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 27, 1998    Commission file number 1-7553

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

              Florida                                 38-0723657
   (State or other jurisdiction)        (I.R.S. Employer Identification No.)

                   50 W. SAN FERNANDO ST., SAN JOSE, CA 95113
                    (Address of principal executive offices)

                                 (408) 938-7700
              (Registrant's telephone number, including area code)

                     ONE HERALD PLAZA, MIAMI, FLORIDA 33132
              (Former name, former address and former fiscal year,
                          if changed since last report)

           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
                                                Philadelphia Stock Exchange
                                                Chicago Stock Exchange
                                                Boston Stock Exchange
                                                Pacific Exchange
                                                Cincinnati 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
closing price on the NYSE as of March 5, 1999: $3,966,337,367.

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest  practicable date: March 5, 1999 - 78,541,334 one
class Common Stock, $.02 1/12 Par Value

                       DOCUMENTS INCORPORATED BY REFERENCE

(1) Portions of definitive  Proxy  Statement dated March 29, 1999, in connection
    with the  Annual  Meeting  of  Shareholders  to be held on May 12, 1999  are
    incorporated into Part III.
<PAGE>

                      Table of Contents for 1998 Form 10-K
                                                                            Page
                                                                            ----
PART I

 Item 1.    Business                                                          2

 Item 2.    Properties                                                        8

 Item 3.    Legal Proceedings                                                 8

 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                                       9

 Item 6.    Selected Financial Data                                          11

 Item 7.    Management's Discussion and Analysis of
            Financial Condition and Results of Operations                    15

 Item 7A.   Quantitative and Qualitative Disclosures About Market Risk       29

 Item 8.    Financial Statements and Supplementary Data                      30

 Item 9.    Changes in and Disagreements with Accountants
            on Accounting and Financial Disclosure                           55

PART III

 Item 10.   Directors and Executive Officers of the Registrant               55

 Item 11.   Executive Compensation                                           58

 Item 12.   Security Ownership of Certain Beneficial 
            Owners and Management                                            58

 Item 13.   Certain Relationships and Related Transactions                   58

PART IV

 Item 14.   Exhibits, Financial Statement Schedules
            and Reports on Form 8-K                                          59

SIGNATURES                                                                   62

SCHEDULES                                                                    65

EXHIBITS                                                                     65

                                       1
<PAGE>

PART I

Item 1.  BUSINESS

                                   THE COMPANY

Knight-Ridder,  Inc., ("Knight Ridder" or the "company") 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 is a communications company engaged in newspaper publishing,  news
and information  services,  electronic retrieval services and graphics and photo
services.  The company publishes 31 daily newspapers and 21 nondaily  newspapers
in 28 U.S.  markets,  reaching  9.2 million  readers  daily and 13.1  million on
Sunday.  It maintains 45 associated  Web sites under the name Knight Ridder Real
Cities.

Knight-Ridder,  Inc.,  incorporated in Florida in 1976, is  headquartered in San
Jose, California, and employs about 22,000 people.

Recent Developments

In 1998, Knight Ridder moved its headquarters to San Jose, California.  Also, in
1998, Knight Ridder sold its remaining Business Information Services subsidiary,
Technimetrics, Inc., its global diversified information subsidiary.

                                   NEWSPAPERS

Knight Ridder had 31 daily  newspapers and 21 nondaily  newspapers at the end of
1998. See Part II, Item 8, "Financial Statements and Supplementary Data", Note A
to  the  consolidated   financial   statements  for  segment  reporting  related
information including principal markets and methods of distribution.

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 San Jose. 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 San Jose.  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 16 foreign  correspondents.  The service
also distributes  editorial computer graphics and deadline photos via the Knight
Ridder-owned PressLink Online.


                                       2
<PAGE>

All of the company's  newspapers  compete for  advertising and readers' time and
attention with broadcast, satellite and cable television, the Internet and other
computer  services,  radio,  magazines,   nondaily  suburban  newspapers,   free
shoppers, billboards and direct mail. In some cases, the newspapers also compete
with other  newspapers  published in nearby cities and towns -  particularly  in
Miami,  St. Paul and Fort Worth.  In Detroit and Fort Wayne,  Knight  Ridder has
joint operating agreements with a second newspaper.  The rest of Knight Ridder's
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.

                   Sources of Knight Ridder Operating Revenue

The table below  presents the relative  percentage  contributions  by individual
papers to the company's  overall  operating  revenue in 1998, 1997 and 1996. The
percentage  contributions of each paper to operating revenue are not necessarily
indicative of contributions to operating profit.

                                            1998         1997         1996
                                            -----        -----        -----
 The Philadelphia Inquirer and
   Philadelphia Daily News                   18.8%        19.0%        21.3%
 The Miami Herald                            10.6         11.4         13.3
 San Jose Mercury News                        9.3         10.4         12.0
 The Kansas City Star(1)                      8.7          6.1          N/A
 Fort Worth Star-Telegram(1)                  7.1          4.9          N/A
 Detroit Free Press(2)                        7.3          7.0          7.7
 The Charlotte Observer                       6.0          6.2          6.9
 Saint Paul Pioneer Press                     4.0          4.1          4.7
 Contra Costa Newspapers                      3.9          3.9          4.4
 Akron Beacon Journal                         3.3          3.6          4.0
 All other                                   21.0         23.4         25.7
                                            -----        -----        -----
                                            100.0%       100.0%       100.0%
                                            -----        -----        -----

(1) The Kansas City Star and Fort Worth  Star-Telegram  were  acquired on May 9,
    1997. This table presents their part-year contribution percentage in 1997.
(2) Knight Ridder portion of Detroit Newspapers

                                    Newsprint

Knight Ridder consumed  approximately  794,000 metric tons of newsprint in 1998.
Approximately  17.3% of the company's total  operating  expenses during the year
was for  newsprint.  Knight  Ridder  purchases  approximately  60% of its annual
consumption  from 15 United  States mills,  with 34% purchased  from 18 mills in
Canada,  and 6% from other offshore sources.  Foreign financial markets continue
to restrict North American newsprint exports. This, combined with the settlement
of the  Fletcher  Challenge  labor  strike  and the  occurrence  and  subsequent
settlement of an Abitibi Consolidated labor strike during 1998, leads management
to believe that sources are more than adequate to meet current demands.

Approximately  93% of the  newsprint  consumed  by the  company  contained  some
recycled  content;  the average  content of these rolls was 39% recycled  fiber.
This translates into an overall recycled newsprint average of 36%.

Knight Ridder is a one-third  partner with Cox  Enterprises  and Media  General,
Inc., in Southeast Paper  Manufacturing Co., a newsprint mill in Dublin, Ga. The

                                       3
<PAGE>

mill  produced  455,000  metric tons in 1998,  using more than  591,000  tons of
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  produced more than 242,000  metric tons in 1998.
Knight  Ridder's  purchases  from  these  two  mills  were  14%  of  its  annual
consumption for 1998, providing an important hedge against volatility.

                                   Technology

Year  2000  Readiness  Disclosure:   For  information  regarding  the  company's
preparation  of its  technology  infrastructure  for the Year 2000, see Part II,
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations", Year 2000 Readiness Disclosure.

Other:  We  completed  the  transition  of all of our  companies  to our  Shared
Services Center to support financial systems and purchasing.  Ten newspapers are
now serviced by our  circulation  customer  service  centers in Miami,  Fla. and
Columbia, S.C.

The Charlotte  Observer and Akron Beacon Journal  completed a full conversion to
flexographic printing.

Major press replacement  projects are under way at The Miami Herald and the Fort
Worth Star-Telegram.  Additionally,  significant renovations to the business and
editorial offices in Philadelphia were completed in 1998.

                            General Advertising Sales

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

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

Newspaper  National  Network (NNN),  Knight Ridder's second general sales agent,
was  established  in 1994 to focus  national  selling on behalf of the newspaper
industry.  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," "one-order, one-bill" prospect.

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

              The Philadelphia Inquirer and Philadelphia Daily News

1998  Revenue  was $579.8  million.  Philadelphia  Newspapers,  Inc.  (PNI),  is
publisher of The Philadelphia  Inquirer and the  Philadelphia  Daily News in the
eight-county Philadelphia metropolitan market.

                                       4
<PAGE>

Philadelphia  Online  (www.philly.com),  an online  service,  continued  to show
growth,  moving from 7.8 million  page views per month in 1997 to more than 12.6
million per month in 1998.

The Philadelphia  Primary  Metropolitan  Statistical  Area (PMSA)  population is
expected to grow 0.3% between 1998 and 2003,  compared  with 4.3% for the United
States.

In 1998, the PMSA had income per capita 15.1% above the U.S. average; by 2003 it
is projected to be 15.8% above.

                        The Miami Herald/El Nuevo Herald

1998 Revenue was $327.2 million. The Miami Herald,  winner of 15 Pulitzer Prizes
and Florida's largest Sunday newspaper, is sold primarily in Miami-Dade, Broward
and Monroe counties. It is also distributed in 29 countries in Latin America and
the Caribbean, primarily through its International Satellite edition.

El Nuevo Herald, the Spanish-language  newspaper, has, since May 1998, been sold
separately   from  The  Miami  Herald  and  is  Audit   Bureau  of   Circulation
(ABC)-audited.  According  to the ABC  Publisher's  Statement  for the  last six
months of 1998,  circulation  was  79,205  daily and 91,439  Sunday.  Last year,
penetration of the two newspapers  combined jumped nearly two percentage  points
both daily and Sunday in Miami-Dade County.

The  Herald's  Broward  County  edition was rezoned and  revamped.  Twice-weekly
community  sections  were  increased  from three zones to six. The Herald is the
largest newspaper in fast-growing southern Broward County.

Online page-views  doubled in both English and Spanish.  With eight sites up and
running, The Herald launched miami.com,  a community portal, in partnership with
other   media   and   community   organizations.    Also   launched:   cars.com,
cometothesun.com and newhomenetwork.com.

Three Newsliner offset presses became operational. The final two presses will be
installed during 1999.

The Miami-Fort Lauderdale Designated Market Area (DMA) population is expected to
grow 6.6% between 1998 and 2003, compared with 4.3% for the United States.

In 1998, the DMA had income per capita 3.7% below the U.S.  average;  by 2003 it
is projected to be 9.4% below.

                                       5
<PAGE>

                              San Jose Mercury News

1998 Revenue was $287.7 million.  The Mercury News serves Silicon Valley,  which
encompasses  San  Jose  -  California's  third-largest  city  - and  surrounding
communities.  The region is the world leader in high  technology and a leader in
exports, ranking second nationally.

Significant  weakness in key high-tech business sectors,  exacerbated by a sharp
drop in exports  to Asia,  slowed and then  reversed  the growth of  recruitment
advertising.  Anticipating  this  decline,  the Mercury News has  developed  new
revenue  sources over the past few years.  1998 saw the publication of two books
(a guide to  retirement  communities  and a new  edition of The Guide to Silicon
Valley  Careers)  and the  continued  growth of several  other  print and online
products.  In  response  to  advertiser  demand,   delivery  of  advertising  to
nonsubscribers was switched to direct mail.

Nuevo Mundo, serving the nation's fourth-largest Hispanic market, is 2 years old
and  growing.  The  Spanish-language  free  weekly  ended the year with  average
circulation of 57,870 copies.  A second weekly  publication,  Viet Mercury,  was
launched in January 1999.  Published  entirely in Vietnamese,  Viet Mercury will
serve another major segment of the local  population and advertisers  wanting to
reach it.

Mercury  Center  (www.mercurycenter.com)   continued  to  grow  in  content  and
viewership.  Founded in 1993,  the Web site averaged more than 1.2 million users
per month in 1998.  Usage  received a boost in May when Mercury  Center became a
free site. New  attractions  for  advertisers  included a database of registered
users;  major upgrades of  recruitment,  real estate and automotive  areas;  and
expanded    sponsorship     opportunities.     A    technology-focused     site,
www.siliconvalley.com, was launched in February 1999.

The  population of the San Jose Primary  Metropolitan  Statistical  Area (PMSA),
which  includes only Santa Clara  County,  is expected to grow 6.9% between 1998
and 2003; the U.S. average is 4.3%.

In 1998, the PMSA had income per capita 48.3% above the U.S. average; by 2003 it
is projected to be 51.2% above.

                              The Kansas City Star

1998  Revenue  was $270.5  million.  The Kansas City Star serves the Kansas City
metropolitan  area.  The Star's  primary  market area consists of 11 counties in
both Kansas and Missouri.

The Star launched a new  circulation  objective to obtain 300,000  average daily
subscribers  by the  year  2000.  The  goal is being  supported  by  promotional
campaigns, a redesign of the newspaper,  expansion of neighborhood news coverage
and development of various business ventures.

                                       6
<PAGE>

The Star's  award-winning  online  community  site,  kansascity.com,  and online
product,  kcstar.com,  continue  to grow  and  improve.  kcstar.com  is a recent
recipient of the Newspaper Association of America's Best Online Newspaper award.

The Kansas City  Metropolitan  Statistical  Area (MSA) population is expected to
grow 4.2% between 1998 and 2003, compared with 4.3% for the United States.

In 1998, the MSA had income per capita 7.1% above the U.S.  average;  by 2003 it
is projected to be 8.6% above.

                            Fort Worth Star-Telegram

1998  Revenue  was  $220.8  million.  Ad  revenue  was  up  2.8%  in  1998.  The
Star-Telegram  is well  positioned  for  growth in the  western  portion  of the
Dallas/Fort Worth market, the nation's ninth-largest metropolitan area.

The  Star-Telegram  continues its zoned approach to local news,  advertising and
customer  service.  In eastern Tarrant County,  the  Star-Telegram  launched six
different editions of Hometown Star, a weekly micro-zoned tabloid.  This was one
of  many  changes  that  allowed  the  Arlington  Star-Telegram  to  again  grow
circulation  versus the prior year in the face of  aggressive  competition.  The
Star-Telegram  continues  to meet reader  demand for news from around the corner
and around the world, as nine out of 10 newspaper readers in Tarrant County read
the Star-Telegram each week. In the online area, the Star- Telegram continues to
operate its own Internet Service Provider business with approximately 3,500 paid
subscribers. Traffic to star-telegram.com grew by more than 40% during 1998.

The Fort Worth/Arlington Primary Metropolitan Statistical Area (PMSA) population
has grown 60% since 1980,  and is expected to grow 7.1%  between  1998 and 2003,
compared  with 4.3% for the  United  States.  

In 1998, the PMSA had income per capita 5.6% above the U.S. average;  by 2003 it
is projected to be 6.9% above.

                               Detroit Free Press

1998 Revenue (Knight Ridder's share) was $224.7 million.  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  Newspaper  Agency (DNA),  an agency
combining the business  operations of the two  newspapers.  This joint operating
agency was formed in 1989. The profits (or losses) are split equally between the
two partners, Knight Ridder and Gannett Co. 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  in  terms  of  population  and
generates approximately $450 million in revenue from its two newspapers.

A union strike,  which began in July 1995, was officially  ended when the unions
surrendered  in  February  1997.  The three  companies  agreed  to place  former
striking employees on a preferential  hiring list. The number of former strikers
on that list is currently  about 565. The unions continue to pursue unfair labor
practice  charges through the National Labor Relations Board.  See Item 3, Legal
Proceedings.

                                       7
<PAGE>

The population of the Detroit Primary  Metropolitan  Statistical  Area (PMSA) is
expected to grow  nearly 1% between  1998 and 2003,  compared  with 4.3% for the
United States.

In 1998 the PMSA had income per capita 16.2% above the U.S. average;  in 2003 it
is projected to be 20.7% above.

                             The Charlotte Observer

1998 Revenue was $187.0 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.

Population in the Charlotte Metropolitan  Statistical Area (MSA) is projected to
grow 8.3%  between 1998 and 2003,  compared  with the U.S.  average of 4.3%. 

In 1998, the MSA had per capita income 8.8% above the U.S.  average;  in 2003 it
is projected to be 13.4% above.

Item 2.  PROPERTIES

The company has daily newspaper  facilities in 28 markets situated in 17 states.
These  facilities  vary in size from 4,900  square feet at The  Monterey  County
Herald   operation  in  Monterey,   Calif.,   to  2.9  million  square  feet  in
Philadelphia. In total, they occupy about 9.6 million square feet. Approximately
2.0 million of the total square footage 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., and Detroit.

Knight Ridder  properties  are  maintained in good  operating  condition and are
suitable for present and  foreseeable  operations.  During the three years ended
Dec.  27,  1998,  the company  spent  approximately  $351.5  million for capital
additions and improvements to its existing properties.

Item 3.  LEGAL PROCEEDINGS

On July 13, 1995, six unions struck the Detroit Free Press, The Detroit News and
the Detroit Newspaper Agency, which operates both newspapers.  Subsequently, the
unions filed numerous  unfair labor practice  charges against the newspapers and
the Agency.  In June 1997,  after a lengthy trial,  a National  Labor  Relations
Board  (NLRB)  administrative  law judge ruled that the strike was caused by the
unfair  labor  practices of the Agency and The Detroit News and ordered that the
Agency  and  the  newspapers   reinstate  all  strikers,   displacing  permanent
replacements if necessary.  The Agency and the newspapers  appealed the decision
to the NLRB.

On August 27, 1998, the NLRB affirmed  certain  unfair labor  practice  findings
against The Detroit News and the Agency and reversed  certain findings of unfair
labor practices against the Agency. The Agency and the newspapers filed a motion
to reconsider  with the NLRB, that was denied on March 4, 1999. The unions filed


                                       8
<PAGE>

an appeal to the U.S.  Court of Appeals for  District of Columbia  Circuit.  The
Agency  and the  newspapers  filed a  motion  to  dismiss  the  appeal  which is
scheduled for hearing on March 23, 1999.

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 all legal  proceedings,  including
Detroit,  will  not  be  material  to  its  financial  position  or  results  of
operations, on a consolidated basis.

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 quarter ended December 27, 1998.

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 is also traded in  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. The company's 78.4 million shares
outstanding  at  December  27,  1998,  were  held  in all 50  states  by  11,373
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 $50 on Feb. 8, 1999.

The average stock trading  volume per day for the years 1998,  1997 and 1996 was
242,129,  271,016 and 181,305,  respectively.  The following  table presents the
company's common stock market data:

<TABLE>
<CAPTION>
                                 1998                                1997                            1996
                        ----------------------              --------------------             --------------------
Quarter                 High               Low              High             Low             High             Low
-------                 ----               ---              ----             ---             ----             ---
<S>                    <C>               <C>               <C>              <C>             <C>             <C>
1st                    57 3/8            50 7/16           42 3/8           37 3/8          36 1/16         29 7/8
2nd                    59 5/8            53 1/8            49               35 3/4          38 7/16         32 11/16
3rd                    57 3/4            44                55 13/16         48 3/4          38              32 7/16
4th                    54 15/16          40 1/2            57 1/8           49 1/8          42              35 3/8
</TABLE>

                                       9
<PAGE>

                            Treasury Stock Purchases

The table below is a summary of treasury stock purchases since 1988:

                             Shares              Cost
                           Purchased            (000s)
                           ---------            ------
1998                       4,725,000         $ 255,533
1997                      13,824,300           643,375
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

                                    Dividends

Common stock  dividend  history and policy appears in Item 6, "11 Year Financial
Highlights";  Item 7, "Management Discussion and Analysis of Financial Condition
and  Results  of  Operations"  Quarterly  Operations;  and  Item  8,  "Financial
Statements  and  Supplementary  Data",  Note  E to  the  consolidated  financial
statements.

                                       10

<PAGE>

Item 6. SELECTED FINANCIAL DATA

11-YEAR FINANCIAL HIGHLIGHTS

The following data were compiled from the consolidated  financial  statements of
Knight Ridder and its subsidiaries.  The consolidated  financial  statements and
related notes and  discussions for the year ended Dec. 27, 1998 (Items 7 and 8),
should be read in order to obtain a better understanding of this data.

<TABLE>
<CAPTION>
                                                       Compound
                                                      Growth Rate
(In thousands, except per                           ----------------          Dec. 27            Dec. 28           Dec. 29
share data and ratios)                              5-Year   10-Year            1998              1997               1996
                                                    ------   -------        -----------        -----------       -----------
<S>                                                    <C>       <C>         <C>                <C>               <C> 
SUMMARY OF OPERATIONS               
Operating Revenue                   
  Advertising                                          9.8%      4.5%        $ 2,362,859        $ 2,202,251       $ 1,793,424
  Circulation                                          4.4       4.7             587,529            567,757           501,826
  Other                                               20.0      16.9             141,531            106,777            78,974
                                                                             -----------        -----------       -----------
    Total Operating Revenue                            9.0       4.9           3,091,919          2,876,785         2,374,224
                                                                             -----------        -----------       -----------
Operating Costs                                                                                  
  Labor, newsprint and other operating costs           7.7       4.3           2,399,249          2,214,026         1,920,444
  Depreciation and amortization                       14.3       8.3             188,052            156,731           120,647
                                                                             -----------        -----------       -----------
    Total Operating Costs                              8.1       4.6           2,587,301          2,370,757         2,041,091
                                                                             -----------        -----------       -----------
Operating Income                                      14.1       6.6             504,618            506,028           333,133
  Interest expense                                    19.0       5.4            (105,936)          (102,662)          (73,137)
  Other, net(1)                                      105.4      15.1             109,234            290,486            50,213
  Income taxes, net                                   19.4       8.9            (202,285)          (297,348)         (124,829)
                                                                             -----------        -----------       -----------
Income from continuing operations(1)                  17.4       7.7             305,631            396,504           185,380
Discontinued BIS operations(2)                                                    60,226             16,511            82,493
Discontinued broadcast operations(2)
Cumulative effect of changes in accounting 
  principles(3)
                                                                             -----------        -----------       -----------
Net Income(1)                                         19.8       8.9         $   365,857        $   413,015       $   267,873
                                                                             ===========        ===========       ===========
Operating income percentage (profit margin)                                         16.3%              17.6%             14.0%
------------------------------------------------------------------------------------------------------------------------------------
SHARE DATA(4)                                                                                    
Basic weighted-average number of shares                                           78,882             88,475            96,021
Diluted weighted-average number of shares                                         98,176            101,314            97,420
Earnings per share                                                                               
   Basic:      Continuing operations(1)               25.4      11.5         $      3.87        $      4.48       $      1.93
               Discontinued BIS operations(2)                                       0.77               0.19              0.86
               Discontinued broadcast operations(2)
               Cumulative effect of changes in
                accounting principles(3)
               Net income(1)                          28.0      12.7                4.64               4.67              2.79
   Diluted:    Continuing operations(1)               20.2       9.3         $      3.11        $      3.91       $      1.90
               Discontinued BIS operations(2)                                       0.62               0.17              0.85
               Discontinued broadcast operations(2)
               Cumulative effect of changes        
                in accounting principles(3)        
               Net income(1)                          22.7      10.5                3.73               4.08              2.75
Dividends declared per common share(5)                 2.7       3.4                0.80               0.80              0.58 1/2
Common stock price:   High                                                            59 5/8             57 1/8            42
                      Low                                                             40 1/2             35 3/4            29 7/8
                      Close                                                           50 13/16           50 3/16           39 1/4
Shareholders' equity per common share                  8.9       8.4         $     17.33        $     15.65       $     12.12
Price/earnings ratio(6)                                                           13.6:1             12.3:1            14.3:1
Adjusted price/earnings ratio(7)                                                  19.3:1             21.8:1            21.6:1
------------------------------------------------------------------------------------------------------------------------------------
OTHER FINANCIAL DATA                                                                             
Common stock acquired                                                        $   255,533        $   643,375       $   221,768
Payment of cash dividends                                                         77,152             78,335            74,262
Ratio of earnings to fixed charges(8)                                              5.3:1              7.1:1             4.0:1
At year end
  Total assets                                                               $ 4,257,097        $ 4,355,142       $ 2,860,907
  Long-term debt (excluding current maturities)                                1,329,001          1,599,133           771,335
  Total debt                                                                   1,527,278          1,668,830           821,335
  Shareholders' equity                                                         1,662,731          1,551,673         1,131,508
  Return on average shareholders' equity(9)                                         22.8%              30.8%             23.9%
  Current ratio                                                                    0.8:1              1.1:1             1.0:1
  Total debt/total capital ratio                                                    47.9%              51.8%             42.1%
</TABLE>

                                       11
<PAGE>

<TABLE>        
<CAPTION>  
                                    
(In thousands, except per                                Dec. 31          Dec. 25          Dec. 26           Dec. 27        
share data and ratios)                                     1995             1994             1993              1992          
                                                       -----------      -----------      -----------       -----------      
<S>                                                    <C>              <C>              <C>              <C>
SUMMARY OF OPERATIONS
Operating Revenue
  Advertising                                          $ 1,672,970      $ 1,583,373      $ 1,481,631       $ 1,444,144      
  Circulation                                              495,315          484,581          474,420           460,014      
  Other                                                     81,897           66,968           56,772            39,932      
                                                       -----------      -----------      -----------       -----------      
    Total Operating Revenue                              2,250,182        2,134,922        2,012,823         1,944,090      
                                                       -----------      -----------      -----------       -----------      
Operating Costs                            
  Labor, newsprint and other operating costs             1,923,179        1,730,158        1,655,138         1,597,983      
  Depreciation and amortization                             98,741           96,613           96,233            89,665      
                                                       -----------      -----------      -----------       -----------      
    Total Operating Costs                                2,021,920        1,826,771        1,751,371         1,687,648      
                                                       -----------      -----------      -----------       -----------      

Operating Income                                           228,262          308,151          261,452           256,442      
  Interest expense                                         (59,512)         (44,216)         (44,403)          (52,358)     
  Other, net(1)                                             14,067            1,802            2,987            13,868      
  Income taxes, net                                        (72,861)        (106,493)         (83,281)          (82,496)     
                                                       -----------      -----------      -----------       -----------      
Income from continuing operations(1)                       109,956          159,244          136,755           135,456      
Discontinued BIS operations(2)                              57,426           11,656           11,334            10,630      
Discontinued broadcast operations(2)                                                                          
Cumulative effect of changes in accounting 
  principles(3)                                             (7,320)                                           (105,200)
                                                       -----------      -----------      -----------       -----------      
Net Income(1)                                          $   160,062      $   170,900      $   148,089       $    40,886      
                                                       ===========      ===========      ===========       ===========      
Operating income percentage (profit margin)                   10.1%            14.4%            13.0%             13.2%     
----------------------------------------------------------------------------------------------------------------------------
SHARE DATA(4)                      
Basic weighted-average number of shares                     99,451          107,888          109,702           108,948      
Diluted weighted-average number of shares                  100,196          108,551          110,663           110,356      
Earnings per share
   Basic:      Continuing operations(1)                $      1.11      $      1.48      $      1.25       $      1.24      
               Discontinued BIS operations(2)                 0.57             0.10             0.10              0.11      
               Discontinued broadcast operations(2)                                                                               
               Cumulative effect of changes in                
                 accounting principles(3)                    (0.07)                                              (0.97)
               Net income(1)                                  1.61             1.58             1.35              0.38      
   Diluted:    Continuing operations(1)                $      1.10      $      1.47      $      1.24       $      1.22      
               Discontinued BIS operations(2)                 0.57             0.10             0.10              0.10      
               Discontinued broadcast operations(2)                                                                               
               Cumulative effect of changes       
                 in accounting principles(3)                 (0.07)                                              (0.95)
               Net income(1)                                  1.60             1.57             1.34              0.37      
Dividends declared per common share(5)                        0.74             0.73             0.70              0.70      
Common stock price:   High                                      33 5/16          30 1/2           32 1/2            32 1/16 
                      Low                                       25 1/8           23 1/4           25 5/16           25 3/8  
                      Close                                     31 1/4           25 7/16          29 11/16          29 1/16
Shareholders' equity per common share                  $     11.43      $     11.58      $     11.33       $     10.75      
Price/earnings ratio(6)                                     19.5:1           16.2:1           22.2:1            78.5:1      
Adjusted price/earnings ratio(7)                            28.4:1           17.3:1           23.9:1            23.8:1      
------------------------------------------------------------------------------------------------------------------------------
OTHER FINANCIAL DATA
Common stock acquired                                  $   319,363      $   136,977      $    40,693       $      
Payment of cash dividends                                   74,377           77,942           76,787            75,992      
Ratio of earnings to fixed charges(8)                        3.2:1            5.2:1            4.4:1             3.8:1      
At year end                        
  Total assets                                         $ 2,966,321      $ 2,409,239      $ 2,399,067       $ 2,431,307      
  Long-term debt (excluding current maturities)          1,000,721          411,504          410,388           495,941      
  Total debt                                             1,013,850          411,504          451,075           560,245      
  Shareholders' equity                                   1,110,970        1,224,654        1,243,169         1,181,812      
  Return on average shareholders' equity(9)                   14.3%            13.9%            12.2%             12.0%     
  Current ratio                                              1.1:1            1.0:1            1.0:1             1.1:1      
  Total debt/total capital ratio                              47.7%            25.2%            26.6%             32.2%     
</TABLE>

                                       12

<PAGE>
<TABLE>
<CAPTION>                            
(In thousands, except per                                Dec. 29         Dec. 30           Dec. 31          Dec. 31         
share data and ratios)                                    1991             1990              1989             1988           
                                                       -----------     -----------       -----------      -----------       
<S>                                                    <C>             <C>               <C>              <C>               
SUMMARY OF OPERATIONS                                                                                     
Operating Revenue                                                                                         
  Advertising                                          $ 1,429,661     $ 1,556,932       $ 1,577,449      $ 1,523,030       
  Circulation                                              439,029         403,188           385,214          370,898       
  Other                                                     35,127          31,981            32,212           29,743       
                                                       -----------     -----------       -----------      -----------       
    Total Operating Revenue                              1,903,817       1,992,101         1,994,875        1,923,671       
                                                       -----------     -----------       -----------      -----------       
Operating Costs                                                                                           
  Labor, newsprint and other operating costs             1,593,847       1,617,138         1,593,186        1,571,525       
  Depreciation and amortization                             86,896          91,553            91,780           84,657       
                                                       -----------     -----------       -----------      -----------       
    Total Operating Costs                                1,680,743       1,708,691         1,684,966        1,656,182       
                                                       -----------     -----------       -----------      -----------       

Operating Income                                           223,074         283,410           309,909          267,489       
  Interest expense                                         (68,806)        (71,784)          (84,492)         (62,456)      
  Other, net(1)                                             35,832          17,019            57,505           26,732       
  Income taxes, net                                        (67,965)        (88,076)         (108,883)         (86,484)      
                                                       -----------     -----------       -----------      -----------       
Income from continuing operations(1)                       122,135         140,569           174,039          145,281       
Discontinued BIS operations(2)                               9,933           8,476             5,797            1,494       
Discontinued broadcast operations(2)                                                          67,366            9,608
Cumulative effect of changes in accounting 
  principles(3)
                                                       -----------     -----------       -----------      -----------       
Net Income(1)                                          $   132,068     $   149,045       $   247,202      $   156,383       
                                                       ===========     ===========       ===========      ===========       
Operating income percentage (profit margin)                  11.7%           14.2%             15.5%            13.9%      
------------------------------------------------------------------------------------------------------------------------------------
SHARE DATA(4)                                                                                             
Basic weighted-average number of shares                    102,586         100,098           103,110          111,842       
Diluted weighted-average number of shares                  103,594         101,366           104,878          113,406       
Earnings per share                                                                                        
   Basic:      Continuing operations(1)                $      1.19     $      1.40       $      1.69      $      1.30       
               Discontinued BIS operations(2)                 0.10            0.09              0.06             0.01       
               Discontinued broadcast operations(2)                                             0.65             0.09
               Cumulative effect of changes in                                                                           
                 accounting principles(3)                                                                                
               Net income(1)                                  1.29            1.49              2.40             1.40       
   Diluted:    Continuing operations(1)                $      1.18     $      1.39       $      1.66      $      1.28       
               Discontinued BIS operations(2)                 0.09            0.08              0.06             0.01       
               Discontinued broadcast operations(2)                                             0.64             0.09
               Cumulative effect of changes                                                                              
                 in accounting principles(3)                                                                             
               Net income(1)                                  1.27            1.47              2.36             1.38       
Dividends declared per common share(5)                        0.70            0.67              0.62 1/4         0.57 1/4   
Common stock price:   High                                      28 3/4          29                29 3/16          23 7/8   
                      Low                                       21 7/8          18 1/2            21 7/16          17 7/8   
                      Close                                     25 3/8          22 15/16          29 3/16          22 11/16 
Shareholders' equity per common share                  $     10.72     $      9.05       $      8.92      $      7.74  
Price/earnings ratio(6)                                     20.0:1          15.6:1            12.4:1           16.4:1  
Adjusted price/earnings ratio(7)                            21.5:1          16.5:1            21.2:1           17.7:1  
------------------------------------------------------------------------------------------------------------------------------------
OTHER FINANCIAL DATA                                                                                 
Common stock acquired                                  $              $    129,909       $   131,885      $   198,279  
Payment of cash dividends                                   71,087          66,422            63,260           62,990  
Ratio of earnings to fixed charges(8)                        2.8:1           3.3:1             3.6:1            3.8:1  
At year end                                                                                          
  Total assets                                         $ 2,305,731    $  2,244,919       $ 2,112,184      $ 2,340,576  
  Long-term debt (excluding current maturities)            556,797         803,914           660,900          727,043  
  Total debt                                               606,840         823,958           712,940        1,037,075  
  Shareholders' equity                                   1,148,620         894,913           917,145          821,625  
  Return on average shareholders' equity(9)                   12.9%           16.5%             28.4%            18.2% 
  Current ratio                                              1.1:1           1.2:1             1.2:1            1.1:1  
  Total debt/total capital ratio                              34.6%           47.9%             43.7%            55.8% 
</TABLE>

                                       13
<PAGE>

(1) Other,  net, Income from continuing  operations and Net Income include:  the
    gains from the sales of the balance of TKR Cable  Company,  the newspaper in
    Gary, Ind., and final sales settlements in 1998; the gains from the sales of
    the majority of TKR Cable Company and our newspapers in Long Beach,  Calif.,
    Boca Raton,  Fla.,  Milledgeville,  Ga., and Newberry,  S.C., as well as the
    gain on the Boulder,  Colo., exchange in 1997; the gain on Netscape in 1996;
    and the gain from the sale of the  Pasadena  Star-News  in 1989.  Net Income
    also includes the gains on the sales of Technimetrics in 1998, KRII in 1997,
    KRF in 1996, and the JoC in 1995.
(2) All years have been  restated to present the Business  Information  Services
    (BIS)  Division as  discontinued  operations.  Results of  operations of the
    company's  BIS  Division  (discontinued  in  1997)  and  Broadcast  Division
    (discontinued  in  1989)  and the  gains on the  sales of BIS and  broadcast
    assets are presented as  "discontinued  BIS  operations"  and  "discontinued
    broadcast operations," respectively.
(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 change in accounting  principle  represents  adjustments  from the
    implementation of FAS 109-Accounting for Income Taxes and FAS 106-Accounting
    for Postretirement Benefits Other than Pensions.
(4) All share data prior to 1996 is restated for the 1996 stock split.
(5) The Board of Directors  declared a $.20 per share dividend on Jan. 28, 1997.
    The quarterly dividend previously paid in January was paid in February.
(6) Price/earnings ratio is computed by dividing closing market price by diluted
    earnings per share.
(7) Adjusted  price/earnings  ratio is computed by dividing closing market price
    by diluted earnings per share from continuing operations.  For comparability
    purposes, diluted earnings per share from continuing operations was adjusted
    to exclude gains on one-time sales as follows: the gain from the sale of the
    balance of TKR Cable Company,  our newspaper in Gary,  Ind., and final sales
    settlements  in 1998;  the gains from the sales of the majority of TKR Cable
    Company,  our four  newspapers  in Long Beach,  Calif.,  Boca  Raton,  Fla.,
    Milledgeville,  Ga., and Newberry, S.C., as well as the gain on the Boulder,
    Colo., exchange in 1997; the gain on Netscape in 1996; and the gain from the
    sale of the Pasadena Star-News in 1989.
(8) 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, and the proportionate share of interest expense
    on  guaranteed  debt  of  certain  equity-method  investees  and on  debt of
    50%-owned companies.
(9) Return on average  shareholders'  equity is computed by dividing  net income
    before the cumulative effect of changes in accounting principles in 1995 and
    1992, including the results of discontinued operations in 1988 through 1998,
    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>

Item 7.   MANAGEMENT'S DISCUSSION & 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 promotes 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 same 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 the nation's  second  largest  newspaper  publisher in terms of
circulation  and  revenue,  with  products  in print  and  online.  The  company
publishes 31 daily and 21 nondaily  newspapers in 28 U.S. markets,  reaching 9.2
million readers daily and 13.1 million on Sunday. It maintains 45 associated Web
sites under the name Knight Ridder Real Cities.

In 1998,  the gross revenue from these  businesses  was about $3.1 billion.  The
company  is  also  involved  in  other   newspaper   businesses   and  newsprint
manufacturing  through  business  arrangements,  including  joint  ventures  and
partnerships.

Newspaper  revenue is derived  principally  from  advertising and newspaper copy
sales.  Advertising  revenue  currently  accounts for about 76% of  consolidated
revenue.  This revenue comes from the three basic  categories  of  advertising -
retail, general and classified.

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.  By using part-run  advertising,  advertisers can
target their messages to selected market segments.

                                       15
<PAGE>

Circulation  revenue  results from the sale of newspapers.  Circulation of daily
and Sunday newspapers currently accounts for 19% 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  and  delivery  agents  who  are  paid a fee for  delivery  of the
newspapers.

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

In 1997,  the company  announced its  intention to sell the  remaining  Business
Information   Services  (BIS)  subsidiaries.   This  decision  resulted  in  the
reclassification  of the former  BIS  segment as  discontinued  operations.  The
company fully divested the BIS segment with the sale of Technimetrics, Inc., its
global diversified information subsidiary, on April 13, 1998.

                              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  information in Part I, Item 1.
"Business" will provide a better  understanding of the following  discussion and
analysis of operating results and of the financial statements as a whole. Item 1
contains  financial data for the company's  largest  newspapers and  information
regarding the company's  properties,  technology  and the raw materials  used in
operations.

RESULTS OF OPERATIONS: 1998 VS. 1997

Knight Ridder earned a record $2.78 per diluted share from continuing operations
in 1998, up 20.9% from the $2.30 earned in 1997,  excluding  one-time gains from
both years and excluding  corporate  relocation  and newspaper  severance  costs
incurred  in 1998.  Including  these  items,  diluted  earnings  per share  from
continuing operations was $3.11, down $.80, or 20.5%, from the $3.91 reported in
1997.

The $3.11  earned in 1998  includes a $.48  one-time  gain from the sales of the
balance of the company's jointly owned cable systems, a newspaper in Gary, Ind.,
and net settlement  adjustments  on the newspapers  sold in 1997. The $3.11 also
includes a one-time charge of $.15 for the costs  associated with the relocation
of the  corporate  headquarters  from  Miami  to San Jose  and  other  newspaper
severance costs recorded in the fourth quarter.

The $3.91 earned in 1997 includes one-time gains of $1.27 on the sale of most of
TKR Cable Company,  $.24 on the exchange of the Daily Camera in Boulder,  Colo.,
and $.10 on the sale of four newspapers.

                                       16
<PAGE>

Excluding one-time gains from both years and corporate  relocation and newspaper
severance  costs  incurred in 1998,  net income from  continuing  operations was
$273.3  million,  up  $40.0  million,  or 17.1%  from  $233.3  million  in 1997.
Including these items in both years,  net income from continuing  operations was
$305.6  million in 1998,  down 22.9%,  from $396.5  million in 1997. Net income,
including the  discontinued  BIS operations in both years, was $365.9 million in
1998, down 11.4% from $413.0 million last year.

Operating  income in 1998 was $504.6 million,  down $1.4 million,  or 0.3%, from
1997.  Excluding  corporate  relocation and newspaper severance costs from 1998,
operating income was up $22.5 million,  or 4.4%, from 1997 on a 7.5% increase in
total operating revenue.  On a pro forma basis for the former Disney and Scripps
newspapers (that is, including full-year results in 1997) but excluding the sold
newspapers from 1997 (comparable basis), and corporate  relocation and newspaper
severance costs from 1998, operating income was about equal to the prior year.

OPERATING REVENUE.  Total company revenue of $3.1 billion was up 7.5% from 1997.
On a comparable basis, total operating revenue was up 3.7%.

Advertising  revenue  increased  by  $160.6  million,  or 7.3%,  in 1998 to $2.4
billion.  On a comparable basis, total advertising revenue improved by 3.8% from
1997 on a full-run ROP linage increase of 1.8%. The following  table  summarizes
the  percentage  change in revenue and full-run ROP linage from 1997 as reported
in our financial statements, as well as results on a comparable basis:

                                                         Pro Forma, Excluding
                                                         Divested Newspapers*
                                                      --------------------------
                                         % Change                    % Change
                           % Change    in Full-Run     % Change     in Full-Run
Advertising Category      in Revenue    ROP Linage    in Revenue     ROP Linage
--------------------      ----------    ----------    ----------     ----------
Retail                        8.0            .9           4.3            .4
General                       6.4           2.5           3.5           3.6
Classified                    6.8           1.1           3.3           3.0
  Total                       7.3           1.1           3.8           1.8

* Including  full-year  results  in  1997  for the  former  Disney  and  Scripps
  newspapers but excluding the sold newspapers

Retail  advertising  revenue improved by $80.5 million,  or 8.0%, from 1997 on a
0.9% increase in full-run ROP linage. On a comparable basis,  retail advertising
revenue  increased 4.3% from 1997.  Retail growth was relatively even throughout
the year.

General  advertising  revenue was up $15.7 million, or 6.4%, from 1997 on a 2.5%
increase in full-run ROP linage.  On a  comparable  basis,  general  advertising
revenue was up 3.5%.

                                       17
<PAGE>

Classified  advertising  revenue was up $64.3 million,  or 6.8%,  from 1997 on a
1.1%  increase  in  full-run  ROP  linage.  On a  comparable  basis,  classified
advertising  revenue was up 3.3%.  The increase was due primarily to help wanted
advertising.

Circulation  revenue improved by $19.8 million,  or 3.5%. On a comparable basis,
circulation   revenue  was  essentially   flat,  on  about  flat  average  daily
circulation copy and an average Sunday circulation copy decline of 1.1%.

Other revenue increased $34.8 million,  or 32.5%. On a comparable  basis,  other
revenue  increased  23.9%,  due  to  increases  in  event  marketing,  alternate
distribution,  online and commercial print revenue. The purchase of two job fair
companies  in 1998 in  Philadelphia  added  to the  growth  in  event  marketing
revenue.

OPERATING  COSTS.  Labor and employee  benefits costs were up $68.8 million,  or
6.1%. On a comparable  basis and excluding  corporate  relocation  and newspaper
severance  costs  from 1998,  labor and  employee  benefits  costs were up $27.1
million,  or 2.3%, on a 1.0% increase in the work force and an average wage rate
increase of 3.0%, offset by a decline in employee benefits costs.

Newsprint,  ink and supplements costs increased by $62.8 million,  or 13.5%, due
to about a 7.0%  increase in the average cost per ton of  newsprint,  and a 5.6%
increase in newsprint consumption.  On a comparable basis, newsprint consumption
increased 1.5%.

Other operating costs increased by $53.6 million, or 8.7%. On a comparable basis
and excluding corporate  relocation costs in 1998, other operating costs were up
$25.1 million,  or 3.9%.  The increase was due primarily to promotion  costs and
the changeover to circulation agents in Detroit,  which was offset by additional
circulation  revenue  recorded  at the retail  price for  newspapers  delivered.
Previously,  circulation  revenue in Detroit was  recorded at the net  wholesale
price.

Depreciation and amortization  increased $31.3 million,  or 20.0%, due primarily
to amortization expense associated with the acquisition of the former Disney and
Scripps newspapers and depreciation  expense associated with certain major press
projects.

NON-OPERATING  ITEMS. Net interest expense increased $4.1 million, or 4.4%, from
1997,  due to higher  debt levels  associated  with the Disney  acquisition  and
higher  interest rates in the earlier part of 1998. The average debt balance for
the year increased $153.7 million from 1997.

Equity in earnings of unconsolidated  companies and joint ventures  increased by
$12.5 million,  more than double the earnings in 1997,  due to improved  results
from our newsprint mill  investments  and InfiNet  Company,  an Internet  access
provider.

The "Other, net" line of the non-operating section decreased $193.7 million from
1997,  due to the  gains  in 1997  from the sale of the  majority  of TKR  Cable
Company,  the Boulder exchange and the sale of four newspapers.  Results in 1998
included the gains on the sales of the balance of the company's  cable  systems,
the Gary, Ind. newspaper, and final settlements on the 1997 newspaper sales.

                                       18
<PAGE>

INCOME TAXES.  The effective  income tax rate on continuing  operations for 1998
was 39.8%, down from 42.9% in 1997. The effective tax rate was higher than usual
in 1997 because of the sale of cable assets,  which  generated  income in states
with higher tax rates.  Additionally,  in 1998  certain tax matters were settled
for amounts that were less than those originally recorded.

OTHER.   Net  income  in  1998  includes  an  after-tax  gain  on  the  sale  of
Technimetrics,  Inc., of $60.0 million, or $.61 per share (diluted),  and income
from discontinued BIS operations, net of applicable taxes, of $184,000.

RESULTS OF OPERATIONS: 1997 VS. 1996

Diluted  earnings per share from continuing  operations was $3.91, up $2.01 from
the $1.90  reported in 1996. The $3.91 includes three one-time gains on sales: a
$1.27 gain on the sale of the majority of TKR Cable Company,  a $.24 gain on the
exchange of the Daily Camera in Boulder,  Colo.,  and a $.10 gain on the sale of
four  newspapers.  The $1.90  includes an $.08 gain on the sale of our  Netscape
Communications  Corporation  (Netscape)  investment,  net of  adjustments in the
carrying  value of certain  investments.  Excluding the one-time gains from 1997
and 1996,  earnings per share for 1997 was $2.30,  which was up $.48,  or 26.4%,
from the $1.82 earned in 1996.

Operating income in 1997 was $506.0 million,  up $172.9 million,  or 51.9%, from
1996. The results include operations from four newspapers acquired from The Walt
Disney  Company in May 1997 and from two  newspapers  received in exchange  from
E.W.  Scripps  Company for the Boulder,  Colo.,  newspaper in August 1997.  They
exclude  results from the (Boulder)  Daily Camera after August 1997 and from the
(Long Beach, Calif.) Press-Telegram, Boca Raton (Fla.) News, The (Milledgeville,
Ga.)  Union-Recorder  and suburban Newberry (S.C.) Observer after their dates of
sale in December  1997.  On a pro forma basis for the former  Disney and Scripps
newspapers (that is, including full-year results in 1997 and 1996) but excluding
the sold newspapers from both 1997 and 1996 (comparable basis), operating income
was up $122.9  million,  or 30.2%,  from 1996.  The  increase was due to an 8.0%
increase  in total  advertising  revenue,  offset in part by a 2.7%  increase in
operating costs.

OPERATING REVENUE. Total company revenue of $2.9 billion was up 21.2% from 1996.
On a comparable basis, total operating revenue was up 6.7%.

Newspaper  advertising revenue increased by $408.8 million, or 22.8%, in 1997 on
a  full-run  ROP  linage  increase  of  18.0%.  On  a  comparable  basis,  total
advertising revenue improved by 8.0% from 1996 on a full-run ROP linage increase
of 6.7%. The following  table  summarizes  the percentage  change in revenue and
full-run  ROP from 1996 as  reported  in our  financial  statements,  as well as
results on a comparable basis:

                                                         Pro Forma, Excluding
                                                         Divested Newspapers*
                                                      -------------------------
                                         % Change                    % Change
                           % Change    in Full-Run     % Change     in Full-Run
Advertising Category      in Revenue    ROP Linage    in Revenue     ROP Linage
--------------------      ----------    ----------    ----------     ----------
Retail                       22.8          19.0           5.7           5.6
General                      23.8          16.7          11.8           8.4
Classified                   22.6          17.3           9.6           7.6
  Total                      22.8          18.0           8.0           6.7

* Including full-year results in 1997 and 1996 for the former Disney and Scripps
  newspapers but excluding the sold newspapers from both 1997 and 1996

                                       19
<PAGE>

Retail advertising  revenue improved by $187.0 million, or 22.8%, from 1996 on a
19.0% increase in full-run ROP linage. On a comparable basis, retail advertising
revenue  increased  5.7%  from  1996,  with  increases  at  almost  all  of  our
newspapers.

General advertising revenue was up $47.3 million, or 23.8%, from 1996 on a 16.7%
increase in full-run ROP linage.  On a  comparable  basis,  general  advertising
revenue was up 11.8%.

Classified  advertising  revenue was up $174.6 million, or 22.6%, from 1996 on a
17.3%  increase  in full-run  ROP  linage.  On a  comparable  basis,  classified
advertising  revenue was up 9.6%.  The increase was due primarily to help wanted
advertising.

Circulation  revenue improved by $65.9 million, or 13.1%. On a comparable basis,
circulation revenue increased 0.5% on an average daily circulation copy increase
of 1.3%, and an average Sunday circulation copy decrease of 0.9%.

Other revenue increased $27.8 million,  or 35.2%, due to increases in commercial
print,  special  publications,  alternate  distribution  and database  marketing
revenue.

OPERATING COSTS.  Labor and employee  benefits costs were up $165.2 million,  or
17.1%. On a comparable  basis,  labor and employee  benefits costs were up $67.7
million,  or 6.2%, on a 2.9% increase in the work force and an average wage rate
increase of 4.2%.

Newsprint,  ink and supplements costs decreased by $5.9 million, or 1.2%, due to
a 20.7%  decrease in the average cost per ton of  newsprint,  mostly offset by a
20.8% increase in newsprint consumption, due to acquisitions,  greater ad volume
and some increased news linage. On a comparable basis, newsprint consumption was
up 6.1%.

Depreciation  and  amortization  increased  $36.1  million,  or  29.9%,  due  to
amortization  expense  associated  with the acquisition of the former Disney and
Scripps newspapers.

Other operating  costs  increased by $134.3  million,  or 27.9%. On a comparable
basis, other operating costs were up $71.6 million,  or 12.6%.  Expenditures for
circulation promotion accounted for a large part of the increase.

NON-OPERATING  ITEMS.  Net interest expense  increased $33.6 million,  or 55.8%,
from 1996, due to higher debt levels associated with the Disney acquisition. The
average debt balance for the year increased $437.3 million from 1996, due to the
debt assumed with the former Disney newspapers acquisition.

Equity in earnings of unconsolidated  companies and joint ventures  decreased by
$19.1 million,  or 63.8%,  due to the absence of earnings from our jointly owned
cable  systems  (majority  sold in  January  1997)  and  lower  income  from our
newsprint mill investments.

The "Other, net" line of the non-operating section increased $265.7 million over
1996, due to gains on the sale of the majority of TKR Cable Company, the Boulder
exchange  and the sale of four  newspapers  in December  1997.  The 1996 results
included the gain on the sale of the Netscape  investment,  net of the reduction
in the carrying value of certain other investments.

                                       20
<PAGE>

INCOME TAXES.  The effective  income tax rate on continuing  operations for 1997
was 42.9%,  up from 40.2% in 1996. The rate increase was largely due to the sale
of cable  assets,  which  generated  income in states  with high tax rates,  and
additional nondeductible goodwill amortization from the Disney acquisition.

OTHER.  Net income in 1997  includes  an  after-tax  gain on the sale of Knight-
Ridder  Information,  Inc., of $15.3 million,  or $.15 per share (diluted),  and
income from  discontinued  BIS  operations,  net of  applicable  taxes,  of $1.3
million, or $.02 per share (diluted).

                                  A Look Ahead

Looking  ahead,  the company  expects  another year of earnings  growth in 1999.
Advertising  revenue  will  likely  increase  between  3% and  4%,  with  retail
strongest and classified  advertising  revenue weakest.  As in 1998, the company
believes some markets will do  considerably  better than this,  while others may
lag. The company does not expect to pay more for newsprint in 1999 than in 1998.

                         Year 2000 Readiness Disclosures

All Year  2000  statements  in this  annual  report  on Form  10-K are Year 2000
Readiness  Disclosures under the Year 2000 Information and Readiness  Disclosure
Act. The Year 2000 (Y2K) issue results from computer  programs  using two digits
rather than four to define the applicable year.  Company computer  programs that
have  time-sensitive  software may  recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a system failure,  disruption of
operations, and/or a temporary inability to conduct normal business activities.

In the spring of 1997, the company initiated a comprehensive  project to address
Y2K issues.  The Y2K project was divided  into five  phases:  Scope  Definition,
Impact Assessment, Conversion, Testing and Implementation.

To implement  this project,  the company  established  a Y2K Project  Management
Office (PMO) to act as a central point of coordination for Y2K activity, chaired
by the vice president and chief information  officer who reports directly to the
chief  executive  officer.  The  PMO  team  includes  executive  management  and
employees with expertise from various disciplines.  At each business unit, a Y2K
coordinator  was  appointed  to  direct  all  local  Y2K  activities.   The  Y2K
coordinator  works closely with the PMO team and local executive  management and
employees.

The Scope  Definition  Phase,  completed in June 1997,  determined  that the Y2K
project  would  encompass  both  Information  Technology  (IT) and non-IT assets
(embedded chips), including: software,  microprocessor-based hardware (including
embedded chips found in facilities and production  environments) and significant
suppliers, customers and other relevant third parties.

The  Impact  Assessment  Phase  included  a  comprehensive   inventory  of  both
internally    developed    software   and   vendor   products,    as   well   as
microprocessor-based  hardware.  These  inventoried  systems  were  evaluated to
determine Y2K issues, if any, and a preliminary assessment regarding replacement
or  remediation  was developed to make these systems Y2K capable,  as necessary.
Additionally,  a central  database  repository  that  contains  each Y2K project
prioritized based on the perceived  business risk was developed.  This phase was
completed in November 1997.

                                       21
<PAGE>

A majority of the company's software is vendor-packaged. Conversion, Testing and
Implementation  Phases have been  ongoing  since mid 1997.  Business  units will
complete Y2K testing  prior to  implementation  for all critical  systems.  When
possible,  previously created test cases are run and results are compared to the
baseline results.

For systems developed in-house, regression and other Y2K date testing is done as
appropriate after Y2K remediation is complete. Results of regression testing are
documented and compared to previous baseline results. Upon successful completion
of the Testing Phase,  the systems will be  implemented  in the live  production
environment  (Implementation  Phase).  In all  material  respects,  the  company
expects that the Conversion, Testing and Implementation Phases will be completed
by June 30, 1999.

Formal communications were initiated with all significant  suppliers,  customers
and other  relevant  third  parties to  determine  the  extent to which  related
interfaces  with company  systems are  vulnerable if these third parties fail to

remediate their own Y2K issues. There can be no assurance that these third-party
systems will be converted on a timely basis. If any of the critical  third-party
systems fail,  such failure could have a material  adverse impact on operations.
However,   the  company  is  monitoring  vendor  compliance  and  will  consider
alternatives  if vendors cannot meet the company's  compliance  requirements  by
June 30, 1999.

At the present  time,  the total cost of the Y2K project is  estimated  to range
from $60 million to $70 million and is being funded with  operating  cash flows.
Approximately  65% of the total will relate to purchased  hardware and software,
which will be capitalized.  The remainder is expensed as incurred.  Expenditures
through Dec. 27, 1998, totaled $30.3 million, of which 70.4% was capitalized. In
certain cases, an expedited system-replacement schedule will also bring enhanced
functionality  and  should  serve to reduce  future  capital  requirements.  The
company  believes that the  acceleration of certain projects has not resulted in
the deferral of other IT projects that would have a material  adverse  impact on
the financial condition and results of operation.

As part of  normal  business  practices,  the  company  maintains  site-specific
emergency  publication  plans to be  followed  during  emergency  circumstances.
Emergency  publication plans are being reviewed and updated with Y2K contingency
considerations  in mind.  This  effort,  plus  additional  contingency  planning
activities, will be completed by mid 1999.

Based on a recent  assessment of its internal  operations,  those over which the
company has direct  control,  the company  believes that with  modifications  to
existing  software and conversions to new software,  the Y2K issue will not pose
significant  operational  problems.  The  remediation  or  replacement  of these
systems  is well under  way.  Furthermore,  the  contingency  plan will  outline
alternative  solutions  in the event that they are  required.  However,  if such
modifications  and  conversions  are not made or are not  completed  in a timely
manner,  the Y2K issue could have a material adverse impact on the operations of
the company.

                                       22
<PAGE>

                           Forward-Looking Statements

Certain  statements in this annual report on Form 10-K and the company's  annual
report to shareholders,  are forward-looking  statements.  These forward-looking
statements  are  subject to certain  risks and  uncertainties,  that could cause
actual results and events to differ materially from those anticipated.

Potential  risks and  uncertainties  that could  adversely  affect the company's
ability to obtain these  results  include,  without  limitations,  the following
factors: (a) increased  consolidation among major retailers or other events that
may adversely  affect  business  operations  of major  customers and depress the
level of local and national advertising; (b) an economic downturn in some or all
of the  company's  principal  newspaper  markets  that  may  lead  to  decreased
circulation or decreased local or national advertising; (c) a decline in general
newspaper  readership  patterns as a result of competitive  alternative media or
other factors;  (d) an increase in newsprint costs over the levels  anticipated;
(e) labor  disputes which may cause revenue  declines or increased  labor costs;
(f) acquisitions of new businesses or dispositions of existing  businesses;  (g)
increases in interest or financing  costs; and (h) rapid  technological  changes
and  frequent new product  introductions  prevalent  in  electronic  publishing,
including the evolution of the Internet.

                    Significant Acquisitions And Divestitures

On April 13, 1998, the company closed on the sale of Technimetrics,  Inc., to an
operating unit of the Thomson  Corporation.  Technimetrics was a subsidiary that
sold global  shareholding  and  business  contact  information.  This sale fully
divested the company of the discontinued  Business Information Services segment.
The  proceeds  from the sale were  $125.0  million  and  resulted  in pretax and
after-tax gains of $103.8 million and $60.0 million, respectively.

On March 18, 1998,  the company,  through its wholly  owned  subsidiary  Knight-
Ridder Cablevision,  Inc., completed the sale to  Tele-Communications,  Inc., of
its  remaining  jointly owned cable  television  systems.  On Feb. 2, 1998,  the
company  completed  the sale of the  Post-Tribune  in Gary,  Ind.,  to Hollinger
International, Inc. The proceeds from these sales were $95.8 million, consisting
of $58.1  million in cash and TCI stock with an aggregate  market value of $37.7
million.  The pretax and  after-tax  gains on the sales were $75.3  million  and
$45.0 million, respectively.

In December 1997, the company closed on the sale of four  newspapers,  the (Long
Beach) Press-Telegram,  the Boca Raton News, The (Milledgeville) Union- Recorder
and the suburban  Newberry  (S.C.)  Observer.  The sale of these four newspapers
resulted in an  after-tax  gain of $10.3  million.  The sale also  included  the
transfer to the company of The Daily Sun and The Buyer's  Guide,  a shopper,  in
Warner Robins,  Ga., and The Byron (Ga.)  Gazette,  a weekly  newspaper,  all of
which are located in fast-growing suburbs in our Macon newspaper's market.

On Nov. 14, 1997, the company  completed the sale of Knight-Ridder  Information,
Inc., (KRII) to M.A.I.D plc for $420 million.  The after-tax gain on the sale of
KRII was $15.3 million.

                                       23
<PAGE>

On Aug. 24, 1997,  the company  exchanged its newspaper in Boulder,  Colo.,  the
Daily  Camera,  for two  newspapers  in  California  owned by the  E.W.  Scripps
Company.

On May 9,  1997,  the  company  completed  the  acquisition  of four  newspapers
indirectly  owned by The Walt Disney Company for $1.65 billion:  The Kansas City
Star, the Fort Worth Star-Telegram,  the Belleville (Ill.) News-Democrat and The
Times Leader in Wilkes-Barre, Pa.

On Jan. 10, 1997, the company and Tele-Communications,  Inc., closed on the sale
of the company's  interest in nearly all of their  jointly owned cable  systems.
The remaining systems  accounted for a small portion of the original  investment
and were subsequently sold in March 1998 (discussed  above).  The after-tax gain
on the sale of TKR Cable  Company  was  $128.3  million.  The sale  yielded  net
after-tax proceeds of $270 million.

On July 26,  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.

                            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,  capital
expenditures,  excluding the  discontinued  BIS operations,  have totaled $351.5
million for additions and improvements to properties.

Additions to property,  plant and equipment increased $25.4 million from 1997 to
$132 million, due to major projects and  significant  Y2K  expenditures in 1998.
Expenditures  in 1998 included  $36.3 million for the Miami and Fort Worth press
projects.  Both the $108.0  million Miami press  expansion and the $37.8 million
Fort Worth press  expansion are expected to be completed in 2000.  Additionally,
The Charlotte  Observer and the Akron Beacon Journal completed a full conversion
to  flexographic  printing.  The total  project costs were $35 million and $27.2
million,  respectively,  with combined expenditures of $4.4 million in 1998. All
of the  aforementioned  press  projects  (except  Fort Worth)  were  replacement
projects that significantly improved waste,  reliability,  speed, print quality,
page and color  capacity.  The Fort Worth  project  was  primarily  designed  to
address page and color capacity issues for existing presses.

Significant  renovations to the business and editorial  offices in  Philadelphia
totaling  $34.5  million,  of which $4.8  million  was spent in 1998,  were also
completed.  These renovations significantly improved the working environment for
a large number of employees and addressed various infrastructure issues.

Also  included  in capital  expenditures  was $7.7  million to replace the Grand
Forks  production  plant  and  building  that  were  destroyed  by a  flood  and
subsequent  fire in April 1997.  The new  facility was  completed in 1998,  at a
total cost of $11.5 million (before insurance recoveries).

Spending is estimated  to be lower in 1999,  partly due to the  acceleration  of
certain  system  replacements  for Y2K  capability  in  previous  years  and the
completion of several major projects.

                                       24
<PAGE>

                              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(1)
                                                    ------------        -------------       -----------         ------------
<S>                                                 <C>                 <C>                 <C>                 <C>
1998 Operating revenue                              $   743,883         $   779,292         $   752,778         $   815,966
     Operating income                                   113,187             127,125             111,629             152,677
     Income from continuing operations                  101,437(a)           66,925(b)           56,983(d)           80,286(e)
     Net gain on sale of BIS operations                                      60,042(c)
     Income from BIS operations, net                        184
     Net income                                         101,621             126,967              56,983              80,286
     Earnings per share(2)
       Basic:   Income from continuing operations          1.27(a)             0.85(b)             0.72(d)             1.03(e)
                Net gain on sale of BIS operations                             0.76(c)
                Income from BIS operations, net
                Net income                                 1.27                1.61                0.72                1.03
       Diluted: Income from continuing operations          1.02(a)             0.68(b)             0.58(d)             0.83(e)
                Net gain on sale of BIS operations                             0.61(c)
                Income from BIS operations, net
                Net income                                 1.02                1.29                0.58                0.83
     Dividends declared per common share                   0.20                0.20                0.20                0.20


1997 Operating revenue (3)                          $   600,830         $   711,656         $   748,704         $   815,595
     Operating income                                    98,169             136,977             107,936             162,946
     Income from continuing operations                  175,458(f)           60,950              73,467(g)           86,629(h)
     Net gain on sale of BIS operations                                                                              15,261(i)
     Income (loss) from BIS operations, net                (726)                350                 545               1,081
     Net income                                         174,732              61,300              74,012             102,971
     Earnings per share(2)
       Basic:   Income from continuing operations          1.88(f)             0.67                0.85(g)             1.04(h)
                Net gain on sale of BIS operations                                                                     0.18(i)
                Income from BIS operations, net                                0.01                                    0.01
                Net income                                 1.88                0.68                0.85                1.23
       Diluted: Income from continuing operations          1.85(f)             0.60                0.69(g)             0.84(h)
                Net gain on sale of BIS operations                                                                     0.15(i)
                Income from BIS operations, net                                0.01                                    0.01
                Net income                                 1.85                0.61                0.69                1.00
     Dividends declared per common share                   0.20                0.20                0.20                0.20


1996 Operating revenue                              $   570,756         $   595,582         $   576,887         $   630,999
     Operating income                                    49,639              78,647              73,948             130,899
     Income from continuing operations                   22,994              41,481              39,340              81,565(k)
     Net gain (adjustment) on sale of BIS operations                                             90,901(j)           (4,646)(j)
     Income (loss) from BIS operations, net                 523                 872              (3,984)             (1,173)
     Net income                                          23,517              42,353             126,257              75,746
     Earnings per share(2)
       Basic:   Income from continuing operations          0.23                0.42                0.41                0.87(k)
                Net gain (adjustment) on sale of
                 BIS operations                                                                    0.96(j)            (0.05)(j)
                Income (loss) from BIS operations,
                  net                                      0.01                0.01               (0.04)              (0.01)
                Net income                                 0.24                0.43                1.33                0.81
       Diluted: Income from continuing operations          0.23                0.42                0.41                0.86(k)
                Net gain (adjustment) on sale of
                 BIS operations                                                                    0.94(j)            (0.05)(j)
                Income (loss) from BIS operations,
                  net                                      0.01                0.01               (0.04)              (0.02)
                Net income                                 0.24                0.43                1.31                0.79
     Dividends declared per common share                   0.18 1/2            0.20                0.20                     (l)
</TABLE>

                                       25
<PAGE>

(1) In the fourth quarter of 1998, the company  changed the method of accounting
    used to determine the  market-related  value of plan assets,  effective Dec.
    29, 1997. The effect of this change on 1998 results of operations, including
    the cumulative  effect of prior years, was not material.  See Item 8, Note F
    to the consolidated financial statements.
(2) Amounts do not total to the annual  earnings per share  because each quarter
    and the year are calculated  separately based on average  outstanding shares
    (basic) and average  outstanding and equivalent  shares (diluted) during the
    periods.
(3) Certain  amounts  in 1997  have been  reclassified  to  conform  to the 1998
    presentation.
(a) Includes the after-tax  gain of $45.0 million on the sales of the balance of
    our jointly  owned cable  systems with  Tele-Communications,  Inc.,  and our
    newspaper in Gary, Ind. ($.56 per share, basic; $.45 per share, diluted).
(b) Includes after-tax corporate relocation costs, net of settlement adjustments
    on 1997 newspaper sales totaling $5.1 million,  or $(.07) per  share, basic;
    $(.05)  per share,  diluted.  Excluding  these  items,  EPS from  continuing
    operations was $.92 per share basic and $.73 per share diluted.
(c) Gain on the sale of Technimetrics, Inc.
(d) Includes after-tax corporate relocation costs of $4.4 million, or $(.06) per
    share,  basic;  $(.05) per share,  diluted.  Excluding these costs, EPS from
    continuing operations was $.78 per share basic and $.63 per share diluted.
(e) Includes after-tax  corporate  relocation costs and other severance costs of
    $3.2  million,  or $(.04) per  share,  basic;  $(.03)  per  share,  diluted.
    Excluding these costs,  EPS from  continuing  operations was $1.07 per share
    basic and $.86 per share diluted.
(f) Includes the after-tax gain of $128.3 million on the sale of the majority of
    TKR Cable Company ($1.38 per share, basic; $1.36 per share, diluted).
(g) Includes the after-tax gain of $24.5 million on the Boulder, Colo., exchange
    ($.28 per share, basic; $.23 per share, diluted).
(h) Includes the after-tax gain of $10.3 million on the sale of four  newspapers
    ($.12 per share, basic; $.10 per share, diluted).
(i) Gain on the sale of KRII.
(j) Gain (adjustment) on the sale of KRF.
(k) Includes the after-tax gain of $8.1 million on the sale of Netscape,  net of
    adjustments  in the carrying value of certain  investments  ($.09 per share,
    basic and diluted).
(l) The Board of Directors  declared a $.20 per share dividend on Jan. 28, 1997.
    The quarterly dividend previously paid in January was paid on Feb. 24, 1997,
    to shareholders of record as of the close of business on Feb. 12, 1997.


                                       26
<PAGE>

                        Financial Position And Liquidity

1998 VS. 1997. The principal change in the company's  financial  position during
1998 was the  application  of cash flow  from  operating  activities,  net sales
proceeds and excess cash towards the repurchase of 4.7 million shares for $255.5
million and the  reduction of debt.  The sales of  Technimetrics,  the company's
newspaper in Gary,  Ind., and the balance of the company's  cable systems in the
first half of 1998 provided after-tax sales proceeds of $111.9 million.

On June 26, 1998,  the $990 million of senior secured bank debt due on Sept. 15,
1999, was paid off with the proceeds from the sale of commercial  paper. At year
end, the  total-debt-to-total-capital  ratio was 47.9%, down from 51.8% in 1997.
Standard & Poor's,  Moody's  and Duff & Phelps  continue  to rate the  company's
commercial paper A1, P2 and D1, and long-term bonds A, A3 and A, respectively.

Cash and short-term  cash  investments  were $26.8 million at the end of 1998, a
$133.5 million  decrease from 1997. The cash was used for stock  repurchases and
to pay down debt. The ratio of current assets to current  liabilities  was 0.8:1
at year end vs. 1.1:1 at the end of 1997. Average  outstanding  commercial paper
during the year was $457.4 million,  with an average effective  interest rate of
5.5%. During 1998, the company's revolving credit and term loan agreement, which
back up the  commercial  paper  program,  increased  from $642.3 million to $1.1
billion.  At year-end 1998,  commercial paper outstanding was $927.2 million and
aggregate unused credit lines were $172.8 million.  The 364-day revolving credit
and term loan portion of the facility  matures in June 1999. The company has the
option and intention to renew this facility for an additional  term through June
2000.

During 1998, net cash provided by operating  activities  increased $55.0 million
to $297.2 million.  The increase was attributed to higher net income,  exclusive
of gains on sales/exchanges of investee/subsidiaries and the net gain on sale of
discontinued  BIS operations  from both years,  offset by a reduction in working
capital.

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
working capital and capital expenditures.

1997 VS. 1996. The principal change in the company's  financial  position during
1997 was the  acquisition of four  newspapers  formerly owned by The Walt Disney
Company for $1.65 billion.  The transaction was financed through the issuance of
$660 million in  convertible  preferred  stock and assumption of $990 million of
pre-existing debt.

During 1997, the company authorized a common stock buyback program to repurchase
in the open market up to 15 million  shares.  In 1997,  13.8 million shares were
repurchased.

The  company  utilized  proceeds  from the  sales of the  majority  of its cable
systems in January 1997,  its  subsidiary  Knight-Ridder  Information,  Inc., in
November  1997  and  four of its  newspapers  in  December  1997  to fund  stock
repurchases  and reduce debt. In November  1997, the company issued $100 million
of notes  maturing in 2007 and $100 million of debentures  maturing in 2027. The


                                       27
<PAGE>

proceeds of the new debt were used to reduce  commercial  paper  borrowings.  At
year end, the  total-debt-to-total-capital  ratio  increased  to 51.8%,  up from
42.1% in 1996. Standard & Poor's and Moody's downgraded the company's commercial
paper  and  long-term  bonds  during  1997.  The  downgrades  resulted  from the
increased  leverage  associated with the Disney newspaper  acquisition  combined
with the  company's  common  stock  repurchase  program.  Standard  & Poor's and
Moody's   commercial  paper  ratings  went  from  A1+  and  P1  to  A1  and  P2,
respectively. Standard & Poor's and Moody's long-term bond ratings went from AA-
and A to A and A3, respectively.

During  1997,  Duff & Phelps  Credit  Rating  Co.  began  rating  the  company's
commercial  paper and long-term  bonds. The commercial paper and long-term bonds
were rated D1 and A, respectively.

Average commercial paper outstanding during the year was $286.7 million, with an
average  effective  interest rate of 5.6%. At year-end  1997,  commercial  paper
outstanding  was $30.0  million and  aggregate  unused  credit lines were $612.3
million.

During 1997, net cash provided by operating activities increased $7.3 million to
$242.2  million.  The  increase was  attributed  to higher  earnings,  operating
profits from the former Disney newspapers and other changes in working capital.

Cash and short-term investments were $160.3 million at the end of 1997, a $137.4
million  increase from 1996.  The increased  cash level was to be used for stock
repurchases in the first quarter of 1998. The ratio of current assets to current
liabilities was 1.1:1 at year end vs. 1.0:1 at the end of 1996.


                               Online Activities

In 1998, the company incurred $22 million of net expense from online activities,
excluding investments in minority internet-related  companies.  These activities
are  becoming  more  integrated  with  traditional   advertising  sales  and  we
anticipate continued growth in this area.


                            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 3% each
year since 1991.  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 costs. Subject to normal competitive conditions,  the company generally
has  demonstrated  the  ability  to raise  sales  prices  to offset  these  cost
increases.

                                       28
<PAGE>

Item 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

BORROWINGS. By balancing the mix of variable- versus fixed-rate borrowings,  the
company manages the interest rate risk of its debt portfolio. Item 8, "Financial
Statements  and  Supplementary  Data",  Note  C to  the  consolidated  financial
statements includes  information  relating to the contractual interest rates and
fair value of the individual borrowings within the portfolio. A hypothetical 10%
change in interest rates would increase  interest  expense  associated with both
fixed- and variable-rate  borrowings by $5.0 million. This hypothetical interest
rate  change  would  also  increase  the fair  value of the fixed  debt by $14.2
million.

NEWSPRINT.  The company consumed  approximately 794,000 metric tons of newsprint
in 1998. It represents 17.3% of the company's 1998 total operating expenses.  In
Part I, Item 1,  "Business",  under the  caption  "Newsprint",  the  company has
included information outlining its suppliers, and natural hedges the company has
in place through its  investment in newsprint  mills.  In Item 7,  "Management's
Discussion and Analysis of Financial Condition and Results of Operations", under
the caption "A Look Ahead",  the expected average price of this commodity during
1999 is discussed.

COLLECTIVE  BARGAINING  AGREEMENTS.  Approximately  36% of the Company's  22,000
employees  are  represented  by some 70 local  unions and work  under  multiyear
collective bargaining agreements. These agreements are renegotiated in the years
in which  they  expire.  During  1999,  there  will be  negotiations  to  extend
collective bargaining agreements with seven unions in some of our major markets.
Individual  newspapers  that are unionized to a greater or lesser degree include
those  in  Akron,  Detroit,  Duluth,  Fort  Wayne,  Grand  Forks,  Kansas  City,
Lexington,  Monterey,  Philadelphia,  St.  Paul,  State  College,  San  Jose and
Wichita.

                                       29
<PAGE>

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See  Quarterly  Operations in Item 7 and Schedule II,  Valuation and  Qualifying
Accounts

CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
 (In thousands of dollars,                        Dec. 27,        Dec. 28,      Dec. 29,
  except share data)                                1998           1997           1996 
                                                 -----------    -----------    ----------
<S>                                               <C>            <C>            <C>
ASSETS
CURRENT ASSETS
  Cash, including short-term cash investments
    of $4,159 in 1998, $140,210 in 1997 and
    $50 in 1996                                  $    26,836    $   160,291    $    22,880
  Accounts receivable, net of allowances of
    $15,738 in 1998, $14,963 in 1997 and
    $12,685 in 1996                                  386,455        374,746        356,079
  Inventories                                         59,109         50,332         42,941
  Prepaid expense                                     14,078         15,844         90,314
  Other current assets                                39,213         39,902         53,513
                                                 -----------    -----------    -----------
      Total Current Assets                           525,691        641,115        565,727
                                                 -----------    -----------    -----------
INVESTMENTS AND OTHER ASSETS
  Equity in unconsolidated companies
     and joint ventures                              201,120        197,585        330,267
  Net assets of discontinued BIS operations                          24,673        352,102
  Other                                              243,586        172,859        132,425
                                                 -----------    -----------    -----------
      Total Investments and Other Assets             444,706        395,117        814,794
                                                 -----------    -----------    -----------
PROPERTY, PLANT AND EQUIPMENT
  Land and improvements                               93,781         89,375         77,526
  Buildings and improvements                         484,367        444,952        387,509
  Equipment                                        1,175,044      1,127,875        994,455
  Construction and equipment installations
    in progress                                       84,559        111,883        110,590
                                                 -----------    -----------    -----------
                                                   1,837,751      1,774,085      1,570,080
  Less accumulated depreciation                     (764,750)      (727,571)      (701,232)
                                                 -----------    -----------    -----------
      Net Property, Plant and Equipment            1,073,001      1,046,514        868,848
                                                 -----------    -----------    -----------
EXCESS OF COST OVER NET ASSETS ACQUIRED AND
 OTHER INTANGIBLES 
    Less accumulated amortization of $264,001 
    in 1998, $197,966 in 1997 and 
    $150,491 in 1996                               2,213,699      2,272,396        611,538
                                                 -----------    -----------    -----------
      Total                                      $ 4,257,097    $ 4,355,142    $ 2,860,907
                                                 ===========    ===========    ===========
</TABLE>

See "Notes to Consolidated Financial Statements."

                                       30
<PAGE>


CONSOLIDATED BALANCE SHEET (Continued)

<TABLE>
<CAPTION>
 (In thousands of dollars,                            Dec. 27,       Dec. 28,     Dec. 29,
  except share data)                                    1998           1997         1996 
                                                    -----------    -----------   -----------
<S>                                                 <C>            <C>           <C>        
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable                                  $   164,558    $   172,021   $   223,962
  Accrued expenses and other liabilities                111,088        131,491       103,730
  Accrued compensation and amounts withheld
    from employees                                      112,827        119,036        96,426
  Federal and state income taxes                                        33,920
  Deferred revenue                                       67,006         72,491        70,452
  Short-term borrowings and
    current portion of long-term debt                   198,277         69,697        50,000
                                                    -----------    -----------   -----------
      Total Current Liabilities                         653,756        598,656       544,570
                                                    -----------    -----------   -----------
NONCURRENT LIABILITIES
  Long-term debt                                      1,329,001      1,599,133       771,335
  Deferred federal and state income taxes               293,015        282,695       142,727
  Postretirement benefits other than pensions           147,118        150,485       158,811
  Employment benefits and  other noncurrent
    liabilities                                         168,974        171,225       109,909
                                                    -----------    -----------   -----------
      Total Noncurrent Liabilities                    1,938,108      2,203,538     1,182,782
                                                    -----------    -----------   -----------
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES           2,502          1,275         2,047
                                                    -----------    -----------   -----------
COMMITMENTS AND CONTINGENCIES (NOTE I)

SHAREHOLDERS' EQUITY
  Preferred stock, $1.00 par value; shares
    authorized - 2,000,000; shares issued -
    1,754,930 in 1998 and 1997, and 0 in 1996             1,755          1,755
  Common stock, $.02 1/12  par value; shares
    authorized - 250,000,000; shares
    issued - 78,374,195 in 1998,
    81,597,631 in 1997 and 93,340,652 in 1996             1,633          1,700         1,945
  Additional capital                                    908,078        911,572       308,320
  Retained earnings                                     735,132        636,646       819,572
  Accumulated other comprehensive income                 18,738                        1,671
  Treasury stock, at cost; 46,667 shares in 1998,
    0 in 1997 and 1996                                   (2,605)
                                                    -----------    -----------   -----------
      Total Shareholders' Equity                      1,662,731      1,551,673     1,131,508
                                                    -----------    -----------   -----------
      Total                                         $ 4,257,097    $ 4,355,142   $ 2,860,907
                                                    ===========    ===========   ===========
</TABLE>

                                       31
<PAGE>

CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
                                                                                        Year Ended
                                                                        -----------------------------------------
                                                                         Dec. 27,        Dec. 28,       Dec. 29,
 (In thousands of dollars, except share data)                              1998           1997           1996 
                                                                        -----------    -----------    -----------
<S>                                                                     <C>            <C>            <C>        
OPERATING REVENUE
  Advertising
    Retail                                                              $ 1,089,273    $ 1,008,736    $   821,768
    General                                                                 261,831        246,096        198,797
    Classified                                                            1,011,755        947,419        772,859
                                                                        -----------    -----------    -----------
      Total                                                               2,362,859      2,202,251      1,793,424
  Circulation                                                               587,529        567,757        501,826
  Other                                                                     141,531        106,777         78,974
                                                                        -----------    -----------    -----------
      Total Operating Revenue                                             3,091,919      2,876,785      2,374,224
                                                                        -----------    -----------    -----------
OPERATING COSTS   
  Labor and employee benefits                                             1,200,981      1,132,227        967,069
  Newsprint, ink and supplements                                            529,154        466,329        472,207
  Other operating costs                                                     669,114        615,470        481,168
  Depreciation and amortization                                             188,052        156,731        120,647
                                                                        -----------    -----------    -----------
      Total Operating Costs                                               2,587,301      2,370,757      2,041,091
                                                                        -----------    -----------    -----------
OPERATING INCOME                                                            504,618        506,028        333,133
                                                                        -----------    -----------    -----------
OTHER INCOME (EXPENSE)
  Interest expense                                                         (105,936)      (102,662)       (73,137)
  Interest expense capitalized                                                4,516          5,376          6,397
  Interest income                                                             3,416          3,404          6,488
  Equity in earnings of unconsolidated companies and joint ventures          23,309         10,800         29,868
  Minority interests in earnings of consolidated subsidiaries               (10,749)       (11,503)        (9,293)
  Other, net (Note G)                                                        88,742        282,409         16,753
                                                                        -----------    -----------    -----------
      Total                                                                   3,298        187,824        (22,924)
                                                                        -----------    -----------    -----------
Income before income taxes                                                  507,916        693,852        310,209
Income taxes                                                                202,285        297,348        124,829
                                                                        -----------    -----------    -----------
INCOME FROM CONTINUING OPERATIONS                                           305,631        396,504        185,380
Net gain on sale of discontinued  BIS operations,
  net of applicable  income taxes of $43,752 in 1998, 
  $8,365 in 1997 and $69,631 in 1996 (Notes B and G)                         60,042         15,261         86,255
Income/(loss) from discontinued BIS operations,
  net of applicable income taxes of $133 in 1998, 
  $1,119 in 1997 and $4,305 in 1996 (Notes B and G)                             184          1,250         (3,762)
                                                                        -----------    -----------    -----------
      Net Income                                                        $   365,857    $   413,015    $   267,873
                                                                        ===========    ===========    ===========
EARNINGS PER SHARE
  Basic:
    Income from continuing operations                                   $      3.87    $      4.48    $      1.93
    Net gain on sale of discontinued BIS operations (Note G)                    .76            .17            .90
    Income/(loss) from discontinued BIS operations, net (Note G)                .01            .02           (.04)
                                                                        -----------    -----------    -----------
      Net Income                                                        $      4.64    $      4.67    $      2.79
                                                                        ===========    ===========    ===========
  Diluted:
    Income from continuing operations                                   $      3.11    $      3.91    $      1.90
    Net gain on sale of discontinued BIS operations (Note G)                    .61            .15            .89
    Income/(loss) from discontinued BIS operations, net (Note G)                .01            .02           (.04)
                                                                        -----------    -----------    -----------
      Net Income                                                        $      3.73    $      4.08    $      2.75
                                                                        ===========    ===========    ===========
AVERAGE SHARES OUTSTANDING (000S)
  Basic                                                                      78,882         88,475         96,021
  Diluted                                                                    98,176        101,314         97,420
</TABLE>

See "Notes to Consolidated Financial Statements."


                                       32

<PAGE>

CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                       Year Ended
                                                                       -----------------------------------------
                                                                         Dec. 27,       Dec. 28,       Dec. 29,
 (In thousands of dollars)                                                1998            1997          1996 
                                                                       -----------    -----------    -----------
<S>                                                                            <C>            <C>            <C>
CASH PROVIDED BY (REQUIRED FOR) OPERATING ACTIVITIES
  Net income                                                           $   365,857    $   413,015    $   267,873
    Noncash items deducted from (included in) income:   
      Gains on sales/exchanges of investee/
        subsidiaries (Note G)                                              (75,251)      (283,126)
      Net gain on sale of discontinued BIS operations                      (60,042)       (15,261)       (86,255)
      Depreciation                                                         101,950         94,138         86,976
      Amortization of excess of cost over net assets acquired               66,035         47,475         18,500
      Amortization of other assets                                          20,067         15,118         15,171
      Provision (benefit) for deferred taxes                                (8,444)       (14,750)        40,647
      Provision for bad debts                                               20,854         23,332         19,315
      Earnings of investees in excess of distributions                     (21,856)       (14,658)       (21,293)
      Minority interests in earnings of consolidated subsidiaries           10,749         11,503          9,293
      Other items, net                                                      18,576         38,656         (9,648)
  Change in certain assets and liabilities:
    Accounts receivable                                                    (39,927)       (57,185)       (62,223)
    Inventories                                                             (9,398)          (326)        30,474
    Other current assets                                                     3,296            380       (159,718)
    Accounts payable                                                       (20,299)       (83,969)        86,251
    Federal and state income taxes                                         (52,234)        20,125          9,347
    Other liabilities                                                      (22,782)        47,724         (9,826)
                                                                       -----------    -----------    -----------
       Net Cash Provided by  Operating Activities                          297,151        242,191        234,884
                                                                       -----------    -----------    -----------
CASH PROVIDED BY (REQUIRED FOR) INVESTING ACTIVITIES
  Proceeds from sales of investee/subsidiaries(Note G)                      58,125        181,145
  Proceeds from sale of discontinued BIS operations (Note G)               125,000        416,983        271,859
  Change in net noncurrent assets of discontinued
    BIS operations                                                             520          1,996          4,249
  Proceeds from sales of securities available for sale                       4,319        241,894
  Additions to property, plant and equipment                              (132,025)      (106,614)      (112,896)
  Other items, net                                                         (35,642)        (8,165)        45,142
                                                                       -----------    -----------    -----------
       Net Cash Provided by Investing Activities                            20,297        727,239        208,354
                                                                       -----------    -----------    -----------
CASH PROVIDED BY (REQUIRED FOR) FINANCING ACTIVITIES
  Proceeds from sale of commercial paper, notes payable and 
     senior notes payable                                                  914,926        833,600        601,010
  Payment of total debt                                                 (1,057,186)      (976,611)      (793,525)
                                                                       -----------    -----------    -----------
       Net Change in Total Debt                                           (142,260)      (143,011)      (192,515)
  Payment of cash dividends                                                (77,152)       (78,335)       (74,262)
  Sale of common stock to employees                                         44,411         60,029         63,815
  Purchase of treasury stock                                              (255,533)      (643,375)      (221,768)
  Other items, net                                                         (20,369)       (27,327)       (21,640)
                                                                       -----------    -----------    -----------
       Net Cash (Required for) Financing
         Activities                                                       (450,903)      (832,019)      (446,370)
                                                                       -----------    -----------    -----------
       Net Increase (Decrease) in Cash                                    (133,455)       137,411         (3,132)
Cash and short-term cash investments at beginning of the year              160,291         22,880         26,012
                                                                       -----------    -----------    -----------
Cash and short-term cash investments at end of the year                $    26,836    $   160,291    $    22,880
                                                                       ===========    ===========    ===========
SUPPLEMENTAL CASH FLOW INFORMATION
  Noncash investing activities (Note G)
    Securities received as proceeds on the sale of investee            $    37,678    $   229,163
  Noncash financing activities (Note G)
    Issuance of preferred stock for the acquisition of the
    Disney newspapers
      Preferred stock                                                                       1,755
      Additional capital                                                                  658,245
    Long-term debt assumed on the acquisition of the Disney newspapers                    990,000
</TABLE>

See "Notes to Consolidated Financial Statements."

                                       33
<PAGE>
<TABLE>
<CAPTION>

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

                                                                   Preferred         Common      Treasury
(In thousands of  dollars,                                            Shares         Shares        Shares   Preferred     Common
except share data)                                               Outstanding    Outstanding   Outstanding       Stock      Stock
                                                                 -----------    -----------   -----------   ---------    -------
<S>                                                              <C>             <C>          <C>           <C>          <C>
BALANCE AT DEC. 31, 1995                                                  --     97,196,308            --   $      --   $  2,025
  Issuance of common shares under stock option plan                               1,040,938                                   22
  Issuance of common shares under stock purchase plan                               126,808                                    3
  Issuance of treasury shares under stock option plan                                             868,752
  Issuance of treasury shares under stock purchase plan                                           326,946
  Purchase of treasury shares                                                                  (6,219,100)
  Retirement of treasury shares                                                  (5,023,402)    5,023,402                   (105)
  Expenses related to capital transactions                       
  Tax benefits arising from employee stock plans                 
  Comprehensive income:                                          
    Net income                                                   
    Change in unrealized gains on securities available for sale, 
     net of tax of $29,886                                       

    Comprehensive income

  Cash dividends declared on common stock - $.58 1/2 per share(1)
------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DEC. 29, 1996                                                  --     93,340,652            --   $      --   $ 1,945
  Issuance of common shares under stock option  plan                                 89,318                                   2
  Issuance of treasury shares under stock option plan                                           1,604,447
  Issuance of treasury shares under stock purchase plan                                           387,514
  Issuance of convertible preferred shares                         1,754,930                                    1,755
  Purchase of treasury shares                                                                 (13,824,300)
  Retirement of treasury shares                                                 (11,832,339)   11,832,339                  (247)
  Tax benefits arising from employee stock plans                 
  Comprehensive income:                                          
    Net income                                                   
    Change in unrealized gains on securities available for sale, 
     net of tax of $1,210                                        

    Comprehensive income                                           

  Cash dividends declared on common stock - $.80 per share       
------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DEC. 28, 1997                                           1,754,930     81,597,631            --   $   1,755   $ 1,700
  Issuance of common shares  under stock option plan                                369,372                                   7
  Issuance of common shares under stock purchase plan                                81,672                                   2
  Issuance of treasury  shares under stock option plan                                             638,420
  Issuance of treasury shares under stock purchase plan                                            267,927
  Issuance of treasury shares to nonemployee directors                                               3,333
  Issuance of treasury shares                                                                       94,173
  Purchase of treasury shares                                                                   (4,725,000)
  Retirement of treasury shares                                                  (3,674,480)     3,674,480                  (76)
  Tax benefits arising from employee stock plans                 
  Comprehensive income:                                          
    Net income                                                   
    Change in unrealized gains on securities available for sale, 
     net of tax of $12,492                                       

    Comprehensive income                                           

  Cash dividends declared on common stock - $.80 per share       
------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DEC. 27, 1998                                           1,754,930     78,374,195       (46,667)  $   1,755   $ 1,633
====================================================================================================================================
</TABLE>

(1) The Board of Directors  declared a $.20 per share dividend on Jan. 28, 1997.
    The quarterly dividend previously paid in January was paid on Feb. 24, 1997,
    to shareholders of record as of the close of business on Feb. 12, 1997.
(2) Accumulated  other   comprehensive   income   at  Dec. 31, 1995,  represents
    unrealized gains on securities available for sale.

See "Notes to Consolidated Financial Statements."

                                       34
<PAGE>

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Continued)

<TABLE>
<CAPTION>
                                                                                              Accumulated 
                                                                                                    Other
(In thousands of dollars,                                          Additional     Retained  Comprehensive     Treasury  
except share data)                                                    Capital     Earnings         Income        Stock        Total
                                                                   ----------   ----------  -------------    ---------   ----------
<S>                                                                <C>          <C>         <C>              <C>         <C>       
BALANCE AT DEC. 31, 1995                                           $ 295,360    $ 770,643   $      42,942(2) $      --   $1,110,970
  Issuance of common shares under stock option plan                   26,589          (11)                                   26,600
  Issuance of common shares under stock purchase plan                  3,724           (1)                                    3,726
  Issuance of treasury shares under stock option plan                 (7,661)                                   30,783       23,122
  Issuance of treasury shares under stock purchase plan               (1,278)                                   11,645       10,367
  Purchase of treasury shares                                                                                 (221,768)    (221,768)
  Retirement of treasury shares                                      (16,586)    (162,649)                     179,340           --
  Expenses related to capital transactions                              (203)                                                  (203)
  Tax benefits arising from employee stock plans                       8,375                                                  8,375
  Comprehensive income:
    Net income                                                                    267,873                                   267,873
    Change in unrealized gains on securities available for sale,
     net of tax of $29,886                                                                        (41,271)                  (41,271)
                                                                                                                         -----------
    Comprehensive income                                                                                                    226,602
                                                                                                                         -----------
  Cash dividends declared on common stock - $.58 1/2 per share(1)                 (56,283)                                  (56,283)
------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DEC. 29, 1996                                           $ 308,320    $ 819,572   $      1,671     $      --   $1,131,508
  Issuance of common shares under stock option  plan                   2,395                                                  2,397
  Issuance of treasury shares under stock option plan                (28,149)                                   70,785       42,636
  Issuance of treasury shares under stock purchase plan               (2,222)                                   17,218       14,996
  Issuance of convertible preferred shares                           658,245                                                660,000
  Purchase of treasury shares                                                                                 (643,375)    (643,375)
  Retirement of treasury shares                                      (37,519)    (517,606)                     555,372           --
  Tax benefits arising from employee stock plans                      10,502                                                 10,502
  Comprehensive income:                                          
    Net income                                                                    413,015                                   413,015
    Change in unrealized gains on securities available for sale, 
     net of tax of $1,210                                                                         (1,671)                    (1,671)
                                                                                                                         -----------
    Comprehensive income                                                                                                    411,344
                                                                                                                         -----------
  Cash dividends declared on common stock - $.80 per share                        (78,335)                                  (78,335)
------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DEC. 28, 1997                                           $ 911,572    $ 636,646   $         --     $      --   $1,551,673
  Issuance of common shares  under stock option plan                  10,185                                                 10,192
  Issuance of common shares under stock purchase plan                  3,966                                                  3,968
  Issuance of treasury  shares under stock option plan               (14,422)                                   32,797       18,375
  Issuance of treasury shares under stock purchase plan               (1,352)                                   13,228       11,876
  Issuance of treasury shares to nonemployee directors                   (13)                                      186          173
  Issuance of treasury shares                                                                                    5,021        5,021
  Purchase of treasury shares                                                                                 (255,533)    (255,533)
  Retirement of treasury shares                                      (11,401)    (190,219)                     201,696           --
  Tax benefits arising from employee stock plans                       9,543                                                  9,543
  Comprehensive income:                                          
    Net income                                                                    365,857                                   365,857
    Change in unrealized gains on securities available for sale, 
      net of tax of $12,492                                                                       18,738                     18,738
                                                                                                                         -----------
    Comprehensive income                                                                                                    384,595
                                                                                                                         -----------
  Cash dividends declared on common stock - $.80 per share                        (77,152)                                  (77,152)
------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DEC. 27, 1998                                           $908,078     $ 735,132   $    18,738      $  (2,605)  $1,662,731
====================================================================================================================================
</TABLE>

                                       35
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Knight Ridder is the nation's  second  largest  newspaper  publisher in terms of
circulation  and  revenue,  with  products  in print  and  online.  The  company
publishes 31 daily newspapers in 28 U.S.  markets,  reaching 9.2 million readers
daily and 13.1 million on Sunday. It maintains 45 associated Web sites under the
name Knight Ridder Real Cities and has investments in two newsprint mills.

The company  reports on a fiscal  year,  ending the last Sunday in the  calendar
year.  Results for 1998,  1997 and 1996 are for the 52 weeks ended Dec. 27, Dec.
28 and Dec. 29, respectively.

The  BASIS  OF  CONSOLIDATION  is  to  include  in  the  consolidated  financial
statements  all the  accounts  of  Knight  Ridder  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,  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. Under the joint operating agreement that expires in
the year 2089,  as of Dec.  26,  1994,  profits  are split  equally  between the
partners.  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 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  servicing  of  general,  retail  and
classified  advertising  accounts  for a group of  newspapers;  Southeast  Paper
Manufacturing   Co.  and  Ponderay   Newsprint   Company,   two  newsprint  mill
partnerships;  InfiNet Company,  a joint venture that allows newspapers to offer
Internet access to subscribers;  Tesserae Information  Systems,  Inc., a company
that produces  software used to merge various  databases;  TKR Cable Company and
TKR Cable Partners,  cable  television  joint ventures (all but one of the cable
companies  jointly  owned  with  Tele-Communications,  Inc.  [TCI]  were sold in
January 1997 and the balance was sold in March 1998); Interealty, Inc. (formerly
known as PRC Realty Systems,  Inc.,  sold in September  1998), a software system
producer for the real estate industry;  and Destination  Florida, a company that
provided online travel information services (ceased operation in 1997).

The company  owns 49 1/2% of the voting  common  stock and 65% of the  nonvoting
common  stock of the SEATTLE  TIMES  COMPANY,  owns 31.1% of the voting stock of
NEWSPAPERS  FIRST, is a one-third  partner in the SOUTHEAST PAPER  MANUFACTURING

                                       36
<PAGE>

CO. and owns a 13 1/2% equity share of PONDERAY NEWSPRINT  COMPANY.  The company
owns  33.3% of the  voting  stock  and 50% of the  nonvoting  Stock  of  INFINET
COMPANY, and owns 33.1% of TESSERAE INFORMATION SYSTEMS, INC.

The investment in unconsolidated  companies and joint ventures at Dec. 27, 1998,
includes  $179.6  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 $23.3  million in 1998,  $10.8 million in 1997 and $29.9 million in 1996
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 $6.6  million in 1998,  $3.1 million in 1997 and $18.6
million in 1996 and were offset against the investment account.

FORT WAYNE NEWSPAPERS,  INC., and THE PROFESSIONAL EXCHANGE LLC (a subsidiary of
Philadelphia Newspapers, Inc.), are the only consolidated subsidiaries 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  Company 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. 27, 1998,  Dec.
28, 1997, and Dec. 29, 1996, 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.

"OTHER  ASSETS"  includes  investments  in companies in which Knight Ridder owns
less  than a 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
"ACCUMULATED OTHER COMPREHENSIVE  INCOME," a separate component of shareholders'
equity. Upon the sale of an investment, the gain/loss is calculated based on the


                                       37
<PAGE>

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  AND OTHER  INTANGIBLES"  includes the
unamortized  excess of cost over the fair  market  value on the  purchase  of at
least a 50% interest in a company's net tangible and  intangible  assets arising
from  these  acquisitions.  The  excess of cost  over net  assets  acquired  and
intangible  assets from  acquisitions  accounted  for as purchases and occurring
subsequent  to Oct. 31, 1970,  totaled,  at Dec.  27, 1998,  approximately  $2.4
billion, including $400.5 million of identified intangible assets. The excess of
cost over net assets  acquired  is being  amortized  over a 40-year  period on a
straight-line  basis,  unless  management  concludes that a shorter term is more
appropriate.   Other  intangibles   acquired  through  acquisitions  consist  of
trademarks,  subscriber  and  advertiser  lists  and  mastheads  that are  being
amortized on a  straight-line  basis over periods ranging from five to 40 years,
with a weighted-average life of 25.7 years. 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.  Revenue is  recognized  in the period in which it is
earned.

"SHORT-TERM  BORROWINGS  AND CURRENT  PORTION OF  LONG-TERM  DEBT"  includes the
carrying  amounts  of  commercial  paper and other  short-term  borrowings  with
original  maturities  of less than one year,  and the portion of long-term  debt
payable within 12 months and which management does not intend to refinance.  The
carrying amounts of short-term  borrowings  approximate fair value.  "LONG- TERM
DEBT"  represents the carrying  amounts of  debentures,  notes payable and other
indebtedness  with maturities  longer than one year.  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  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. See Note E.

In 1997,  the  company  adopted  FAS 128 -  EARNINGS  PER SHARE  (EPS).  FAS 128
replaced the calculation of primary and fully diluted EPS with basic and diluted
EPS. Basic EPS will typically be higher than primary EPS due to the exclusion of
any dilutive  effects of options,  warrants and convertible  securities from the
calculation.  Diluted  EPS is very  similar  to the  previously  reported  fully
diluted  EPS.  All EPS  amounts  for all  earlier  periods  presented  have been
restated to conform to the FAS 128 requirements.

"BASIC   EARNINGS  PER  SHARE"  is  computed  by  dividing  net  income  by  the

                                       38

<PAGE>

weighted-average  number of common  shares  outstanding.  "DILUTED  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.

In 1997,  the company  also adopted FAS 129 - DISCLOSURE  OF  INFORMATION  ABOUT
CAPITAL  STRUCTURE.  FAS 129  establishes  standards for disclosing  information
about an entity's  capital  structure.  The adoption of this  statement  did not
result in additional required disclosures.

In 1998, the company adopted FAS 130 - REPORTING  COMPREHENSIVE  INCOME. FAS 130
establishes new rules for the reporting and display of comprehensive  income and
its  components.  FAS 130  requires  that  unrealized  gains  or  losses  on the
company's  available-for-sale  securities  be  included  in  "ACCUMULATED  OTHER
COMPREHENSIVE  INCOME," a separate component of shareholders'  equity.  Prior to
its adoption,  unrealized gains or losses on available-for-sale  securities were
separately  identified as such in shareholders'  equity. The adoption of FAS 130
expanded the disclosure  provided in the statement of shareholders'  equity. See
Note H.

FAS 131 - DISCLOSURES  ABOUT SEGMENTS OF AN ENTERPRISE  AND RELATED  INFORMATION
was effective in 1998. The company is a newspaper company with products in print
and online.  It  maintains  operations  and local  management  in the markets it
serves, including the metropolitan areas of Philadelphia,  Pa., Miami, Fla., San
Jose,  Calif.,  Kansas  City,  Mo.,  Fort  Worth,  Texas,  Detroit,  Mich.,  and
Charlotte,  N.C. Revenue is earned through the sale of advertising,  circulation
and related  activities.  Newspapers  are  distributed  in print  through  local
distribution channels, as well as online through Web sites.

The company  conducts  business in one  operating  segment  and  determined  its
operating  segment based on the individual  operations  that the chief operating
decision  maker  reviews  for  purposes  of  assessing  performance  and  making
operating decisions.  These individual  operations have been aggregated into one
segment  because  the  company  believes  doing so helps  users  understand  the
company's  performance  and assess its prospects.  The combined  operations have
similar  economic  characteristics  and each  operation  has  similar  products,
services, customers, production processes and distribution methods.

In 1998,  the  company  also  adopted  FAS 132 -  EMPLOYERS'  DISCLOSURES  ABOUT
PENSIONS AND OTHER POSTRETIREMENT  BENEFITS. FAS 132 standardizes the disclosure
requirements for pensions and other postretirement benefits, requires additional
information on changes in the benefit obligations and fair values of plan assets
and eliminates  certain  disclosures that are no longer considered  useful.  See
Note F.

In 2000,  the  company  plans  to  adopt  FAS 133 -  ACCOUNTING  FOR  DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. Based on current circumstances,  the company
does not believe the effect of adoption will be material.

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 1997 and 1996 have been  reclassified to conform to the 1998
presentation.

                                       39
<PAGE>

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.

Federal, state and local income taxes consist of the following (in thousands):

<TABLE>
<CAPTION>
                                      1998                   1997                  1996
                               -------------------    -------------------    -------------------
                               Current    Deferred    Current    Deferred    Current    Deferred
                               --------   --------    --------   --------    --------   --------
<S>                         <C>        <C>         <C>        <C>         <C>        <C>     
Federal income taxes           $213,161   $ (4,479)   $286,645   $(33,176)   $127,610   $ 28,075
State and local income taxes     39,953     (2,465)     64,519    (11,156)     29,913     13,167
                               --------   --------    --------   --------    --------   --------
  Total                        $253,114   $ (6,944)   $351,164   $(44,332)   $157,523   $ 41,242
                               ========   ========    ========   ========    ========   ========
Provision for:
  Continuing operations .      $210,729   $ (8,444)   $312,098   $(14,750)   $ 84,182   $ 40,647
  Discontinued operations        42,385      1,500      39,066    (29,582)     73,341        595
                               --------   --------    --------   --------    --------   --------
    Total                      $253,114   $ (6,944)   $351,164   $(44,332)   $157,523   $ 41,242
                               ========   ========    ========   ========    ========   ========

</TABLE>

Cash  payments  of income  taxes for the years  1998,  1997 and 1996 were $262.7
million, $278.5 million and $147.2 million, respectively. Payments in 1998, 1997
and 1996 include the tax impact resulting from one-time gains.  Payments in 1998
included the tax impact from the sale of the balance of our jointly  owned cable
system,  Technimetrics,  Inc., and our newspaper in Gary, Ind.  Payments in 1997
included  the tax impact  from the sale of the  majority  of our cable  systems,
Knight-Ridder  Information,  Inc., and the  sales/exchanges  of our  newspapers.
Payments  in 1996  included  the  tax  impact  from  the  sale of  Knight-Ridder
Financial.

                                       40
<PAGE>

EFFECTIVE INCOME TAX RATES

The differences  between income tax expense for continuing  operations  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>

                                                            1998        1997        1996
                                                         ---------    ---------   ---------
<S>                                                      <C>          <C>         <C>      
Federal statutory income tax                             $ 177,771    $ 242,848   $ 108,573
State and local income taxes, net of federal benefit        17,033       34,300      13,612
Statutory rate applied to nondeductible amortization
  of the excess of cost over net assets acquired            15,123       13,482       2,781
Other items, net                                            (7,642)       6,718        (137)
                                                         ---------    ---------   ---------
  Total                                                  $ 202,285    $ 297,348   $ 124,829
                                                         =========    =========   =========

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

                                                            1998        1997        1996
                                                         ---------    ---------   ---------
Deferred Tax Asset
Postretirement benefits other than pensions (including
  amounts relating to partnerships in which the
  company participates)                                  $  84,100    $  88,016   $  95,764
Accrued interest                                             7,175        8,165      10,576
Other nondeductible accruals                                60,022       51,651      43,594
                                                         ---------    ---------   ---------
  Gross deferred tax asset                               $ 151,297    $ 147,832   $ 149,934
                                                         =========    =========   =========

Deferred Tax Liability
Depreciation and amortization                            $ 341,618    $ 341,872   $ 196,116
Compensation and benefit accruals                            7,810       15,855       6,802
Equity in partnerships and investees                        51,170       46,845      73,499
Unrealized appreciation in equity securities                12,492                    1,210
Research and experimental expenditures                                               10,964
Other                                                        3,361        4,010      11,066
                                                         ---------    ---------   ---------
  Gross deferred tax liability                           $ 416,451    $ 408,582   $ 299,657
                                                         ---------    ---------   ---------
  Net deferred tax liability                             $ 265,154    $ 260,750   $ 149,723
                                                         =========    =========   =========
</TABLE>

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

                                                            1998        1997        1996
                                                         ---------    ---------   ---------
<S>                                                      <C>          <C>         <C>      
Current asset                                            $  27,861    $  23,445   $  24,296
Noncurrent liability                                       293,015      282,695     142,727
Discontinued BIS operations - net  liability                              1,500      31,292
                                                         ---------    ---------   ---------
  Net deferred tax liability                             $ 265,154    $ 260,750   $ 149,723
                                                         =========    =========   =========
</TABLE>

                                       41
<PAGE>

C. DEBT

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

                                                                          Dec. 27       Dec. 28      Dec. 29
                                                                            1998          1997        1996
                                                                         ----------   ----------   ----------
<S>                                                                      <C>          <C>          <C>       
Commercial paper due at various dates through June 18, 1999, at an
  effective interest rate of 5.5% as of Dec. 27, 1998. Amounts are
  net of unamortized discounts of $9,639 in 1998, $207 in
  1997 and $1,683 in 1996 (a)                                            $  917,533   $   29,793   $  364,817
Senior secured bank debt due on Sept. 15, 1999, advanced under
  a $1.2 billion credit agreement with a variable interest rate
  indexed to LIBOR plus 27-1/2 basis points(b)                                           990,000
Debentures due on April  15, 2009, bearing interest at 9.875%,
  net of unamortized discount of $1,701 in 1998, $1,867 in
  1997 and $2,032 in 1996                                                   198,299      198,133      197,968
Debentures due on Nov. 1,  2027, bearing interest at 7.15%,
  net of unamortized discount of $5,614 in 1998 and $5,739 in 1997           94,386       94,261
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 $223 in 1998, $383 in 1997 and $555 in 1996                   119,777      159,617      159,445
Notes payable due on Nov 1, 2007, bearing interest at 6.625%,
  net of unamortized discount of $2,022 in 1998 and $2,179 in 1997           97,978       97,821
Senior notes payable due on Dec. 15, 2005, bearing interest at 6.3%,
  net of unamortized discount of $695 in 1998, $795 in 1997 and
  $895 in 1996                                                               99,305       99,205       99,105
                                                                         ----------   ----------   ----------
                                                                          1,527,278    1,668,830      821,335
                                                                         ----------   ----------   ----------
Less amounts payable in one year(c)                                         198,277       69,697       50,000
                                                                         ----------   ----------   ----------
    Total long-term debt                                                 $1,329,001   $1,599,133   $  771,335
                                                                         ==========   ==========   ==========
</TABLE>

(a) Commercial  paper is supported by $1.1 billion of revolving  credit and term
    loan  agreements,  $500 million of which matures on June 22, 2003,  and $600
    million of which  matures on June 22,  1999.  The company has the option and
    intention to renew the $600 million  facility  before June 22, 1999,  for an
    additional 364-day term through June 2000.
(b) Senior secured bank debt was  collateralized by all personal property assets
    and four recorded  first  mortgages of Cypress  Media,  Inc., a wholly owned
    subsidiary.  Bank debt was paid off on June 26, 1998, with proceeds from the
    sale of commercial paper.
(c) In 1998,  this  represents  $39.9  million for the 8.5% note  payable due on
    Sept. 1, 1999, and $158.4 million of commercial paper due within the next 12
    months and which management does not intend to refinance.

Interest payments during 1998, 1997 and 1996 were $118.4 million,  $87.2 million
and $70.9 million, respectively.

                                       42

<PAGE>

The following table presents the approximate  annual  maturities of debt for the
years after 1998 (in thousands):

1999                                   $  198,277
2000                                      299,114
2001                                       39,919
2002
2003                                      500,000
2004 and thereafter                       489,968
                                       ----------
  Total                                $1,527,278
                                       ==========

The carrying amounts and fair values of debt as of Dec. 27, 1998, are as
follows (in thousands):
                                        Carrying             Fair
                                         Amount              Value
                                       ----------          ----------
Commercial paper                       $  917,533          $  917,533
9.875% Debentures                         198,299             263,309
7.15% Debentures                           94,386             109,940
8.5% Notes payable                        119,777             128,546
6.625% Notes payable                       97,978             106,689
6.3% Senior notes payable                  99,305             103,860
                                       ----------          ----------
  Total                                $1,527,278          $1,629,877
                                       ==========          ==========

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>

                                                       1998        1997         1996
                                                   ----------   ----------   ----------
<S>                                                <C>          <C>          <C>       
Current assets                                     $  246,940   $  212,939   $  258,037
Property, plant and equipment and other assets      1,260,996    1,158,224    4,076,604
Current liabilities                                   170,856      143,683      287,782
Long-term debt and other  noncurrent liabilities      518,560      394,253    2,893,716
Net sales                                             782,893      806,587    1,417,668
Gross profit                                           90,719       62,426      225,307
Net income                                             56,201       24,428       55,104
Company's share of:
  Net assets                                          201,120      197,585      330,267
  Net income                                           23,309       10,800       29,868
</TABLE>

                                       43
<PAGE>

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. 27, 1998,  Dec.  28,  1997,  and Dec. 29, 1996,  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.

In January 1997, the company and  Tele-Communications,  Inc., closed on the sale
of the company's  interest in all but one of their jointly owned cable  systems.
The sale of the balance of the cable  system was  completed  in March 1998.  See
Note G.

E. CAPITAL STOCK

In 1991,  shareholders  authorized 2 million shares of Series B preferred  stock
for future  issuance  (which is  convertible  into 20  million  shares of common
stock).

In  1997,  the  Board of  Directors  authorized  1,758,242  shares  of  Series B
preferred  stock,  $1.00 par value per  share,  and issued  1,754,930  preferred
shares in connection  with the May 9, 1997,  acquisition of four newspapers that
were  indirectly  owned by The  Walt  Disney  Company.  Each  share of  Series B
preferred  stock is  convertible  into 10 shares of  common  stock.  If and when
dividends  and other  distributions  are  declared  by the  Board of  Directors,
holders of the Series B preferred stock are entitled to receive the dividends or
other  distribution  paid on the  number of shares of the  corporation's  common
stock into which such share of this series is  convertible.  Each holder of this
series is entitled to vote with respect to all matters upon which holders of the
corporation's  common  stock  are  entitled  to vote.  The  holder  of  Series B
preferred stock has two votes for each preferred share.

Concurrent with the 1996 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  1,500,000  preferred  shares for  issuance  upon  exercise of the
rights.

                                       44
<PAGE>

In 1998  and  1997,  the  Series  B  preferred  stock,  each  share  of which is
convertible  into 10 shares of common stock, and shares of common stock issuable
upon exercise of stock options are included in the diluted EPS calculation,  but
excluded  from  the  basic  EPS  calculation.  The 1998  and  1997  diluted  EPS
calculations include 17,549,300 and 10,968,313 weighted-average shares of Series
B  convertible  preferred  stock,  respectively,  and  1,744,887  and  1,870,340
weighted-average shares of common stock issuable upon exercise of stock options,
respectively.  In 1996,  the only  difference  between the basic and diluted EPS
calculations  is the dilutive impact of options that are included in the diluted
EPS calculation.

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  349,599  shares in 1998,  387,514 shares in 1997 and 453,754 shares in
1996. The purchase price of shares issued in 1998 under this plan ranged between
$41.28 and $48.58,  and the market  value on the  purchase  dates of such shares
ranged from $48.56 to $57.16.

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  March 1994 were  exercisable  at issue
date.  Options  granted  thereafter  vest in  three  equal  installments  over a
three-year  period from the date of grant.  There is 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. Shares of common stock relating to options outstanding under this plan
are reserved at the date of grant.

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

                                           Number of        Weighted-Average
                                            Shares      Exercise Price Per Share
                                           ---------    ------------------------
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
    Exercised                             (1,693,765)           26.54
    Expired                                 (340,341)           29.00
    Forfeited                                (25,873)           32.55
    Granted                                1,412,668            51.65
Outstanding                                            
  Dec. 28, 1997                            6,257,534            35.74
    Exercised                             (1,007,792)           28.35
    Expired                                  (25,230)           33.88
    Forfeited                                (90,224)           55.61
    Granted                                1,481,750            49.72
Outstanding                                            
  Dec. 27, 1998                            6,616,038            39.74

                                       45
<PAGE>

In 1997, the company  established the Long-Term Incentive Plan. The plan rewards
participants   whose   leadership  helps  the  company  reach  levels  of  total
shareholder return, as defined. The plan covers a single three-year  performance
period  from Jan. 1, 1997,  through  Dec.  31,  1999.  Participants  received an
aggregate  initial grant of 347,218  shares of  restricted  Knight Ridder common
stock.  Additional  grants,  net of forfeitures,  resulted in restricted  shares
outstanding  of  314,925  and  322,286  at Dec.  27,  1998  and Dec.  28,  1997,
respectively. The grants of common stock are restricted, as the vesting of these
shares is triggered upon the occurrence of certain performance goals.

In  1997,  the  company   established  the  Compensation  Plan  for  Nonemployee
Directors.  The  purpose of the plan is to attract  and retain the  services  of
qualified  individuals  who are not employees of the company to serve as members
of the Board of Directors.  Part of the compensation  plan includes the issuance
of stock  options.  Options vest in three equal  installments  over a three-year
period  and  expire  no later  than 10 years  from the date of  grant.  In 1997,
200,000  shares  were  authorized  for  issuance  as  options  under  the  plan.
Participants   were  granted  24,000  and  26,000  options  in  1998  and  1997,
respectively.  In addition, 3,333 shares were awarded under the plan as retainer
payments to nonemployee directors in 1998.

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

At Dec. 27, 1998,  shares of the company's  authorized but unissued common stock
were reserved and available for issuance as follows:

                                                                         Shares
                                                                      ---------
Employee Stock Option Plan                                              810,465
Employees Stock Purchase Plan                                         1,071,507
Nonemployee Directors Plan                                              146,667
                                                                     ----------
  Total                                                               2,028,639
                                                                     ==========

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 1998, 1997 and
1996,  respectively:  risk-free rates of 4.7%, 5.7% and 6.1%; dividend yields of
1.6%,  1.6% and 2.0%;  volatility  factors of the  expected  market price of the
company's common stock of 0.17, 0.14 and 0.16; and a  weighted-average  expected
life of the option of 6.4, 6.4 and 6.5 years. The  weighted-average  fair values
of the stock  options  for 1998,  1997 and 1996 were  $11.58,  $12.44 and $9.65,
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 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 stock options.

                                       46
<PAGE>

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 1998, 1997 and 1996
pro forma  information  follows (in  thousands,  except for  earnings  per share
information):

                                    1998          1997          1996
                                -----------   -----------   -----------
Net income                      $   356,777   $   407,274   $   264,600
Basic earnings per share               4.52          4.60          2.76
Diluted earnings per share             3.63          4.02          2.72

The 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. 27,  1998,  ranged  between
$22.66 and $57.53.  The  weighted-average  remaining  contractual  life of those
options for 1998,  1997 and 1996 is 7.3,  6.9 and 6.4 years,  respectively.  The
weighted-average  exercise  price of those  options  for 1998,  1997 and 1996 is
$39.82,  $35.77 and $29.96,  respectively.  3,882,661,  3,643,950  and 4,305,845
options were exercisable at the end of 1998, 1997 and 1996, respectively.

F. PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS

A summary of the components of net periodic benefit cost for the defined benefit
plans and postretirement benefit plans (other benefits) 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>
                                                Pension Benefits                    Other Benefits
                                         --------------------------------    --------------------------------
                                           1998        1997        1996        1998        1997        1996
                                         --------    --------    --------    --------    --------    --------
<S>                                      <C>         <C>         <C>         <C>         <C>         <C>     
Defined benefit plans:
  Service cost                           $ 41,994    $ 30,116    $ 28,562    $  3,390    $  3,524    $  3,769
  Interest cost                            67,864      61,458      56,698      10,380      10,988      11,229
  Expected return on plan assets          (89,264)    (75,151)    (65,342)       (778)       (753)
  Recognized net actuarial (gain) loss     (1,095)         57         749        (829)       (324)       (324)
  Amortization of prior service cost        6,418       5,990       6,268      (4,649)     (4,508)     (4,276)
  Amortization of transition
    (asset) obligation                     (3,999)     (4,516)     (4,645)
                                         --------    --------    --------    --------    --------    --------
    Net                                    21,918      17,954      22,290       7,514       8,927      10,398
Multi-employer union plans                 11,731      11,125       9,157
Defined contribution plans                 11,681      10,742       9,022
Other                                       1,695       1,968       1,412
                                         --------    --------    --------    --------    --------    --------
  Net periodic benefit cost              $ 47,025    $ 41,789    $ 41,881    $  7,514    $  8,927    $ 10,398
                                         ========    ========    ========    ========    ========    ========
</TABLE>

Service cost in 1998 included approximately $7.0 million related to accelerating
the retirement of certain employees.

                                       47
<PAGE>

Weighted-average  assumptions  used each year in accounting for defined  benefit
plans and postretirement benefits were:
<TABLE>
<CAPTION>

                                               Pension Benefits      Other Benefits
                                              ------------------   ------------------
                                              1998   1997   1996   1998   1997   1996
                                              ----   ----   ----   ----   ----   ----
<S>                                           <C>    <C>    <C>    <C>    <C>    <C> 
Discount rate as of year end                  6.8%   7.0%   7.5%   6.8%   7.0%   7.5%
Return on plan assets                         8.8    8.5    8.5    6.5    6.5    6.5
Rate of compensation increase                 4.5    4.5    4.5    4.5    4.5    4.5
Medical trend rate:
  Projected                                                        7.0    8.0    9.0
  Reducing to this percentage in 2001 and
    thereafter                                                     5.5    5.5    5.5
</TABLE>

The assumed health care cost trend rate has a significant  effect on the amounts
reported.  A  one-percentage-point  change in the assumed health care cost trend
rate would have the following effects:

                                   1-Percentage-         1-Percentage-
                                   Point Increase        Point Decrease
                                   --------------        --------------
Effect on total of service
  and interest cost
  components in 1998                  $   607               $  (517)
Effect on postretirement
  benefit obligation as of
  12/27/98                            $ 4,507               $(3,957)













                                       48
<PAGE>

The following  table sets forth the funded status and amounts  recognized in the
Consolidated   Balance  Sheet  for  the  company's   benefit  plans   (excluding
liabilities of the DNA that are reported net in the  Consolidated  Balance Sheet
under the caption "Equity in  unconsolidated  companies and joint ventures") (in
thousands):

<TABLE>
<CAPTION>
                                                         Pension Benefits                           Other Benefits
                                           -----------------------------------------    -----------------------------------------
                                               1998          1997           1996           1998            1997          1996
                                           -----------    -----------    -----------    -----------    -----------    -----------
<S>                                       <C>            <C>            <C>            <C>            <C>            <C>        
Change in Benefit Obligation
Benefit obligation at beginning of year   $    955,332    $   796,879    $   772,964    $   132,618    $   121,488    $   142,571
Service cost                                    38,230         27,423         27,914          2,266          2,316          2,410
Interest cost                                   67,864         61,458         56,698          7,114          7,987          8,296
Plan participants' contributions                                                              1,216          1,653          1,435
Amendments                                       5,666          4,483         13,299           (868)                       (8,599)
Actuarial (gains) losses                        35,582         57,444        (51,397)       (11,788)         2,695        (14,825)
Net acquisitions (divestitures)                                51,384         17,225                         6,931           (304)
Benefits paid                                  (48,775)       (43,739)       (39,824)        (9,329)       (10,452)        (9,496)
                                           -----------    -----------    -----------    -----------    -----------    -----------
Benefit obligation at end of year          $ 1,053,899    $   955,332    $   796,879    $   121,229    $   132,618    $   121,488
                                           -----------    -----------    -----------    -----------    -----------    -----------
Change In Plan Assets
Fair value of plan assets
  at beginning of year                     $ 1,058,759    $   859,911    $   772,494    $    12,386    $    12,400    $        --
Actual return on plan assets                   130,259        173,445        106,651            916            843
Acquisitions                                                   59,495         12,124
Company contributions                            8,930          9,647          8,466          7,512          7,942         20,461
Plan participants' contributions                                                              1,216          1,653          1,435
Benefits paid                                  (48,775)       (43,739)       (39,824)        (9,329)       (10,452)        (9,496)
                                           -----------    -----------    -----------    -----------    -----------    -----------
Fair value of plan assets at end of year   $ 1,149,173    $ 1,058,759    $   859,911    $    12,701    $    12,386    $    12,400
                                           -----------    -----------    -----------    -----------    -----------    -----------

Funded status of plan (underfunded)        $    95,274    $   103,427    $    63,032    $  (108,528)   $  (120,232)   $  (109,088)
Unrecognized net actuarial loss               (120,239)      (126,768)       (84,860)       (18,297)        (6,724)        (9,788)
Unrecognized prior service cost                 42,159         42,911         44,418        (20,293)       (23,529)       (27,535)
Unrecognized net (asset) obligation at the
  date FAS 87 was adopted, 
  net of amortization                           (8,480)       (12,576)       (16,854)
                                           -----------    -----------    -----------    -----------    -----------    -----------
Net prepaid (accrued) benefit cost         $     8,714    $     6,994    $     5,736    $  (147,118)   $  (150,485)   $  (146,411)
                                           ===========    ===========    ===========    ===========    ===========    =========== 
</TABLE>
Amounts recognized in the Consolidated Balance Sheet consist of:
<TABLE>
<CAPTION>

                                                         Pension Benefits                           Other Benefits
                                           -----------------------------------------    -----------------------------------------
                                               1998          1997           1996           1998            1997          1996
                                           -----------    -----------    -----------    -----------    -----------    -----------
<S>                                       <C>            <C>            <C>            <C>            <C>            <C>        
Prepaid benefit cost                       $    51,636    $    56,504    $    47,983
Accrued benefit liability                      (42,922)       (49,510)       (42,247)   $  (147,118)   $  (150,485)   $  (146,411)
Additional minimum liability                    (9,200)        (5,922)       (14,279)
Intangible asset                                 9,200          5,922         14,279
                                           -----------    -----------    -----------    -----------    -----------    -----------
Net prepaid (accrued) benefit cost         $     8,714    $     6,994    $     5,736    $  (147,118)   $  (150,485)   $  (146,411)
                                           ===========    ===========    ===========    ===========    ===========    =========== 
</TABLE>

                                       49
<PAGE>

Amounts  applicable to the  company's  pension  plans with  accumulated  benefit
obligations in excess of plan assets are as follows:

                                              1998         1997         1996
                                           ---------    ---------    ---------
Projected benefit obligation               $(119,794)   $ (43,497)   $ (87,467)
Accumulated benefit obligation              (106,092)     (32,484)     (77,021)
Fair value of plan assets                     68,988        2,529       49,809
Unfunded accumulated benefit obligation      (37,104)     (29,955)     (27,212)

Of the plans whose  accumulated  benefit  obligations  exceed plan  assets,  the
amounts applicable to qualified plans are as follows:

                                              1998         1997         1996
                                           ---------    ---------    ---------
Projected benefit obligation               $ (79,800)   $  (2,934)   $ (55,632)
Accumulated benefit obligation               (75,211)      (2,934)     (52,011)
Fair value of plan assets                     68,988        2,529       49,809
Unfunded accumulated benefit obligation       (6,223)        (405)      (2,202)

Net pension  assets are  included in "Other"  noncurrent  assets and net pension
liabilities   are  included  in  "Employment   benefits  and  other   noncurrent
liabilities."  In  1996,  net  pension   liabilities   related  to  discontinued
operations were included in "Net assets of discontinued BIS  operations."  These
net pension liabilities were assumed by corporate in 1997.  Substantially all of
the assets of the  company-administered  plans are invested in listed stocks and
bonds. In 1996, the $12.4 million funding of the postretirement  plan assets was
included in "Prepaid expense."

In the fourth quarter of 1998, the company changed the method of accounting used
to determine the market-related  value of plan assets,  effective Dec. 29, 1997.
The  method was  changed  to:  (1) align the  method of  calculating  the return
component  of net  periodic  pension  costs with the related  plans'  investment
strategy; and (2) to minimize significant  year-to-year  fluctuations in pension
cost caused by financial  market  volatility.  The effect of this change on 1998
results of operations,  including the cumulative  effect of prior years, was not
material.

G. ACQUISITIONS AND DISPOSITIONS

ACQUISITIONS

On May 9, 1997, the company  completed the acquisition for $1.65 billion of four
newspapers  indirectly  owned by The Walt Disney  Company.  The  acquisition was
accomplished  through  the  merger of a wholly  owned  subsidiary  with and into
Cypress Media, Inc.  ("Media"),  formerly known as ABC Media, Inc., the owner of
the four  newspapers.  Media owns  newspapers  in Kansas City,  Mo., Fort Worth,
Texas, Belleville,  Ill., and Wilkes-Barre,  Pa. The company intends to continue
to manage and operate Media as a newspaper company.

The acquisition was accounted for under the purchase method.  The purchase price
was  allocated  based on the  estimated  fair market  value of net  tangible and
intangible  assets  acquired.  The fair  market  value of the net  tangible  and
intangible assets of Media was approximately $317.3 million at date of purchase,

                                       50
<PAGE>

including  $351.6 million of intangible  assets,  which are being amortized on a
straight-line  basis  over  periods  ranging  from 10  years  to 40  years.  The
intangible  assets  acquired  primarily  represent  mastheads,   which  have  an
indefinite  life, but are being amortized over 40 years.  The excess of purchase
price over these net assets,  approximately $1.33 billion,  has been recorded as
goodwill and is being amortized on a straight-line basis over 40 years.

Pursuant to the  merger,  the company  issued  1,754,930  shares of its Series B
convertible  preferred stock.  Each share of preferred stock is convertible into
10 shares of common stock.  At the effective time of the merger,  Media had $990
million of bank debt, which was assumed by the company. The company's results of
operations include Media from May 9, 1997.

The pro forma  unaudited  results of  operations,  as though  the  former  Media
newspapers acquisition had occurred at the beginning of the fiscal year in which
the acquisition took place as well as for the comparable preceding year, were as
follows (in thousands of dollars, except share data):

                                                      1997               1996
                                                   ----------         ----------
Operating revenue                                  $3,058,791         $2,873,946
Income before income taxes                            695,466            313,038
Net income                                            413,932            255,602
Earnings per share
  Basic                                            $     4.68         $     2.66
  Diluted                                                4.09               2.22

On Aug. 24, 1997, the company exchanged its newspaper in Boulder, Colo., for two
newspapers in California owned by the E.W. Scripps Company,  The Monterey County
Herald and the San Luis Obispo County Telegram-Tribune.

The exchange was accounted for under the purchase method.  The fair market value
of the two newspapers  received in the exchange was approximately $55.8 million,
and that value was allocated to the net tangible and intangible  assets of these
newspapers.  The fair market value of the  identified  tangible  and  intangible
assets was  approximately  $50.3  million at date of exchange,  including  $17.7
million of intangible assets, which are being amortized on a straight-line basis
over periods ranging from 10 years to 40 years.  The excess of the fair value of
these newspapers over their net assets, of approximately $5.5 million,  has been
recorded as goodwill  and is being  amortized on a  straight-line  basis over 40
years.  The company's  results of operations  include  Boulder  through Aug. 24,
1997, and Monterey and San Luis Obispo from that same date forward.

DISPOSITIONS 

Related to Continuing Operations:

On March 18, 1998, the company closed on the sale of its remaining interest in a
jointly  owned cable system with  Tele-Communications,  Inc.  (TCI).  On Feb. 2,
1998,  the  company  sold  the   Post-Tribune   in  Gary,   Ind.,  to  Hollinger
International, Inc. The proceeds from these sales were $95.8 million, consisting
of $58.1  million in cash and TCI stock with an aggregate  market value of $37.7
million.  The pretax and  after-tax  gains on the sales were $75.3  million  and
$45.0 million, respectively.

                                       51
<PAGE>

In December  1997,  the company sold its  newspapers in Boca Raton,  Fla.,  Long
Beach,  Calif.,  Milledgeville,  Ga.,  and  Newberry,  S.C. The sale of the Boca
Raton,  Newberry and Milledgeville  newspapers to Community  Newspaper Holdings,
Inc., also included the transfer to the company of The Daily Sun and The Buyer's
Guide, a shopper,  in Warner Robins,  Ga., and The Byron (Ga.) Gazette, a weekly
newspaper.  The Long Beach newspaper was sold to Garden State Newspapers,  Inc.,
an  affiliate  of  Media  News  Group.  The  proceeds  from the sale of the four
newspapers  were $50.7 million.  The pretax and after-tax  gains from their sale
were $18.1 million and $10.3 million, respectively.

On Aug. 24, 1997, the company exchanged its newspaper in Boulder, Colo., for two
newspapers  in  California  owned  by the E.W.  Scripps  Company.  The  exchange
resulted  in pretax and  after-tax  gains of $43.2  million  and $24.5  million,
respectively.

In  January  1997,  the  company  and TCI  closed  on the sale of the  company's
interest in all but one of their  jointly owned cable  systems.  As noted above,
the balance of the cable system was sold in March 1998. The total sale price was
$377.6 million and resulted in pretax and after-tax  gains of $221.8 million and
$128.3 million, respectively.

In November  1996,  the company sold its  investment in Netscape  Communications
Corporation,  resulting in an after-tax gain of $8.1 million, net of adjustments
in the carrying value of certain other investments.

Related to Discontinued Operations:

In 1997,  the company  announced its  intention to sell the  remaining  Business
Information   Services  (BIS)  subsidiaries.   This  decision  resulted  in  the
reclassification  of the former  BIS  segment as  discontinued  operations.  The
company fully divested the BIS segment with the sale of Technimetrics, Inc., its
global diversified information subsidiary, in 1998.

On April  13,  1998,  the  company  closed  on the sale of  Technimetrics  to an
operating  unit of The  Thomson  Corporation.  The  proceeds  from the sale were
$125.0 million and resulted in pretax and after-tax  gains of $103.8 million and
$60.0 million, respectively.

On Nov. 14,  1997,  the company sold KRII to M.A.I.D plc for $420 million plus a
working capital purchase price adjustment of approximately $15 million. The sale
resulted  in a  pretax  gain of $23.6  million  and an  after-tax  gain of $15.3
million.

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.

                                       52
<PAGE>

H. COMPREHENSIVE INCOME

The following  table presents the components of other  comprehensive  income for
1998,  1997 and  1996 as shown in the  statement  of  shareholders'  equity  (in
thousands):
<TABLE>
<CAPTION>

                                                                  1998        1997        1996
                                                                --------    --------    --------
<S>                                                              <C>       <C>          <C>
Unrealized gains on securities available for sale:
  Change in unrealized gains, net of taxes of $12,492 in
    1998, $716 in 1997 and $17,388 in 1996                      $ 18,738    $ (1,086)   $(23,870)
  Less: reclassification adjustment for gains
    realized in net income, net of taxes of $494 in 1997
    and $12,498 in 1996                                                         (585)    (17,401)
                                                                --------    --------    --------
Other comprehensive income                                      $ 18,738    $ (1,671)   $(41,271)
                                                                ========    ========    ======== 
</TABLE>


I. COMMITMENTS AND CONTINGENCIES

At Dec.  27,  1998,  the company had lease  commitments  currently  estimated to
aggregate  approximately  $79.1  million  that expire from 1999  through 2051 as
follows (in thousands):

1999                                                            $   16,552
2000                                                                13,733
2001                                                                10,608
2002                                                                 8,623
2003                                                                 7,674
2004 and thereafter                                                 21,918
                                                                ----------
  Total                                                         $   79,108
                                                                ==========

Payments under the lease contracts were $19.3 million in 1998,  $15.6 million in
1997 and $14.2 million in 1996.

In  connection  with the  company's  insurance  program,  letters  of credit are
required to support certain projected worker compensation  obligations.  At Dec.
27, 1998, the company had approximately $45 million of undrawn letters of credit
outstanding.

On July 13, 1995, six unions struck the Detroit Free Press, The Detroit News and
the Detroit Newspaper Agency, which operates both newspapers.  Subsequently, the
unions filed numerous  unfair labor practice  charges against the newspapers and
the Agency.  In June 1997,  after a lengthy trial,  a National  Labor  Relations
Board  (NLRB)  administrative  law judge ruled that the strike was caused by the
unfair  labor  practices of the Agency and The Detroit News and ordered that the
Agency  and  the  newspapers   reinstate  all  strikers,   displacing  permanent
replacements if necessary.  The Agency and the newspapers  appealed the decision
to the NLRB.

On August 27, 1998, the NLRB affirmed  certain  unfair labor  practice  findings
against The Detroit News and the Agency and reversed  certain findings of unfair
labor practices against the Agency. The Agency and the newspapers filed a motion
to reconsider  with the NLRB, that was denied on March 4, 1999. The unions filed
an appeal to the U.S.  Court of Appeals for  District of Columbia  Circuit.  The
Agency  and the  newspapers  filed a  motion  to  dismiss  the  appeal  which is
scheduled for hearing on March 23, 1999.

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 all legal  proceedings,  including
Detroit,  will  not  be  material  to  its  financial  position  or  results  of
operations, on a consolidated basis.

                                       53

<PAGE>


REPORT OF INDEPENDENT AUDITORS

Shareholders
Knight-Ridder, Inc.

We have audited the accompanying  consolidated  balance sheet of Knight- Ridder,
Inc., and  subsidiaries  as of Dec. 27, 1998,  Dec. 28, 1997, and Dec. 29, 1996,
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. 27, 1998, Dec. 28, 1997, and Dec. 29, 1996, 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 F to the  consolidated  financial  statements,  in 1998 the
company changed its method of accounting for certain postretirement benefits.

                                                 /s/ ERNST & YOUNG LLP
                                                 ---------------------
San Jose, California
January 22, 1999

                                       54
<PAGE>

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

1999 Proxy  Statement  pages 5 and 6,  "Election of Directors" and "Nominees for
Election for Three-Year Terms Ending 2002; pages 7 and 8, "Directors  Continuing
in Office"; page 9, "Section 16 (a) Beneficial Ownership Reporting  Compliance";
pages  10 and 11,  "Board  Committees  and  Attendance"  and  "How  the  Company
Compensates  Directors"; and  page  11,  "Certain   Relationships  and   Related
Transactions".

KNIGHT RIDDER EXECUTIVE COMMITTEE

Alvah H. Chapman Jr., 77
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; The
Miami Herald general manager 1962 to 1969. B.S.,  business  administration,  The
Citadel, 1942.

Mary Jean Connors, 46
Senior vice president/human resources since 1996; 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, 67
Retired president and a partner in the law firm of Hughes Hubbard & Reed. Served
as president 1995 to 1997;  executive  vice president 1994 to 1995;  senior vice
president 1987 to 1993;  general counsel 1980 to 1993.  Prior to that, a partner
with Hughes Hubbard & Reed.  LL.B.,  Harvard Law School,  1956; B.A.,  political
science, University of Michigan, 1953.

Ross Jones, 56
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.  Advanced
Management Program,  Harvard Business School,  1988; M.B.A.,  finance,  Columbia
University Business School, 1970; B.A., classics, Brown University, 1965.

Frank McComas, 53
Senior vice  president/operations  since 1996; 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.

                                       55
<PAGE>

P. Anthony Ridder, 58
Chairman of the 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.

Steven B. Rossi, 49
Senior vice  president/operations  since December 1998. Served as executive vice
president and general  manager,  Philadelphia  Newspapers,  Inc.,  1992 to 1998;
executive vice president 1991 to 1992;  senior vice president 1988 to 1991; vice
president/finance  and CFO 1987 to 1988. Served as vice president and divisional
general manager of Amerigas,  Inc., 1981 to 1987.  M.B.A., The Wharton School of
the University of Pennsylvania, 1974; B.A., economics, Ursinus College, 1971.

Karen Stevenson, 48
Vice president and general  counsel since August 1998.  Served as executive vice
president,  general  counsel and secretary of TELE-TV in New York, 1995 to 1997;
member of the San Francisco law firm of Howard, Rice, Nemerovski, Canady, Falk &
Rabkin,   1990  to  1995;  vice   president/law   and  secretary,   Transamerica
Corporation,  1988 to 1990.  J.D.,  Boalt  Hall  School  of Law,  University  of
California, 1980; B.A., sociology, University of California, Los Angeles, 1971.

KNIGHT RIDDER OFFICERS

Marshall Anstandig, 50
Vice president/senior  labor and employment counsel since August 1998. Served as
partner in the law firm of Brown & Bain, P.A., 1996 to 1998; managing partner in
law firm of Bryan Cave in Phoenix 1990 to 1996.  J.D.,  Detroit  College of Law,
Michigan State University, 1974; B.A., political science, Hope College, 1971.

Marty Claus, 50
Vice  president/news  since 1993.  Served as Detroit Free Press managing editor/
business and features 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, 42
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  Corporation  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, 50
Vice   president/research   since  1989.  Served  as  vice   president/news  and
circulation  research 1986 to 1989;  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.

Clark Hoyt, 56
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,  Detroit Free Press and Washington  Bureau,
1968 to 1976. B.A., English literature, Columbia College, 1964.

                                       56
<PAGE>

Mindi Keirnan, 43
Vice president/operations  since 1996; 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, 53
Vice  president/corporate  relations  since 1994 and corporate  secretary  since
January  1999.  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,  The Wharton School of the
University of Pennsylvania, 1970; B.A., English, Yale, 1967.

Tally C. Liu, 48
Vice  president/finance  and  advanced  technology  since  1998.  Served as vice
president/finance  and administration 1994 to 1998; 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, 45
Vice  president/production  and facilities  since 1998.  Served as Knight Ridder
vice  president/technology  1994 to 1998; 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;  various
production  positions,  Knight Ridder and The Miami Herald,  1977 to 1986. M.S.,
management science, Auburn University, 1977; B.S., University of North Carolina,
business administration, 1976.

Alan G. Silverglat, 52
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.

David Starr, 48
Vice president and chief  information  officer since June 1998.  Served as chief
information  officer at The Reader's  Digest  Association,  Inc.,  1997 to 1998;
chief  information  officer  for ITT  Corporation,  1994 to  1997;  senior  vice
president,  information  technology,  Citicorp Payment  Products,  1986 to 1993;
senior manager,  Price Waterhouse,  1980 to 1986. B.A.,  physics,  Florida State
University, 1972.

                                       57
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

1999 Proxy Statement,  page 10, "Board Committees and Attendance";  pages 10 and
11, "How the Company  Compensates  Directors"  and  "Certain  Relationships  and
Related  Transactions";  page 19 through  page 23, "How the Company  Compensates
Executive  Officers";  page 23, "Summary  Compensation  Table";  page 24, "Stock
Option Grants in Last Fiscal Year";  page 25,  "Aggregate Stock Option Exercises
in Last  Fiscal  Year  and  Fiscal  Year-End  Stock  Option  Values";  page  26,
"Long-Term Incentive Plan Awards in Last Fiscal Year" and "Other Benefits";  and
page 27, "Performance of Knight Ridder Common Stock".

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

1999 Proxy Statement,  page 5, "Information About Knight Ridder Stock Ownership"
and page 9, "Stock Ownership of Directors and Officers".

See Part II, Item 8, "Financial  Statements and  Supplementary  Data", Note E to
the consolidated financial statements.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

1999 Proxy Statement, page 11, "Certain Relationships and Related Transactions".

                                       58
<PAGE>

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 27, 1998, are included in Item 8:

                  Consolidated  Balance Sheet - December 27, 1998,  December 28,
                  1997, and December 29, 1996

                  Consolidated  Statement  of Income - Years ended  December 27,
                  1998, December 28, 1997, and December 29, 1996

                  Consolidated  Statement  of Cash Flows - Years ended  December
                  27, 1998, December 28, 1997, and December 29, 1996

                  Consolidated  Statement of Shareholders'  Equity - Years ended
                  December 27, 1998, December 28, 1997, and December 29, 1996

                  Notes to consolidated financial statements - December 27, 1998

         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

                  No.  2         -  Disposition  of  Assets is  incorporated  by
                                    reference to the Company's Form 8-K dated as
                                    of March 18, 1998, filed March 31, 1998.

                  No.  3(i)      -  Amended    and    Restated    Articles    of
                                    Incorporation   of    Knight-Ridder,    Inc.
                                    (totally   amended   and   restated   as  of
                                    February,    1998)   are   incorporated   by
                                    reference to the  Company's  Form 10-K filed
                                    March 13, 1998.

                        (ii)     -  Bylaws of  Knight-Ridder,  Inc.  (As Amended
                                    Through January 28, 1997),  are incorporated
                                    by  reference  to the  Company's  Form  10-Q
                                    filed May 9, 1997.

                  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-K filed July 9, 1996.


                                       59
<PAGE>

                                    Indenture,  dated as of October 9, 1997,  is
                                    Incorporated  by reference to the  Company's
                                    Registration    Statement   on   Form   S-3,
                                    effective October 10, 1997 (No. 333-37603).

                  No. 10 (a)     -  Knight-Ridder,  Inc.  Employee  Stock Option
                                    Plan (As amended  through  January 26, 1999)
                                    is filed herein.

                         (b)     -  Knight-Ridder,  Inc.  Compensation  Plan for
                                    Nonemployee Directors effective July 1, 1997
                                    (As amended  through  January  26,  1999) is
                                    filed herein.

                         (c)     -  Knight Ridder Annual Incentive Plan is filed
                                    herein.

                         (d)     -  Consulting Agreement is filed herein.

                                 -  Stock     Purchase     Agreement     between
                                    Knight-Ridder Business Information Services,
                                    Inc. and M.A.I.D.  plc,  dated as of October
                                    1, 1997 is  incorporated by reference to the
                                    Company's Form 10-Q filed November 12, 1997.

                                 -  Knight-Ridder, Inc. Long-Term Incentive Plan
                                    is   incorporated   by   reference   to  the
                                    Company's Form 10-Q filed on May 9, 1997.

                                 -  Knight-Ridder   Local   Incentive   Plan  is
                                    incorporated  by reference to the  Company's
                                    Form 10-K filed on March 20,  1996.

                                 -  Executive  Officer's   Retirement  Agreement
                                    dated December 19, 1991, is  incorporated by
                                    reference to the  Company's  Form 10-K filed
                                    on March 23, 1994.

                  No. 11         -  Statement  re   Computation   of  Per  Share
                                    Earnings is filed herein.

                  No. 12         -  Statement  re  Computation  of  Earnings  to
                                    Fixed   Charges   Ratio   From    Continuing
                                    Operations is filed herein.

                  No. 18         -  Change  in  accounting  principle  is  filed
                                    herein.

                  No. 21         -  Subsidiaries  of  the  Registrant  is  filed
                                    herein.

                                       60
<PAGE>


                  No. 23         -  "Consent of  Independent  Auditors" is filed
                                    herein.

                  No. 24         -  "Powers  of  Attorney" for Thomas P. Gerrity
                                    and   Kathleen  Foley  Feldstein  are  filed
                                    herein.  "Power of Attorney"  for M. Kenneth
                                    Oshman is  incorporated  by reference to the
                                    Company's Form 10-K filed on March 10, 1997.
                                    "Power of Attorney"  for James I. Cash,  Jr.
                                    is   incorporated   by   reference   to  the
                                    Company's Form 10-K filed on March 20, 1996.
                                    "Powers of Attorney"  for all other  members
                                    of the Board of Directors  are  incorporated
                                    by  reference  to the  Company's  Form  10-K
                                    filed on March 24, 1995.

                  No. 27         -  "Financial Data Schedule" is filed herein.

   (b) Reports on Form 8-K filed during the fourth quarter of 1998:

       There were no reports on Form 8-K filed during the quarter ended December
       27, 1998.

   (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.


                                       61
<PAGE>


                                   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 19, 1999
-----------------------------               ------------------------------------
                                        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 19, 1999
-----------------------------               ------------------------------------
                                            P. Anthony Ridder
                                            Chairman and
                                            Chief Executive Officer

Dated March 19, 1999
-----------------------------               ------------------------------------
                                            Ross Jones
                                            Chief Financial Officer and
                                            Senior Vice President/Finance

Dated March 19, 1999
-----------------------------               ------------------------------------
                                            Gary R. Effren
                                            Vice President/Controller
                                            (Chief Accounting Officer)


                                       62
<PAGE>




                                            /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/ Kathleen Foley Feldstein*
                                            ------------------------------------
                                            Kathleen Foley Feldstein
                                            Director

                                            /s/ Thomas P. Gerrity*
                                            ------------------------------------
                                            Thomas P. Gerrity
                                            Director

                                            /s/ Barbara Barnes Hauptfuhrer*
                                            ------------------------------------
                                            Barbara Barnes Hauptfuhrer
                                            Director

                                            /s/ Jesse Hill, Jr.*
                                            ------------------------------------
                                            Jesse Hill, Jr.
                                            Director

                                            /s/ M. Kenneth Oshman*
                                            ------------------------------------
                                            M. Kenneth Oshman
                                            Director

                                            /s/ Thomas L. Phillips*
                                            ------------------------------------
                                            Thomas L. Phillips
                                            Director

                                            /s/ P. Anthony Ridder*
                                            ------------------------------------
                                            P. Anthony Ridder
                                            Director

                                            /s/ Randall L. Tobias*
                                            ------------------------------------
                                            Randall L. Tobias
                                            Director

                                       63
<PAGE>


                                            /s/ Gonzalo F. Valdes-Fauli*
                                            ------------------------------------
                                            Gonzalo F. Valdes-Fauli
                                            Director

                                            /s/John L. Weinberg*
                                            ------------------------------------
                                            John L. Weinberg
                                            Director


Dated March 19, 1999                        * By Ross Jones
------------------------------              ------------------------------------
                                            Ross Jones
                                            Attorney-in-fact


                                       64
<PAGE>

                           ANNUAL REPORT ON FORM 10-K

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

                               SUPPLEMENTARY DATA

                                CERTAIN EXHIBITS

                          YEAR ENDED DECEMBER 27, 1998

                      KNIGHT-RIDDER, INC. AND SUBSIDIARIES

                              SAN JOSE, CALIFORNIA

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<PAGE>

<TABLE>
<CAPTION>
                                                                                                                    SCHEDULE  II

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

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 27, 1998:

   RESERVES AND ALLOWANCES
     DEDUCTED FROM ASSET ACCOUNT:
        ACCOUNTS RECEIVABLE ALLOWANCES                $ 14,963       $ 20,854                            $20,079 (2)   $ 15,738
        VALUATION ALLOWANCE FOR DEFERRED TAXES           1,357                                                            1,357
                                                      --------       --------        --------           --------       --------
                                                      $ 16,320       $ 20,854                           $ 20,079       $ 17,095
YEAR ENDED DECEMBER 28, 1997:

   RESERVES AND ALLOWANCES
     DEDUCTED FROM ASSET ACCOUNT:
        ACCOUNTS RECEIVABLE ALLOWANCES                $ 12,685       $ 23,332        $    752(1)        $ 21,806 (2)   $ 14,963
        VALUATION ALLOWANCE FOR DEFERRED TAXES           1,357                                                            1,357
                                                      --------       --------        --------           --------       --------
                                                      $ 14,042       $ 23,332        $    752           $ 21,806       $ 16,320
YEAR ENDED DECEMBER 29, 1996:

   RESERVES AND ALLOWANCES
     DEDUCTED FROM ASSET ACCOUNT:
        ACCOUNTS RECEIVABLE ALLOWANCES                $ 14,348       $ 19,315        $  2,097(1)        $ 23,075 (2)   $ 12,685
        VALUATION ALLOWANCE FOR DEFERRED TAXES           1,357                                                            1,357
                                                      --------       --------        --------           --------       --------
                                                      $ 15,705       $ 19,315        $  2,097           $ 23,075       $ 14,042
</TABLE>

(1)  Represents  amounts from the former BIS  division  included  under  "Income
     (loss) from  discontinued BIS operations" in the Consolidated  Statement of
     Income.

(2)  Represents  uncollectible  accounts  written-off,  net of  recoveries,  and
     dispositions of subsidiaries' balances.

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