698)
    Other items, net ....................................................         777         45,964       44,697
  Change in certain assets and liabilities:
    Accounts receivable .................................................     (42,908)       (18,620)     (41,135)
    Inventories .........................................................      30,474        (32,292)       1,867
    Other current assets ................................................     (88,219)        (9,531)       2,104
    Accounts payable ....................................................      86,251        (19,235)      11,099
    Federal and state income taxes ......................................         972        (16,145)       1,358
    Other liabilities ...................................................      (9,826)         3,006       33,803
                                                                            ---------    -----------    ---------
        Net Cash Provided by Operating Activities .......................     273,126        167,697      369,114
                                                                            ---------    -----------    ---------

CASH PROVIDED BY (REQUIRED FOR) INVESTING ACTIVITIES
  Net proceeds from sale of Knight-Ridder Financial (Note H) ............     271,859
  Acquisition of Contra Costa Newspapers, Inc. (Note H) .................                   (335,755)
  Additions to property, plant and equipment ............................    (126,586)      (121,025)     (67,110)
  Other items, net (Note H) .............................................      19,532         47,403      (61,013)
                                                                            ---------    -----------    ---------
        Net Cash Provided by (Required for) Investing Activities ........     164,805       (409,377)    (128,123)
                                                                            ---------    -----------    ---------

CASH PROVIDED BY (REQUIRED FOR) FINANCING ACTIVITIES
  Proceeds from sale of commercial paper and senior notes payable .......     601,010      1,092,620      375,308
  Reduction of total debt ...............................................    (793,525)      (490,274)    (414,879)
                                                                            ---------    -----------    ---------
        Net Change in Total Debt ........................................    (192,515)       602,346      (39,571)
  Payment of cash dividends .............................................     (74,262)       (74,377)     (77,942)
  Sale of common stock to employees .....................................      72,202         75,437       25,897
  Purchase of treasury stock ............................................    (221,768)      (319,363)    (136,977)
  Other items, net ......................................................     (24,720)       (25,604)     (26,157)
                                                                            ---------    -----------    ---------
        Net Cash Provided by (Required for) Financing Activities ........    (441,063)       258,439     (254,750)
                                                                            ---------    -----------    ---------
          Net Increase (Decrease) in Cash ...............................      (3,132)        16,759      (13,759)
Cash and short-term cash investments at beginning of the year ...........      26,012          9,253       23,012
                                                                            ---------    -----------    ---------
Cash and short-term cash investments at end of the year .................   $  22,880    $    26,012    $   9,253
                                                                            =========    ===========    =========

Working capital at end of the year ......................................   $  21,157    $    65,280    $   2,163
                                                                            =========    ===========    =========
</TABLE>


See "Notes to Consolidated Financial Statements."






                                      26
<PAGE>   27

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                            COMMON
                                                            SHARES       COMMON   ADDITIONAL   RETAINED     TREASURY
(In thousands of dollars, except share data)            OUTSTANDING(1)  STOCK(1)   CAPITAL    EARNINGS(1)    STOCK
                                                        --------------  --------  ----------  -----------   --------
<S>                                                      <C>            <C>      <C>          <C>          <C>
BALANCES AT DEC. 26, 1993 ...........................    109,694,972    $2,285   $ 342,201    $ 898,683    $   -   
  Issuance of common shares under
   stock option plans ...............................         59,200                 1,104       
  Issuance of treasury shares under
   stock option plans ...............................        455,622                (3,562)                 (12,571)
  Issuance of treasury shares under
    stock purchase plan .............................        620,246                (2,767)                 (16,835)
  Purchase of treasury shares .......................     (5,044,600)                                       136,977
  Retirement of 3,968,732 treasury shares (1) .......                      (81)    (12,300)     (95,189)   (107,571)
  Tax benefits arising from employee stock plans ....                                1,716                         
  Net income ........................................                                           170,900            
  Cash dividends declared on
   common stock - $.73 per share (1) ................                                           (78,336)           
                                                         -----------    ------   ---------    ---------    --------

BALANCES AT DEC. 25, 1994 ...........................    105,785,440    $2,204   $ 326,392    $ 896,058    $   -
  Issuance of common shares under
   stock option plans ...............................        152,150         2       3,429                         
  Issuance of treasury shares under
   stock option plans ...............................      2,167,760                (9,712)                 (62,712)
  Issuance of treasury shares under
    stock purchase plan .............................        599,558                (2,407)                 (16,926)
  Purchase of treasury shares .......................    (11,508,600)                                       319,363
  Retirement of 8,741,282 treasury shares (1) .......                     (181)    (26,830)    (212,715)   (239,725)
  Tax benefits arising from employee stock plans ....                                4,488                         
  Unrealized gains on investments ...................                                            42,942            
  Net income ........................................                                           160,062            
  Cash dividends declared on
   common stock - $.74 per share (1) ................                                           (72,762)           
                                                         -----------    ------   ---------    ---------    --------

BALANCES AT DEC. 31, 1995 ...........................     97,196,308    $2,025   $ 295,360    $ 813,585    $   -
  Issuance of common shares under
   stock option plans ...............................      1,040,938        22      26,589          (11)           
  Issuance of common shares under
   stock purchase plan ..............................        126,808         3       3,724           (1)           
  Issuance of treasury shares under
   stock option plans ...............................        868,752                (7,661)                 (30,783)
  Issuance of treasury shares under
    stock purchase plan .............................        326,946                (1,278)                 (11,645)
  Purchase of treasury shares .......................     (6,219,100)                                       221,768
  Retirement of 5,023,402 treasury shares ...........                     (105)    (16,586)    (162,649)   (179,340)
  Expenses related to capital transactions ..........                                 (203)                        
  Tax benefits arising from employee stock plans ....                                8,375                         
  Reductions in unrealized gains on investments .....                                           (41,271)           
  Net income ........................................                                           267,873            
  Cash dividends declared on
   common stock - $.58 1/2 per share (2) ............                                           (56,283)           
                                                         -----------    ------   ---------    ---------    --------
BALANCES AT DEC. 29, 1996 ...........................     93,340,652    $1,945   $ 308,320    $ 821,243    $   -   
                                                         ===========    ======   =========    =========    ========
</TABLE>

(1) Number of shares and related amounts have been restated to reflect a
    two-for-one stock split in the form of a 100% stock dividend, effected 
    July 31, 1996.

(2) The Board of Directors declared a $.20 per share dividend on Jan. 28, 1997.
    The quarterly dividend, usually paid in January, was paid on Feb. 24, 1997,
    to shareholders of record as of the close of business on Feb. 12, 1997.
   

See "Notes to Consolidated Financial Statements."





                                      27
<PAGE>   28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      A description of the company's business and the nature and scope of its
operations is set forth in Item 1 and 2. Reading this information is recommended
for a more complete understanding of the financial statements.
      The company reports on a fiscal year, ending the last Sunday in the
calendar year.  Results for 1996 and 1994 are for the 52 weeks ended Dec. 29 and
Dec. 25, respectively, and results for 1995 are for the 53 weeks ended Dec. 31.
      The BASIS OF CONSOLIDATION is to include in the consolidated financial
statements all the accounts of Knight-Ridder, Inc., and its more-than-50%-owned
subsidiaries. All significant intercompany transactions and account balances
have been eliminated in consolidation.
      The company is a 50% partner in the DETROIT NEWSPAPER AGENCY (DNA), a
joint operating agency between Detroit Free Press, Inc., a wholly owned
subsidiary of Knight-Ridder, Inc., and The Detroit News, Inc., a wholly owned
subsidiary of Gannett Co., Inc. In 1989, business operations of the Free Press
and The Detroit News were transferred to the DNA. Knight-Ridder received 45% of
any profit of the agency through the first three years, with Gannett receiving
55%. In the fourth year, Knight-Ridder received 47% of the DNA profit and
beginning Dec. 27, 1993, received 49%. As of Dec. 26, 1994, profits are split
equally through the end of the 100-year Joint Operating Agreement (JOA). The
Consolidated Statement of Income includes, on a line-by-line basis, the
company's pro rata share of the revenue and expense generated by the operation
of the agency.
      INVESTMENTS in companies in which Knight-Ridder, Inc., has an equity
interest of at least 20% but not more than 50% are accounted for under the
equity method. Under this method, the company records its share of earnings as
income and increases the investment by the equivalent amount. Dividends are
recorded as a reduction in the investment.
      The investment caption "EQUITY IN UNCONSOLIDATED COMPANIES AND JOINT
VENTURES" in the Consolidated Balance Sheet represents the company's equity in
the net assets of DNA; the Seattle Times Company and subsidiaries; Newspapers
First, a company responsible for the sales and services of general, retail and
classified advertising accounts for a group of newspapers; Southeast Paper
Manufacturing Co. and Ponderay Newsprint Company, two newsprint mill
partnerships; TKR Cable Company and TKR Cable Partners, a cable television joint
venture; InfiNet, a joint venture that allows newspapers to offer Internet
access to subscribers; Destination Florida, a company that provides online
travel information services; and Interealty (formerly known as PRC Realty
Systems, Inc.,) a software system producer for the real estate industry. The
company owns 49-1/2% of the voting common stock and 65% of the nonvoting common
stock of the SEATTLE TIMES COMPANY, owns 48% of the voting stock of NEWSPAPERS
FIRST, is a one-third partner in the SOUTHEAST PAPER MANUFACTURING CO., owns a
13-1/2% equity share of PONDERAY NEWSPRINT COMPANY, and owns 50% of the stock of
TKR CABLE COMPANY and is a 50% partner in TKR CABLE PARTNERS. The company has a
15% interest in TCI/TKR Limited partnership through TKR Cable Partners. The
company is a one-third partner in INFINET and a 50% partner in DESTINATION
FLORIDA and owns a 25% interest in INTEREALTY.
      The investment in unconsolidated companies and joint ventures at Dec. 29,
1996, includes $300.3 million representing the company's share of undistributed
earnings (excluding the DNA) accumulated since the investment dates. The
company's share of the earnings of the unconsolidated companies (except for the
DNA) of $29.9 million in 1996, $20.7 million in 1995 and $7.4 million in 1994 is
included in the caption "EQUITY IN EARNINGS OF UNCONSOLIDATED COMPANIES AND
JOINT VENTURES" in the Consolidated Statement of Income. Dividends and cash
distributions received from the unconsolidated companies and joint ventures
(excluding the DNA) were $18.6 million in 1996, $3.2 million in 1995 and $3.1
million in 1994 and were offset against the investment account.
      FORT WAYNE NEWSPAPERS, INC., INFOMART/DIALOG AND TRANSAX SYSTEMS (Transax
Systems was sold in 1995) are the only consolidated subsidiaries and joint
ventures that have a minority ownership interest. The minority shareholders'
interest in the net income of these subsidiaries has been reflected as an
expense in the Consolidated Statement of Income in the caption "MINORITY
INTERESTS IN EARNINGS OF CONSOLIDATED SUBSIDIARIES." Also included in this
caption is a contractual minority interest resulting from a JOA that runs
through the year 2021 between The Miami Herald Publishing Co. and Cox
Newspapers, Inc., covering the publication of The Herald and The Miami News,
which ceased publication in 1988. The company's liability to the minority
interest shareholders is included in the Consolidated Balance Sheet caption,
"MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES."
      "CASH AND SHORT-TERM CASH INVESTMENTS" includes currency and checks on
hand, demand deposits at commercial banks, overnight repurchase agreements of
government securities and investment-grade commercial paper with maturities of
90 days or less. Cash and short-term investments are recorded at cost. Due to
the short-term nature of marketable securities, cost approximates market value.
        The majority of the company's "ACCOUNTS  RECEIVABLE" as of Dec. 29,
1996, Dec. 31, 1995, and Dec. 25, 1994, are from advertisers, newspaper
subscribers and information users.  Credit is extended based on the 
evaluation of the customer's financial condition, and generally collateral is
not required.  Credit losses are provided for in the financial statements and
consistently have been within management's expectations.
      "INVENTORIES" are priced at the lower of cost (first-in, first-out FIFO
method), or market. Most of the inventory is newsprint, ink and other supplies
used in printing newspapers.

                                      28
<PAGE>   29
      "OTHER ASSETS" includes investments in companies in which Knight-Ridder
owns a less than 20% interest. These investments are reviewed for appropriate
classification at the time of purchase and re-evaluated as of each balance sheet
date. Investments available for sale are carried on the balance sheet at fair
market value, with the unrealized gains/losses (net of tax) reported as a
separate component of shareholders' equity, which resulted in unrealized gains
(net of tax) of $1.7 million at Dec. 29, 1996, $42.9 million at Dec. 31, 1995,
and zero at Dec. 25, 1994. Upon the sale of an investment, the gain/loss is
calculated based on the original cost, less the proceeds from the sale.
Investments are classified as held-to-maturity when the company has the positive
intent and ability to hold the investment to maturity.
      "PROPERTY, PLANT AND EQUIPMENT" is recorded at cost, and the provision for
depreciation for financial statement purposes is computed principally by the
straight-line method over the estimated useful lives of the assets.
      "EXCESS OF COST OVER NET ASSETS ACQUIRED" arises from the
purchase of at least a 50% interest in a company for a price higher than the
fair market value of the net tangible assets. Intangible assets of this type
arising from acquisitions accounted for as purchases and occurring subsequent to
Oct. 31, 1970, totaled approximately $1.1 billion at Dec. 29, 1996. They are
generally being amortized over a 40-year period on a straight-line basis, unless
management has concluded a shorter term is more appropriate. If, in the opinion
of management, an impairment in value occurs, based on the undiscounted cash
flow method, any necessary additional write-downs will be charged to expense.
      "DEFERRED REVENUE" arises as a normal part of business from advance
subscription payments for newspapers and business information services. Revenue
is recognized in the period in which it is earned.
      "SHORT-TERM BORROWINGS" represent the carrying amounts of commercial paper
and other short-term borrowings that approximate fair value. "LONG-TERM DEBT"
represents the carrying amounts of debentures and notes payable. Fair values,
disclosed in Note C, are estimated using discounted cash flow analyses based on
the company's current incremental borrowing rates for similar types of borrowing
arrangements.
      In 1994, the company adopted FAS 112 - EMPLOYERS ACCOUNTING FOR POST
EMPLOYMENT BENEFITS. The adoption of FAS 112 did not materially impact the
financial statements. In the first quarter of 1995, the company adopted FAS
116-ACCOUNTING FOR CONTRIBUTIONS RECEIVED AND CONTRIBUTIONS MADE. Under FAS 116,
unconditional promises, including multi-year promises, are recognized in the
period the promise is made. The adoption of FAS 116 resulted in a $7.3 million
charge (net of tax) to operations, or $.07 per share, and was recorded as a
cumulative effect adjustment. In 1996, the company adopted FAS 121-ACCOUNTING
FOR THE IMPAIRMENT OF LONG-LIVED ASSETS. FAS 121 requires impairment losses to
be recorded on long-lived assets when indicators of impairment are present and
the undiscounted cash flows estimated to be generated by those assets are less
than the assets' carrying amount. The adoption of FAS 121 did not materially
impact the financial statements. Also in 1996, the company implemented FAS 123
- ACCOUNTING FOR STOCK-BASED COMPENSATION. Under this statement, the company
accounts for stock-based compensation plans under the provisions of APB 25 -
Accounting for Stock Issued to Employees, and discloses the general and pro
forma financial information required by FAS 123 (Note E).
      "EARNINGS PER SHARE" is computed by dividing net income by the weighted
average number of common and common equivalent shares outstanding. Quarterly
earnings per share may not add to the total for the year, since each quarter and
the year are calculated separately based on average outstanding shares during
the period.
      USE OF ESTIMATES - the preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
      Certain amounts in 1995 and 1994 have been reclassified to conform to the
1996 presentation.

NOTE B - INCOME TAXES
     The company's income tax expense is determined under the liability method,
which requires adjusting previously deferred taxes for changes in tax rates.
      Substantially all of the company's earnings are subject to domestic
taxation. No material foreign income taxes have been imposed on reported
earnings.

Federal, state and local income taxes consist of the following (in thousands):
<TABLE>
<CAPTION>
                                                            1996                 1995                1994
                                                    -------------------  -------------------    -----------------
                                                     Current   Deferred   Current   Deferred    Current  Deferred
                                                    --------   --------  --------   --------    --------  -------
<S>                                                 <C>        <C>       <C>        <C>         <C>        <C>
Federal income taxes ............................   $127,610   $28,075   $100,568   $(10,128)   $ 97,824   $2,501
State and local income taxes ....................     29,883    13,167     26,733      3,241      18,791       54
                                                    --------   -------   --------   ---------   --------   ------
  Total .........................................   $157,493   $41,242   $127,301   $ (6,887)   $116,615   $2,555
                                                    ========   =======   ========   ========    ========   ======
</TABLE>

      Cash payments of income taxes for the years 1996, 1995 and 1994 were
$147.2 million, $130.1 million and $104.5 million, respectively. Payments in
1996 and 1995 include the tax impact resulting from gains on the sale of
Knight-Ridder Financial and the Journal of Commerce, respectively.


                                      29
<PAGE>   30

                           EFFECTIVE INCOME TAX RATES

     The differences between income tax expense shown in the financial
statements and the amounts determined by applying the federal statutory rate of
35% in each year are as follows (in thousands):

<TABLE>
<CAPTION>

                                                                             1996         1995        1994
                                                                           --------     --------    ---------
<S>                                                                        <C>          <C>          <C>    
Federal statutory income tax ...........................................   $ 163,312    $ 100,729    $ 101,525
State and local income taxes, net of federal benefit ...................      27,540       19,483       12,249
Statutory rate applied to nondeductible amortization
  of the excess of cost over net assets acquired .......................       5,706        6,122        7,650
Change in deferred state tax asset valuation allowance .................                   (2,628)
Other items, net .......................................................       2,177       (3,292)      (2,254)
                                                                           ---------    ---------    ---------
    Total ..............................................................   $ 198,735    $ 120,414    $ 119,170
                                                                           =========    =========    =========

</TABLE>

The deferred tax asset and liability at the fiscal year end is comprised 
of the following components (in thousands):


<TABLE>
<CAPTION>
                                                                              1996         1995         1994
                                                                           ----------   ---------    ---------
<S>                                                                        <C>          <C>          <C>    
Deferred Tax Assets
Postretirement benefits other than pensions (including amounts
  relating to partnerships in which the company participates) ..........   $  95,764    $  85,789    $  84,833
Compensation and benefit accruals ......................................      (6,802)      21,768       17,130
Accrued interest .......................................................      10,576        8,073        5,135
Other nondeductible accruals ...........................................      43,594       30,068       28,127
                                                                           ---------    ---------    ---------
  Gross deferred tax assets ............................................   $ 143,132    $ 145,698    $ 135,225
                                                                           =========    =========    =========


Deferred Tax Liability
Depreciation and amortization ..........................................   $ 196,116    $ 154,242    $ 189,843
Equity in partnerships and investees ...................................      73,499       52,708       46,715
Unrealized appreciation in equity securities ...........................       1,210       33,478
Research and experimental expenditures .................................      10,964       12,232        9,379
Other ..................................................................      11,066       31,924        5,412
                                                                           ---------    ---------    ---------
  Gross deferred tax liability .........................................   $ 292,855    $ 284,584    $ 251,349
                                                                           =========    =========    =========
  Net deferred tax liability ...........................................   $ 149,723    $ 138,886    $ 116,124
                                                                           =========    =========    =========

</TABLE>

The components of deferred taxes included in the Consolidated
Balance Sheet are as follows (in thousands):



<TABLE>
<CAPTION>
                                                                              1996         1995         1994
                                                                           ---------    ---------    ---------
<S>                                                                        <C>          <C>          <C>    
Current asset ..........................................................   $  24,296    $  26,159    $  22,487
Noncurrent liability ...................................................     174,019      165,045      138,611
                                                                           ---------    ---------    ---------
Net deferred tax liability .............................................   $ 149,723    $ 138,886    $ 116,124
                                                                           =========    =========    =========
</TABLE>




                                      30
<PAGE>   31

NOTE C - DEBT

        Debt consisted of the following (in thousands):
<TABLE>
<CAPTION>

                                                                                 Dec. 29      Dec. 31      Dec. 25
                                                                                  1996         1995         1994
                                                                                 -------      -------      -------
<S>                                                                             <C>          <C>          <C>    
Commercial paper due at various dates through March 21, 1997,
  at an effective interest rate of 5.5% as of Dec. 29, 1996.
  Amounts are net of unamortized discounts of $1,683 in 1996,
  $5,502 in 1995 and $136 in 1994 (a) .......................................   $  364,817   $  557,698   $ 54,764
Debentures due on April 15, 2009, bearing interest at 9.875%,
  net of unamortized discount of $2,032 in 1996; $2,211 in 1995
  and $2,363 in 1994 ........................................................      197,968      197,789    197,637
Notes payable, bearing interest at 8.5%, subject to mandatory pro rata
  amortization of 25% annually commencing Sept. 1, 1998, through
  maturity on Sept. 1, 2001, net of unamortized discount of $555 in 1996,
  $726 in 1995 and $897 in 1994 .............................................      159,445      159,274    159,103
Senior notes payable on Dec. 15, 2005, bearing interest at 6.3%,
  net of unamortized discount of $895 in 1996 and $911 in 1995 ..............       99,105       99,089
                                                                                ----------   ----------   --------
                                                                                   821,335    1,013,850    411,504
Less amounts payable in one year (b) ........................................       50,000       13,129
                                                                                ----------   ----------   --------
      Total long-term debt ..................................................   $  771,335   $1,000,721   $411,504
                                                                                ==========   ==========   ========
</TABLE>


      (a)  Commercial paper is supported by $650 million of revolving credit
and term loan agreements, $400 million of which mature on Oct. 25, 2001, and 
$250 million of which mature on Oct. 24, 1997.

      (b)  The $400 million revolving credit and term loan agreements maturing 
on Oct. 25, 2001, are long-term in that no principal payments are required
during the next 12 months. However, due to the company's intent to reduce its
outstanding commercial paper, $50 million has been classified as current.

      Interest payments during 1996, 1995 and 1994 were $70.9 million, $45.4
million and $40.2 million, respectively.

      The following table presents the approximate annual maturities of debt for
the five years after 1996 (in thousands):
<TABLE>
<S>                                              <C>    
1997....................................         $  50,000
1998....................................            39,861
1999....................................            39,861
2000....................................            39,861
2001....................................           354,679
2002 and thereafter.....................           297,073
                                                 ---------
       Total                                     $ 821,335
                                                 =========
</TABLE>

       The carrying amounts and fair values of debt as of Dec. 29, 1996, are as 
follows (in thousands):

<TABLE>
<CAPTION>

                                    Carrying     Fair
                                     Amount      Value
                                    --------   --------
<S>                                 <C>        <C>    
Commercial paper.................   $364,817   $364,817
9.875% Debentures................    197,968    235,526
8.5% Notes payable...............    159,445    173,408
6.3% Senior notes payable........     99,105     97,728
                                    --------   --------
       Total.....................   $821,335   $871,479
                                    ========   ========
</TABLE>




                                      31
<PAGE>   32
NOTE D - UNCONSOLIDATED COMPANIES AND JOINT VENTURES

      Summary financial information for the company's unconsolidated companies
and joint ventures that are accounted for under the equity method is as follows
(in thousands):
<TABLE>
<CAPTION>


                                                                           1996          1995         1994
                                                                         ----------   ----------   -----------
<S>                                                                      <C>          <C>          <C>    
Current assets .......................................................   $  258,037   $  274,815   $   228,864
Property, plant and equipment and other assets .......................    4,076,604    3,671,364     3,498,335
Current liabilities ..................................................      287,782      323,199       290,418
Long-term debt and other noncurrent liabilities ......................    2,893,716    2,572,060     2,479,374
Net sales ............................................................    1,417,668    1,248,694     1,021,198
Gross profit .........................................................      449,383      376,545       313,221
Net income (loss) ....................................................       55,104        6,517       (48,142)
Company's share of:
  Net assets .........................................................      330,267      321,658       293,205
  Net income .........................................................   $   29,868   $   20,661   $     7,412
</TABLE>


      In 1989, the Detroit Free Press and The Detroit News began operating  
under a joint operating agreement as the Detroit Newspaper Agency (DNA).  
Balance sheet amounts for the DNA at Dec. 29, 1996, Dec. 31, 1995, and Dec. 25, 
1994, are included above and the net assets contributed to the DNA are included 
in "Equity in unconsolidated companies and joint ventures" in the Consolidated 
Balance Sheet.

NOTE E - CAPITAL STOCK

      In 1991, shareholders authorized 20 million shares of preferred stock for
future issuance.

      On June 21, 1996, the Board of Directors declared a two-for-one stock
split in the form of a 100% common stock dividend that was payable on July 31,
1996, to shareholders of record on July 10, 1996. The financial statements have
been restated to give retroactive recognition to the stock split in prior
periods by reclassifying from retained earnings to common stock, the par value
of the additional shares arising from the split. In addition, all references in
the financial statements to number of shares and per share amounts have been
restated.

      Concurrent with the stock split, the company executed a rights agreement
to replace a similar agreement that expired on July 10, 1996. The agreement
grants each holder of a common share a right, under certain conditions, to
purchase from the company a unit consisting of one one-hundredth of a share of
preferred stock, at a price of $150, subject to adjustment. The rights provide
that in the event the company is a surviving corporation in a merger, each
holder of a right will be entitled to receive, upon exercise, common shares
having a value equal to two times the exercise price of the right. In the event
the company engages in a merger or other business combination transaction in
which the company is not the surviving corporation, the rights agreement
provides that proper provision shall be made so that each holder of a right will
be entitled to receive, upon the exercise thereof at the then-current exercise
price of the right, common stock of the acquiring company having a value equal
to two times the exercise price of the right. No rights certificates will be 
distributed until 10 days following a public announcement that a person or 
group of affiliated or associated persons has acquired, or obtained the right
to acquire, beneficial ownership of 20% or more of the company's outstanding 
common stock, or 10 business days following the commencement of a tender offer 
or exchange offer for 20% or more of the company's outstanding stock. Until
such time, the rights are evidenced by the common share certificates of the 
company. The rights are not exercisable until distributed and will expire on 
July 10, 2006, unless earlier redeemed or exchanged by the company. The company 
has the option to redeem the rights in whole, but not in part, at a price of 
$.01 per right subject to adjustment. The company's Board of Directors has 
reserved for issuance upon exercise of the rights 1,500,000 preferred shares.

      The Employees Stock Purchase Plan provides for the sale of common stock to
employees of the company and its subsidiaries at a price equal to 85% of the
market value at the end of each purchase period. Participants under the plan
received 453,754 shares in 1996, 599,558 shares in 1995 and 620,246 shares in
1994. The purchase price of shares issued in 1996 under this plan ranged between
$28.59 and $35.49, and the market value on the purchase dates of such shares
ranged from $33.63 to $41.75.

      The Employee Stock Option Plan provides for the issuance of nonqualified
stock options and incentive stock options. Options are issued at prices not less
than market value at date of grant and until 1994 were exercisable at issue
date. Options granted after March 1994 are exercisable in three equal 
installments vesting over a three-year period from the date of grant. There is 



                                      32
<PAGE>   33
no expiration date for the granting of options, but options must expire no 
later than 10 years from the date of grant. The option plan provides for the 
discretionary grant of stock appreciation rights (SARs) in tandem with 
previously granted options, which allow a holder to receive in cash, stock or 
combinations thereof the difference between the exercise price and the fair 
market value of the stock at date of exercise. 

Proceeds from the issuance of shares under these plans are included in 
shareholders' equity and do not affect income.

Transactions under the Employee Stock Option Plans are summarized as follows:

<TABLE>
<CAPTION>


                                                                                        Weighted
                                                                                        Average
                                                                                        Exercise
                                                                           Number of     Price
                                                                             Shares    Per Share
                                                                           ----------  ---------
<S>                                                                        <C>          <C>
Outstanding
  Dec. 26, 1993 .......................................................    7,732,846    $   25.47
    Exercised .........................................................     (514,822)       19.55
    Expired ...........................................................
    Forfeited .........................................................      (12,200)       27.79
    Granted ...........................................................    1,440,900        24.62

Outstanding
  Dec. 25, 1994 .......................................................    8,646,724        25.68
    Exercised .........................................................   (2,319,910)       24.21
    Expired ...........................................................
    Forfeited .........................................................      (24,800)       26.24
    Granted ...........................................................    1,345,300        32.16

Outstanding
  Dec. 31, 1995 .......................................................    7,647,314        27.26
    Exercised .........................................................   (1,909,690)       25.95
    Expired ...........................................................       (8,650)       29.54
    Forfeited .........................................................     (148,579)       28.70
    Granted ...........................................................    1,324,450        39.25

Outstanding
  Dec. 29, 1996 .......................................................    6,904,845        29.89
</TABLE>


      At Dec. 29, 1996, shares of the company's authorized but unissued common 
stock were reserved for issuance as follows:

<TABLE>
<CAPTION>

                                                Shares
                                               ---------
<S>                                            <C>    
Employee stock option plans ................   3,223,215
Employees stock purchase plan ..............   1,808,620
                                               ---------
Total ......................................   5,031,835
                                               =========
</TABLE>

      As required by FAS 123, pro forma information regarding net income and 
earnings per share has been determined as if the company had accounted for its
employee stock options under the fair value method of that statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 1996
and 1995, respectively: risk-free rates of 6.1% and 5.5%; dividend yields of
2.0% and 2.5%; volatility factors of the expected market price of the company's
common stock of 0.16 and 0.17; and a weighted-average expected life of the
option of 6.5 years for both. The weighted-average fair value of the stock
options for the years 1996 and 1995 were $9.65 and $6.94, respectively.

        The Black-Scholes option valuation model was developed for use in 
estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the company's employee stock options have characteristics
significantly different from those traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, the
existing models, in management's opinion, do not necessarily provide a reliable
single measure of the fair value of its employee stock options.




                                      33
<PAGE>   34
      For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. In addition,
the 15% discount in market value under the employees stock purchase plan is
treated as compensation expense for pro forma purposes. The company's 1996 and
1995 pro forma information follows (in thousands, except for earnings per share
information):

<TABLE>
<CAPTION>
                                    1996          1995
                                  --------      -------
<S>                               <C>           <C>
Net earnings                      $264,506      $158,472
Earnings per common
   and common equivalent share      2.72          1.58
</TABLE>

      The 1996 pro forma effect on net income is not necessarily representative
of the effect in future years because it does not take into consideration pro
forma compensation expense related to grants made prior to 1995.

      The exercise price of options outstanding at Dec. 29, 1996, ranged between
$20.13 and $39.31. The weighted-average remaining contractual life of those
options for 1996 and 1995, is 7.3 and 7.1 years, respectively. 4,305,845 and
5,323,930 options were exercisable at the end of 1996 and 1995, respectively.

NOTE F - RETIREMENT PLANS

      The company and its subsidiaries have several company-administered
noncontributory defined benefit plans covering most non-union employees. These
plans provide benefits that are based on the employees' compensation during
various times before retirement. The funding policy for these plans is to
contribute annually an amount that is intended to provide the projected benefit
earned during the year for the covered employees. The company also contributes
to certain multi-employer union defined benefit plans, company-administered and
jointly administered negotiated plans covering union employees. The funding
policy for these plans is to make annual contributions in accordance with
applicable agreements.

      The company also sponsors certain defined contribution plans established
pursuant to Section 401(k) of the Internal Revenue Code. Subject to certain
dollar limits, employees may contribute a percentage of their salaries to these
plans, and the company will match a portion of the employees' contributions.

      A summary of the components of net periodic pension cost for the defined
benefit plans (both company-administered non-negotiated and single-employer
negotiated plans) is presented here, along with the total amounts charged to
pension expense for multi-employer union defined benefit plans, defined
contribution plans and other agreements (in thousands):

<TABLE>
<CAPTION>
                          1996        1995        1994
                        ---------  ----------   --------
<S>                     <C>        <C>          <C>
Defined benefit plans:
   Service cost........ $  27,916  $  19,570    $23,699
   Interest cost.......    56,698     51,725     48,559
   Actual return on
     plan assets.......  (106,651)  (137,554)    20,553
   Net amortization
     and deferral......    43,681     84,042    (78,037)
                        ---------  ---------    -------

     Net...............    21,644     17,783     14,774
Multi-employer
   union plans.........    11,849     13,006     13,640
Defined contribution
   plans...............    10,838     11,030     10,415
Other..................     1,416      1,808      2,129
                        ---------  ---------    -------
  Net periodic
     pension cost...... $  45,747  $  43,627    $40,958
                        =========  =========    =======
</TABLE>

Assumptions used each year in accounting for defined benefit plans were:

<TABLE>
<CAPTION>
                                1996      1995     1994
                               ------    ------   ------
<S>                             <C>       <C>     <C>
Discount rate as of
   year end..................   7.5%      7.25%   8.5%
Expected long-term rate
   of return on assets
   assumed in determining
   pension expense...........    8.5       8.5   8.0-8.5
Rate of increase in
   compensation levels
   as of year end............    4.5       4.5   3.5-4.5
</TABLE>                                                                

                                      34
<PAGE>   35
     The following table sets forth the funded status and amounts recognized in
the Consolidated Balance Sheet for the defined benefit plans (in thousands):

<TABLE>
<CAPTION>
                                                Dec. 29, 1996            Dec. 31, 1995              Dec. 25, 1994
                                           -----------------------   ----------------------     ----------------------
                                           Plans Whose Plans Whose   Plans Whose  Plans Whose    Plans Whose  Plans Whose
                                             Assets    Accumulated     Assets     Accumulated      Assets     Accumulated
                                             Exceed     Benefits       Exceed      Benefits        Exceed      Benefits
                                           Accumulated   Exceed      Accumulated    Exceed       Accumulated    Exceed
                                            Benefits     Assets       Benefits      Assets        Benefits      Assets
                                           (16 plans)   (9 plans)    (17 plans)   (11 plans)     (19 plans)   (8 plans)
                                           ----------- -----------   ----------   -----------    -----------  ----------
<S>                                          <C>          <C>          <C>           <C>          <C>          <C>
Actuarial present value of benefit 
obligations:
  Vested benefit obligations .............   $601,284     $  74,766    $  564,319    $  83,275    $ 459,237    $ 49,613
                                             ========     =========    ==========    =========    =========    ========
  Accumulated benefit obligations ........   $612,444     $  77,021    $  574,642    $  85,581    $ 468,205    $ 51,217
                                             ========     =========    ==========    =========    =========    ========
Projected benefit obligation .............   $709,412     $  87,467    $  672,691    $ 100,273    $ 539,832    $ 58,989
Plan assets at fair value ................    810,102        49,809       717,475       55,019      612,776      32,380           
                                             --------     ---------    ----------    ---------    ---------    --------             
Projected benefit obligation                            
  less than (in excess of) plan assets ...    100,690       (37,658)       44,784      (45,254)      72,944     (26,609)
Unrecognized net (gain) loss .............    (96,564)       11,704       (15,441)      15,032      (37,278)      1,220
Prior service cost not yet recognized                                   
  in net periodic pension cost ...........     33,135        11,283        24,865       12,522       28,408      13,685
Unrecognized net (asset) obligation                     
  at the date FAS 87 was adopted,                       
  net of amortization ....................    (18,592)        1,738       (23,689)       2,190      (29,122)      2,523
Adjustment required to recognize                        
  minimum liability ......................                  (14,279)                   (18,071)                 (10,199)
                                             --------     ---------      --------    ---------    ---------    --------           
Net pension asset (liability) recognized                
  in the Consolidated Balance Sheet ......   $ 18,669     $ (27,212)     $ 30,519    $ (33,581)   $  34,952    $(19,380)
                                             ========     =========      ========     ========    =========    ========
</TABLE>


      Of the nine plans whose accumulated benefits exceed assets, four are 
qualified pension plans.  These qualified plans have vested benefits of $50.5 
million and assets of $49.8 million.

      Net pension assets are included in "Other" noncurrent assets and net
pension liabilities are included in "Employment benefits and other noncurrent 
liabilities." Substantially all of the assets of the company-administered plans 
are invested in listed stocks and bonds.




NOTE G - SEGMENT INFORMATION

      The company is a diversified information and communications company with
two principal business segments: Newspapers and Business Information Services.
Financial data regarding the company's business segments are presented in Item 1
and 2 Business/Properties.

      Operating revenue by industry segment includes sales to unaffiliated
customers, as reported in the company's consolidated income statement.

      Operating income is operating revenue less operating expenses, including
depreciation expense and amortization of intangibles. General corporate expenses
are not allocated to the Newspaper or Business Information Services divisions.
Equity in earnings of unconsolidated companies and joint ventures, minority
interests in earnings of consolidated subsidiaries, interest income, net
interest expense, other nonoperating income and expense items, as well as
income taxes and the cumulative effect of change in accounting principle, have
not been included in the amounts reflected as operating income by segment.

      Identifiable assets by segment are all assets employed in the individual
operations of each business segment and excess of cost over net assets acquired
associated with acquisitions in each segment. General corporate assets include
cash and equivalents, other investments, net assets of unconsolidated companies
and joint ventures (other than the Detroit Newspaper Agency, which is included
in Newspaper Division assets), and property, plant and equipment used primarily
for corporate purposes. Investments in unconsolidated companies and joint
ventures are discussed in Notes A and D.



                                      35
<PAGE>   36
NOTE H - ACQUISITIONS AND DISPOSITIONS

                                  ACQUISITIONS

      On Oct. 31, 1995, the company acquired 100% of the outstanding shares of
Lesher Communications, Inc., ("Lesher") for $360 million. The difference between
the purchase price of $360 million and the cash distribution of $335.8 million
was due to certain assumed liabilities. Lesher, a privately held newspaper
company based in Walnut Creek, Calif., publishes four daily newspapers in
contiguous Contra Costa and eastern Alameda County markets in the East Bay area
of Northern California. Lesher was renamed Contra Costa Newspapers, Inc., (CCN)
in November 1995.

      The fair value of assets acquired, not including goodwill, was $99.0
million and assumed liabilities totaled $107.7 million. Included in the assumed
liabilities was $68.1 million of liabilities paid at closing. Goodwill and other
intangibles of $276.4 million are being amortized over periods ranging from 15
to 40 years on the straight-line basis.

      The pro forma results listed below are unaudited and reflect purchase
price accounting adjustments assuming the acquisition occurred at the beginning
of each year presented (in thousands, except per share data).

<TABLE>
<CAPTION>
                                     1995         1994
                                  ----------   ----------
<S>                               <C>          <C>    
Net sales .....................   $2,854,923   $2,744,623
Operating earnings ............      243,754      336,470
Earnings before
  income taxes ................      267,678      275,007
Net earnings ..................      161,700      161,765
Earnings per common and
  common equivalent share .....         1.61         1.49
</TABLE>

      During October 1995, the company acquired 100% interest in The CARL
Corporation, a leading provider of library automation services. The company also
acquired a 100% interest in The UnCover Company, a joint partnership of The 
CARL Corporation and Blackwell Limited.

      All acquisitions were accounted for as purchases and, accordingly, the
accompanying financial statements include the results of their operations from
the acquisition dates. The acquisition cost of CCN in 1995 is included in the
caption "Acquisition of Contra Costa Newspapers, Inc.," while the costs of the
CARL and UnCover acquisitions in 1995 are included in the caption "Other items,
net" in the "Cash Provided by (Required for) Investing Activities" section of
the Consolidated Statement of Cash Flows.

                                  DISPOSITIONS

      On July 26, 1996, the company sold Knight-Ridder Financial (KRF) to Global
Financial Information Corporation for $275 million. The pretax and after-tax
gains from the sale of KRF were $155.9 million and $86.3 million, respectively.

      In November 1996, the company sold its investment in Netscape 
Communications Corporation, resulting in an after-tax gain of $7.3 million, net 
of adjustments in the carrying value of certain other investments.

      In January 1997, the company and Tele-Communications, Inc., closed on the
previously announced sale of the company's interest in all but one of their
jointly owned cable investments. The remaining systems, including Kentucky,
account for a small portion of the original investment. That sale is expected to
close later. The company expects to report an after-tax gain on the transaction
of between $130 million and $150 million. The company expects the total sale to
yield net after-tax proceeds of between $270 million and $280 million.

      On April 3, 1995, the company sold the Journal of Commerce (JoC) to the
Economist Group of London for $115 million. The after-tax gain from the sale of
the JoC was $53.8 million.

NOTE I - POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

      The company and its subsidiaries have defined postretirement benefit plans
that provide medical and life insurance for retirees and eligible dependents.
The company's postretirement benefit expense is determined under the provisions
of FAS 106, Employers' Accounting for Postretirement Benefits Other Than 
Pensions. This statement requires that the cost of these benefits, which are 
primarily for health care and life insurance, be recognized in the financial
statements throughout the employees' active working careers.

The company valued the accumulated postretirement benefit obligation using the
following assumptions:

<TABLE>
<CAPTION>
                                                                         1996     1995    1994
                                                                         ----     ----    ----
<S>                                                                      <C>      <C>     <C>    
Discount rate at the end of the year ...............................     7.5%     7.25%   8.5%
Annual rate of increase in salaries ................................     4.5      4.5     4.5
Medical trend rate:
  Projected ........................................................     9.0     10.0    11.0
  Reducing to this percentage in 2001 and thereafter ...............     5.5      5.5     5.5
</TABLE>




                                      36
<PAGE>   37




      The following tables present the funded status of the company's benefit
plans (excluding liabilities of the DNA that are reported in the Consolidated
Balance Sheet under the investment caption "Equity in unconsolidated companies 
and joint ventures") and the components of 1996, 1995 and 1994 periodic
expense (in thousands):

<TABLE>
<CAPTION>
 
                                                       1996                     1995                   1994
                                              -----------------------   --------------------     -------------------
                                                             Life                    Life                    Life
                                                           Insurance               Insurance               Insurance
                                               Medical     and Other    Medical    and Other     Medical   and Other
                                                 Plans       Plans        Plans      Plans        Plans      Plans
                                              ----------   ----------   --------   ----------   ---------  ----------
<S>                                             <C>         <C>         <C>        <C>           <C>       <C>
Accumulated postretirement benefit obligation:
  Retirees....................................  $ 58,225    $13,519     $ 69,180   $13,313      $ 64,244   $11,194
  Fully eligible active plan participants.....    12,476      5,202       16,935     5,500        11,673     4,467
  Other active plan participants..............    17,802     14,695       21,820    16,423        13,554    15,454
                                                --------    -------     --------   -------      --------   -------
Accumulated benefit obligation
  in excess of plan assets....................    88,503     33,416      107,935    35,236        89,471    31,115
Unrecognized net reduction (increase)
  in prior service costs......................    27,693       (158)      31,723      (180)       35,752      (222)
Unrecognized net gain (loss)..................     1,496      8,317      (10,623)    5,581         1,628     8,938
                                                --------    -------     --------   -------      --------   -------
Accrued liability recognized in the 
  balance sheet...............................  $117,692    $41,575     $129,035   $40,637      $126,851   $39,831
                                                ========    =======     ========   =======      ========   =======
</TABLE>

<TABLE>
<S>                                                    <C>                    <C>                     <C>
Net periodic postretirement benefit cost 
  includes the following components:
    Service cost..............................         $ 3,804                $ 4,477                 $ 3,081
    Interest cost.............................          11,334                 11,909                  11,203
    Amortization..............................          (4,793)                (5,303)                 (4,810)
                                                       -------                -------                 -------
    Net periodic postretirement benefit cost..         $10,345                $11,083                 $ 9,474
                                                       =======                =======                 =======
Impact of 1% increase in medical trend rate:       
    Aggregate impact on 1996 service cost          
      and interest cost.......................         $ 1,058
                                                       =======
    Increase in Dec. 29, 1996, accumulated         
      postretirement benefit obligation.......         $ 6,160
                                                       =======
</TABLE>


     A pretax gain resulting from curtailments, settlements and special
termination benefits under these plans was $8.6 million in 1996, which related
primarily to restructuring of plans.


NOTE J - COMMITMENTS AND CONTINGENCIES

     At Dec. 29, 1996, the company had lease commitments currently estimated to 
aggregate approximately $73.8 million that expire from 1997 through 2051 as 
follows (in thousands):

<TABLE>
<CAPTION>

<S>                                              <C>
1997...........................................  $18,888
1998...........................................   13,937
1999...........................................   11,374
2000...........................................    8,785
2001...........................................    6,356
2002 and thereafter............................   14,447
                                                 -------
Total..........................................  $73,787
                                                 =======
</TABLE>

     Payments under the lease contracts were $25.1 million in 1996, $27.8
million in 1995, and $27.0 million in 1994. In connection with the company's
insurance program, letters of credit are required to support certain projected
worker compensation obligations. At Dec. 29, 1996, the company had approximately
$40.3 million of undrawn letters of credit outstanding.

      In 1990, a verdict was rendered against the company's subsidiary,
Philadelphia Newspapers, Inc. (PNI), publisher of The Philadelphia Inquirer and
Philadelphia Daily News, in a libel action entitled Sprague v. Philadelphia
Newspapers, Inc., for $2.5 million in compensatory damages and $31.5 million in
punitive damages. On April 1, 1996, the libel action was settled. The settlement
had no material impact on earnings.

      Various libel actions and environmental and other legal proceedings that
have arisen in the ordinary course of business are pending against the company
and its subsidiaries. In the opinion of management, the ultimate liability to
the company and its subsidiaries as a result of these legal proceedings will not
be material to the financial position or results of operations.



                                      37
<PAGE>   38

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

SHAREHOLDERS
KNIGHT-RIDDER, INC.

      We have audited the accompanying consolidated balance sheet of
Knight-Ridder, Inc., and subsidiaries as of Dec. 29, 1996, Dec. 31, 1995, and
Dec. 25, 1994, and the related consolidated statements of income, cash flows and
shareholders' equity for the years then ended. Our audits also included the
financial statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.

      We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Knight-Ridder,
Inc., and subsidiaries at Dec. 29, 1996, Dec. 31, 1995, and Dec. 25, 1994, and
the consolidated results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles. Also, in
our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.

      As discussed in Note A to the financial statements, in 1995 the company
changed its method of accounting for contributions.



                                                           /s/ Ernst & Young LLP
                                                           ---------------------
Miami, Florida
Jan. 29, 1997



                                      38
<PAGE>   39


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

        Not Applicable 

PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

1996 Proxy Statement page 2, "Election of Directors"; page 3, "Nominees for
Election as Directors for Terms Ending 2000; pages 4 and 5 "Continuing
Directors"; pages 7 and 8, "Compensation Committee Interlocks and Insider
Participation"; page 15, "Certain Relationships"; page 15, "Section 16(a)
Beneficial Ownership Reporting Compliance".

KNIGHT-RIDDER EXECUTIVE COMMITTEE

          Alvah H. Chapman Jr., 75  Served as chairman of the Executive
                                    Committee 1984 to 1995; chairman of the
                                    board 1982 to 1989; chief executive officer
                                    1976 to 1988; president 1973 to 1982;
                                    executive vice president 1967 to 1973; vice
                                    president 1966 to 1967; Miami Herald general
                                    manager 1962 to 1969. B.S., business
                                    administration, The Citadel, 1942.
                                  
          Mary Jean Connors, 44     Senior vice president/human resources since
                                    October; vice president/human resources
                                    1989 to 1996. Served as Philadelphia
                                    Newspapers, Inc., vice president/human
                                    resources 1988 to 1989; assistant to the
                                    senior vice president/news for Knight-Ridder
                                    1988; The Miami Herald assistant managing
                                    editor/personnel 1985 to 1988; held various
                                    editing positions at The Miami Herald 1980
                                    to 1985. B.A., English, Miami University in
                                    Oxford, Ohio, 1973.

          John C. Fontaine, 65      President since 1995. Served as executive
                                    vice president 1994 to 1995; senior vice
                                    president 1987 to 1993; general counsel 1980
                                    to 1993. Formerly a partner with Hughes
                                    Hubbard & Reed. LL.B., Harvard Law School,
                                    1956; B.A., political science, University of
                                    Michigan, 1953.

          Ross Jones, 54            Senior vice president and chief financial
                                    officer since 1993. Served as vice
                                    president/finance in 1993; vice president
                                    and treasurer of Reader's Digest
                                    Association, Inc., 1985 to 1993 and in other
                                    positions there 1977 to 1985. Served as
                                    manager at Brown Brothers Harriman & Co.
                                    1970 to 1977. M.B.A., finance, Columbia
                                    University Business School, 1970; B.A.,
                                    classics, Brown University, 1965.

          Frank McComas, 51         Senior vice president/operations since
                                    September; vice president/operations 1995 to
                                    1996. Served as publisher, The (Columbia)
                                    State, 1988 to 1995; publisher, Bradenton
                                    Herald, 1980 to 1988; held various positions
                                    at The Miami Herald and The Charlotte
                                    Observer, 1970 to 1980. Advanced Management
                                    Program, Harvard Business School, 1994;
                                    B.B.A. in business administration, Kent
                                    State University, 1968.

          Bernard H. Ridder Jr., 80 Former chairman of the board 1979 to 1982;
                                    former chairman of the Executive Committee
                                    1976 to 1984; former vice chairman of the
                                    board 1974 to 1979. Served as president and
                                    chief executive officer of Ridder
                                    Publications, Inc., 1969 to 1974. B.A.,
                                    history, Princeton University, 1938.

          P. Anthony Ridder, 56     Chairman of Executive Committee since 1995;
                                    Knight-Ridder chairman and CEO since 1995.
                                    Served as president 1989 to 1995; president
                                    of the Newspaper Division 1986 to 1995;
                                    chairman of the Operating Committee since
                                    1985. Served as publisher of the San Jose
                                    Mercury News 1977 to 1986; general manager
                                    1975 to 1977; business manager 1969 to 1975.
                                    B.A., economics, University of Michigan,
                                    1962.




                                      39
<PAGE>   40
OTHER OFFICERS


MARTY CLAUS, 48
Vice president/news since 1993. Served as Detroit Free Press managing
editor/business and features from 1987 to 1992; held various editing positions
at the Free Press 1977 to 1987. Held various writing and editing positions at
the San Bernardino (Calif.) Sun-Telegram 1970 to 1977. B.A., journalism,
Michigan State University Honors College, 1970.

GARY R. EFFREN, 40
Vice president/controller since 1995. Served as assistant vice
president/assistant treasurer 1993 to 1995; assistant to the vice
president/finance and treasurer 1989 to 1993; director of corporate accounting
1986 to 1989; business manager of Viewdata Corp. of America 1984 to 1986;
manager of financial reporting 1983 to 1984. M.B.A., University of Miami, 1989;
B.S., accounting, Rider College, 1978; CPA.

VIRGINIA DODGE FIELDER, 48
Vice president/research since 1989. Served as vice president/news and
circulation research 1986 to 1989. Served as director/news and circulation
research 1981 to 1985; editorial research manager, Chicago Sun-Times 1979 to
1981; held various positions at Lexington Herald-Leader 1976 to 1979. Ph.D.,
mass communications, Indiana University, 1976; M.A., journalism, Indiana
University, 1974; B.A., psychology, Transylvania University, 1970.

DOUGLAS C. HARRIS, 57
Vice president and secretary since 1986. Served as vice president/personnel 1977
to 1985; director/personnel 1972 to 1977. Formerly with Peat, Marwick, Mitchell
and Co. as director of college and special recruiting. Advanced Management
Program, Harvard Business School, 1987; Ed.D., counseling and guidance, Indiana
University, 1968; M.S., student personnel, Indiana University, 1964; B.S.,
business administration, Murray State University, 1961.

CLARK HOYT, 54
Vice president/news since 1993. Served as chief of the Knight-Ridder Washington
Bureau 1987 to 1993; news editor 1985 to 1987; managing editor, The Wichita
Eagle 1981 to 1985; various editing positions, Detroit Free Press 1977 to 1981;
various reporting positions, the Detroit Free Press and Washington Bureau. B.A.,
English literature, Columbia College, 1964.

ROBERT D. INGLE, 57
Vice president/new media since 1995. Served as president and executive editor of
the San Jose Mercury News 1981 to 1995; managing editor, The Miami Herald 1977
to 1981; various editing positions, The Miami Herald 1962 to 1977. B.A.,
journalism and political science, University of Iowa, 1962.

MINDI KEIRNAN, 41
Vice president/operations since August; assistant vice president/assistant to
the chairman and CEO 1995 to 1996. Served as assistant to the president 1994 to
1995; managing editor/news, Saint Paul Pioneer Press 1991 to 1994; various
editing positions at Gannett News Service, Crain's Chicago Business, the Detroit
Free Press and the Tallahassee Democrat 1977 to 1991. B.S., political science,
Florida State University, 1984.

POLK LAFFOON IV, 51
Vice president/corporate relations since 1994. Served as assistant to the
president 1992 to 1994; assistant circulation director/distribution, The Miami
Herald, 1991 to 1992; executive assistant to the vice president/marketing 1989 
to 1991; Living Today editor, 1987 to 1989. Served as director and vice 
president/investor relations, Taft Broadcasting Co., 1982 to 1987. M.B.A., 
marketing, Wharton School, 1970; B.A., English, Yale, 1967.

TALLY C. LIU, 46
Vice president/finance and administration since 1994. Served as vice
president/finance and controller 1993 to 1994; vice president and controller
1990 to 1993. Served as San Jose Mercury News vice president and chief financial
officer 1987 to 1990 and in various roles 1983 to 1987; held various finance
positions, Boca Raton News, 1978 to 1983. M.B.A., Florida Atlantic University,
1977; B.S., business administration, National Chen-Chi University, 1973; CPA.

LARRY D. MARBERT, 43
Vice president/technology since 1994. Served as Philadelphia Newspapers, Inc.,
senior vice president/operations 1991 to 1994; vice president/operations
research and planning 1988 to 1991; vice president/production 1986 to 1988;
Knight-Ridder director of production/Newspaper Division 1981 to 1986; various
production positions, The Miami Herald 1977 to 1981. M.S., management science,
Auburn University, 1977; B.S., University of North Carolina, business
administration, 1976.

CRISTINA LAGUERUELA MENDOZA, 50
Vice president/general counsel since 1993; vice president/associate general
counsel 1992 to 1993; associate general counsel 1990 to 1992. Served as a
partner in Murai, Wald, Biondo, Moreno & Mendoza, P.A., 1988 to 1990; associate
1984 to 1988. J.D., University of Miami Law School, 1982; M.A., political
science, University of Miami, 1967; B.A., political science, Chatham College,
1966.

ALAN G. SILVERGLAT, 50
Vice president/treasurer since 1995. Served as senior vice president/finance and
planning for Business Information Services Division 1983 to 1995; other BIS
positions 1980 to 1983. Formerly with Ernst & Young. B.S., business
administration, University of Missouri, 1968; CPA.

                                      40
<PAGE>   41
JEROME S. TILIS, 54
Vice president/marketing since 1987. Served as president of the Detroit Free
Press 1985 to 1989; senior vice president of Philadelphia Newspapers, Inc., 1980
to 1985; vice president of advertising sales and marketing 1979 to 1980;
advertising director 1977 to 1979. Advanced Management Program, Harvard Business
School, 1984; B.S., chemistry, Hunter College, 1964.

ITEM 11.      EXECUTIVE COMPENSATION

1996 Proxy Statement, pages 7 and 8, "Compensation Committee Interlocks and 
Insider Participation"; page 8, "Executive Compensation"; pages 8 through 10, 
"Compensation Committee Report"; page 11, "Senior Executive Compensation"; 
page 12, "Stock Options Granted"; pages 12 and 13, "Stock Options Exercised"; 
page 13, "Pension Benefits"; page 14 "Performance of the Company's Stock"; and 
page 15, "Compensation of Directors"

ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

1996 Proxy Statement page 1, "Common Stock Outstanding and Principal Holders"
and page 6, "Security Ownership of Management"

See Note E in Item 8.

ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

1996 Proxy Statement page 15, "Certain Relationships"; Page 3 "Nominees for
Election as Directors for Terms Ending 2000"; Pages 4 and 5, "Continuing
Directors"; pages 7 and 8, "Compensation Committee Interlocks and Insider
Participation"; and Page 1, "Common Stock Outstanding and Principal Holders"

PART IV

ITEM 14.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
              8-K 
 (a)

      1.      The following consolidated financial statements of Knight-Ridder, 
              Inc. and subsidiaries, included in the annual report of the 
              registrant to its shareholders for the year ended December 29, 
              1996, are included in Item 8:                 
                                                                               
              Consolidated Balance Sheet - December 29, 1996, December 31, 1995 
              and December 25, 1994                                       
                                                                               
              Consolidated Statement of Income - Years ended December 29, 1996, 
              December 31, 1995 and December 25, 1994                    
                                                                               
              Consolidated Statement of Cash Flows - Years ended December 29, 
              1996, December 31, 1995 and December 25, 1994                
                                                                               
              Consolidated Statement of Shareholders' Equity - Years ended     
              December 29, 1996, December 31, 1995 and December 25, 1994       
                                                                               
              Notes to consolidated financial statements 
                                                                               
      2.      The following consolidated financial statement schedule of       
              Knight-Ridder, Inc. and subsidiaries is included in Item        
              14(d):                                                           
                                                                               
              Schedule II - Valuation and qualifying accounts                  
                                                                               
              All other schedules for which provision is made in the applicable 
              accounting regulation of the Securities and Exchange Commission 
              are not required under the related instructions, or are 
              inapplicable, or have been shown in the consolidated financial 
              statements or notes thereto, and therefore have been omitted from 
              this section.                   
                                                                               
      3.      Exhibits                                                         

<TABLE>
              <S>        <C>   <C>
              No.  3     -     Articles of Incorporation and Bylaws are 
                               incorporated by reference to the Company's Form 
                               10-K filed in March 1981.                    
                                                                            
              No.  4     -     Indenture, dated as of April 6, 1989, is 
                               incorporated by reference to the Company's 
                               Registration Statement on Form S-3, effective 
                               April 7, 1989.  (No. 33-28010)               
                                                                              
                         -     Rights Agreement, dated as of  June 21, 1996, 
                               is incorporated by reference to the Company's  
                               Form 8-A filed July 9, 1996.     
</TABLE>




                                      41
<PAGE>   42
<TABLE>
             <S>        <C>   <C>
                                                              
             No. 10     -     Knight-Ridder Annual Incentive Plan description 
                              is incorporated by reference to the Company's 
                              Form 10-K filed electronically on March 24, 1995.
                                                              
                        -     Amendment to the Employee Stock Option Plan is 
                              incorporated by reference to the Company's Form 
                              10-K filed electronically on March 23, 1994.   

                        -     Director's Pension Plan dated January 1, 1994 is 
                              incorporated by reference to the Company's Form 
                              10-K filed electronically on March 23, 1994.  
                                                                            
                        -     Executive Officer's Retirement Agreement dated 
                              July 19, 1993 is incorporated by reference to the 
                              Company's Form 10-K filed electronically on March
                              23, 1994.
                                                  
                        -     Executive Officer's Retirement Agreement dated 
                              December 19, 1991 is incorporated by reference to
                              the Company's Form 10-K filed electronically on 
                              March 23, 1994.                                 
                                                                              
                        -     Executive Officer's Consulting/Retirement 
                              Agreement dated September 20, 1989 is 
                              incorporated by reference to the Company's Form 
                              10-K filed electronically March 24, 1995. 
                                                                        
                        -     Knight-Ridder local Incentive Plan description is
                              incorporated by reference to the Company's Form 
                              10-K filed electronically on March 20, 1996.     
                                                                              
             No. 11     -     Statement re Computation of Per Share Earnings is
                              filed herein on page 48.             
                                                                              
             No. 12     -     Statement re Computation of Earnings to Fixed 
                              Charges Ratio From Continuing Operations is filed
                              herein on page 49.                             
                                                                              
             No. 21     -     Subsidiaries of the registrant is filed herein on
                              page 50.                            
                                                                              
             No. 23     -     "Consent of Independent Certified Public 
                              Accountants" is filed herewith on page 51.      
                                                                               
             No. 24     -     "Power of Attorneys" for M. Kenneth Oshman filed 
                              herein on page 52.                    
                                                                              
                              "Power of Attorneys" for James I. Cash, Jr. is 
                              incorporated by reference to the Company's Form 
                              10-K filed electronically on March 20, 1996.  
                              "Power of Attorneys" for all other members of the
                              Board of Directors is incorporated by reference 
                              to the Company's Form 10-K filed electronically 
                              on March 24, 1995.            
                                                                              
             No. 27     -     "Financial Data Schedule" is filed herein on 
                               page 53.                                 
</TABLE>

(b)   Reports on Form 8-K filed during the fourth quarter of 1996:

      No reports were filed on Form 8-K during the quarter ended December 29, 
      1996.

      Form 8-K dated January 10, 1997
             Item 2. Disposition of Assets
             Item 7. Financial Statements and Exhibits; proforma financial
                     statements filed.

(c)   Exhibits

      The response to this portion of Item 14 is submitted as a separate 
      section  of this report.

(d)   Financial Statement Schedules

      The response to this portion of Item 14 is submitted as a separate 
      section of this report.



                                      42
<PAGE>   43

                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                        KNIGHT-RIDDER, INC.



Dated March 10, 1997                    /s/ P. Anthony Ridder
-------------------------               ----------------------------------------
                                  By    P. Anthony Ridder
                                        Chairman and
                                        Chief Executive Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.



Dated March 10, 1997                    /s/ P. Anthony Ridder
-------------------------               ----------------------------------------
                                        P. Anthony Ridder                     
                                        Chairman and                          
                                        Chief Executive Officer               
                                                                               
Dated March 10, 1997                    /s/ Ross Jones                        
-------------------------               ----------------------------------------
                                        Ross Jones                            
                                        Chief Financial Officer and           
                                        Senior Vice President/Finance
                                                                               
Dated March 10, 1997                    /s/ Gary R. Effren                   
-------------------------               ----------------------------------------
                                        Gary R. Effren                    
                                        Vice President/Controller             
                                        (Chief Accounting Officer)            





                                      43
<PAGE>   44



                                        /s/ James I. Cash, Jr.*               
                                        ----------------------------------------
                                        James I. Cash, Jr.                    
                                        Director                              
                                                                              
                                        /s/ Alvah H. Chapman, Jr.*            
                                        ----------------------------------------
                                        Alvah H. Chapman, Jr.                 
                                        Director                              
                                                                              
                                        /s/ Joan Ridder Challinor *           
                                        ----------------------------------------
                                        Joan Ridder Challinor                 
                                        Director                              
                                                                              
                                        /s/ John C. Fontaine*                  
                                        ----------------------------------------
                                        John C. Fontaine                      
                                        Director                              
                                                                              
                                        /s/ Peter C. Goldmark, Jr.*           
                                        ----------------------------------------
                                        Peter C. Goldmark, Jr.                
                                        Director                              
                                                                              
                                        /s/ Barbara Barnes Hauptfuhrer*       
                                        ----------------------------------------
                                        Barbara Barnes Hauptfuhrer            
                                        Director                              
                                                                              
                                        /s/ Jesse Hill, Jr.*                  
                                        ----------------------------------------
                                        Jesse Hill, Jr.                       
                                        Director                              
                                                                              
                                        /s/ C. Peter McColough*               
                                        ----------------------------------------
                                        C. Peter McColough                    
                                        Director                              
                                                                              
                                        /s/ M. Kenneth Oshman*                
                                        ----------------------------------------
                                        M. Kenneth Oshman                     
                                        Director                              
                                                                              
                                        /s/ Thomas L. Phillips*               
                                        ----------------------------------------
                                        Thomas L. Phillips                     
                                        Director                               
                                                                               
                                                                               


                                      44
<PAGE>   45


                                        
                                        /s/ P. Anthony Ridder*
                                        ----------------------------------------
                                        P. Anthony Ridder
                                        Director
                                                                               
                                        /s/ Randall L. Tobias*               
                                        ----------------------------------------
                                        Randall L. Tobias                    
                                        Director                             
                                                                             
                                        /s/ Gonzalo F. Valdes-Fauli*         
                                        ----------------------------------------
                                        Gonzalo F. Valdes-Fauli              
                                        Director                             
                                                                             
                                        /s/ John L. Weinberg*                 
                                        ----------------------------------------
                                        John L. Weinberg                     
                                        Director                             
                                                                             
                                                                             
Dated March 10, 1997                    * By Ross Jones                     
-------------------------               ----------------------------------------
                                        Ross Jones                             
                                        Attorney-in-fact                       
                                                                   

                                      45
<PAGE>   46



                           ANNUAL REPORT ON FORM 10-K

                          ITEM 14 (a)(2), (c) and (d)

                               SUPPLEMENTARY DATA

                                CERTAIN EXHIBITS

                          YEAR ENDED DECEMBER 29, 1996

                      KNIGHT-RIDDER, INC. AND SUBSIDIARIES

                                 MIAMI, FLORIDA


                                      46
<PAGE>   47



                                                                     SCHEDULE II


                                       
                       VALUATION AND QUALIFYING ACCOUNTS
                     KNIGHT-RIDDER, INC. AND SUBSIDIARIES
                           (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>

COLUMN A                                           COLUMN B                     COLUMN C                COLUMN D          COLUMN E
--------                                           --------                     --------                --------          --------
                                                                                ADDITIONS                                         
                                                                       -------------------------
                                                   BALANCE AT          CHARGED          CHARGED                                   
                                                   BEGINNING           TO COSTS           TO                             BALANCE  
                                                       OF                AND             OTHER                           AT END  
DESCRIPTION                                          PERIOD            EXPENSES         ACCOUNTS       DEDUCTIONS       OF PERIOD  
-----------                                        ----------          --------         --------       ----------       ---------
<S>                                                <C>                <C>               <C>           <C>               <C>
YEAR ENDED DECEMBER 29, 1996:                                                                                                  
                                                                                                                                   
  RESERVES AND ALLOWANCES                                                                                                        
    DEDUCTED FROM ASSET ACCOUNT:                                                                                                
         ACCOUNTS RECEIVABLE                                                                                                      
               ALLOWANCES                          $  14,348          $  21,412                       $  23,075 (1)     $  12,685 
        VALUATION ALLOWANCE FOR                                                                                                    
               DEFERRED TAXES                          1,357                  -                                             1,357 
                                                   ---------          ---------         --------      ---------         ---------
                                                   $  15,705          $  21,412                       $  23,075         $  14,042 
                                                                                                                                   
                                                                                                                                   
YEAR ENDED DECEMBER 31, 1995:                                                                                                  
                                                                                                                                   
  RESERVES AND ALLOWANCES                                                                                                        
    DEDUCTED FROM ASSET ACCOUNT:                                                                                                
         ACCOUNTS RECEIVABLE                                                                                                      
               ALLOWANCES                          $  13,728          $  20,129                       $  19,509 (1)     $  14,348 
        VALUATION ALLOWANCE FOR                                                                                                    
               DEFERRED TAXES                          3,985                  -                           2,628 (2)         1,357 
                                                   ---------          ---------         --------      ---------         ---------
                                                   $  17,713          $  20,129                       $  22,137         $  15,705 
                                                                                                                                   
                                                                                                                                   
YEAR ENDED DECEMBER 25, 1994:                                                                                                  
                                                                                                                                   
  RESERVES AND ALLOWANCES                                                                                                        
    DEDUCTED FROM ASSET ACCOUNT:                                                                                                
         ACCOUNTS RECEIVABLE                                                                                                      
               ALLOWANCES                          $  14,554          $  17,818                       $  18,644 (1)     $  13,728 
        VALUATION ALLOWANCE FOR                                                                                                    
               DEFERRED TAXES                          3,985                  -                               -             3,985 
                                                   ---------          ---------         --------      ---------         ---------
                                                   $  18,539          $  17,818                       $  18,644         $  17,713 
</TABLE>

(1)  Represents uncollectible accounts written-off, net of recoveries.
(2)  Represents net reduction in valuation allowance which was determined to
     no longer be required.



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