<PAGE>
================================================================================

   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 17, 2003

                                  ------------

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  ------------

                                   FORM 20-F/A
                                (AMENDMENT NO. 1)

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

                         Commission File Number: 0-22346

                                  ------------

                                 HOLLINGER INC.
             (Exact name of Registrant as specified in its charter)

                                 ONTARIO, CANADA
                 (Jurisdiction of incorporation or organization)

                                10 TORONTO STREET
                                TORONTO, ONTARIO
                                 CANADA M5C 2B7
                     (Address of principal executive office)

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

                            RETRACTABLE COMMON SHARES


Number of outstanding shares of each of the Registrant's classes of capital or
common stock at December 31, 2002:

                      4,580,979 SERIES II PREFERENCE SHARES
                     10,147,225 SERIES III PREFERENCE SHARES
                      32,352,047 RETRACTABLE COMMON SHARES

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 which financial statement item the Registrant has elected
to follow:

                   Item 17             Item 18   X
                           -----               -----


                                  ------------


                         INDEX TO EXHIBITS ON PAGE _____

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                              Page 1 of       Pages
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TABLE OF CONTENTS

EXPLANATORY NOTE.............................................................  2
ITEM 3.        KEY INFORMATION...............................................  5
ITEM 4.        INFORMATION ON THE COMPANY.................................... 16
ITEM 5.        OPERATING AND FINANCIAL REVIEW AND PROSPECTS.................. 29
ITEM 7.        MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS............. 57
ITEM 18.       FINANCIAL STATEMENTS..........................................F-1
ITEM 19.       EXHIBITS...................................................... 64
SIGNATURES................................................................... 65

                                       1
<PAGE>

                                EXPLANATORY NOTE

This report is being filed to amend and restate "Item 3A. Selected Financial
Data", "Item 3D. Risk Factors", "Item 4D. Business Strategy", "Item 4G.
Property, Plants and Equipment", "Item 5A. Operating Results", "Item 5B.
Liquidity and Capital Resources", "Item 7A. Major Shareholders", "Item 7B.
Related Party Transactions", "Item 18. Financial Statements" and "Item 19.
Exhibits" contained in our annual report on Form 20-F for the year ended
December 31, 2002 originally filed with the Securities and Exchange Commission
on June 27, 2003.

Item 3A Selected Financial Data

As described below under "Item 18 Consolidated Balance Sheets", Selected
Financial Data was amended to conform with the presentation of amounts due to
related parties and amounts due from related parties in the Company's
consolidated balance sheet. As a result, for the years ended December 31, 1998,
1999, 2000, 2001 and 2002, the total assets increased by $275,000 to
$5,704,776,000 by $175,000 to $5,650,609,000, by $1,185,000 to $4,671,372,000,
by $26,874,000 and $23,640,000 to $3,656,116,000 and $3,639,861,000,
respectively.

In addition, footnote 2 to the Selected Financial Data table was amended to
disclose the impact on the Company's reported Canadian Generally Accepted
Accounting Principles ("GAAP") consolidated statement of earnings for the years
ended December 31, 1998, 1999, 2000 and 2001 and the United States GAAP
consolidated statement of earnings for the years ended December 31, 2000 and
2001 in respect of goodwill and intangible assets not being amortized.

The Company amended the Selected Financial data to include footnote 5 to
"Diluted earnings (loss) per share". Effective January 1, 2001, the Company
adopted, retroactively, with restatement, the recommendations of the CICA
Section 3500, with respect to earnings per share. As a result, the diluted
earnings (loss) per share were increased from $3.01 per share to $3.09 per share
in 1998, from $3.83 per share to $4.39 per share in 1999 and $4.48 per share to
$5.05 per share in 2000.

As described below under "Item 18. Note 26 Schedule of Reconciliation to United
States Generally Accepted Accounting Principles (GAAP)", retractable common
shares under U.S. GAAP were retroactively reclassified outside of shareholders'
deficiency for the year ended December 31, 2001 and 2002. Therefore, footnote 9
to "Capital Stock" was included in Selected Financial Data.

Item 3D Risk Factors

The Company amended Risk Factors to reflect the change in subsequent events as
reported below under "Item 18 Note 29 Subsequent Events".

Items 4D and 4G of this Form 20-F/A for the year ended December 31, 2002 have
been revised.

The Company has amended this Form 20-F/A to disclosure International's 100%
ownership in the downtown Chicago facilities described therein.

Item 5A Operating Results

The Company amended under "Overview - Hollinger Inc." the change in subsequent
events as reported below under "Item 18 Note 29 Subsequent Events".

In addition, the "Outlook for International" was updated to reflect the current
outlook as disclosed in the Company's interim consolidated financial statements
for the six month period ended June 30, 2003.

Under "The Company's Significant Transactions", an amendment was made to reflect
the change in subsequent events as reported below under "Item 18 Note 29
Subsequent Events".

As described below under "Item 18. Note 26 Schedule of Reconciliation to United
States Generally Accepted Accounting Principles (GAAP)", the presentation of
retractable common shares under U.S. GAAP differs from Canadian GAAP and
therefore, the difference was included under "Canadian and United States
Accounting Policy Differences".

Item 5B of this Form 20-F/A for the year ended December 31, 2002 has been
revised.

Item 7 of this Form 20-F/A for the year ended December 31, 2002 has been
revised.


                                       2
<PAGE>
Item 18 of this Form 20-F/A for the year ended December 31, 2002 has been
revised for the following note disclosures:

Consolidated Balance Sheets

In the consolidated balance sheet as at June 30, 2003, the Company reclassified
amounts due from related parties which were previously netted against amounts
due to related parties. As a result, the consolidated balance sheets as at
December 31, 2001 and December 31, 2002 were reclassified to conform with the
current presentation of amounts due from related parties and amounts due to
related parties.

The net impact of the reclassification as at December 31, 2001 was to increase
amounts due from related parties, total assets, amounts due to related parties
and total liabilities and shareholders' deficiency by $26,874,000 to
$26,874,000, $3,656,116,000, $72,793,000 and $3,656,116,000 respectively. As at
December 31, 2002, the net impact of the reclassification was to increase
amounts due from related parties, total assets, amounts due to related parties
and total liabilities and shareholders' deficiency by $23,640,000 to
$23,640,000, $3,639,861,000, $103,295,000 and $3,639,861,000 respectively.

23. Related Party Transactions

In note 23d), the terms of the amount owing from Hollinger Canadian Publishing
Holdings Co. ("HCPH Co.") to Ravelston Management Inc. ("RMI") were amended to
appropriately reflect the interest rate and repayment terms. The amount owing to
RMI by HCPH Co. is due on demand, is unsecured and is stated to bear interest at
an annual rate of bankers' acceptance rate plus 4%.

26. Schedule of Reconciliation to United States Generally Accepted Accounting
Principles (GAAP)

In 2001 and 2002, the Company originally presented its retractable common shares
as part of shareholders' deficiency. Under U.S. GAAP the retractable common
shares do not qualify as permanent equity due to the retractable features being
effective at the option of the holder. As a result, the retractable common
shares are required to be reclassified outside of shareholders' deficiency.

In addition, under U.S. GAAP loans receivable from employees relating to share
purchases were originally presented in the consolidated balance sheet as a
deduction from capital stock. As a result of the presentation of retractable
common shares outside of shareholders' deficiency for U.S. GAAP purposes, the
loans receivable from employees relating to share purchases are no longer
required to be deducted from capital stock.

The Company has retroactively restated its U.S. GAAP shareholders' deficiency in
respect of these changes in presentation, the net impact of which was to
increase the shareholders' deficiency in 2001 by $265,931,000 to $569,558,000.

Accordingly, notes 26m) and 26v) have been amended to reflect the changes in the
presentation of capital stock and loans receivable from employees relating to
share purchases as required under U.S. GAAP.

29. Subsequent Events

The Company had previously disclosed in note 29e), that effective April 30,
2003, US$15.7 million principal amount of subordinated debt owing to Hollinger
International by NB Inc. was transferred by Hollinger International to HCPH Co.,
a subsidiary of Hollinger International, and subsequently transferred to RMI by
HCPH Co. in satisfaction of loan due from HCPH Co. to RMI (note 23d)). Hollinger
International and the Company previously reported that the committee of
independent directors of International had agreed to the US$15.7 million offset
to the remaining US$20.4 million of debt against amounts owed by International
to RMI, and further stated that the offset was effected April 30, 2003.

Although management of International and the Company believed final approval had
been given to the offset by the committee of independent directors of
International, the committee has advised that final approval of any offset
remains subject to appropriate due diligence and receipt of a further
independent fairness opinion. The due diligence process has not yet been
concluded and accordingly, the offset has not been completed as at August 25,
2003.

As a result, the Auditors' Report date has been double dated in respect of the
update to note 29e) as of August 25, 2003.

                                       3

<PAGE>
In addition, Item 19 of this Form 20-F/A for the year ended December 31, 2002
has been revised to include certain currently dated certifications of our
principal executive officer and principal financial officer.

This Form 20-F/A continues to speak as of the date of the original filing and
does not, and does not purport to, amend, update or restate the information in
any other Item of the Form 20-F filed on June 27, 2003 or reflect any events
that have occurred after such Form 20-F was filed, other than as required to
reflect the amendments described above and set forth below. All information
contained in this Form 20-F/A is subject to updating and supplementing as
provided in our reports filed with the Securities and Exchange Commission
subsequent to the date of the original filing of our annual report on Form 20-F
on June 27, 2003.

                                       4
<PAGE>

ITEM 3.  KEY INFORMATION

A.       SELECTED FINANCIAL DATA

                  SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA

    The summary historical consolidated financial data as of December 31, 1998,
1999, 2000, 2001, and 2002 has been derived from the audited consolidated
financial statements of the Company. The following data should be read in
conjunction with "Item 5 - Operating Financial Review and Prospects" and the
consolidated financial statements and notes thereto of the Company, included
elsewhere in this report.

    Our consolidated financial statements have been prepared in accordance with
Canadian generally accepted accounting principles ("Canadian GAAP"). For a
discussion of the material differences between Canadian GAAP and United States
generally accepted accounting principles ("US GAAP"), see note 26 to our audited
consolidated financial statements.

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                    ----------------------------------------------------------------------------
                                        1998            1999            2000            2001            2002
                                    -----------     -----------     -----------     -----------     ------------
<S>                                 <C>             <C>             <C>             <C>             <C>
                                                    (ALL AMOUNTS IN THOUSANDS OF CANADIAN DOLLARS)
OPERATING DATA:
  Canadian GAAP:
  Revenue
  Sales.........................    $  3,319,188    $  3,241,319    $  3,158,280    $  1,822,060    $  1,628,198
   Investment and other income..          22,464          18,953          28,146          97,282          29,729
                                    ------------    ------------    ------------    ------------    ------------
                                       3,341,652       3,260,272       3,186,426       1,919,342       1,657,927
                                    ------------    ------------    ------------    ------------    ------------
  Expenses
  Cost of sales and expenses(1).       2,620,177       2,647,465       2,586,183       1,730,108        1453,894
   Depreciation and
    amortization(2).............         209,498         228,802         219,932         144,716          88,193
   Interest expense(3)..........         233,878         258,231         274,331         177,926         121,747
                                    ------------    ------------    ------------    ------------    ------------
                                       3,063,553       3,134,498       3,080,446       2,052,750       1,663,834
                                    ------------    ------------    ------------    ------------    ------------
  Net earnings (loss) in equity
   accounted companies..........            (616)          1,211         (14,115)        (18,571)         (1,233)
                                    ------------    ------------    ------------    ------------    ------------
  Net foreign currency gains
   (losses).....................          (2,230)          3,911         (12,288)         (7,470)        (19,741)
                                    ------------    ------------    ------------    ------------    ------------
</TABLE>

                                       5

<PAGE>

<TABLE>
<S>                                 <C>             <C>             <C>             <C>             <C>
  Earnings (loss) before the
   undernoted...................         275,253         130,896          79,577        (159,449)        (26,881)
   Unusual items................         404,519         413,397         700,945        (295,434)        (62,630)
   Income tax recovery
    (expense)(4)................        (300,929)       (207,263)       (260,091)         89,477        (124,025)
   Minority interest recovery
    (expense)...................        (267,358)       (182,215)       (331,058)        233,508         124,896
                                    ------------    ------------    ------------    ------------    ------------
  Net earnings (loss)...........    $    111,485    $    154,815    $    189,373    $   (131,898)   $    (88,640)
                                    ============    ============    ============    ============    ============
 Dividends per retractable common
  share(5)                          $       0.60    $       0.60    $       0.60           $0.60    $       0.60
 Basic net earnings (loss) per
  share                             $       3.35    $       4.43    $       5.11    $      (3.91)   $      (2.76)
 Diluted net earnings (loss) per
  share(6)                          $       3.09    $       4.39    $       5.05    $      (4.17)   $      (2.79)
 US GAAP:
  Revenue(7)....................                                    $  3,109,670    $  1,774,255    $  1,579,663
  Net earnings (loss)...........                                    $     86,281    $    (82,047)   $    (83,760)
  Basic earnings (loss) before
   cumulative effect of change in
   accounting principles, per
   share                                                            $       1.52    $      (2.33)   $      (2.32)
  Basic net earnings (loss) per
   share                                                            $       1.52    $      (2.33)   $      (2.70)
  Diluted earnings (loss) before
   cumulative effect of change in
   accounting principles, per
   share                                                            $       1.42    $      (2.62)   $      (2.35)
  Diluted net earnings (loss) per
   share                                                            $       1.42    $      (2.62)   $      (2.73)
BALANCE SHEET DATA (AT PERIOD
 END):
 Canadian GAAP:
  Total assets..................    $  5,704,776    $  5,650,609    $  4,671,372    $  3,656,116    $  3,639,861
  Bank indebtedness.............    $    232,128    $    307,961    $    312,000    $    129,475    $     90,810
  Long-term debt, including
   current portion(8)...........    $  2,412,749    $  2,465,416    $  1,276,920    $  1,351,626    $  1,789,321
Capital stock(9)................    $    240,434    $    315,229    $    308,263    $    271,774    $    273,759
Net assets......................    $    (67,168)   $    138,888    $    (68,431)   $   (263,470)   $   (351,331)
Weighted average number of
common shares outstanding
during the period (thousands)...          33,152          34,971          37,041          33,740          32,064
</TABLE>

----------

(1)  The Company adopted effective January 1, 1999, on a retroactive basis, a
     new Canadian accounting standard issued by The Canadian Institute of
     Chartered Accountants ("CICA") with respect to accounting for employee
     future benefits, including pension and non-pension post-retirement
     benefits. The Company elected not to restate the comparative figures for
     periods prior to 1999 for this change in accounting policy. The cumulative
     effect of adopting the new standard in 1999 under Canadian GAAP was to
     increase the deficit as at January 1, 1999 by $7.8 million.

(2)  Effective January 1, 2002, the Company implemented on a prospective basis
     CICA Handbook Section 3062 ("HB 3062"), "Goodwill and Other Intangible
     Assets", which is consistent with SFAS No. 142 in the U.S. The new standard
     requires that goodwill and intangible assets with indefinite lives no
     longer be amortized, but instead be tested for impairment at least
     annually.

     The transitional provisions of HB 3062 and SFAS No. 142 require the Company
     to assess whether goodwill is impaired as of January 1, 2002. The Company
     completed its transitional impairment testing for goodwill and recorded an
     impairment charge of $32.0 million in respect of the goodwill for the
     Jerusalem Post operation. Such loss, net of related minority interest,
     amounted to $12.1 million and was recorded as a charge to the opening
     deficit as at January 1, 2002 under Canadian GAAP (as a cumulative effect
     of a change in accounting

                                        6


<PAGE>

     principle under US GAAP).

     At January 1, 2002, the Company has unamortized goodwill in the amount of
     $905.6 million, which is no longer being amortized. This amount is before
     any reduction for the transitional impairment.

     This change in accounting policy cannot be applied retroactively and the
     amounts presented for prior periods have not been restated for this change.
     If this change in accounting policy were applied to the reported Canadian
     GAAP consolidated statement of earnings for the years ended December 31,
     1998, 1999, 2000 and 2001 and the U.S. GAAP consolidated statement of
     earnings for the years ended December 31, 2000 and 2001, the impact of the
     change, in respect of goodwill and intangible assets not being amortized,
     would be as follows:

<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31,
                                                     ------------------------------------------------------
                                                        1998          1999          2000           2001
                                                     -----------   -----------   -----------   ------------
                                                     (ALL AMOUNTS THOUSANDS OF CANADIAN DOLLARS EXCEPT PER
                                                                         SHARE AMOUNTS)
     <S>                                             <C>           <C>           <C>           <C>
     Canadian GAAP
     Net earnings (loss), as reported..............   $111,485      $154,815      $189,373      $(131,898)
     Add goodwill and intangible asset amortization
       net of income taxes and minority interest...     31,113        36,829        31,384         16,978
                                                      --------      --------      --------      ---------
     Adjusted net earnings (loss)..................   $142,598      $191,644      $220,757      $(114,920)
                                                      ========      ========      ========      =========
     Basic earnings (loss) per share -- as
       reported....................................   $   3.35      $   4.43      $   5.11      $   (3.91)
     Basic adjusted earnings (loss) per share......   $   4.29      $   5.48      $   5.97      $   (3.41)
     Diluted earnings (loss) per share -- as
       reported(6).................................   $   3.09      $   4.39      $   5.05      $   (4.17)
     Diluted adjusted earnings (loss) per share....   $   3.99      $   5.36      $   5.90      $   (3.64)
</TABLE>

<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31,
                                                                    ------------------------
                                                                       2000         2001
                                                                    ----------   -----------
     <S>                                                            <C>          <C>
     U.S. GAAP
     Net earnings (loss), as reported............................    $ 86,281     $ (82,047)
     Add goodwill and intangible asset amortization net of income
       taxes and minority interest...............................      38,668        17,548
                                                                     --------     ---------
     Adjusted net earnings (loss)................................    $124,949     $ (64,499)
                                                                     ========     =========
     Basic earnings (loss) per share -- as reported..............    $   1.52     $   (2.33)
     Basic adjusted earnings (loss) per share....................    $   2.56     $   (1.81)
     Diluted earnings (loss) per share -- as reported............    $   1.42     $   (2.62)
     Diluted adjusted earnings (loss) per share..................    $   2.46     $   (2.10)
</TABLE>

     Adjusted net earnings (loss), noted above, in respect of both US and
     Canadian GAAP, reflects only the reduction in amortization expense of
     intangibles now classified as goodwill and does not give effect to the
     impact that this change in accounting policy would have had on the gains
     and losses resulting from the disposal of operations during 1998, 1999,
     2000 and 2001, nor the expensing of the costs previously capitalized under
     Canadian GAAP to increase long-term readership in 1998, 1999, 2000 and
     2001.

(3)  Total interest expense is the sum of interest on long-term debt and other
     interest.

(4)  The Company adopted effective January 1, 2000, on a retroactive basis, a
     new Canadian accounting standard issued by the CICA with respect to
     accounting for income taxes. The Company elected not to restate the
     comparative figures for periods prior to 2000 for this change in accounting
     policy. The cumulative effect of adopting the new standard in 2000 under
     Canadian GAAP was to increase the deficit as at January 1, 2000 by $291.0
     million.

(5)  Effective January 1, 2001, the Company adopted, retroactively with
     restatement, the recommendations of the CICA Section 3500 with respect to
     earnings per share. Under the revised standard, the treasury stock method
     is used instead of the imputed earnings approach for determining the
     dilutive effect of options, issued warrants or other similar instruments.

     The change in the method of calculation of earnings per share did not
     impact the previously reported basic earnings per share for 1998, 1999 and
     2000. Diluted earnings per share for 1998 were increased from $3.01 per
     share to $3.09 per share, for 1999 were increased from $3.83 per share to
     $4.39 per share and for 2000 were increased from $4.48 per share to $5.05
     per share.

(6)  Dividends include stock dividends. Based on the average foreign exchange
     rate for the period, the US dollar equivalent of the dividends per
     retractable common share is US$0.40, US$0.40, US$0.40, US$0.39 and US$0.38
     for the years ended December 31, 1998, 1999, 2000, 2001 and 2002.

(7)  Under Canadian GAAP, the Company is required to proportionately consolidate
     its 50% interest in its joint ventures, resulting in higher revenues under
     Canadian GAAP than under US GAAP.

(8)  Long-term debt including current portion, excludes retractable preference
     shares.

(9)  For Canadian GAAP, common shares which are retractable at the option of the
     holder are included in shareholders' deficiency, whereas, under U.S. GAAP,
     the retractable common shares would be excluded from shareholders'
     deficiency.

EXCHANGE RATE

    The following table sets out, for each period indicated, the high and low
exchange rates for one U.S. dollar expressed in Canadian dollars, the average of
such exchange rates on the last day of each month during such period, and the
exchange rate at the end of such period, based upon the noon rate of exchange as
reported by the Federal Reserve Bank of New York (the "Noon Rate"):

<TABLE>
<CAPTION>
                                                             FISCAL YEAR ENDED DECEMBER 31,
                                                             ------------------------------
                                           1998           1999           2000           2001           2002
                                          ------         ------         ------         ------         ------
<S>                                       <C>            <C>            <C>            <C>            <C>
    High...............................   1.5720         1.5302         1.5600         1.6023         1.6126

    Low................................   1.4075         1.4440         1.4435         1.4933         1.5108

    Average............................   1.4902         1.4827         1.4871         1.5519         1.5702

    Period End.........................   1.5375         1.4400         1.4995         1.5925         1.5800
</TABLE>

                                        7

<PAGE>

    The following table sets out for the last six months the high and low
exchange rates for one U.S. dollar expressed in Canadian dollars, based upon the
Noon Rate:

<TABLE>
<CAPTION>
                       DECEMBER        JANUARY     FEBRUARY         MARCH           APRIL             MAY
                       --------        -------     ---------        ------          -----             ---
                         2002            2003        2003            2003            2003             2003
                         ----            ----        ----            ----            ----             ----
<S>                    <C>             <C>         <C>              <C>             <C>              <C>
    High...........     1.5800          1.5750      1.5315          1.4905          1.4831           1.4221

    Low............     1.5478          1.5220      1.4880          1.4659          1.4336           1.3446
</TABLE>

    On December 31, 2002, the Noon Rate was Cdn. $1.5800 = U.S.$1 and on June
12, 2003, the Noon Rate was Cdn. $1.3492 = U.S.$1.

D.       RISK FACTORS

Holders and prospective purchasers of the Company's Series II preference shares,
Series III preference shares and retractable common shares should consider
carefully all of the information set forth in this Annual Report and, in
particular, should evaluate the following risks in connection with an investment
in the Series II preference shares, Series III preference shares and retractable
common shares. Information contained or incorporated by reference in this Annual
Report contains forward-looking terminology such as "believes", "expects",
"may", "will", "should" or "anticipates" or the negative thereof or other
variations thereon or comparable terminology, or discussions of strategy. Such
statements include, without limitation, the Company's beliefs about trends in
the industry and its views about the long-term future of the industry and the
Company. See "Item 5. Operating and Financial Review and Prospects" and "Item 4.
Information on the Company." No assurance can be given that the future results
covered by the forward-looking statements including certain risks and
uncertainties that could cause actual results in the future to vary materially
from the future results covered in such forward-looking statements. Other
factors could also cause actual results in the future to vary materially from
the future results covered in such forward-looking statements.

RISKS RELATED TO THE COMPANY'S CASH FLOWS AND CAPITAL STRUCTURE

THE COMPANY DEPENDS ON THE FINANCIAL SUPPORT OF RMI TO SATISFY CERTAIN OF ITS
OBLIGATIONS.

On a non-consolidated basis, the Company has experienced a shortfall between the
dividends and fees received from its subsidiaries and its operating costs,
including interest and dividends on its preference shares, and such shortfalls
are expected to continue in the future. Accordingly, the Company is dependent
upon the continuing financial support of RMI to fund such shortfalls and,
therefore, pay its liabilities as they fall due. Prior to March 10, 2003 such
shortfalls were funded by Ravelston and RMI on an informal basis. On March 10,
2003, concurrent with the issue by the Company of US$120.0 million Senior
Secured Notes due 2011, RMI entered into a Support Agreement with the Company.
Under the agreement, RMI has agreed to make annual support payments in cash to
the Company on a periodic basis by way of contributions to the capital of the
Company (without the issuance of additional shares of the Company) or
subordinated debt. The annual support payments will be equal to the greater of
(a) the Company's negative net cash flow (as defined) for the relevant period
(which does not extend to outlays for retractions or redemptions), determined on
a non-consolidated basis, and (b) US$14.0 million per year (less any payments of
management services fees by International directly to the Company or NB Inc. and
any excess in the net dividend amount that the Company and NB Inc. receive from
International over US$4.65 million per year), in either case reduced by any
permanent repayment of debt owing by Ravelston to the Company. Pursuant to this
arrangement, RMI has made payments to the Company in respect of the period from
March 10 to June 30, 2003 in the amount of US$6.2 million. Under the terms of
the Senior Secured Notes if in any quarterly period after April 1, 2003, the
Company fails to receive in cash, a minimum aggregate amount of at least US $4.7
million from a) payments made by RMI pursuant to the Support Agreement and b)
dividends paid by International on its shares held by the Company and NB Inc.,
the Company would be in default under its Senior Secured Notes and they could
become due and payable immediately.

RMI DEPENDS ON CONTINUING TO RECEIVE SUFFICIENT FEES FROM INTERNATIONAL PURSUANT
TO THE SERVICES AGREEMENTS TO CONTINUE TO PROVIDE THE REQUIRED FINANCIAL SUPPORT
TO THE COMPANY UNDER THE SUPPORT AGREEMENT.

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RMI currently derives all of its income and operating cash flow from the fees
paid pursuant to Services Agreements with International and its subsidiaries.
RMI's ability to provide the required financial support under the Support
Agreement with the Company is substantially dependent on RMI continuing to
receive sufficient fees pursuant to those Services Agreements. The Services
Agreements may be terminated by either party by giving 180 days notice. The fees
in respect of the Services Agreements are negotiated annually with and approved
by the audit committee of International. The fees to be paid to RMI for the year
ending December 31, 2003 amount to approximately US $22.0 million to US $24.0
million and were approved in February 2003. The fees in respect of the periods
after December 31, 2003 have not yet been negotiated or approved.

As described more fully in note 12 to the June 30, 2003 unaudited interim
consolidated financial statements, a shareholder of International has requested
that the Board of International investigate and, if determined to be advisable,
take corrective action in respect of certain matters, including the payment of
fees by International pursuant to management services agreements with RMI.
Although the Board of International has established a special committee of the
Board of Directors to conduct an independent review and investigation of the
matters, the timing and outcome of the process and the impact on the Company and
RMI is uncertain at this time.

Based on the Company's current investment in International and the current
quarterly dividend paid by International of US$0.05 per share: (i) the minimum
support payment required to be made by RMI to avoid a default under the terms of
the Senior Secured Notes is approximately US$14.0 million annually and (ii) the
Company estimates the support payment required by RMI to fund its negative net
cash flow will approximate US$20.0 million for the twelve months ending June 30,
2004. This amount assumes payment by the Company of preference share dividends
of approximately US$5.0 million which have yet to be considered by the Board of
Directors and which depend on the Company having the ability under corporate law
to pay such dividends. The Company's ongoing liquidity, on a non-consolidated
basis, continues to depend to a large degree on support payments from RMI which
in turn depends on fees received pursuant to its services agreements with
International. If the Company does not receive support payments of a least
US$15.0 million for the twelve months ending June 30, 2004, based on the above
assumptions, then it will be required to dispose of assets or seek financing in
order to meet its non-consolidated obligations as they fall due.

The Company is contemplating a variety of initiatives to address the potential
matters referred to above, however at this time there can be no certainty that
such initiatives will be completed.

In addition, Publishing's Senior Credit Facility agreement limits the amount of
fees payable pursuant to Services Agreements by Publishing and its subsidiaries,
excluding the Canadian Newspaper Group, (together, the "Restricted Group") in
any fiscal year as not to exceed the greater of US$ 22.0 million or 2.5% of
total revenue of the Restricted Group.

INTERNATIONAL DEPENDS ON THE CASH FLOW OF ITS SUBSIDIARIES TO SATISFY ITS
OBLIGATIONS, INCLUDING DIVIDENDS AND PAYMENTS UNDER THE SERVICE AGREEMENTS. THE
AMOUNT OF DIVIDENDS THE COMPANY RECEIVES FROM INTERNATIONAL MAY CHANGE.

International is a holding company and owns no significant assets other than its
equity interest in Publishing. Therefore, International is largely dependent
upon the cash flow of its subsidiaries, principally Publishing and its
subsidiaries, to meet its obligations, including the payment of dividends and
amounts under the Services Agreements. International's subsidiaries and
affiliated companies are under no obligation to pay dividends to International.
In the case of Publishing and its principal United States and foreign
subsidiaries, those companies are subject to statutory restrictions and
restrictions in Publishing's Senior Credit Facility and the Senior Notes due
2010 (the "Publishing Notes") that limit their ability to pay dividends to
International and are subject to restrictions in Publishing's Senior Credit
Facility that limit their ability to pay fees under the Services Agreements.
Recently, International reduced its dividends from US$0.11 per share per quarter
in June 2002 to US$0.05 per share per quarter commencing September 2002 and
future quarterly dividends could be further decreased. Reductions in the
International dividend will increase the minimum support payment required to be
made by RMI to fund the Company's negative net cash flow. Any failure by RMI to
receive from International and its subsidiaries amounts under the Services
Agreement, either in conjunction with a decrease in International dividends or
not, could have a material adverse effect on the Company.

THE ASSETS AND CASH FLOW OF INTERNATIONAL AND ITS SUBSIDIARIES ARE SUBJECT TO
THE PRIOR CLAIMS OF OTHERS AND ARE NOT SUBJECT TO THE RESTRICTIVE COVENANTS
CONTAINED IN THE TERMS OF THE SENIOR SECURED NOTES.

Substantially all of the shares, properties and assets of certain of
International's subsidiaries, including Publishing and certain of its
subsidiaries, have been pledged to the lenders under the Publishing's Senior
Credit Facility. The Company's right to participate in the distribution of
assets of any subsidiary or affiliated company upon its liquidation or
reorganization will be subject to the prior claims of the creditors of such
subsidiary or affiliated company, including trade creditors, except to the
extent that the Company may itself be a creditor with recognized claims
against such subsidiary or affiliated company. Further, the Company and its
restricted subsidiaries have agreed to certain restrictive covenants under the
terms of the Senior Secured Notes. Because International and its subsidiaries
will not be restricted subsidiaries for purposes of the indenture governing the
Senior Secured Notes, such covenants will not apply to them. Therefore any cash
flow generated by International and its subsidiaries and the proceeds from any
sale of such subsidiaries will not be subject to the restrictive covenants
contained in the indenture. International and its subsidiaries generate
substantially all of the Company's total consolidated revenues and comprise
substantially all of total consolidated assets.

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ALL OF THE SHARES OF THE COMPANY ARE EXCHANGEABLE, REDEEMABLE OR RETRACTABLE. IF
HOLDERS OF THE COMPANY'S SHARES ELECT TO EXCHANGE, REDEEM OR RETRACT THOSE
SHARES, AS THE CASE MAY BE, THIS COULD HAVE A MATERIAL IMPACT ON THE FINANCIAL
CONDITION OF THE COMPANY AND THE COMPANY MAY NOT BE ABLE TO SATISFY SUCH
EXCHANGES, REDEMPTIONS OR RETRACTIONS.

As a result of steps taken during 1997 and 1998, all of the shares of the
Company are exchangeable, redeemable or retractable. The retractable common
shares and Series II preference shares are retractable for
shares of International's Class A common stock (or equivalent value if the
Company exercises its option to redeem for cash) and the series III preference
shares are retractable for cash. This enables the Company to qualify as
a "mutual fund corporation" for purposes of the Income Tax Act (Canada). In the
event that holders of the Company's shares elect to exchange, redeem or retract
their shares for shares of International's Class A common stock, this would have
a material impact on the financial condition of the Company and the Company may
not be able to satisfy such exchanges, redemptions or retractions.

The Company's issued capital stock consists of Series II preference shares,
Series III preference shares and retractable common shares, each of which is
retractable at the option of the holder. There is uncertainty regarding the
Company's ability to meet future retractions of preference shares and
retractable common shares. Under corporate law, the Company is not required to
make any payment to redeem any shares in certain circumstances, including if the
Company's liquidity would be unduly impaired as a consequence. If, when shares
are submitted by holders for retraction or when the Series III preference shares
mature on April 30, 2004, there are reasonable grounds for believing that, after
making the payment in respect of those shares, the Company's liquidity would be
unduly impaired, the retractions and redemptions will not be completed. In such
event, shareholders would not become creditors of the Company but would remain
as shareholders until such time as the retraction is able to be completed under
applicable law. The Company's uncertain ability to make payments on future
retractions and redemptions of shares is due to the fact that liquidity of its
assets is limited at present, given that substantially all of its shares of
International common stock were provided as security for the Senior Secured
Notes.

During the period April 1, 2003 to May 16, 2003 holders of 3,651,784 Series III
preference shares, holders of 504,989 Series II preference shares, and holders
of 22,500 retractable common shares submitted retraction notices to the
Company. As of May 20, 2003, the Company completed or announced that it was
able to complete the retraction of 504,989 Series II preference shares for
232,293 shares of International Class A common stock, 876,050 Series III
preference shares for approximately $7.7 million in cash and 22,500 retractable
common shares for cash of $124,000. This completed all retraction notices
received up to and including April 30, 2003.

On May 20, 2003, after careful deliberation, the Company concluded that it was
not able to complete the retractions of shares submitted after April 30, 2003
without unduly impairing its liquidity. Since April 30, 2003 and up to and
including June 19, 2003, the Company has received retraction notices from
holders of 2,939,543 Series III preference shares of which 1,281,239 retraction
notices were subsequently withdrawn, leaving retraction notices from holders of
1,658,354 Series III preference shares for aggregate retraction proceeds of
approximately $15.8 million which are unable to be completed at the current
time. In addition, during the same time period, retraction notices were
received from the holders of 357,958 Series II preference shares for aggregate
retraction proceeds of 164,660 shares of International Class A common stock or
cash of approximately $2.5 million, which are unable to be completed at the
current time.

Giving effect to the retractions completed as of June 19, 2003, there continues
to be outstanding 3,775,990 Series II preference shares (exchangeable for
1,736,955 shares of Class A common stock of International), 9,271,175 Series III
preference shares and 32,917,186 retractable common shares.

The Company's Series III preference shares have a fixed redemption date on April
30, 2004 for a cash payment of $10.00 per share plus any accrued and unpaid
dividends to that date. The total cost to redeem all of the issued and
outstanding Series III preference shares would be $92.7 million..

The Company will periodically review its liquidity position to determine if and
when further retractions can be completed. The Company will not complete
retractions or redemptions if to do so would unduly impair its liquidity.
Retractions of Series II preference shares and Series III preference shares will
be processed on a combined basis in order determined by their retraction date
(with equal ranking of the series) in advance of any retractable common shares
that are submitted for retraction. Following the satisfaction of all pending
retracted Series II preference shares and Series III preference shares,
retractions of the retractable common shares will be processed in order

                                        10

<PAGE>

determined by their retraction date. Accordingly, retractions of retractable
common shares cannot be completed as long as there are pending and unsatisfied
retractions of Series II preference shares and Series III preference shares.

IF THE SHARES OF INTERNATIONAL'S CLASS B COMMON STOCK ARE SUBJECT TO ANY
FORECLOSURE, REALIZATION OR OTHER SIMILAR ACTION, SUCH STOCK MAY BE
AUTOMATICALLY CONVERTED INTO SHARES OF CLASS A COMMON STOCK OF INTERNATIONAL
AND, AS A RESULT, LOSE THEIR MULTIPLE VOTING RIGHTS.

Under International's certificate of incorporation, each share of
International's Class B common stock is entitled to certain multiple voting
rights per share. However, in the event that shares of Class B common stock
pledged as collateral security for indebtedness become subject to any
foreclosure, realization or other similar action by a third party pledgee,
unless such shares are transferred to a third party purchaser who purchases or
obtains the shares of Class B common stock in a "Permitted Transaction", they
will be automatically converted into fully paid and non-assessable shares of
International's Class A common stock on a share-for-share basis. A Permitted
Transaction, as defined in International's certificate of incorporation, is a
transaction with respect to shares of Class B common stock between a third party
and the Company, its subsidiaries or affiliates, in which, or as part of which,
the third party makes a bona fide tender offer, in compliance with the
applicable securities and other laws, to purchase all of the outstanding shares
of Class A common stock from the holders for an amount in cash or other
consideration equal to the amount per share to be received by the record holder
of shares of Class B common stock, and such tender offer is successfully
consummated. Accordingly, it is unlikely that upon a foreclosure or realization
on the pledged shares of Class B common stock by the collateral agent acting on
behalf of holders of the Senior Secured Notes, the collateral agent would be
able to exercise the same degree of control over International based upon its
ownership of such stock as Lord Black, the controlling shareholder of the
Company and International, currently does.

RESTRICTIVE COVENANTS IN THE SENIOR SECURED NOTES ISSUED BY THE COMPANY COULD
ADVERSELY AFFECT BUSINESS BY LIMITING THE COMPANY'S OPERATING AND STRATEGIC
FLEXIBILITY.

The indenture governing the Senior Secured Notes contains restrictive covenants,
subject to certain exceptions, that limit the Company's ability to:

    -    incur more debt or guarantee indebtedness;

    -    pay dividends on its capital stock or redeem, repurchase or retire its
         capital stock or subordinated indebtedness, or make distributions or
         investments;

    -    enter into transactions with affiliates;

    -    create liens;

    -    merge, consolidate or sell assets; and

    -    sell or issue capital stock.

As a result of these covenants, the Company's ability to respond to changing
business and economic conditions may be significantly restricted and the Company
may be prevented from engaging in transactions that might otherwise be
beneficial. Any breach of these covenants could cause a default.

RISKS RELATED TO INTERNATIONAL'S BUSINESS AND THE INDUSTRY

Since the Company's asset value is derived from its investment in International,
the Company is subject to the following risks that affect International and its
business.

RESTRICTIVE COVENANTS IN THE PUBLISHING NOTES AND PUBLISHING'S SENIOR CREDIT
FACILITY COULD ADVERSELY AFFECT INTERNATIONAL'S BUSINESS BY LIMITING
INTERNATIONAL'S OPERATING AND STRATEGIC FLEXIBILITY.

The Senior Credit Facility and the indenture governing the Publishing Notes
contain restrictive covenants, subject to certain exceptions, that limit
Publishing's and its restricted subsidiaries' ability to:

                                        11

<PAGE>
    -    incur more debt or guarantee indebtedness;

    -    pay dividends on their capital stock or redeem, repurchase or retire
         their capital stock or subordinated indebtedness, or make distributions
         or investments;

    -    enter into transactions with affiliates;

    -    create liens;

    -    merge, consolidate or sell assets;

    -    sell or issue capital stock; and

    -    pay dividends or other amounts to Publishing from restricted
         subsidiaries.

As a result of these covenants, International's ability to respond to changing
business and economic conditions may be significantly restricted and
International may be prevented from engaging in transactions that might
otherwise be beneficial. Any breach of these covenants could cause a default
under the Senior Credit Facility or Publishing Notes.

INTERNATIONAL TOGETHER WITH ITS SUBSIDIARIES HAS A SIGNIFICANT DEGREE OF
LEVERAGE AND SUBSTANTIAL DEBT SERVICE OBLIGATIONS AND ARE SUBJECT TO DEBT
COVENANTS THAT COULD LIMIT THEIR ABILITY TO MAKE DEBT REDUCTIONS AND
DISTRIBUTIONS.

The instruments governing the terms of the principal indebtedness of
International, Publishing and its principal United States and foreign
subsidiaries, contain various covenants, events of default and other provisions
that could limit International's financial flexibility, including the payment of
dividends with respect to outstanding common stock and the pursuit of a growth
strategy. Amongst the various covenants are several financial covenants
requiring certain of International's subsidiaries to maintain stipulated
leverage, fixed charge and interest coverage ratios. Failure to maintain the
stipulated ratios could lead to increased interest costs, acceleration of
certain time periods in the underlying documents, a prohibition of certain
activities and restriction on the payment of dividends to the Company.

International's Senior Credit Facility is denominated in US dollars and bears
interest at floating rates referenced to several short term alternatives. In
December 2002, International entered into cross currency (U.S. dollars to pounds
sterling) floating to fixed swaps in respect of all borrowings under the Senior
Credit Facility. The swap agreements, which mature December 2008 in respect of
Term Loan A and December 2009 in respect of Term Loan B, have been entered into
for US$265.0 million, being the full amount of borrowings under each of the term
loans, at a weighted average rate of 8.47%. A UK subsidiary of International's
is the borrower of amounts outstanding under the Senior Credit Facility.

In 2003 Publishing entered into fixed to floating swap agreements to reduce
International's effective rate of borrowing under US$250.0 million of
Publishing's Senior Notes. A total of US$300.0 million of 9% Senior Notes is
outstanding. The effective rate for the first six months is a blended rate of
5.98%. The swaps mature December 15, 2010, the same date on which the underlying
notes mature.

International relies on distributions from subsidiaries to meet its financial
obligations. International is an international holding company and its assets
consist solely of investments in its subsidiaries and affiliated companies. As a
result, International ability to meet its future financial obligations is
dependent upon the availability of cash flows from its domestic and foreign
subsidiaries through dividends, intercompany advances, management fees and other
payments. Similarly, International's ability to pay dividends on its common
stock may be limited as a result of International's dependence upon the
distribution of earnings of its subsidiaries and affiliated companies.
International's subsidiaries and affiliated companies are under no obligation to
pay dividends and, in the case of Publishing and its principal domestic and
foreign subsidiaries, are subject to statutory restrictions and restrictions in
debt agreements that limit their ability to pay dividends. Substantially all of
the shares of International's non-Canadian subsidiaries have been pledged to
lenders of International. International's right to participate in the
distribution of assets of any subsidiary or affiliated company upon its
liquidation or reorganization will be subject to the prior claims of the
creditors of such subsidiary or affiliated company, including trade creditors,
except to the extent that International may be a creditor with recognized claims
against such subsidiary or affiliated company.

INTERNATIONAL'S REVENUES ARE CYCLICAL AND DEPENDENT UPON GENERAL ECONOMIC
CONDITIONS IN ITS NEWSPAPERS' TARGET MARKETS.

Advertising and circulation are International's two primary sources of revenue.
International's advertising revenues and, to a lesser extent, circulation
revenues, are cyclical and dependent upon general economic conditions in its
newspapers' target markets. Historically, increases in advertising revenues have
corresponded with economic recoveries while decreases, as well as changes in the
mix of advertising, have corresponded with general economic downturns and
regional and local economic recessions. In 2001, due to the general downturn in
the economy, advertising revenue for the Chicago Group on a same store 52-week
basis was lower by US$20.0 million or 6.7% compared with 2000, and advertising
revenue for the U.K. Newspaper Group was lower by L27.2 million or 10.6%
(in local currency terms). Advertising revenue stabilized somewhat for the
Chicago Group in the year ended December 31, 2002, as it was up marginally by
0.8% over the prior year. However, advertising revenue for the U.K. Newspaper
Group continued to reflect difficult economic conditions, as it was lower by
L17.7 million or 7.7% in

                                        12
<PAGE>
2002 compared to the prior year and for the three months ended March 31, 2003,
in level currency, was 6.5% lower than the first quarter of 2002. In addition,
International's dependency on advertising sales, which generally have a short
lead-time, means that International has only a limited ability to accurately
predict future results.

INTERNATIONAL'S FOREIGN OPERATIONS AND ASSETS SUBJECT IT TO CURRENCY EXCHANGE
RATE FLUCTUATIONS; ADVERSE MOVEMENTS IN EXCHANGE RATES MAY NEGATIVELY IMPACT
INTERNATIONAL'S NET EARNINGS.

Operations outside of the United States, principally in the U.K. Newspaper
Group, accounted for approximately 56.1% of International's operating revenues
and approximately 53.3% of International's operating income (excluding expenses
incurred by the Investment and Corporate Group) for the year ended December 31,
2002. Generally, International does not hedge against foreign currency exchange
rate risks except through borrowings in those currencies. As a result,
International may experience economic loss and a negative impact on earnings
with respect to its investments and on earnings of its foreign subsidiaries,
solely as a result of currency exchange rate fluctuations (principally any
weakening of the pound sterling against the U.S. dollar).

In 2001, International and the Partnership sold participation interests
("Participations") in $756.8 million principal amount of debentures of a
subsidiary of CanWest Global Communications Corp. ("CanWest") to a special
purpose trust ("Participation Trust") at an exchange rate of US$0.6482 to each
Canadian dollar which translates into US$ 490.5 million. Units of the
Participation Trust, denominated in U.S. dollars, were in turn issued and sold
by the Participation Trust to third parties. In respect of the underlying
CanWest debentures, based on the original Canadian dollar principal amount,
International will be required to deliver to the Participation Trust, US$490.5
million at the then current exchange rate, plus interest received. On September
30, 2002, International unwound certain foreign currency contracts and as a
consequence its foreign exchange exposure on CanWest debentures is no longer
hedged. At December 31, 2002, the accrued liability to the Participation Trust
was US$575.9 million and the corresponding CanWest debentures had a principal
amount receivable of $888.2 million. A US$0.05 change in the U.S. dollar to
Canadian dollar exchange rate applied to the $888.2 million principal amount of
CanWest debentures at December 31, 2002 would result in a US$44.4 million loss
or gain to International.

On May 11, 2003, CanWest redeemed $265 million of the debentures of which
U.S.$159.8 million has been delivered to the Participation Trust and the
balance of US$27.6 million has been received by International and the
Partnership, a portion of which must be retained until November 4, 2010. This
will reduce the International's obligation to the Trust and hence its exposure
to changes in the U.S. dollar to Canadian dollar exchange rate.

NEWSPRINT REPRESENTS INTERNATIONAL'S SINGLE LARGEST RAW MATERIAL EXPENSE AND
INCREASES IN THE PRICE OF NEWSPRINT COULD DECREASE ITS NET EARNINGS.

Newsprint represents International's single largest raw material expense and is
its most significant operating cost, other than employee costs. In 2002,
newsprint costs represented approximately 15.0% of International's revenues.
Newsprint costs vary widely from time to time and trends in pricing can vary
between geographic regions. During the first half of 2001, newsprint prices in
North America were at their highest price per tonne since 1994 and 1995.
However, the recessionary climate in 2001 caused a significant decline in
industry consumption and this, coupled with an abundant supply of competitively
priced newsprint, resulted in a downward trend in prices during the second half
of 2001. This downward trend continued into 2002; however, there are indications
that prices may moderately increase in the near term from their current levels.
In the United Kingdom, International's newsprint prices payable in 2002, which
are subject to longer-term contracts, were less than the average prices paid in
2001. If newsprint prices increase in the future and International cannot pass
these costs on to its customers, such increases may have a material adverse
effect on its results of operations. Although International has implemented
measures in an attempt to offset a rise in newsprint prices, such as reducing
page width where practical and managing its return policy, price increases have
in the past had a material adverse effect on International and may do so again
in the future.

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COMPETITION IN THE NEWSPAPER INDUSTRY ORIGINATES FROM MANY SOURCES. THE ADVENT
OF NEW TECHNOLOGIES AND INDUSTRY PRACTICES, SUCH AS THE PROVISION OF NEWSPAPER
CONTENT ON FREE INTERNET SITES, MAY DECREASE INTERNATIONAL'S SALES OR FORCE
INTERNATIONAL TO MAKE OTHER CHANGES THAT HARM ITS OPERATING PERFORMANCE.

Revenues in the newspaper industry are dependent primarily upon advertising
revenues and paid circulation. Competition for advertising and circulation
revenue comes from local and regional newspapers, radio, broadcast and cable
television, direct mail, and other communications and advertising media that
operate in International's markets. The extent and nature of such competition
is, in large part, determined by the location and demographics of the markets
and the number of media alternatives in those markets. Some of International's
competitors are larger and have greater financial resources than International.
In the past, newspapers which compete in some of International's markets have
chosen to reduce their cover prices and/or decrease the price of bulk sales in
efforts to increase their circulation at the expense of International's
newspapers. Price competition has been particularly intense in the United
Kingdom and Chicago, Illinois in recent years. These actions have in the past
forced International to similarly reduce its cover prices and/or decrease the
price of bulk sales, which has had a negative effect on its sales revenues and
overall financial performance. International may experience price competition
from competing newspapers and other media sources in the future that force
International to make similar reductions, which would again decrease its
operating results and circulation revenues. In addition, the use of alternative
means of delivery, such as free Internet sites, for news and other content has
increased significantly in the past few years. In the event that significant
numbers of International's customers choose to receive content using these
alternative delivery sources rather than International's newspapers,
International may be forced to decrease the prices it charges for its newspapers
or make other changes in the way it operates, or International may face a
long-term decline in circulation, any or all of which may harm International's
financial and operating performance.

INTERNATIONAL'S PUBLICATIONS HAVE EXPERIENCED DECLINES IN CIRCULATION IN THE
PAST AND MAY DO SO IN THE FUTURE.

The Chicago Sun-Times and The Daily Telegraph have experienced small declines in
circulation. According to figures published by the Audit Bureau of Circulations,
circulation of the Chicago Sun-Times experienced a compounded annual growth rate
(CAGR) of minus 1.0% since it was acquired in 1994, through 2002, while
circulation of The Daily Telegraph experienced a CAGR of minus 1.3% from
September 1996 through 2002. International believes that the principal factors
contributing to the declines in circulation include the competitive factors
described above and the use of alternative means of information delivery such as
the Internet. From 2000 through 2002, average daily circulation (Monday to
Friday) of the Chicago Sun-Times has stabilized and shown a slight increase.
However, there is a risk that circulation of International's newspapers will
decline in the future. A significant decline in circulation could have a
material adverse effect on International's business and financial performance.

IF INTERNATIONAL FAILS TO IMPLEMENT ITS BUSINESS STRATEGY, ITS BUSINESS WILL BE
ADVERSELY AFFECTED.

International's future financial performance and success are dependent in large
part upon its ability to successfully implement its business strategy. There is
a risk that International will not be able to successfully implement its
business strategy or be able to improve its operating results. In particular,
there is a risk that International will not be able to increase circulation of
its publications, obtain new sources of advertising revenues, generate
additional revenues by building on the brand names of its publications or raise
the cover prices of its publications without causing a decline in circulation.
Furthermore, any growth through acquisitions and investments will be dependent
upon identifying suitable acquisition or investment candidates and successfully
consummating such transactions and integrating the acquired operations at
reasonable costs. International may not be able to successfully integrate any
acquired businesses and may not be able to achieve anticipated revenue and cost
benefits.

Such acquisitions and investments may require additional funding which may be
provided in the form of additional debt, equity financing or a combination
thereof. There is a risk that any such additional financing will not be
available to International on acceptable terms or at all or that International
or Publishing will not be permitted under the terms of its Senior Credit
Facility or the terms of the indenture governing Publishing's Senior Notes to
obtain such additional financing.

Implementation of International's business strategy could be affected by a
number of factors beyond its control, such as increased competition, general
economic conditions, legal developments or increased operating costs and
expenses. In particular, there has been a recent trend of increased
consolidation among major retailers, some as a

                                       14

<PAGE>

result of bankruptcies of certain retailers. This trend may adversely affect
International's results of operations by reducing the number of advertisers
using its products and increasing the purchasing power of the consolidating
retailers, thereby leading to increased margin pressure on its advertising
revenues.

Any failure by International to successfully implement its business strategy may
adversely affect its ability to service its indebtedness including the ability
to make principal and interest payments on its Senior Notes and Senior Credit
Facility. This may also adversely affect International's ability to pay
fees to RMI under the Services Agreements and pay dividends on its common stock.
This could adversely affect the Company's ability to service its indebtedness,
including the Company's ability to make interest payments on its Senior Secured
Notes. International may, in addition, decide to alter or discontinue certain
aspects of its business strategy at any time.

THE COMPANY'S AND INTERNATIONAL'S PERFORMANCE COULD BE ADVERSELY AFFECTED IF IT
AND INTERNATIONAL LOSE KEY PERSONNEL.

The Company believes that its and International's success is largely dependent
on the abilities and experience of Lord Black, the Chief Executive Officer, F.
David Radler, the Chief Operating Officer, Daniel W. Colson, The Telegraph's
Chief Executive Officer, and the senior management team. The loss of the
services of Lord Black, F. David Radler, Daniel W. Colson or one or more of
the senior executives could adversely affect the Company's and International's
ability to effectively manage the respective overall operations or successfully
execute current or future business strategies. In addition, the Company believes
that its and International's success will depend upon its and International's
ongoing ability to attract and retain qualified management and other employees.

INTERNATIONAL MAY EXPERIENCE LABOR DISPUTES, WHICH COULD SLOW DOWN OR HALT
PRODUCTION OR DISTRIBUTION OF ITS NEWSPAPERS OR OTHER PUBLICATIONS.

Approximately 23% of International's employees are represented by labor unions
and those employees are mostly covered by collective bargaining or similar
agreements which are regularly renewable. A work stoppage or strike may occur
prior to the expiration of the current labor agreements or during negotiations
of new labor agreements or extensions of existing labor agreements. Work
stoppages or other labor-related developments could slow down or halt production
or distribution of the newspapers, which would adversely affect International's
results of operations.

INTERNATIONAL HAS A SUBSTANTIAL POTENTIAL TAX LIABILITY AS A RESULT OF GAINS ON
THE SALE OF CERTAIN OF ITS NON-U.S. OPERATIONS.

The Company has reflected in current liabilities on its consolidated balance
sheet certain income taxes payable, a substantial portion of which has been
provided on gains on the sale of a portion of International's non-U.S.
operations. The potential taxes would be an obligation of International's
subsidiaries in the Canadian Newspaper Group. While International has
implemented initiatives that it believes will defer and/or reduce these taxes
owed by subsidiaries in respect of these gains, the benefits of these strategies
have not been reflected in our accounts. There is a risk that the initiatives
International has implemented will not be successful in deferring and/or
reducing these taxes.

RISKS RELATED TO CONTROL BY A SINGLE SHAREHOLDER

LORD BLACK IS THE COMPANY'S CONTROLLING SHAREHOLDER AND THERE MAY BE A CONFLICT
BETWEEN HIS INTERESTS AND INTERESTS OF OTHER SHAREHOLDERS.

Lord Black currently controls a majority of the voting power of the Company and
indirectly the voting power of International, and other shareholders of the
Company will be unable to affect the outcome of stockholder voting as long as
Lord Black retains his controlling interest.

Ravelston, the Company's controlling stockholder, is controlled by Lord Black,
Chairman of the Board and Chief Executive Officer of the Company and
International, through his direct and indirect ownership of Ravelston, a
corporation owned by Lord Black and Messrs. F. David Radler, Daniel Colson, J.A.
Boultbee, Peter Atkinson, Peter White, Charles Cowan and the estate of Mr.
Dixon Chant (all of whom are current or former officers and/or directors of
International and the Company). As of June 19, 2003, Lord Black controlled a
78.2% voting interest in the Company. As a result of this controlling interest,
Lord Black will be able to determine the outcome of all matters that require
shareholder approval, including the election of directors, amendment of the
Company's articles and approval of significant corporate transactions. Lord
Black will also have a significant influence over decisions affecting the
capital structure, including the incurrence of additional indebtedness and the
declaration of dividends.

                                       15
<PAGE>

We understand that neither Ravelston nor Lord Black presently intends to reduce
its voting control over the Company such that a third party would be able to
exercise effective control over it.

ENTITIES AFFILIATED WITH LORD BLACK AND OTHER OFFICERS AND DIRECTORS OF
INTERNATIONAL AND THE COMPANY ENGAGE IN SIGNIFICANT TRANSACTIONS WITH
INTERNATIONAL AND THE COMPANY, WHICH TRANSACTIONS MAY NOT NECESSARILY BE
CONSUMMATED ON AN ARMS-LENGTH BASIS.

Various entities which are affiliated with Lord Black and other officers and
directors of the Company and International engage in significant transactions
with International and the Company, which transactions may not necessarily be
consummated on an arms-length basis and involve a risk that those transactions
may not be as favourable to the Company as those that could be negotiated with
non-affiliated third parties. It is the policy of International and the Company
that the independent directors of each company review and approve related party
transactions in respect of the applicable company.

Ravelston, the controlling shareholder of RMI, controls International through
its ownership interest in the Company. Pursuant to two agreements between RMI
and International and HCPH Co., RMI provides advisory, consultative, procurement
and administrative services to International and HCPH Co. including strategic
advice, planning, and financial services (including advice and assistance with
respect to acquisitions, divestitures and joint ventures), other consulting
services and assistance in operational matters. Certain subsidiaries of
International also have separate services agreements directly with certain
Ravelston executives, as well as Black-Amiel Management Inc. and Moffat
Management Inc., both affiliates of Ravelston. All of the services agreements
were negotiated in the context of a parent-subsidiary relationship and,
therefore, were not the result of arms-length negotiations between independent
parties. There is a risk that the terms of the services agreements may not be as
favorable to International as the terms that might be reached through
negotiations with non-affiliated third parties. The terms have been negotiated
with and approved by the independent members of International's board of
directors.

CERTAIN OF THE COMPANY'S OFFICERS ARE EMPLOYED BY RAVELSTON OR RMI AS WELL AS
HOLD SENIOR MANAGEMENT POSITIONS WITH THE COMPANY AND INTERNATIONAL, WHICH COULD
RESULT IN CONFLICTS OF INTEREST OR COULD LIMIT THE TIME THOSE OFFICERS DEVOTE TO
MANAGEMENT OF THE COMPANY.

Lord Black, the Company's Chairman and Chief Executive Officer, Mr. Radler, the
Company's Deputy Chairman and Chief Operating Officer, Mr. Colson,
Vice-Chairman, Mr. Atkinson, Executive Vice-President, Mr. Boultbee, Executive
Vice-President and Mr. Creasey, Chief Financial Officer, each hold senior
management positions with Ravelston or RMI, as the case may be, as well as the
Company and International. Some of these officers may spend a portion of their
professional time and effort on behalf of companies other than the Company. In
certain instances, their efforts for Ravelston will relate to activities which
are unrelated to the interests of the Company. The Company has not established
any minimum time requirements for these officers.

ITEM 4.  INFORMATION ON THE COMPANY

A.  HISTORY AND DEVELOPMENT OF THE COMPANY.

     Hollinger Inc. is the continuing company, under the laws of Canada,
resulting from the 1985 amalgamation of Argcen Holdings Inc., Hollinger Argus
Limited (incorporated June 28, 1910) and Labmin Resources Limited. The Company's
corporate offices are located at 10 Toronto Street, Toronto, Ontario, M5C 2B7,
(416) 363-8721.

     The Company is effectively controlled by Lord Black, Chairman of the Board
and Chief Executive Officer of the Company, through Ravelston, a privately-held
investment company, which Lord Black controls and whose principal asset is its
direct and indirect ownership of the Company's securities.

B.  BUSINESS OVERVIEW

     The Company, through our operating subsidiaries, has in the past acquired
underperforming newspaper properties with a view to improving the operation and
enhancing profitability and value. Generally, it was our intention to control
the business and to realize profits from the continued ownership, operation and
improvement of the business along with profits from the periodic disposal of all
or part of our holding in an operation. Our emphasis has been on daily
newspapers and usually those that are dominant in their respective markets. Our
purchases generally have been of newspaper businesses that are underperforming
either through weak operating management or as a result of an inability to
access necessary capital. We also concentrated on acquisitions and disposals
that increased the average size of our newspapers or that had significant
potential synergies with our other newspapers.

                                       16
<PAGE>

In recent years, we have focused more on selling mature newspaper franchises
with considerably less emphasis on acquisitions. Management's current intention
is to concentrate on a few core assets to maximize their potential.

    The Company's principal asset is its approximately 30.3% equity
(approximately 72.8% voting) interest in International, a publisher of
English-language newspapers in the United States, the United Kingdom and Israel
with a smaller publishing presence in Canada. In addition to the investment in
International, the Company also has interests through wholly-owned subsidiaries
in various other properties that do not, in the aggregate, contribute materially
to our revenue or earnings. These properties include a 40% interest in a daily
newspaper in the Cayman Islands and Canadian commercial real estate properties,
including our head office at 10 Toronto Street, Toronto, Canada. International's
23 paid daily newspapers have a worldwide combined circulation of approximately
two million. In addition, International owns or has an interest in over 250
other publications, including non-daily newspapers and magazines. Included among
International's 144 paid newspapers are the following premier titles:

    -   the Chicago Group's Chicago Sun-Times, which has the highest daily
        readership and second highest circulation of any newspaper in the
        Chicago metropolitan area and has the fifth highest daily readership of
        any metropolitan daily newspaper in the United States;

    -   the U.K. Newspaper Group's The Daily Telegraph, which is the leading
        daily broadsheet newspaper in the U.K. with a 36% share of circulation
        in its domestic market and approximately 300,000 greater circulation
        than that of its nearest competitor; and

    -   the Community Group's Jerusalem Post, which is the most widely read
        English-language daily newspaper published in the Middle East and is
        highly regarded regionally and internationally.

    International's operations consist principally of the Chicago Group, the
U.K. Newspaper Group, the Canadian Newspaper Group and the Community Group, as
well as minority investments in various Internet and media-related companies and
an investment in debentures of a subsidiary of CanWest held by the Partnership.

CHICAGO GROUP

    The Chicago Group consists of more than 100 newspapers in the greater
Chicago metropolitan area. The group's primary newspaper is the Chicago
Sun-Times, which was founded in 1948 and is Chicago's most widely read
newspaper. The Chicago Sun-Times is published in a tabloid format, has a daily
circulation of approximately 480,000 and continues to have the leading daily
readership in the 16 county Chicago metropolitan area, attracting 1.7 million
readers daily. International pursues a clustering strategy in the greater
Chicago metropolitan market, covering all of Chicago's major suburbs as well as
its surrounding high growth counties. This strategy enables International to
rationalize duplicative back office functions and printing facilities as well as
offer joint selling programs to advertisers.

    In December 2000, International acquired Fox Valley Publications Inc. which
publishes four daily newspapers, one paid non-daily and twelve free distribution
publications in the Chicago suburbs for total cash consideration of $166.7
million (US$111.0 million).

U.K. NEWSPAPER GROUP

    The U.K. Newspaper Group's operations include The Daily Telegraph, The
Sunday Telegraph, The Weekly Telegraph, telegraph.co.uk, and The Spectator and
Apollo magazines. The Daily Telegraph was launched in 1855 and is based in
London, the dominant financial center in Europe. It is the largest circulation
broadsheet daily newspaper in the U.K. as well as in all of Europe with an
average daily circulation of approximately 980,000. The Daily Telegraph's
Saturday edition has the highest average daily circulation (approximately 1.2
million) among broadsheet daily newspapers in the U.K. The Sunday Telegraph is
the second highest circulation broadsheet Sunday newspaper in the U.K. with an
average circulation of approximately 778,000. The Daily Telegraph's market
leadership and national reach have allowed it to maintain the leading share of
advertising among broadsheet daily newspapers in the U.K. over the last decade.
In addition, International has leveraged The Daily Telegraph's strong reader
loyalty, trusted brand name and proprietary customer database to generate
incremental revenue from the sale of ancillary products and services to its
readers.

CANADIAN NEWSPAPER GROUP

    At December 31, 2002, International's Canadian Newspaper Group primarily
consisted of HCPH Co. and an

                                       17
<PAGE>

87% interest in the Partnership. During 2001 HCPH Co. (formerly Hollinger
Canadian Publishing Holdings Inc.) became the successor to the operations of
XSTM. As of April 30, 2003, HCPH Co. and the Partnership owned ten daily and
twenty-three non-daily newspaper properties and the Business Information Group
(formerly Southam Magazine and Information Group) which publishes Canadian
business magazines and tabloids for the automotive, trucking, construction,
natural resources, manufacturing and other industries.

    In January 2001, the Partnership completed the sale of UniMedia Company to
Gesca Limited, a subsidiary of Power Corporation of Canada. The publications
sold represented the French language newspapers of the Partnership including
three paid circulation dailies and 15 weeklies published in Quebec and Ontario.
A pre-tax gain of approximately $75.1 million was recognized on this sale.

    In two separate transactions in July and November 2001, International and
the Partnership completed the sale of most of the remaining Canadian newspapers
to Osprey Media Group Inc. ("Osprey") for total cash proceeds of approximately
$255.0 million plus closing adjustments primarily for working capital. Included
in these sales were community newspapers in Ontario such as The Kingston
Whig-Standard, The Sault Star, the Peterborough Examiner, the Chatham Daily News
and The Observer (Sarnia). The former Chief Executive Officer of the Partnership
is a minority shareholder of Osprey.

    In connection with the two sales of Canadian newspaper properties to Osprey
in 2001, to satisfy a closing condition, the Company, International, Lord Black
of Crossharbour PC(C), OC, KCSG and three senior executives entered into
non-competition agreements with Osprey pursuant to which each agreed not to
compete directly or indirectly in Canada with the Canadian businesses sold to
Osprey for a five-year period, subject to certain limited exceptions, for
aggregate consideration of $7.9 million. Such consideration was paid to Lord
Black and the three senior executives and was approved by International's
independent directors.

    In August 2001, International entered into an agreement to sell to CanWest
its remaining 50% interest in the National Post. In accordance with the
agreement, the Company's representatives resigned from their executive positions
at the National Post effective September 1, 2001. Accordingly, from September 1,
2001, the Company had no influence over the operations of the National Post and
the Company ceased to consolidate or record on an equity basis its share of
earnings or losses. The results of operations of the National Post are included
in the consolidated results to August 31, 2001.

    On November 16, 2000, International and its affiliates, XSTM and the
Partnership, completed the sale of most of their Canadian newspapers and related
assets to CanWest for total sale proceeds, at fair value, of approximately $2.8
billion. Included in the sale was a 50% interest in National Post, all of the
metropolitan newspapers, including the Ottawa Citizen, The Gazette (Montreal),
the Calgary Herald, the Edmonton Journal, The Vancouver Sun and The Province
(Vancouver), a large number of community newspapers, including The Windsor Star,
the Regina Leader Post, the Star Phoenix and the Times-Colonist (Victoria) and
operating Canadian Internet properties, including canada.com. In connection with
the sale to CanWest, Ravelston entered into a management services agreement with
CanWest and National Post pursuant to which it agreed to continue to provide
management services to the Canadian businesses sold to CanWest in consideration
for an annual fee of $6 million. In addition, CanWest will be obligated to pay
Ravelston a termination fee of $45 million, in the event that CanWest chooses to
terminate the management services agreement, or $22.5 million, in the event that
Ravelston chooses to terminate the agreement. Also, as required by CanWest as a
condition to the transaction, the Company, International, Ravelston, Lord Black
and Messrs. Boultbee, Radler and Atkinson, entered into non-competition
agreements with CanWest pursuant to which each agreed not to compete directly or
indirectly in Canada with the Canadian businesses sold to CanWest for a
five-year period, subject to certain limited exceptions, for aggregate
consideration of $80 million paid by CanWest in addition to the purchase price
referred to above. Of that consideration, $38 million was paid to Ravelston and
$42 million was paid to Lord Black and the three senior executives.
International's independent directors approved the terms of these payments.

    In November 2000, XSTM converted its convertible promissory note in the
Partnership in the amount of $225.8 million into 22,575,324 units of the
Partnership, thereby increasing its interest in the Partnership to 87%.

    In November 2000, following the completion of the transaction with CanWest,
the Partnership made a special cash distribution to its unitholders. The amount
of the distribution was $3.10 per unit payable on December 1, 2000. In March
2001, following the completion of the transaction with Gesca Limited, the
Partnership made a second special cash distribution to its unitholders. The
amount of the distribution was $0.70 per unit payable on March 30,

                                       18
<PAGE>

2001. In August 2001, the Partnership made a third special cash distribution to
its unitholders. The amount of the distribution was $1.18 per unit payable on
August 20, 2001. In December 2001, the Partnership made a fourth special cash
distribution to its unitholders. The amount of the distribution was $1.45 per
unit payable on December 28, 2001. No special cash distributions were made by
the Partnership to unitholders during 2002.

COMMUNITY GROUP

    The Community Group consists of The Jerusalem Post, the most widely read
English-language daily newspaper published in the Middle East with a daily and
weekend readership of 223,000. The paid circulation of all The Jerusalem Post
products, including English and French-language international weekly editions,
is over 110,000.

    During 2001, the Company sold its last remaining United States community
newspaper. For accounting and management purposes, the Community Group continues
to include the Company's wholly-owned subsidiary Jerusalem Post which publishes
The Jerusalem Post. In addition, International transferred two Community Group
publications to Horizon Publications Inc. in exchange for net working capital.
Horizon Publications Inc. is managed by former Community Group executives and
controlled by certain members of International's board of directors. The terms
of these transactions were approved by the independent directors of
International.

    During 2000, International sold most of its remaining U.S. community
newspaper properties, including 11 paid dailies, three paid non-dailies and 31
free distribution publications for total proceeds of approximately
US$215,000,000 ($325,166,000). Pre-tax gains totalling $75,114,000 were
recognized on these sales. Included in these dispositions, International sold
four U.S. community newspapers for an aggregate consideration of US$38.0 million
($56.5 million) to Bradford Publishing Company, a company formed by a former
U.S. Community Group executive and in which some of International's directors
are shareholders. The terms of this transaction were approved by the independent
directors of International.

    In connection with the sales of United States newspaper properties in 2000,
to satisfy a closing condition, International, Lord Black and three senior
executives entered into non-competition agreements with the purchasers, pursuant
to which each agreed not to compete directly or indirectly in the United States
with the United States businesses sold to the purchasers for a fixed period,
subject to certain limited exceptions, for aggregate consideration of US$15.6
million ($23.4 million), a portion of which was paid in 2001 and a portion of
which was paid in 2000. All such amounts were paid to Lord Black and the three
senior executives. The independent directors of International have approved the
terms of these payments.

DISPOSITIONS OF INVESTMENTS

    In November 2001, International sold 27,405,000 non-voting shares in CanWest
(including 405,000 shares issued on conversion of 2,700,000 multiple voting
preferred shares), received as part of the proceeds on the 2000 CanWest sale as
previously described, for total proceeds of approximately $271.3 million. The
sale resulted in a pre-tax loss of $157.5 million.

    In August and December 2001, International and the Partnership sold
Participations in $540.0 million and $216.8 million principal amounts,
respectively, of debentures issued by a subsidiary of CanWest to the
Participation Trust. Units of the Participation Trust were sold by the
Participation Trust to arm's length third parties. These transactions resulted
in net proceeds to International of $621.8 million and have been accounted for
as sales of CanWest debentures. The net loss on these transactions amounted to
$97.4 million.

    International has not retained an interest in the Participation Trust nor
does it have any ongoing involvement in the Participation Trust. The
Participation Trust and its investors have no recourse to International's other
assets in the event that CanWest defaults on its debentures. Under the terms of
the Participation Trust, the interest, principal and redemption payments
received by International in respect of the underlying CanWest debentures will
be paid to the Participation Trust in U.S. dollars on the basis of a fixed
exchange rate. In addition, in accordance with the terms of the participation
agreement, International cannot transfer to an unaffiliated third party the
equivalent of US$50.0 million ($79.0 million at December 31, 2002) principal
amount of CanWest debentures or proceeds received from those debentures.

     On February 17, 2000, Interactive Investor International, in which
International owned 51.7 million shares or a 47% equity interest, completed its
initial public offering issuing 52 million shares and raising L78 million ($181

                                       19
<PAGE>

million). The offering reduced International's equity ownership to 33% and
resulted in a dilution gain of $25.8 million for accounting purposes.
Subsequently, International sold five million shares of its holding, reducing
its equity interest to 28.5% and resulting in a pre-tax gain in 2000 of $2.4
million. The balance of the investment was sold in 2001 resulting in an
additional pre-tax gain in 2001 of $14.7 million.

C. NEWSPAPER INDUSTRY OVERVIEW

    Newspaper publishing is one of the oldest and largest segments of the media
industry and the only remaining mass medium that has not become fragmented.
Newspapers are generally viewed as the best medium for retail advertising, which
emphasizes the price of goods, in contrast to television, which is generally
used for image-oriented advertising. According to the Newspaper Association of
America ("NAA"), daily newspaper readers include 60% of college graduates and
64% of households with income greater than US$75,000. Due to their significant
readership and household penetration, newspapers continue to be the most cost
effective means for advertisers to reach this highly sought after demographic
group. Additionally, management believes newspaper advertising is more cost
effective than television and radio advertising.

    Most newspapers rely on advertising (70-80% of total revenue) and
circulation (20-30% of total revenue) for their revenues; by contrast,
television and radio rely almost entirely on advertising revenue. Newspaper
advertising is sold in several ways: full-run (printed on a newspaper page and
included in all editions, known as "run of press"), zoned part-run (printed on a
page and included in editions slated for a specific local geographic area), or
as preprints or inserts (advertising that is printed separately and inserted in
a newspaper). Department stores traditionally have been a major source of
display advertising, filling pages with pictures of their merchandise.
Classified advertising is also a significant component of revenue for
newspapers, usually accounting for about one-third of total advertising sales.
The circulation and demographic information verified by the Audit Bureau of
Circulations is the basis for the ad rates that newspapers charge to
advertisers.

U.S. NEWSPAPER INDUSTRY

    In 2001, daily newspaper advertising expenditures in the U.S. were
approximately US$44.3 billion, representing a compounded annual growth rate
("CAGR") of 3.9% since 1991. In addition total morning daily and Sunday
circulation has increased nationally from 29.4 million and 54.7 million in 1980
to 46.8 million and 59.1 million in 2001, respectively. While there are a few
newspapers that have national circulation, most U.S. newspapers operate in
regional markets with limited local competition. Display and classified
advertising are sold to both local and national advertisers. Newspapers account
for 30% of total U.S. advertising spending. Because newspapers reach 56% of U.S.
adults daily, advertisers utilize newspapers to reach the broadest possible
number of potential customers for their products and services.

     Over the last several years, newspapers have used a clustering strategy
consisting of owning and managing papers with geographic proximity in order to
achieve both revenue and cost benefits. Newspaper clusters are able to offer
advertisers broader, bundled purchasing compared to the narrower reach of a
single newspaper. Clusters can also facilitate cost efficiencies by
consolidating printing facilities, distribution channels, sharing editorial
resources and other types of centralized cost savings.

U.K. NEWSPAPER INDUSTRY

    British national newspapers more closely resemble North American magazines
in that they have broad distribution and readership across the country and
derive a much larger portion of their advertising revenue from national
advertisers, unlike North American newspapers which, because of their relatively
small geographic distribution areas, derive a substantial portion of their
advertising from local advertisers. National newspapers in the U.K. reach 70% of
the adult population, the second highest reach of all U.K. media behind only
television.

    The U.K. newspaper market is segmented and, within each segment, highly
competitive. The U.K. newspaper market consists of 10 national daily and 11
national Sunday newspapers, 1,593 regional and local newspapers, 3,174 consumer
magazines, and 5,713 business magazines. There are nine national U.K. newspaper
owners and three newspaper segments, the quality, mid-market and popular
segments. The market segment in which The Daily Telegraph competes is generally
known as the quality daily newspaper segment, consisting of all the broadsheets.
The Daily Telegraph and its competitors in this market segment appeal to the
middle and upper end of the demographic scale. In 2001, newspapers received a
30% share of the total advertising spending in the U.K., which is

                                       20
<PAGE>

the largest percentage of any medium. In addition, national newspaper
advertising spending has increased in nine of the last 10 years and has grown at
a CAGR of 6.3% since 1991.

D. BUSINESS STRATEGY

    The Company's revenue, on a consolidated basis, is dependent upon the
financial performance of the underlying assets, principally the assets of
International. Through our influence of International's strategic direction and
management, we intend to pursue the following strategies:

    Pursue Revenue Growth by Leveraging International's Significant Market
Position. International will continue to leverage its significant position in
daily readership in the attractive Chicago and U.K. markets in order to drive
revenue growth. For the Chicago Group, International will continue to build
revenues by taking advantage of the extensive cluster of its combined Chicago
Group publications, which allows International to offer local advertisers
geographically and demographically targeted advertising solutions and national
advertisers an efficient one-stop vehicle to reach the entire Chicago market.
For the U.K. Newspaper Group, International will continue to focus on retaining
The Daily Telegraph's national circulation dominance and increasing circulation
of The Sunday Telegraph, introduce new sections to the newspaper in order to
help advertisers target specific reader demographics, and periodically implement
cover price increases. In addition, International believes that The Daily
Telegraph's successful prepaid subscription program will continue to enhance
revenue opportunities.

    Continue to Maximize Operating Efficiency of Underlying Assets.
International has extensive expertise in introducing and maintaining operating
efficiencies, producing superior newspapers and increasing revenues.
Historically, these efficiencies have resulted from centralized newsprint
purchasing, clustering and consolidating duplicative functions and facilities at
its acquired newspaper publications, and investing in technology and production
equipment. For example, in April 2001, International completed the installation
of a U.S.$115 million, state-of-the-art printing facility in Chicago which has
lowered its production costs, enhanced product quality, and increased the
availability of color printing which generates higher advertising yields. In
response to the recent economic downturn, International has reduced total
compensation and other operating costs (other than newsprint) during fiscal year
2002 as compared to the corresponding period in 2001, which has positioned
International to significantly benefit as the advertising market recovers.
International will continue to aggressively manage its cost structure in the
future in order to optimize cash flow.

    Publish Relevant and Trusted High Quality Newspapers. International is
committed to maintaining the high quality of its newspaper product and editorial
integrity so as to ensure continued reader loyalty, which is the foundation of
its newspaper franchises. The Chicago Sun-Times has been recognized for its
editorial quality with several Pulitzer Prize-winning writers and awards for
excellence from Illinois' major press organizations. The Daily Telegraph and The
Sunday Telegraph are known for their quality content and superior product and
have in recent times been voted "National Newspaper of the Year", Britain's most
coveted industry award. In addition, International is focused on maintaining its
relevance in the United States in its urban and suburban markets by continuing
to provide leading local news coverage, while providing in-depth national and
international news coverage in the U.K. market. International believes that this
is a key strategy in maintaining and building upon the entrenched readership
base of its leading newspaper properties.

Prudent Asset Management. In addition to pursuing revenue growth from its
existing publications and maximizing operating efficiencies, International may
from time to time pursue selective, complementary newspaper acquisitions and
non-core divestitures. Management has a successful track record of identifying
value-enhancing acquisitions and underperforming newspaper properties,
integrating and optimizing these acquisitions, and opportunistically divesting
assets for optimal value to achieve debt reduction. Since International's
formation in 1986, the existing senior management team has built, primarily
through acquisitions, and managed up to 400 newspapers and related publications.
After acquiring control of The Daily Telegraph in 1986, International
significantly modernized the Telegraph's printing plants, negotiated a
two-thirds reduction in work force, and revitalized its titles. In 1994, it
acquired the Chicago Sun-Times and has since doubled its operating profits. More
recently, International divested its U.S. community newspaper operations and the
majority of its Canadian newspaper assets, which were monetized at attractive
cash flow multiples. This strategy has positioned International to emerge from
the current downturn with reduced leverage, efficient and focused operations,
and solid operating platforms for growth.

     In implementing these strategies there are certain risks that could cause
actual results to differ from our expectations, including the impact of
strategies of our competitors, the ability to compete in specific markets for
products and services, the impact of industry consolidation among key suppliers
or customers, the ability to continue to obtain improved efficiencies and lower
overall production costs, increased newsprint costs, the ability to avoid
significant increases in labor costs or a significant deterioration in labor
relations and the impact of electronic commerce and the increased use of
alternative non-print media such as the Internet.

                                       21
<PAGE>

E. BUSINESS OF THE COMPANY

    The Company's most important property in terms of revenue and earnings is
International. Of International's reported total operating revenue in 2002,
approximately 44% was attributable to the Chicago Group, 48% to the U.K.
Newspaper Group, 7% to the Canadian Newspaper Group and 1% to the Community
Group. In 2001, the Chicago Group, the U.K. Newspaper Group, the Canadian
Newspaper Group and the Community Group accounted for 39%, 42%, 17% and 2%,
respectively, of International's reported total operating revenues.

    The Company also has interests through wholly-owned subsidiaries in various
other assets that do not, in the aggregate, contribute materially to the
Company's revenue or earnings. These assets include a 40% interest in a daily
newspaper in the Cayman Islands and Canadian commercial real estate properties.

CHICAGO GROUP

    SOURCES OF REVENUE. The following table sets forth the sources of revenue
and the percentage such sources represent of total revenues for the Chicago
Group during the past three years.

<TABLE>
<CAPTION>
                             ----------------------------------------------------------------------
                                                         YEAR ENDED DECEMBER 31,
                             ----------------------------------------------------------------------
                                      2000                        2001                   2002
                             ----------------------------------------------------------------------
                                                           (US$ IN THOUSANDS)
<S>                           <C>            <C>         <C>              <C>     <C>           <C>
Advertising..............     $305,027        76%        $338,521          76%    $341,261       77%
Circulation..............       80,261        20           92,716          21       89,427       20
Job Printing and Other...       16,129         4           11,647           3       11,089        3
                             ----------------------------------------------------------------------
Total....................     $401,417       100%        $442,884         100%    $441,777      100%
                             ======================================================================
</TABLE>

The Chicago Group consists of more than 100 titles in the greater Chicago
metropolitan area including the Chicago Sun-Times, the Post Tribune in northwest
Indiana and Chicago's Daily Southtown. International's other newspaper
properties in the greater Chicago metropolitan area include:

-   Pioneer Newspapers Inc., which currently publishes 56 weekly newspapers in
    Chicago's north and northwest suburbs;

-   Midwest Suburban Publishing Inc., which in addition to the Daily Southtown,
    publishes 23 biweekly newspapers, 13 weekly newspapers and four free
    distribution papers primarily in Chicago's south and southwest suburbs; and

-   Fox Valley Publications Inc., which is doing business as Chicago Suburban
    Newspapers, publishes four daily newspapers, The Herald News, The Beacon
    News, The Courier News and The News Sun, 12 free distribution newspapers and
    six free total market coverage products ("TMC") in the fast growing counties
    surrounding Chicago and Cook County.

    ADVERTISING. Substantially all advertising revenues are derived from local
and national retailers and classified advertisers. Advertising rates and rate
structures vary among the publications and are based, among other things, on
circulation, penetration and type of advertising (whether classified, national
or retail). In 2002, retail advertising accounted for the largest share of
advertising revenues (47%), followed by classified (39%) and national (14%). The
Chicago Sun-Times offers a variety of advertising alternatives, including
full-run advertisements, geographically zoned issues, special interest pull-out
sections and advertising supplements in addition to regular sections of the
newspaper targeted to different readers, such as arts, food, real estate, TV
listings, weekend, travel and special sections. The Chicago area suburban
newspapers also offer similar alternatives to the Chicago Sun-Times platform for
their daily and weekly publications. The Chicago Group operates the Reach
Chicago Newspaper Network, an advertising vehicle that can reach the combined
readership base of all the Chicago Group publications and allows International
to offer local advertisers geographically and demographically targeted
advertising solutions and national advertisers an efficient one-stop vehicle to
reach the entire Chicago market.

    CIRCULATION. Circulation revenues are derived from single copy newspaper
sales made through retailers and vending racks and home delivery newspaper sales
to subscribers. In 2002, approximately 69% of the copies of the Chicago
Sun-Times sold and 61% of the circulation revenues were single copy sales.
Approximately 80% of 2002 circulation revenues of the Chicago area suburban
newspapers were derived from subscription sales. The average paid daily and
Sunday circulation of the Chicago Sun-Times is approximately 481,000 and
383,000, respectively.

                                       22
<PAGE>

The Chicago Sun-Times has had consecutive increases over the past two years in
paid daily circulation. The daily and Sunday paid circulation of the Daily
Southtown is approximately 48,000 and 53,000, respectively. The daily and Sunday
paid circulation of the Post-Tribune is approximately 65,000 and 70,000,
respectively. The aggregate daily and Sunday paid circulation of the Chicago
Suburban Newspapers is approximately 100,000 and 114,000, respectively. The
aggregate circulation for the free TMC products is approximately 296,000 and the
circulation of the free distribution newspapers and bi-weekly paid circulation
of the Chicago Suburban Newspapers is approximately 227,000 and 21,000,
respectively.

    OTHER PUBLICATIONS AND BUSINESS ENTERPRISES. The Chicago Group continues to
strengthen its online dominance. Suntimes.com and the related Group websites
have approximately 1.4 million unique users with some 25 million page
impressions per month. The www.classifiedschicago.com regional
classified-advertising website, which was created through a partnership with
Paddock Publications, pools classified advertisements from all Chicago Group
publications, as well as Paddock Publications' metropolitan daily to create a
valuable new venue for advertisers, readers and on-line users. Additionally,
www.DriveChicago.com continues to be a leader in automotive websites. During
2000, the Chicago Group joined Paddock Publications and the Chicago Automobile
Trade Association to create this website that pools the automotive classified
advertising of three of the Chicago metropolitan area's biggest dailies with the
automotive inventories of many of Chicago's metropolitan new car dealerships.

    SALES AND MARKETING. Each newspaper or operating subsidiary in the Chicago
Group has had its own marketing department which works closely with both
advertising and circulation sales and marketing teams to introduce new readers
to the Group's newspapers through various initiatives. The Chicago Sun-Times
marketing department uses strategic partnerships, such as major event
productions and sporting venues, for on-site promotion and to generate
subscription sales. The Chicago Sun-Times has also formed a marketing and media
partnership with local TV and radio outlets for targeted audience exposure.
Similarly at Fox Valley Publications and Midwest Suburban Publishing, marketing
professionals work closely with circulation sales professionals to determine
circulation promotional activities, including special offers, sampling programs,
in-store kiosks, sporting event promotions, dealer promotions and community
event participation. In-house printing capabilities allow the Fox Valley
marketing department to offer direct mail as an enhancement to customers' run of
press advertising programs. Midwest Suburban Publishing, like the other
newspapers, generally targets readers by zip code. Midwest Suburban Publishing
owns its existing customer list of 120,000 names along with the Penny Saver
address list containing 435,000 household names. The Post-Tribune marketing
department focuses on attracting readers in the top 20 zip codes that major
advertisers have identified as being the most attractive.

    DISTRIBUTION. The Chicago Group has gained benefits from International's
clustering strategy. In recent years, International has succeeded in combining
distribution networks within the Chicago Group where circulation overlaps. The
Chicago Sun-Times is distributed through both an employee and contractor network
depending upon the geographic location. The Chicago Sun-Times takes advantage of
a joint distribution program with its sister publication, Fox Valley
Publications, in which Fox Valley Publications distributes the Chicago Sun-Times
in areas outside of Cook County. The Chicago Sun-Times has approximately 8,000
street newspaper boxes and more than 8,500 newsstands and over the counter
outlets from which single copy newspapers are sold, as well as approximately 250
street "hawkers" selling the newspapers in high-traffic urban areas. Of the
total circulation, approximately 69% is sold through single copy outlets, and
31% through home delivery subscriptions. Midwest Suburban Publishing's Daily
Southtown is distributed primarily by Chicago Sun-Times independent contractors.
Additionally, in certain western suburbs, the Daily Southtown also has a joint
distribution program with Fox Valley Publications. The Daily Southtown and its
sister publication, The Star, are also distributed in approximately 1,600
outlets and newspaper boxes in Chicago's southern suburbs and Chicago's south
side and downtown areas. Midwest's Penny Saver is distributed through the post
office and through independent contractors. Approximately 83% of Fox Valley
Publication's circulation is from home delivery subscriptions. While 85% of the
Post-Tribune's circulation is by home delivery, it also distributes newspapers
to 635 retail outlets and approximately 420 single copy newspaper boxes. Pioneer
has a solid home delivery base that represents 94% of its circulation. Pioneer
is also distributed to more than 350 newspaper boxes and is in more than 1,200
newsstand locations.

    PRINTING. The Chicago Sun-Times' Ashland Avenue printing facility became
fully operational in April 2001 and gives the Chicago Group printing presses
that have the quality and speed necessary to effectively compete with the other
regional newspaper publishers. Fox Valley Publications' 100,000 sq. ft. plant,
which was completed in 1992, houses a state-of-the-art printing facility in
Plainfield, Illinois, which prints all of its products. Midwest Suburban
Publishing prints all of its publications at its South Harlem Avenue facility in
Chicago. Pioneer prints the

                                       23
<PAGE>

main body of its weekly newspapers at its Northfield production facility. In
order to provide advertisers with more color capacity, certain of Pioneer's
sections are printed at the Chicago Sun-Times Ashland Avenue facility. The
Post-Tribune has one press facility in Gary, Indiana.

    COMPETITION. Each of the Chicago area newspapers competes in varying degrees
with radio, broadcast and cable television, direct marketing and other
communications and advertising media as well as with other newspapers having
local, regional or national circulation. The Chicago metropolitan region
comprises Cook County and six surrounding counties and is served by eight local
daily newspapers of which International owns six. The Chicago Sun-Times competes
in the Chicago region with the Chicago Tribune, a large established metropolitan
daily and Sunday newspaper, which is the fifth largest metropolitan daily
newspaper in the United States based on circulation. In addition, the Chicago
Sun-Times and other Chicago Group newspapers face competition from other
newspapers published in adjacent or nearby locations and circulated in the
Chicago metropolitan area market.

    RAW MATERIALS. The basic raw material for newspapers is newsprint. In 2002
approximately 132,000 tons were consumed. Newsprint costs equaled approximately
14.3% of the Chicago Group's revenues. Average newsprint prices for the Chicago
Group decreased about 21% in 2002 from 2001. The Chicago Group is not dependent
upon any single newsprint supplier. The Chicago Group's access to Canadian,
United States and offshore newsprint producers ensures an adequate supply of
newsprint. The Chicago Group, like other newspaper publishers in North America,
has not entered into any long-term fixed price newsprint supply contracts. The
Chicago Group believes that its sources of supply for newsprint are adequate for
its anticipated needs.

U.K. NEWSPAPER GROUP

    SOURCES OF REVENUE. The following table sets forth the sources of revenue
and their percentage of total revenues for The Telegraph during the past three
years.

<TABLE>
<CAPTION>
                         ------------------------------------------------------------------------
                                                    YEAR ENDED DECEMBER 31,
                         ------------------------------------------------------------------------
                                       2000                     2001                   2002
                         ------------------------------------------------------------------------
                                           (IN THOUSANDS OF BRITISH POUNDS STERLING)
<S>                            <C>           <C>         <C>        <C>         <C>           <C>
Advertising............        L255,945       69%        L228,715    68%        L211,045       66%
Circulation............          95,690       26           94,502    28           93,640       29
Other..................          19,020        5           14,252     4           16,261        5

                         ------------------------------------------------------------------------
Total..................        L370,655      100%        L337,469   100%        L320,946      100%
                         ========================================================================
</TABLE>

(1)      Financial data is in accordance with U.K. generally accepted accounting
         principles.

The U.K. Newspaper Group's operations include The Daily Telegraph, The Sunday
Telegraph, The Weekly Telegraph, telegraph.co.uk, and The Spectator and Apollo
magazines.

    ADVERTISING. Advertising is the largest source of revenue at The Telegraph.
The Telegraph's display advertising strengths are in the financial, automobile
and travel sections. The level of classified advertisements, especially
recruitment advertisements, fluctuates with the economy. The Telegraph's
strategy with respect to classified advertising is to improve volume and yield
in four sectors: recruitment, property, travel and automobiles. Classified
advertising revenue represents 27% of total advertising revenue. Recruitment
advertising is the largest classified advertising category, representing about
36% of all classified advertising in terms of revenue in 2002.

    CIRCULATION. The target audience of The Telegraph's newspapers is generally
conservative, middle and upper income readers, with a continuing emphasis on
gaining new younger readers. The editorial strengths of The Telegraph's
newspapers are national, international, financial news and features and
comprehensive sports coverage. In May 1996, The Telegraph introduced the first
national advance purchase subscription program in the United Kingdom. The
program has proven successful in driving circulation increases although there
has been some inevitable cannibalization of single copy sales. By the end of
1996, the plan had about 100,000 weekday and 200,000 Sunday average sales and
the average prepaid subscription was for a period of about 40 weeks. In order to
gain broad acceptance of this revolutionary plan, the subscriptions were offered
at a significant discount. The

                                       24
<PAGE>

amount of that discount was reduced throughout 1997 and continued to be reduced
thereafter. The program currently has approximately 315,000 subscribers.

    OTHER PUBLICATIONS AND BUSINESS ENTERPRISES. The Telegraph is involved in
several other publications and business enterprises, including The Spectator,
Apollo, The Weekly Telegraph and telegraph.co.uk (formerly Electronic
Telegraph). Telegraph.co.uk has over 3.2 million unique users with some 30
million page impressions per month. The Telegraph uses its brand in developing
ancillary revenue streams such as reader offers including travel promotions,
financial services, household products and books. During 1999, The Telegraph, in
conjunction with The Boots Company plc, the United Kingdom's leading beauty and
health retailer, launched a new web site focusing on the women's on-line market,
www.handbag.com. The site deals with, among other things, health, beauty and the
arts.

    SALES AND MARKETING. The Telegraph's marketing department helps introduce
new readers to our newspapers through strategic marketing initiatives. The
Telegraph has research groups that seek the views of readers. This provides
useful information to better target editorial, promotional and commercial
activities. The Telegraph's marketing and prospect database, which contains
information about the newspaper readership, purchasing, and lifestyles of
readers, is used to selectively target customers. In addition, the direct
marketing department is responsible for the development of a customer contact
strategy, circulation initiatives such as subscription programs, discount
vouchers supporting the launch of new sections and supplements, and various
support promotions.

    DISTRIBUTION. Since 1988, The Telegraph's newspapers have been distributed
to wholesalers by truck under a contract with a subsidiary of TNT Express (U.K.)
Limited ("TNT"). The Telegraph's arrangements with wholesalers contain
performance provisions to ensure minimum standards of copy availability while
controlling the number of unsold copies. On May 25, 2001, a new contract with
TNT was entered into by each of the major publishers at West Ferry Printers, a
joint venture owned equally by The Telegraph and another British newspaper
publisher. That contract is for a minimum term of five years and six months and
commenced on May 27, 2001.

    Wholesalers distribute newspapers to retail news outlets. The number of
retail news outlets throughout the United Kingdom has increased as a result of a
1994 ruling by the British Department of Trade and Industry that prohibits
wholesalers from limiting the number of outlets in a particular area. More
outlets do not necessarily mean more sales and The Telegraph's circulation
department has continued to develop its control of wastage while taking steps to
ensure that copies remain in those outlets with high single copy sales. In
addition to single copy sales, many retail news outlets offer home delivery
services. In 2002 home deliveries accounted for 40% of sales of both The Daily
Telegraph and The Sunday Telegraph.

    Historically, wholesalers and retailers have been paid commissions based on
a percentage of the cover price. Prior to June 1994 when competitive pressures
caused The Telegraph to reduce its cover price, wholesaler and retailer
commissions amounted to approximately 34% of the then cover price.
Notwithstanding the reduction of the cover price, the commissions paid were not
reduced. In line with other national newspapers, The Telegraph has moved away
from a commission paid on a percentage of cover price to a fixed amount per
copy.

    PRINTING. The majority of copies of The Daily Telegraph and The Sunday
Telegraph are printed by The Telegraph's two 50% owned joint venture printing
companies, West Ferry Printers and Trafford Park Printers. The Telegraph has a
very close involvement in the management of the joint venture companies and
regards them as being important to The Telegraph's day-to-day operations. The
magazine sections of the Saturday edition of The Daily Telegraph and of The
Sunday Telegraph are printed under contract by external magazine printers. The
Telegraph also prints the majority of its overseas copies under contracts with
external printers in Northern Ireland, Spain and Belgium.

    Management of each joint venture printing company continually seeks to
improve production performance. Major capital expenditures require the approval
of the boards of directors of the joint venture partners. There is high
utilization of the plants at West Ferry and Trafford Park Printers, with little
spare capacity. At Trafford Park Printers, revenue earned from contract printing
for third parties has a marginal effect on The Telegraph's printing costs. West
Ferry Printers also undertakes some contract printing for third parties, which
results in increased profitability.

                                       25
<PAGE>

    West Ferry Printers has 18 presses, six of which are configured for The
Telegraph's newspapers, eight are used for the newspapers published by The
Telegraph's joint venture partner, Express Newspapers, and the remaining four
are used by contract printing customers. Trafford Park Printers has six presses,
two of which are used primarily for The Telegraph's newspapers.

    COMPETITION. In common with other national newspapers in the United Kingdom,
The Telegraph's newspapers compete for advertising revenue with other forms of
media, particularly television, magazine, direct mail, posters and radio. In
addition, total gross advertising expenditures, including financial, display and
recruitment classified advertising, are affected by economic conditions in the
United Kingdom. The Telegraph's primary competition in the United Kingdom is The
Times, however The Daily Telegraph has 42% greater circulation than The Times.

    There have been no strikes or general work stoppages involving employees of
The Telegraph or the joint venture printing companies in the past five years.
Management of The Telegraph believes that its relationships with its employees
and the relationships of the joint venture printing companies with their
employees are generally good.

    RAW MATERIALS. Newsprint represents the single largest raw material expense
of The Telegraph's newspapers and, next to employee costs, is the most
significant operating cost. Approximately 157,000 metric tons are consumed
annually. In 2002, the total cost was approximately 17% of the U.K. Newspaper
Group's revenues. Prices were fixed throughout 2002 at levels some 9.9% below
the average price paid during 2001. Inventory held at each printing location is
sufficient for three to four days production and in addition, suppliers' stock
held in the United Kingdom normally represents a further four to five weeks
consumption. Recently negotiated contracts for 2003 are at prices 7.1% below
those for 2002.

    On October 17, 2001, Paper Purchase and Management Limited was established
as a joint venture between The Telegraph and Guardian Media Group plc. The main
purpose of the joint venture is to control the specifications and sourcing, as
well as monitoring the usage, of newsprint throughout the printing plants
operated by one or both of the joint venture partners and at other locations
where the joint venture partners' publications are printed on a contract basis.
Further, by combining the purchasing power of the joint venturers, The Telegraph
is able to negotiate better prices. The Telegraph purchases newsprint from a
number of different suppliers located primarily in Canada, the United Kingdom,
Scandinavia and continental Europe. With many sources of newsprint accessible to
it, The Telegraph is neither reliant on any single supplier nor is availability
of newsprint a concern.

CANADIAN NEWSPAPER GROUP

    SOURCES OF REVENUE. The following table sets forth the sources of revenue
and the revenue mix of the total Canadian Newspaper Group, during the past three
years, including revenue of operations sold up to the date of sale. Operations
sold in the past three years include: the Canadian metropolitan newspapers and a
large number of community papers to CanWest in 2000; the sale of the French
language newspapers to Gesca in 2001; the sale of Ontario community newspapers
to Osprey in 2001; and the sale of International's remaining 50% interest in the
National Post to CanWest in 2001.

<TABLE>
<CAPTION>
                              ---------------------------------------------------------------
                                                    YEAR ENDED DECEMBER 31,
                              ---------------------------------------------------------------
                                       2000                  2001                    2002
                              ---------------------------------------------------------------
<S>                             <C>         <C>        <C>        <C>         <C>         <C>
                                              (IN THOUSANDS OF CANADIAN DOLLARS)
Newspapers:
   Advertising.............     $1,158,678   73%       $171,032    56%        $ 47,215     43%
   Circulation.............        287,513   18          53,030    17            6,611      6
   Job printing and other..         70,809    5          35,249    12           11,883     11
Business
Communications....                  62,193    4          45,763    15           43,412     40
                              ---------------------------------------------------------------
Total......................     $1,579,193  100%       $305,074   100%        $109,121    100%
                              ===============================================================
</TABLE>

    At December 31, 2002 International's Canadian Newspaper Group primarily
consisted of HCPH Co. and an 87% interest in the Partnership. During 2001, HCPH
Co. became the successor to the operations of XSTM.

                                       26
<PAGE>

    HCPH Co. and the Partnership own ten daily and twenty-three non-daily
newspaper properties and the Business Information Group (formerly Southam
Magazine and Information Group) which publishes Canadian business magazines and
tabloids for the transportation, construction, natural resources, manufacturing
and other industries.

    ADVERTISING. Newspaper advertising revenue in 2002 totaled $47.2 million.
Advertisements are carried either within the body of the newspapers, and
referred to as run-of-press ("ROP") advertising, or as inserts. ROP, which
represented 91% of total advertising revenue in 2002 is categorized as either
retail, classified or national. The three categories represented 72%, 12% and
16%, respectively, of ROP advertising revenue in 2002.

    CIRCULATION. Virtually all newspaper circulation revenue in 2002 was from
subscription sales.

    COMPETITION. The majority of revenue is from advertising. Advertising
lineage in the newspapers is affected by a variety of factors including
competition from print, electronic and other media as well as general economic
performance and the level of consumer confidence. Specific advertising segments
such as real estate, automotive and help wanted will be significantly affected
by local factors.

    RAW MATERIALS. The basic raw material for newspapers is newsprint. Newsprint
consumption in 2002 was approximately 10,900 tons. The newspapers within the
Canadian Newspaper Group have access to adequate supplies to meet anticipated
production needs. They are not dependent upon any single newsprint supplier. The
Canadian Newspaper Group, like other newspaper publishers in North America, has
not entered into any long-term fixed price newsprint supply contracts.

    REGULATORY MATTERS. The publication, distribution and sale of newspapers and
magazines in Canada is regarded as a "cultural business" under the Investment
Canada Act and consequently, any acquisition of control of the Canadian
Newspaper Group by a non-Canadian investor would be subject to the prior review
and approval by the Minister of Industry of Canada. Because no such acquisition
of control of the Company or International has occurred, the current ownership
is acceptable.

    OWNERSHIP. During 2001, HCPH Co. became the successor to the operations of
XSTM. International indirectly owns a combined 100% interest in HCPH Co. and
indirectly owns an 87.0% interest in the Partnership. Under the Income Tax Act
(Canada), there are limits on non-Canadian ownership of Canadian newspapers. At
present, we do not meet those limits and, if this continues beyond a specified
cure period, there could be adverse effects on advertising revenue. We intend to
take the necessary steps to ensure that we are in compliance before the cure
period expires.

COMMUNITY GROUP

     SOURCES OF REVENUE. The following table sets forth the sources of revenue
and the percentage that such sources represented of total revenues for the
Community Group during the past three years.

<TABLE>
<CAPTION>
                               --------------------------------------------------------------------
                                                    YEAR ENDED DECEMBER 31,
                               --------------------------------------------------------------------
                                       2000                  2001                   2002
                               --------------------------------------------------------------------
                                                    (US$ IN THOUSANDS)
<S>                            <C>          <C>     <C>          <C>     <C>          <C>
Advertising................    $38,294       57%    $ 5,806       30%    $  3,937      30%
Circulation................     19,168       28       7,751       41        6,082      46
Job Printing and Other.....      9,874       15       5,558       29        3,212      24
                               --------------------------------------------------------------------
Total......................    $67,336      100%    $19,115      100%    $ 13,231     100%
                               ====================================================================
</TABLE>

     Approximately 46.0% of the Jerusalem Post's revenues of $13.2 million in
2002 were derived from circulation, with 24.2% from job printing and other and
29.8% from advertising. The Jerusalem Post in the past derived a relatively high
percentage of its revenues from job printing as a result of a long-term contract
to print and bind copies of the Golden Pages, Israel's equivalent of a Yellow
Pages telephone directory. During 2002, Golden Pages effectively cancelled this
agreement and has ceased placing printing orders. An action was commenced by the
Jerusalem Post in 2003 seeking damages for the alleged breach. Newsprint costs
relating to publication of the

                                       27
<PAGE>

Jerusalem Post equalled approximately 11.3% of the Jerusalem Post's revenues in
2002. Newsprint used in producing the Golden Pages was provided by the owners of
that publication.

    REGULATORY MATTERS. Newspapers in Israel are required by law to obtain a
license from the country's interior minister, who is authorized to restrain
publication of certain information if, among other things, it may endanger
public safety. To date, the Jerusalem Post has not experienced any difficulties
in maintaining its license to publish or been subject to any efforts to restrain
publication. In addition, all written media publications in Israel are reviewed
by Israel's military censor prior to publication in order to prevent the
publication of information that could threaten national security. Such
censorship is considered part of the ordinary course of business in the Israeli
media and has not adversely affected the Jerusalem Post's business in any
significant way.

F.  ORGANIZATIONAL STRUCTURE

The following simplified chart shows the basic corporate structure of the
Company at June 19, 2003.

[ORGANIZATIONAL STRUCTURE CHART]

NOTES:

(a) Represents equity interest (72.8% voting interest)

G.  PROPERTY, PLANTS AND EQUIPMENT

    The Company believes that its and International's properties and equipment
are in generally good condition, well-maintained and adequate for current
operations.

    The Chicago Sun-Times conducts its editorial, pre-press, marketing, sales
and administrative activities in a 535,000 square foot, seven-story building in
downtown Chicago, which is owned by International. International has completed
the full conversion of its Chicago Sun-Times production operations to a new
320,000 square foot state-of-the-art printing facility, at a total construction
cost of approximately US$115 million. It is intended that new facilities will be
identified to house the

                                       28
<PAGE>

Chicago Sun-Times non-production activities and the downtown Chicago building
will be redeveloped. Agreement has been reached for a joint development of the
downtown Chicago building under which, if it proceeds, the Chicago Group will
receive the first US$75 million of consideration and will share in future
profits. There can be no assurance that this joint development will proceed.

Pioneer utilizes and owns a building in north suburban Chicago for editorial,
pre-press, sales and administrative activities. Pioneer leases several outlying
satellite offices for its editorial and sales staff in surrounding suburbs.
Production currently occurs at a 65,000 square foot leased building in a
neighboring suburb. Midwest Suburban Publishing utilizes one building for
editorial, pre-press, marketing, sales and administrative activities. Production
activities occur at a separate facility. Both facilities are located in
Chicago's south suburbs. The Post-Tribune editorial, prepress, marketing, sales
and administrative activities are housed in the newly completed facility in
Merrillville, Indiana while production activities continue at its facility in
Gary, Indiana. The headquarters for Fox Valley Publications Inc is a 172,000
square foot owned facility, built in 1992 and located in Plainfield, Illinois.
Fox Valley Publications produces its newspapers at this facility which also
houses marketing functions, pre-press as well as certain sales and
administrative activities. The editorial and sales activities are housed at
five owned facilities located in surrounding suburbs.

    The Telegraph occupies five floors of a tower at Canary Wharf in London's
Docklands under a 25-year operating lease expiring in 2017. Printing of The
Telegraph's newspaper titles is done principally at fifty percent owned joint
venture printing plants in London's Docklands and in Trafford Park, Manchester.

    The Jerusalem Post is produced and distributed in Israel from a three-story
building in Jerusalem owned by Jerusalem Post. Jerusalem Post also leases a
sales office in Tel Aviv and a sales and distribution office in New York.

    The Canadian Newspaper Group's newspapers and magazines are published at
numerous facilities throughout Canada.

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A.  OPERATING RESULTS

OVERVIEW - HOLLINGER INC.

The Company is an international holding company and its assets consist primarily
of investments in subsidiaries and affiliated companies, principally the
investment in International. As at May 30, 2003, the Company directly and
indirectly owns 11,256,538 shares of Class A common stock and 14,990,000 shares
of Class B common stock of International, which represent 30.3% of the equity
and 72.7% of the voting interests. International's Class A common stock is
listed on the New York Stock Exchange. All of the Company's operating
subsidiaries are owned through International. Significant liabilities of the
holding company currently include Senior Secured Notes due 2011 and Series II
and Series III preference shares, which are retractable by the holder. NB Inc.,
a wholly owned subsidiary of the Company, has subordinated debt due to
International. On a non-consolidated basis, the Company's income consists mainly
of dividends from subsidiaries, principally International, and its operating
costs include public company costs (mainly legal and professional fees,
directors' fees and transfer agent fees), interest on its Senior Secured Notes
and dividends on Series II and Series III preference shares.

    On a non-consolidated basis, the Company has experienced a shortfall between
the dividends and fees received from its subsidiaries and its obligations to pay
its operating costs, including interest and dividends on its preference shares
and such shortfalls are expected to continue in the future. Accordingly, the
Company is dependent upon the continuing financial support of RMI, a wholly
owned subsidiary of Ravelston, the Company's ultimate parent company, to fund
such shortfalls and, therefore, pay its liabilities as they fall due. On March
10, 2003, concurrent with the issue of Senior Secured Notes, RMI entered into a
support agreement with the Company, under which RMI has agreed to make annual
support payments in cash to the Company by way of capital contributions (without
the issuance of additional shares of the Company) or subordinated debt. The
annual support payments will generally be equal to the greater of (a) the
Company's negative net cash flow for the relevant period (which does not extend
to outlays for retractions or redemptions), determined on a non-consolidated
basis, and (b) U.S.$14.0 million per year.

                                       29
<PAGE>

Pursuant to this arrangement, RMI has made payments to the Company in respect of
the period from March 10 to March 31, 2003 in the amount of US$1.1 million.

    RMI currently derives all of its income and operating cash flow from the
fees paid pursuant to Services Agreements with International and its
subsidiaries. RMI's ability to provide the required financial support under the
support agreement with the Company is dependent on RMI continuing to receive
sufficient fees pursuant to those Services Agreements. The Services Agreements
may be terminated by either party by giving 180 days notice. The fees in respect
of the Services Agreements are negotiated annually with and approved by the
audit committee of International. The fees to be paid to RMI for the year ending
December 31, 2003 amount to approximately US$22.0 million to US$24.0 million and
were approved in February 2003. The fees in respect of the periods after
December 31, 2003 have not yet been negotiated or approved.

     As described more fully below in"Hollinger International Inc. -- Recent
Developments", a shareholder of International has requested that the Board
investigate and, if determined to be advisable, take corrective action in
respect of certain matters, including the payment of fees by International
pursuant to management services agreements with RMI. Although the Board of
International has established a special committee of the Board of Directors to
conduct an independent review and investigation of the matters, the timing and
outcome of the process and the impact on the Company and RMI is uncertain at
this time. Under the terms of the Senior Secured Notes, if in any quarterly
period after April 1, 2003, the Company fails to receive in cash a minimum
aggregate amount of at least US$4.7 million from a) payments made by RMI
pursuant to the support agreement and b) dividends paid by International on its
shares held by the Company and NBI, the Company would be in default under its
Senior Secured Notes and they could become due and payable immediately.

     Based on the Company's current investment in International and the current
quarterly dividend paid by International of US$0.05 per share: (i) the minimum
support payment required to be made by RMI to avoid a default under the terms of
the Senior Secured Notes is approximately US$14.0 million annually and (ii) the
Company estimates the support payment required by RMI to fund its negative net
cash flow will approximate US$20.0 million for the twelve months ending June 30,
2004. This amount assumes payment by the Company of preference share dividends
of approximately US$5.0 million which have yet to be considered by the Board of
Directors and which depend on the Company having the ability under corporate law
to pay such dividends. The Company's ongoing liquidity on a non-consolidated
basis continues to depend to a large degree on support payments from RMI which
in turn depends on fees received pursuant to its services agreements with
International. If the Company does not receive support payments of at least
US$15.0 million for the twelve months ending June 30, 2004, based on the above
assumptions, then it will be required to dispose of assets of seek financing in
order to meet its non-consolidated obligations as they fall due.

     The Company is contemplating a variety of initiatives to address the
potential matters referred to above, however at this time there can be no
certainty that such initiatives will be completed.

     On May 22, 2003, International and the Company announced that they had
reached an agreement in principle whereby the Company would sell some of its
holding of International's Class A shares to Southeastern Asset Management Inc.
("Southeastern"), and would seek certain phased changes in voting rights of
International's Class B shares over five years. There were also, prior and
subsequent to May 22, 2003, tentative agreements on the optimal scale of
management fees, Southeastern nominations to International's Board of Directors,
and on certain other matters, including possible consideration to the Company
for varying the super-voting rights that attach to International's Class B
shares. These discussions have evolved substantially but in a manner generally
consistent with what was announced May 22, 2003. As a result of publicity
accorded these discussions and International's affairs generally, other entities
have initiated conversations on matters related to the subjects of the
Southeastern discussions. All of these conversations are in progress, but it is
impossible at this time to foretell whether they will reach an executable
agreement, or what the nature of such an agreement might be.

    In addition, the Company's issued capital stock consists of Series II
preference shares, Series III preference shares and retractable common shares,
each of which is retractable at the option of the holder. There is uncertainty
regarding the Company's ability to meet its future financial obligations arising
from the retraction of preference shares and retractable common shares. These
matters are more fully discussed under "Liquidity and Capital Resources -
Financial Condition and Cash Flows".

OVERVIEW - HOLLINGER INTERNATIONAL INC.

    International's business is concentrated in the publication of newspapers in
the United States, the United Kingdom, Canada and Israel. Revenues are derived
principally from advertising, paid circulation and, to a lesser extent, job
printing. Of International's reported total operating revenue in 2002,
approximately 44% was attributable to the Chicago Group, 48% to the U.K.
Newspaper Group, 7% to the Canadian Newspaper Group and 1% to the Community
Group. The Chicago Group consists of the Chicago Sun-Times and other daily and
weekly newspapers in the greater Chicago metropolitan area. The U.K. Newspaper
Group consists of the operations of The Daily Telegraph, The Sunday Telegraph,
The Weekly Telegraph, telegraph.co.uk, and The Spectator and Apollo magazines,
its subsidiaries and joint ventures. The Canadian Newspaper Group consists of
the operations of HCPH Co., an 87% investment in the Partnership and until
August 31, 2001, a 50% interest in National Post publications. The Community
Group consists of the Jerusalem Post publications.

    During 2000, International sold most of its remaining U.S. community
newspapers properties and completed the sale of most of International's Canadian
newspapers and related assets to CanWest.

    During 2001, International sold most of the remaining Canadian newspaper
properties, the 50% interest in the National Post and the last remaining United
States community newspaper. In addition, International sold its approximate
15.6% equity interest in CanWest and participation interests in most of the
debentures issued by a subsidiary of CanWest both of which were received in 2000
as part of the proceeds on the sale of Canadian newspaper properties to CanWest.



Recent Developments -- Hollinger International Inc.

On May 19, 2003, a shareholder of International filed a Schedule 13D with the
SEC and, amongst other things, served a demand letter on the Board of
International requesting that the Board investigate and, if determined to be
advisable, take corrective action in respect of payments made to senior
executives of International and to RCL in respect of non-competition agreements
as previously disclosed in International's and the Company's financial
statements. On June 11, 2003, the same shareholder filed an Amendment to the
Schedule 13D with the SEC reiterating the earlier demands as well as requesting
that the Board investigate and, if determined to be advisable, take corrective
action in respect of (i) an asset sale by International to an entity affiliated
with certain officers and directors of International, and (ii) the payment of
fees by International pursuant to various affiliated management services
agreements including fees paid to RMI. On June 17, 2003, in response to these
requests, the Board established a special committee to conduct an independent
review and investigation of those concerns. The special committee's review and
investigation are continuing. The timing and outcome of this process is
uncertain. The potential impact of the demand letters and special committee
process on the financial statements of International and the Company and on RCL
and RMI can not now be precisely calculated but the costs of the process are
estimated at between US$6.0 million and US$8.0 million of increased expenses in
the current year. Increased expenses related to higher director and officer
insurance premiums, legal costs and other costs incurred in connection with the
special committee's review and investigation will be reflected in the third and
subsequent quarters.

BUSINESS OF THE COMPANY

    The Company, through operating subsidiaries, has in the past acquired
underperforming newspaper properties with a view to improving the operation and
enhancing profitability and value. Generally, it was the Company's intention to
control the business and to realize profits from the continued ownership,
operation and improvement of the business along with profits from the periodic
disposal of all or part of the Company's holding in an operation. The Company's
emphasis has been on daily newspapers and usually those that are dominant in
their respective markets. The Company's purchases generally have been of
newspaper businesses that are underperforming either through weak operating
management or as a result of an inability to access necessary capital. The
Company also concentrated on acquisitions and disposals that increased the
average size of the Company's newspapers or that had significant potential
synergies with its other newspapers. In recent years, the Company has focused
more on selling

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mature newspaper franchises with considerably less emphasis on acquisitions.
Management's current intention is to concentrate on a few core assets to
maximize their potential.

OUTLOOK FOR INTERNATIONAL

    The industry wide advertising market remains sluggish particularly in the
United Kingdom. Although a turnaround is expected in advertising revenues for
the industry, the timing of such turnaround is uncertain and it is too soon to
have confidence in any recent encouraging news on that front. At the UK
Newspaper Group advertising revenue in local currency for the three months ended
March 31, 2003 was 6.5% lower than in 2002 and management does not anticipate
any significant improvement in the United Kingdom advertising market in the near
term. Mitigating the impact on operating income of that decline in advertising
revenue are the impact of a September 2002 cover price increase at the Telegraph
and the full year impact of aggressive cost reduction measures. In addition, the
retirement of Senior Notes, Senior Subordinated Notes and Total Return Equity
Swaps will result in lower interest costs at International in 2003.

     All of the Company's significant operations are owned through the
investment in International. International has recently issued guidance in
respect of its operating income for the year ending December 31, 2003.
International's operating income is expected to be affected by non-recurring
items, particularly the costs associated with the review now being conducted by
the special committee of the Board of Directors of International and undertaken
in response to the concerns of a shareholder of International. A thorough and
independent inquiry into the matters raised leading up to the announcement of
the formation of the special committee on June 17, 2003, will produce higher
legal costs and insurance premiums than could have been foreseen when
International's original forecast was made. The present impact on 2003 of these
costs is in the range of US$6.0 million to US$8.0 million. The new forecast also
reflects continued softness in the U.K. newspaper advertising market, which has
persisted longer than was generally expected. Please refer to the form 10-Q
filed by International with the SEC on August 18, 2003.

THE COMPANY'S SIGNIFICANT TRANSACTIONS

    In June 2000, the Company and International exercised their option to pay
cash on the mandatory exchange of the Hollinger Canadian Publishing Holdings
Inc. Special shares. Each Special share was exchanged for cash of US$8.88
resulting in a payment to Special shareholders of US$95.0 million. The Company
was responsible for US$36.8 million of this amount.

    On June 1, 2001, International converted all of its Series C preferred
stock, which was held by the Company, at the conversion ratio of 8.503 shares of
International's Class A common stock per share of Series C preferred stock into
7,052,464 shares of International's Class A common stock. The 7,052,464 shares
of Class A common stock of International were subsequently purchased for
cancellation by International on September 5, 2001 for a total of $143.8 million
(U.S. $92.2 million). The purchase price per share was 98% of the closing price
of a share of Class A common stock and was approved by International's
independent directors. The proceeds were used to reduce the Company's bank
indebtedness by $142.0 million.

    On September 27, 2001, International redeemed 40,920 shares of its Series E
redeemable convertible preferred stock held by the Company at their stated
redemption price of $146.63 per share for a total of $6.0 million.

    In December 2001, the Company sold 2,000,000 shares of International's Class
A common stock to third parties for total cash proceeds of $31.4 million, the
proceeds of which were used to reduce the Company's bank indebtedness.

    During January 2002, the Company sold a further 2,000,000 shares of
International's Class A common stock to third parties for total cash proceeds of
$38.6 million, the proceeds of which were used to reduce the Company's bank
indebtedness.

     On March 10, 2003, the Company issued U.S. $120.0 million aggregate
principal amount of 11 7/8% Senior Secured Notes due 2011. The total net
proceeds were used to refinance existing indebtedness, to repay amounts due to
Ravelston and to make certain advances to Ravelston. The Senior Secured Notes
are fully and unconditionally guaranteed by RMI. The Company and RMI entered
into a support agreement, under which RMI has agreed to make annual support
payments in cash to the Company on a periodic basis by way of contributions to
the capital of the Company (without receiving any shares of the Company) or
subordinated debt. The amount of the annual support payments will be equal to
the greater of (a) the non-consolidated negative net cash flow of the Company
(which does not extend to outlays for retractions or redemptions) and (b) U.S.
$14.0 million per year (subject to certain adjustments as permitted under the
Indenture governing the Company's Senior Secured Notes), in either case, as

                                       31
<PAGE>

reduced by any permanent repayment of debt owing by Ravelston to the Company.
Initially, the support amount to be contributed by RMI will be satisfied through
the permanent repayment by Ravelston of its approximate $16.4 million of
advances from the Company, which resulted from the use of proceeds of the
Company's issue of Senior Secured Notes. Thereafter, all support amount
contributions by RMI will be made through contributions to the capital of the
Company, without receiving any additional shares of the Company, except that, to
the extent that the minimum payment exceeds the negative net cash flow of the
Company, the amounts will be contributed through an interest-bearing, unsecured,
subordinated loan to the Company. The support agreement terminates upon the
repayment of the Senior Secured Notes, which mature in 2011. All aspects of the
offering of the Senior Secured Notes and the amendment to certain indebtedness
due to International described below were approved by a Special Committee of the
Board of Directors of the Company, comprised entirely of independent directors.

     On March 10, 2003, prior to the closing of the above offering, NB Inc. sold
its shares of Class A common stock and Series E redeemable convertible preferred
stock of International to RMI. Such shares were in turn sold back to NB Inc.
from RMI at the same price, with a resulting increase in the tax basis of the
shares of International and a taxable gain to RMI. As the exchange of the
International shares with RMI represents a transfer between companies under
common control, NB Inc. will record, in 2003, contributed surplus of
approximately $2.3 million, being the tax benefit associated with the increase
in the tax value of the shares of International.

     Contemporaneously with the closing of the issue of Senior Secured Notes,
International:

     (a)    repurchased for cancellation, from NB Inc., 2,000,000 shares of
            Class A common stock of International at U.S. $8.25 per share for
            total proceeds of U.S. $16.5 million; and

     (b)    redeemed, from NB Inc., pursuant to a redemption request, all of the
            93,206 outstanding shares of Series E redeemable convertible
            preferred stock of International at the fixed redemption price of
            $146.63 per share totalling U.S. $9.3 million.

     Proceeds from the repurchase and redemption were offset against debt due
from NB Inc. to International, resulting in net outstanding debt due to
International of approximately U.S. $20.4 million. The remaining debt bears
interest at 14.25% (or 16.5% in the event that the interest is paid in kind), is
subordinated to the Company's Senior Secured Notes (so long as the Senior
Secured Notes are outstanding), and is guaranteed by Ravelston and secured by
certain assets of Ravelston.

     All aspects of the transaction relating to the changes in the debt
arrangements with NB Inc. and the subordination of this remaining debt have been
reviewed by the audit committee of the Board of Directors of International,
comprised entirely of independent directors.

     Effective April 30, 2003, US$15.7 million principal amount of subordinated
debt owing to Hollinger International by NB Inc. was transferred by Hollinger
International to HCPH Co., a subsidiary of Hollinger International, and
subsequently transferred to RMI by HCPH Co. in satisfaction of a loan due from
HCPH Co. to RMI (note 23d)). International and the Company previously reported
that the committee of independent directors of International had agreed to the
US$15.7 million offset to the remaining US$20.4 million of debt against amounts
owed by International to RMI, and further stated that the offset was effected
April 30, 2003. Although management of International and the Company believed
final approval had been given to the offset by the committee of independent
directors of International, the committee has advised that final approval of any
offset remains subject to appropriate due diligence and receipt of a further
independent fairness opinion. The due diligence process has not yet been
concluded and accordingly, the offset has not been completed as at August 25,
2003. The debt owing by NB Inc. to Hollinger International of US$20.4 million
bears interest at the rate of 14.25% if interest is paid in cash and 16.50% if
it is paid in kind. The debts is subordinated to the Senior Secured Notes for so
long as the Senior Secured Notes are outstanding, and is guaranteed by RCL and
the Company. Hollinger International entered into a subordination agreement with
the Company and NB Inc. pursuant to which Hollinger International has
subordinated all payments of principal, interest and fees on the debt owed to it
by NB Inc. to the payment in full of principal, interest and fees on the Senior
Secured Notes, provided that payments with respect to principal and interest can
be made to International to the extent permitted in the indenture governing the
Senior Secured Notes.

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<PAGE>

HOLLINGER INTERNATIONAL INC.'S SIGNIFICANT TRANSACTIONS

SIGNIFICANT TRANSACTIONS IN 2000

    On November 16, 2000, International and its affiliates, XSTM and the
Partnership ("Hollinger Group") completed the sale of most of International's
Canadian newspapers and related assets to CanWest. Included in the sale were the
following assets of the Hollinger Group:

    -   a 50% interest in National Post (International continued as managing
        partner);

    -   the metropolitan and a large number of community newspapers in Canada
        (including the Ottawa Citizen, The Vancouver Sun, The
        Province(Vancouver), the Calgary Herald, the Edmonton Journal, The
        Gazette (Montreal), The Windsor Star, the Regina Leader Post, the Star
        Phoenix and the Times- Colonist (Victoria); and

    -   the operating Canadian Internet properties, including canada.com.

    The sale resulted in the Hollinger Group receiving approximately $1.7
billion (U.S.$1.1 billion) cash, approximately $425 million (U.S.$277 million)
in voting and non-voting shares of CanWest at fair value (representing an
approximate 15.6% equity interest and 5.7% voting interest) and subordinated
non- convertible debentures of a holding company in the CanWest group at fair
value of approximately $697 million (U.S.$456 million). The aggregate sale price
of these properties at fair value was approximately $2.8 billion (U.S.$1.8
billion), plus closing adjustments for working capital at August 31, 2000 and
cash flow and interest for the period September 1 to November 16, 2000 which, in
total, approximated an additional U.S.$40.7 million at December 31, 2000.
U.S.$972 million of the cash proceeds from this sale were used to pay down
International's bank credit facility.

    During 2000, International sold most of its remaining U.S. community
newspaper properties including 11 paid dailies, three paid non-dailies and 31
free distribution publications for total proceeds of approximately U.S.$215.0
million. Pre-tax gains totaling U.S.$91.2 million were recognized by
International on these sales.

    In December 2000, International acquired four paid daily newspapers, one
paid non-daily and 12 free distribution publications in the Chicago suburbs, for
total consideration of U.S.$111.0 million.

    In November 2000, XSTM converted a promissory note from the Partnership in
the principal amount of $225.8 million (U.S.$147.9 million) into 22,575,324
limited partnership units of the Partnership, thereby increasing its interest in
the Partnership to 87.0%.

    On February 17, 2000, Interactive Investor International, in which
International owned 51.7 million shares or a 47.0% equity interest, completed
its initial public offering ("IPO"), issuing 52 million shares and raising
$181.0 million. The IPO reduced International's equity ownership interest to 33%
and resulted in a dilution gain of $25.8 million. Subsequently International
sold five million shares of its holding, reducing its equity interest to 28.5%
resulting in a pretax gain of $2.4 million in 2000. The balance of the
investment was sold in 2001 resulting in an additional pre-tax gain in 2001 of
$14.7 million.

SIGNIFICANT TRANSACTIONS IN 2001

     In January 2001, the Partnership completed the sale of UniMedia Company to
Gesca Limited, a subsidiary of Power Corporation of Canada. The publications
sold represented the French language newspapers of the Partnership, including
three paid circulation dailies and 15 weeklies published in Quebec and Ontario.
A pre-tax gain of approximately $75.1 million was recognized on this sale.

     In two separate transactions in July and November 2001, International and
the Partnership completed the sale of most of International's remaining Canadian
newspapers to Osprey Media Group Inc. ("Osprey") for total sale proceeds of
approximately $255.0 million plus closing adjustments primarily for working
capital. Included in these sales were community newspapers in Ontario, such as
The Kingston Whig-Standard, The Sault Star, the Peterborough Examiner, the
Chatham Daily News and The Observer (Sarnia). Pre-tax gains of approximately
$1.5 million were recognized on these sales. The former Chief Executive Officer
of the Partnership is a minority shareholder of Osprey.

                                       33
<PAGE>

     In August 2001, International entered into an agreement to sell to CanWest
its remaining 50% interest in the National Post. In accordance with the
agreement, its representatives resigned from their executive positions at the
National Post effective September 1, 2001. Accordingly, from September 1, 2001,
International had no influence over the operations of the National Post and
International no longer consolidates or records, on an equity basis, its share
of earnings or losses. The results of operations of the National Post are
included in the consolidated results to August 31, 2001. A pre-tax loss of
approximately $120.7 million was recognized on the sale.

     In August and December 2001, International sold participation interests
("Participations") in $540.0 million (U.S. $350.0 million) and $216.8 million
(U.S.$140.5 million), respectively, principal amounts of debentures issued by a
subsidiary of CanWest to a special purpose trust ("Participation Trust"). Units
of the Participation Trust were sold by the Participation Trust to arm's-length
third parties. These transactions resulted in net proceeds of $621.8 million
(U.S.$401.2 million) and have been accounted for as sales of International's
CanWest debentures. The pre-tax loss on these transactions, including realized
holding losses on the underlying debentures, amounted to $97.4 million and has
been recognized in unusual items.

     On November 28, 2001, International sold 27,405,000 non-voting shares in
CanWest (including 405,000 shares issued on conversion of 2,700,000 multiple
voting preferred shares) for total cash proceeds of approximately $271.3
million. The sale resulted in a realized pre-tax loss of $157.5 million, which
is included in unusual items.

SIGNIFICANT TRANSACTIONS IN 2002

     On December 23, 2002, a wholly owned subsidiary of International,
Publishing and certain of Publishing's subsidiaries entered into an amended and
restated U.S. $310.0 million Senior Credit Facility with a group of financial
institutions arranged by Wachovia Bank N.A. (the "Senior Credit Facility").

     The Senior Credit Facility consists of (a) a U.S. $45.0 million revolving
credit facility, which matures on September 30, 2008 (the "Revolving Credit
Facility"), (b) a U.S. $45.0 million Term Loan A, which matures on September 30,
2008 ("Term Loan A") and (c) a U.S. $220.0 million Term Loan B, which matures on
September 30, 2009 ("Term Loan B"). Publishing (a wholly owned direct
subsidiary) and Telegraph Group (a wholly owned indirect subsidiary) are the
borrowers under the Revolving Credit Facility and First DT Holdings Ltd.
("FDTH", a wholly owned indirect subsidiary in the United Kingdom) is the
borrower under Term Loan A and Term Loan B. The Revolving Credit Facility and
Term Loans bear interest at either the Base Rate (U.S.) or LIBOR, plus an
applicable margin. Cross-currency floating to fixed rate swaps from US$ LIBOR to
Sterling fixed rate have been purchased in respect of all amounts advanced under
the Senior Credit Facility. No amounts have currently been drawn under the
Revolving Credit Facility.

     Publishing's borrowings under the Senior Credit Facility are guaranteed by
Publishing's material U.S. subsidiaries, while FDTH's and Telegraph Group's
borrowings under the Senior Credit Facility are guaranteed by Publishing and its
material U.S. and U.K. subsidiaries. International is also a guarantor of the
Senior Credit Facility. Publishing's borrowings under the Senior Credit Facility
are secured by substantially all of the assets of Publishing and its material
U.S. subsidiaries, a pledge of all of the capital stock of Publishing and its
material U.S. subsidiaries and a pledge of 65% of the capital stock of certain
foreign subsidiaries. FDTH's and Telegraph Group's borrowings under the Senior
Credit Facility are secured by substantially all of the assets of Publishing and
its material U.S. and U.K. subsidiaries and a pledge of all of the capital stock
of Publishing and its material U.S. and U.K. subsidiaries. International's
assets in Canada have not been pledged as security under the Senior Credit
Facility.

     The Senior Credit Facility loan documentation requires Publishing to comply
with certain covenants which include, without limitation and subject to certain
exceptions, restrictions on additional indebtedness; liens; certain types of
payments (including without limitation, capital stock dividends and redemptions,
payments on existing indebtedness and intercompany indebtedness), and on
incurring or guaranteeing debt of an affiliate, making certain investments and
paying management fees; mergers, consolidations, sales and acquisitions;
transactions with affiliates; conduct of business, except as permitted; sale and
leaseback transactions; changing fiscal year; changes to holding company status;
creating or allowing restrictions on taking action under the Senior Credit
Facility loan documentation; and entering into operating leases, subject to
certain baskets and exceptions. The Senior Credit Facility loan documentation
also contains customary events of default.

                                       34
<PAGE>

     On December 23, 2002, Publishing also issued U.S.$300.0 million aggregate
principal amount of 9% senior unsecured notes due 2010 (the "9% Senior Notes")
at par to certain qualified institutional buyers ("QIBs") pursuant to Rule 144A
under the Securities Act of 1933, as amended. The proceeds from the sale of the
9% Senior Notes, together with drawdowns under the Senior Credit Facility and
available cash balances, were used to redeem approximately U.S. $239.9 million
of Publishing's Senior Subordinated Notes due 2006 and approximately U.S. $265.0
million of Publishing's Senior Subordinated Notes due 2007, plus applicable
premium and accrued interest to the date of redemption, and to make a
distribution of U.S. $100.0 million to International. International used the
distribution (a) to repay all amounts borrowed by International on October 3,
2002 under its loan agreement with Trilon International Inc., (b) to retire the
equity forward purchase agreements between International and certain Canadian
chartered banks (the "Total Return Equity Swap") made as of October 1, 1998, as
amended, and (c) for other general corporate purposes.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     The preparation of consolidated financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenue and expenses, and the related disclosure of contingent assets and
liabilities. On an ongoing basis, we evaluate our estimates, including those
related to bad debts, investments, intangible assets, income taxes,
restructuring, pensions and other post-retirement benefits, contingencies and
litigation. We base our estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from those estimates under different assumptions or
conditions.

     We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements.

     We maintain allowances for doubtful accounts for estimated losses resulting
from the inability of our customers to make required payments. If the financial
condition of our customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances could be required.

     We hold minority interests in both publicly traded and privately held
companies. Some of the publicly traded companies have highly volatile share
prices. We record an investment impairment charge when we believe an investment,
whether or nor publicly traded, has experienced a decline in value that is other
than temporary. Future adverse changes in market conditions or poor operating
results of underlying investments may not be reflected in an investment's
current carrying value, thereby requiring an impairment charge in the future.

     We have significant goodwill recorded in our accounts. Certain of our
newspapers operate in highly competitive markets. We are required to determine
annually whether or not there has been any impairment in the value of these
assets. Changes in long-term readership patterns and advertising expenditures
may affect the value and necessitate an impairment charge. Certain indicators of
potential impairment that could impact the Company's reporting units include,
but are not limited to, the following: (a) a significant long-term adverse
change in the business climate that is expected to cause a substantial decline
in advertising spending, (b) a permanent significant decline in a reporting
units' newspaper readership, (c) a significant adverse long-term negative change
in the demographics of a reporting units' newspaper readership and (d) a
significant technological change that results in a substantially more
cost-effective method of advertising than newspapers.

     The Company sponsors several defined benefit pension and post-retirement
benefit plans for domestic and foreign employees. These defined benefit plans
include pension and post-retirement benefit obligations, which are calculated
based on actuarial valuations. In determining these obligations and related
expenses, key assumptions are made concerning expected rates of return on plan
assets and discount rates. In making these assumptions, the Company evaluated,
among other things, input from actuaries, expected long-term market returns and
current high-quality bond rates. The Company will continue to evaluate the
expected long-term rates of return on plan assets and discount rates at least
annually and make adjustments as necessary, which could change the pension and
post-retirement obligations and expenses in the future.

     Unrecognized actuarial gains and losses in respect of pension and
post-retirement benefit plans are recognized by the Company over a period
ranging from 8 to 17 years, which represents the weighted average remaining
service life of the employee groups. Unrecognized actuarial gains and losses
arise from several factors, including

                                       35
<PAGE>

experience, assumption changes in the obligations and from the difference
between expected returns and actual returns on assets. At the end of 2002, the
Company had unrecognized net actuarial losses of $233.4 million. These
unrecognized amounts could result in an increase to pension expense in future
years depending on several factors, including whether such losses exceed the
corridor in accordance with CICA Section 3461, "Employee Future Benefits".

     The estimated accumulated benefit obligations for the defined benefit plans
exceeded the fair value of the plan assets at December 31, 2002 and 2001, as a
result of the negative impact that declines in global capital markets and
interest rates had on the assets and obligations of the Company's pension plans.
During 2002, the Company made contributions of $20.2 million to the defined
benefit plans. Global capital market and interest rate fluctuations could impact
funding requirements for such plans. If the actual operations of the plans
differ from the assumptions, and the deficiency between the plans' assets and
obligations continues, additional Company contributions may be required. If the
Company is required to make significant contributions to fund the defined
benefit plans, reported results could be adversely affected, and the Company's
cash flow available for other uses may be reduced.

     The Company recognizes a pension valuation allowance for any excess of the
prepaid benefit cost over the expected future benefit. Increases or decreases in
global capital markets and interest rate fluctuations could increase or decrease
any excess of the prepaid benefit cost over the expected future benefit
resulting in an increase or decrease to the pension valuation allowance. Changes
in the pension valuation allowance are recognized in earnings immediately.

     Included in current liabilities are income taxes that have been provided on
gains on sales of assets computed on tax bases that result in higher gains for
tax purposes than for accounting purposes. Strategies have been and may be
implemented that may also defer and/or reduce these taxes, but the effects of
these strategies have not been reflected in the accounts.

CHANGES IN ACCOUNTING POLICIES

ACCOUNTING FOR INCOME TAXES

     During 1999, the CICA mandated a change to the method of accounting for
income taxes that made Canadian GAAP more consistent with US GAAP. The change
was required to be adopted retroactively effective January 1, 2000 and the
Company chose to do so without restating prior years' financial statements. The
change required the Company to provide income taxes on the excess of book value
of intangible assets, other than goodwill, over the tax value of those assets
(book/tax differences). Over the years, the Company has recorded significant
amounts as circulation assets when businesses were purchased, which has not
resulted in amortizable tax cost. The adjustment made effective January 1, 2000
increased future income tax liabilities by $516.1 million and reduced minority
interest by $225.1 million with the net amount being recorded as an increase in
deficit in the amount of $291.0 million. The recording of these amounts is not
an indication that taxes will actually be paid, not does it reflect the timing
of any such payments.

EARNINGS PER SHARE

     Effective January 1, 2001, the Company adopted, retroactively with
restatement, the recommendations of CICA Section 3500 with respect to earnings
per share. Under the revised standard, the treasury stock method is used instead
of the imputed earnings approach for determining the dilutive effect of options,
issued warrants or other similar instruments.

     The change in the method of calculation of earnings per share did not
impact the previously reported basic earnings per share for 2000. Diluted
earnings per share for 2000 were increased from $4.48 per share to $5.05 per
share.

BUSINESS COMBINATIONS AND GOODWILL AND OTHER INTANGIBLES

     In August 2001, the CICA issued Handbook Section 1581, "Business
Combinations" ("Section 1581") and Handbook Section 3062, "Goodwill and Other
Intangible Assets" ("Section 3062"). Section 1581 specifies criteria that
intangible assets acquired in a business combination must meet to be recognized
and reported separately from goodwill. Section 3062 requires that goodwill and
intangible assets with indefinite useful lives no longer be

                                       36
<PAGE>

amortized, but instead be tested for impairment at least annually by comparing
the carrying value to the respective fair value in accordance with the
provisions of Section 3062. Section 3062 also requires that intangible assets
with estimable useful lives be amortized over their respective estimated useful
lives to their estimated residual values, and reviewed for impairment by
assessing the recoverability of the carrying value.

     The Company adopted the provisions of Section 1581 as of July 1, 2001 and
Section 3062 as of January 1, 2002. Upon adoption of Section 3062, the Company
was required to evaluate its existing intangible assets and goodwill that were
acquired in purchase business combinations, and effective January 1, 2002, has
reclassified certain amounts previously ascribed to circulation to
non-competition agreements and subscriber and advertiser relationships, with the
balance to goodwill.

     In connection with Section 3062's transitional goodwill impairment
evaluation, Section 3062 requires the Company to perform an assessment of
whether there is an indication that goodwill is impaired as of the date of
adoption. To accomplish this, the Company identified its reporting units and
determined the carrying value of each reporting unit by assigning the assets and
liabilities, including the existing goodwill and identifiable intangible assets,
to those reporting units as of January 1, 2002. The Company had until June 30,
2002 to determine the fair value of each reporting unit and compare it to the
carrying amount of the reporting unit. To the extent the carrying amount of a
reporting unit exceeded the fair value of the reporting unit, an indication
existed that the reporting unit goodwill may be impaired and the Company was
required to perform the second step of the transitional impairment test. The
second step was required to be completed no later than December 31, 2002. In the
second step, the Company compared the implied fair value of the reporting unit
goodwill with the carrying amount of the reporting unit goodwill, both of which
would be measured as of January 1, 2002. The implied fair value of goodwill was
determined by allocating the fair value of the reporting unit to all of the
assets (recognized and unrecognized) and liabilities of the reporting unit in a
manner similar to a purchase price allocation, in accordance with Section 1581.
The residual fair value after this allocation is the implied fair value of the
reporting unit goodwill.

     At January 1, 2002, the Company had unamortized goodwill in the amount of
$905.6 million, which is no longer being amortized. This amount is before any
reduction for the transitional impairment noted below. This change in accounting
policy cannot be applied retroactively and the amounts presented for prior
periods have not been restated for this change.

     The Company completed its transitional impairment testing for goodwill
under Section 3062 and recorded an impairment charge of $32.0 million in respect
of the goodwill for the Jerusalem Post operation. That loss, net of related
minority interest, amounted to $12.1 million and has been recorded as a charge
to the opening deficit as at January 1, 2002.

STOCK-BASED COMPENSATION AND OTHER STOCK-BASED PAYMENTS

     The Company and certain of its subsidiaries have employee stock-based
compensation plans. Until December 31, 2001, compensation expense was not
recognized on the grant or modification of options under these plans.

     Effective January 1, 2002, the Company adopted Handbook Section 3870,
"Stock-based Compensation and Other Stock-based Payments" ("Section 3870").
Under Section 3870, the Company is required to account for, on a prospective
basis, all stock-based payments made by the Company to non-employees, including
employees of RCL and employee awards that are direct awards
of stock, call for settlement in cash or other assets, or are stock appreciation
rights that call for settlement by the issuance of equity instruments, granted
on or after January 1, 2002, using the fair value-based method. For all other
stock-based payments, the Company has elected to use the settlement method of
accounting whereby cash received on the exercise of stock options is recorded as
capital stock.

     Under the fair value-based method, stock options granted to employees of
RCL by the Company and its subsidiaries are measured at the fair value of the
consideration received, or the fair value of the equity instruments issued, or
liabilities incurred, whichever is more reliably measurable. Such fair value
determined is recorded as a dividend-in-kind with no resulting impact on the
Company's net earnings. Section 3870 will be applied prospectively to all
stock-based payments to non-employees granted on or after January 1, 2002. The
Company has not granted any stock options since the adoption of Section 3870.
During 2002, the only options granted by International which are impacted by the
adoption of 3870 are options granted to employees of RCL. The fair value of such
options must be recorded as a dividend by International, with no impact to the
Company's results.

                                       37
<PAGE>

Consequently, there is no impact of adoption of this standard on the Company's
financial statements for the year ended December 31, 2002.

RECENT CANADIAN ACCOUNTING PRONOUNCEMENTS

FOREIGN CURRENCY AND HEDGING

     In November 2001, the CICA issued Accounting Guideline 13, "Hedging
Relationships" ("AcG 13"). AcG 13 establishes new criteria for hedge accounting
and will apply to all hedging relationships in effect on or after July 1, 2003.
Effective January 1, 2004, the Company will reassess all hedging relationships
to determine whether the criteria are met or not and will apply the new guidance
on a prospective basis. To qualify for hedge accounting, the hedging
relationship must be appropriately documented at the inception of the hedge and
there must be reasonable assurance, both at the inception and throughout the
term of the hedge, that the hedging relationship will be effective. The Company
is in the process of formally documenting all hedging relationships and has not
yet determined whether any of its current hedging relationships will not meet
the new hedging criteria.

IMPAIRMENT OF LONG-LIVED ASSETS

     In December 2002, the CICA issued Handbook Section 3063, "Impairment of
Long-Lived Assets" and revised Section 3475, "Disposal of Long-Lived Assets and
Discontinued Operations." These sections supersede the write-down and disposal
provisions of Section 3061, "Property, Plant and Equipment" and Section 3475,
"Discontinued Operations." The new standards are consistent with U.S. generally
accepted accounting principles. Section 3063 establishes standards for
recognizing, measuring and disclosing impairment of long-lived assets held for
use. An impairment is recognized when the carrying amount of an asset to be held
and used exceeds the projected future net cash flows expected from its use and
disposal, and is measured as the amount by which the carrying amount of the
asset exceeds its fair value. Section 3475 provides specific criteria for and
requires separate classification for assets held for sale and for these assets
to be measured at the lower of their carrying amounts and fair value, less costs
to sell. Section 3475 also broadens the definition of discontinued operations to
include all distinguishable components of an entity that will be eliminated from
operations. Section 3063 is effective for the Company's 2004 fiscal year;
however, early application is permitted. Revised Section 3475 is applicable to
disposal activities committed to by the Company after May 1, 2003; however,
early application is permitted. The Company expects that the adoption of these
standards will have no material impact on its financial position, results of
operations or cash flow at this time.

DISCLOSURE OF GUARANTEES

     In February 2003, the CICA issued Accounting Guideline 14, "Disclosure of
Guarantees" ("AcG 14"). AcG 14 requires certain disclosures to be made by a
guarantor in its interim and annual financial statements for periods beginning
after January 1, 2003. The Company has determined the impact these new
disclosures and included such information in note 27h) to its audited
consolidated financial statements included elsewhere in this Annual Report.

RECENT US ACCOUNTING PRONOUNCEMENTS

DEBT EXTINGUISHMENTS

    In April 2002, the Financial Accounting Standards Board ("FASB") issued
Statement No. 145, Rescission of FASB Statements No. 4, 44, and 64, Amendment of
FASB Statement No. 13, and Technical Corrections ("SFAS 145"). The Statement
addresses, among other things, the income statement treatment of gains and
losses related to debt extinguishments, requiring that such expenses no longer
be treated as extraordinary items, unless the items meet the definition of
extraordinary per APB Opinion No. 30, Reporting the Results of Operations --
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions. Upon adoption, any
gain or loss on extinguishment of debt that was classified as an extraordinary
item in prior periods presented, that does not meet the criteria in APB Opinion
No. 30 for classification as an extraordinary item, is required to be
reclassified. The Company has adopted this Statement effective January 1, 2002
for US GAAP purposes and retroactively classified net losses on repayment of
debt previously classified as extraordinary items.

COSTS ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES

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<PAGE>

    In July 2002, the FASB issued Statement of Financial Accounting Standards
No. 146, Accounting for Costs Associated with Exit or Disposal Activities ("FAS
146"). FAS 146 addresses financial accounting and reporting for costs associated
with exit or disposal activities, and is effective for exit or disposal
activities initiated after December 31, 2002. FAS 146 nullifies Emerging Issues
Task Force Issue No. 94-3 ("EITF 94-3") Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in Restructuring). The principal difference between FAS
146 and EITF 94-3 relates to the recognition of a liability for a cost
associated with an exit or disposal activity. FAS 146 requires that the cost
associated with an exit or disposal activity be recognized when the liability is
incurred, whereas under EITF 94-3 the liability was recognized at the date of an
entity's commitment to an exit plan. The Company is currently assessing the
impact of FAS 146 on its financial position and results of operations.

GUARANTEES

    In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" ("FIN 45"), which requires certain
disclosures to be made by a guarantor in its interim and annual financial
statements for periods ending after December 15, 2002 about its obligations
under guarantees. FIN 45 also requires the recognition of a liability by a
guarantor at the inception of certain guarantees entered into or modified after
December 31, 2002. FIN 45 requires the guarantor to recognize a liability for
the non-contingent component of certain guarantees; that is, it requires the
recognition of a liability for the obligation to stand ready to perform in the
event that specified triggering events or conditions occur. The initial
measurement of this liability is the fair value of the guarantee at inception.
The Company included the disclosure of its guarantees in note 27h) of its
audited consolidated financial statements included elsewhere in this Annual
Report.

VARIABLE INTEREST ENTITIES

    In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities" ("VIE's") ("FIN 46") which requires that companies
that control another entity through interests other than voting interest should
consolidate the controlled entity. In the absence of clear control through a
voting equity interest, a company's exposure (variable interests) to the
economic risk and the potential rewards from a VIE's assets and activities are
the best evidence of a controlling financial interest. VIE's created after
January 31, 2003 must be consolidated immediately. VIE's existing prior to
February 1, 2003 must be consolidated by the Company commencing with its third
quarter 2003 financial statements. The Company has not yet determined whether it
has any VIE's which will require consolidation.

LIABILITIES AND EQUITY

    On May 15, 2003, the FASB issued Statement No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity. The
Statement requires issuers to classify as liabilities (or assets in some
circumstance) three classes of freestanding financial instruments that embody
obligations for the issuer.

    Generally, the Statement is effective for financial instruments entered into
or modified after May 31, 2003 and is otherwise effective at the beginning of
the first interim period beginning after June 15, 2003. The Company will adopt
the provisions of the Statement on July 1, 2003.

    To date, the Company has not entered into any financial instruments within
the scope of the Statement. The Company is currently assessing the impact of the
new standard.

DERIVATIVES AND HEDGING ACTIVITIES

         In April 2003, the FASB issued SFAS No. 149, "Amendment of SFAS No. 133
on Derivative Instruments and Hedging Activities". SFAS 149 amends and clarifies
accounting for SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities". In particular, it clarifies under what circumstances a contract
with an initial net investment meets the characteristics of a derivative as
discussed in SFAS No. 133; clarifies when a derivative contains a financing
component; amends the definition of an underlying to conform it to the language
used in the FASB Interpretation No. 45; and amends certain other existing
pronouncements.

                                       39
<PAGE>

         SFAS No. 149 is effective for contracts entered into or modified after
June 30, 2003 and for hedging relationships designated after June 30, 2003. The
Company will adopt the provisions of SFAS No. 149 for U.S. GAAP purposes in the
quarter ending June 30, 2003 and is currently assessing the impact, if any, that
the adoption of SFAS No. 149 will have on its results of operations and
financial position.

CANADIAN AND UNITED STATES ACCOUNTING POLICY DIFFERENCES

     We prepare our consolidated financial statements in accordance with
Canadian GAAP. GAAP in the United States (US GAAP) differs in certain respects
from Canadian GAAP. The areas of material differences and their impact on our
consolidated financial statements are described in note 26 to the audited
consolidated financial statements, included elsewhere in this Annual Report.

     Our statement of operations prepared under Canadian GAAP does not present
operating income as is required under US GAAP. The following are the significant
differences between Canadian and US GAAP which would impact any assessment of
our US GAAP operating income:

    i)  Prior to January 1, 2002, the Company capitalized certain operating
        costs incurred to improve the long-term readership of our publications
        ("betterments") and amortized such costs on a straight-line basis over
        their useful lives. Capitalization of such operating costs is not
        permitted under US GAAP, which would result in higher operating costs,
        partially offset by lower amortization expense under US GAAP.

    ii) The Company presented as unusual items certain operating expenses, which
        are of an infrequent nature, including start up costs associated with
        new printing facilities as well as certain pension, benefit and
        redundancy costs. Such costs are presented as operating expenses under
        US GAAP.

    iii) The Company proportionately consolidated the operating results of our
        joint ventures under Canadian GAAP. Under US GAAP joint ventures are
        required to be accounted for using the equity method. While this GAAP
        difference does not affect our consolidated net earnings, it does
        increase operating revenues and operating expenses from those that would
        be reported under US GAAP.

    iv) The Company reported investment and interest income as revenue under
        Canadian GAAP, whereas such income is required to be reported as
        non-operating income under US GAAP.

    v)  On January 1, 2000, upon adoption of a new income tax standard under
        Canadian GAAP, the Company elected not to restate our prior year's
        results. As a result, under Canadian GAAP the Company reported a charge
        to deficit. Under US GAAP this has been reflected as additional goodwill
        upon recognition of deferred income tax liabilities on business
        acquisitions. Accordingly, the Company had higher goodwill amortization
        (for periods prior to January 1, 2002) under US GAAP.

     There are also a number of additional differences between Canadian and US
GAAP which would impact the Company's non-operating income, including the
following:

    i)  The Company is required under Canadian GAAP to treat the dividends paid
        on our Series II and Series III redeemable preference shares as interest
        expense. Under US GAAP, such dividends are charged to retained earnings
        which would result in lower interest expense under US GAAP.

    ii) The Company is not required to mark-to-market International's forward
        purchase contracts under Canadian GAAP. The unrealized losses on these
        contracts are required to be expensed under US GAAP. In December 2002,
        these contracts were settled and the losses realized.

    iii) Dilution gains reported under Canadian GAAP are lower than those which
        would be reported under US GAAP principally as a result of the
        capitalization of betterments under Canadian GAAP.

    iv) Gains on sales of businesses reported under Canadian GAAP are higher
        than those which would be reported under US GAAP principally as a result
        of additional goodwill recorded under US GAAP in connection with income
        taxes on business acquisitions noted under item (v) above.

                                       40
<PAGE>

    v)  Canadian GAAP requires recognition of a pension valuation allowance for
        any excess of the benefit expense over the expected future benefit.
        Changes in the pension valuation allowance are recognized in earnings
        under Canadian GAAP immediately. US GAAP does not permit the recognition
        of pension valuation allowances.

    vi) Under U.S. GAAP, the transitional provisions of new accounting standards
        for goodwill require the write-down resulting from the impairment test,
        upon adoption on January 1, 2002, to be reflected in the consolidated
        statement of earnings as a cumulative effect of a change in accounting
        principle. However, Canadian GAAP requires the same loss to be recorded
        as a charge to the opening deficit as at January 1, 2002.

   vii) Under Canadian GAAP, the Company was required to treat the transfer in
        1997 of the Canadian newspapers to International as a disposition at
        fair value. This resulted in the recognition of a gain to the extent
        there is a minority interest in International.

         U.S. GAAP requires that the transfer of the Canadian newspapers to a
         subsidiary company be accounted for at historical values using "as-if"
         pooling of interests accounting. As a result, the revenues and expenses
         for the periods prior to January 1, 1997 would be restated to give
         effect to the transfer of the Canadian newspapers to International and
         the gross gain of $114,000,000, prior to deducting expenses, on the
         sale of the properties and the increase in intangible assets of an
         equivalent amount would not have been recorded for U.S. GAAP purposes.
         However, such gain would be recognized for U.S. GAAP purposes as the
         underlying Canadian newspaper operations were sold to third parties, or
         there was a further dilution in the Company's interest in
         International.

     In addition to the above items, under U.S. GAAP, the retractable common
shares do not qualify as permanent equity due to the retractable features, being
effective at the option of the holder. As a result, retractable common shares
are classified outside shareholders' deficiency under U.S. GAAP.

CONSOLIDATED FINANCIAL INFORMATION

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2002 COMPARED TO 2001

     NET LOSS. The net loss in the year ended December 31, 2002 amounted to
$88.6 million or a loss of $2.76 per retractable common share compared to a net
loss of $131.9 million or a loss of $3.91 per retractable common share in 2001.
The results of both periods are impacted by a large number of unusual items
which are discussed below.

     SALES REVENUE. Sales revenue in 2002 was $1,628.2 million compared with
$1,822.1 million in 2001, a decrease of $193.9 million. The reduction in sales
revenue is primarily due to the sale of most of the remaining Canadian newspaper
properties in July and November 2001 and the sale of the remaining 50% interest
in the National Post in August 2001. Declines in U.K. advertising revenue in
local currency were partly offset by the strengthening of the pound sterling.
Sales revenue, in local currency, for the Chicago Group was flat year over year.

     COST OF SALES AND EXPENSES. Cost of sales and expenses in 2002 were
$1,453.9 million compared with $1,730.1 million in 2001, a decrease of $276.2
million. The decrease in cost of sales and expenses resulted primarily from the
disposition of Canadian newspaper properties in 2001 as well as lower newsprint
costs, lower compensation costs and general cost reductions at the Chicago Group
and the U.K. Newspaper Group, primarily as a result of cost containment
strategies. Lower cost of sales and expenses at the U.K. Newspaper Group, in
local currency, were partially offset by the effect of the strengthening of the
pound sterling.

     DEPRECIATION AND AMORTIZATION. Depreciation and amortization in 2002
amounted to $88.2 million compared with $144.7 million in 2001, a reduction of
$56.5 million. The reduction results from both the disposition of Canadian
properties in 2001 and the adoption on January 1, 2002 of CICA Handbook Section
3062, which resulted in goodwill not being amortized subsequent to January 1,
2002. In the year ended December 31, 2001, amortization of goodwill and
intangible assets, including amortization of goodwill and intangible assets in
respect of properties sold during 2001 which were not being amortized in 2002,
approximated $53.3 million.

     INVESTMENT AND OTHER INCOME. Investment and other income in 2002 amounted
to $29.7 million compared with $97.3 million in 2001, a decrease of $67.6
million. Investment and other income in 2001 included interest on debentures
issued by a subsidiary of CanWest and a dividend on CanWest shares. In September
2001, CanWest temporarily suspended its semi-annual dividend. In the latter part
of 2001, all of the CanWest shares were sold and Participations were sold to the
Hollinger Participation Trust in respect of nearly all of the CanWest
debentures,

                                       41
<PAGE>

resulting in significantly lower interest and dividend income in 2002. Most of
the proceeds from the disposal of the CanWest investments were retained as
short-term investments at low rates of interest until the end of the first
quarter of 2002 when a portion of International's long-term debt was retired.

     INTEREST EXPENSE. Interest expense for 2002 was $121.7 million compared
with $177.9 million in 2001, a reduction of $56.2 million. The reduction mainly
results from lower average debt levels in 2002 compared with 2001. The Company
reduced its revolving bank credit facility in 2001 by $173.4 million and by
$38.5 million in January 2002 and International reduced its long-term debt
beginning in March 2002 by U.S. $290.0 million. In addition, since both the
Company's Series II and Series III preference shares are financial liabilities,
dividends on such shares are included in interest expense. Dividends paid on the
Series II preference shares were lower in 2002 than in 2001, as a result of
Series II preference share retractions and International reducing its dividend
on shares of Class A common stock, on which the Series II preference share
dividends are based.

     NET LOSS IN EQUITY-ACCOUNTED COMPANIES. Net loss in equity-accounted
companies amounted to $1.2 million in 2002 compared with $18.6 million in 2001.
Net loss in equity-accounted companies in 2001 primarily represented an
equity-accounted loss in Interactive Investor International, which was sold
during the third quarter of 2001.

     NET FOREIGN CURRENCY LOSSES. Net foreign currency losses increased from a
loss of $7.5 million in 2001 to a loss of $19.7 million in 2002. Net foreign
currency losses in 2002 includes a $10.4 million net loss on amounts sold to the
Hollinger Participation Trust and a $5.7 million loss on a cross currency swap.

     UNUSUAL ITEMS. Unusual items in 2002 amounted to a loss of $62.6 million
compared with a loss of $295.4 million in 2001. Unusual items in 2002 included
the loss on retirement of Publishing's Senior Notes in the amount of $56.3
million, a $63.6 million write-off of investments, and a $43.3 million loss on
the termination of the Total Return Equity Swap, partly reduced by a $20.1
million gain on the dilution of the Company's investment in International, a net
$44.5 million foreign exchange gain on the reduction of net investments in
foreign subsidiaries and a $34.4 million reduction of the pension valuation
allowance. Unusual items in 2001 included a $240.1 million loss on sales of
investments, a $23.0 million loss on sale of publishing interests, a $79.9
million loss on write-off of investments and a $29.6 million realized loss on
the Total Return Equity Swap, partly offset by a $59.4 million gain on the sale
of and dilution of the Company's investment in International and a $58.7 million
reduction of the pension valuation allowance.

     INCOME TAXES. In 2002, income tax expense was $124.0 million computed on a
loss before income taxes and minority interest of $89.5 million primarily as a
result of non-deductible expenses including the settlement of the Total Return
Equity Swap and an increase in the tax valuation allowance of $74.0 million. In
2001, the income tax recovery was $89.5 million on a loss before income taxes
and minority interest of $454.9 million in part due to the impact of losses at
the National Post for which a tax benefit was not recorded.

     MINORITY INTEREST. Minority interest in the year ended December 31, 2002
was a recovery of $124.9 million compared to a recovery of $233.5 million in
2001. Minority interest primarily represents the minority share of the net loss
of International and the net earnings of the Partnership. In 2001, minority
interest also included the minority's 50% share of the National Post net loss to
August 31, which totaled $28.7 million.

RESULTS OF OPERATIONS BY SEGMENT FOR THE YEAR ENDED DECEMBER 31, 2002 COMPARED
TO 2001

CHICAGO GROUP

     Sales revenue in 2002 was $693.7 million compared with $686.3 million in
2001, an increase of $7.4 million or 1.1%. The increase results entirely from
the slightly stronger United States dollar compared to the Canadian dollar on
average in 2002 compared with 2001. In U.S. dollars, sales revenue was U.S.
$441.8 million in 2002, a slight decrease compared with U.S. $442.9 million in
2001. Advertising revenue in 2002 was U.S. $341.3 million compared with
U.S.$338.5 million in 2001, an increase of U.S. $2.8 million or 0.8%.
Circulation revenue in 2002 was U.S. $89.4 million compared with U.S. $92.7
million in 2001, a decrease of U.S. $3.3 million or 3.6%. The decrease was
primarily the result of price discounting.

     Cost of sales and expenses in 2002 were $591.6 million compared with $623.0
million in 2001, a decrease of $31.4 million or 5.0%. In U.S. dollars, cost of
sales and expenses were U.S. $376.7 million in 2002 compared with U.S. $402.1
million in 2001, a decrease of U.S. $25.4 million or 6.3%. Cost savings were
achieved across the board

                                       42
<PAGE>

with reductions in compensation costs, in newsprint costs and in other operating
costs. Reductions in compensation and other costs are the result of cost
management initiatives undertaken during the course of 2002 and 2001; however,
the reduction in newsprint cost was primarily the result of newsprint price
decreases. The average newsprint cost per tonne was approximately 21% lower in
2002 than in 2001.

     Depreciation and amortization in 2002 was $42.4 million compared with $53.5
million in 2001, a reduction of $11.1 million. The reduction is largely the
result of the adoption, effective January 1, 2002 of Section 3062, which
resulted in goodwill and intangible assets with indefinite useful lives no
longer being amortized. Amortization of approximately $15.3 million in 2001
related to such assets.

     Operating income in 2002 totaled $59.7 million compared with $9.8 million
in 2001, an increase of $49.9 million. This increase is the result of lower
newsprint, compensation and other operating costs in 2002 compared with 2001 and
lower amortization expense resulting from the adoption of new accounting
standards for goodwill and intangible assets.

U.K. NEWSPAPER GROUP

     In 2002, sales revenue for the U.K. Newspaper Group was $804.6 million
compared with $801.1 million in 2001, an increase of $3.5 million or 0.4%. In
pounds sterling, sales revenue was (pound)341.5 million in 2002 compared with
(pound)358.9 million in 2001, a decrease of (pound)17.4 million or 4.8%. In 2002
compared to 2001, the pound sterling on average strengthened compared with the
Canadian dollar. Advertising revenue at the Telegraph in 2002 was (pound)211.0
million compared with (pound)228.7 million in 2001, a decrease of (pound)17.7
million or 7.7%. Advertising revenues were lower in the recruitment and
financial areas. Circulation revenue in 2002 was (pound)93.6 million at the
Telegraph compared with (pound)94.5 million in 2001. Lower revenue from both a
change in the mix of sales between single copy and subscribers and lower overall
average circulation in 2002 compared with 2001 was partly offset by increased
revenue resulting from single copy cover price increases of 5 pence in each of
September 2001 and 2002 in respect of The Daily Telegraph.

     Total cost of sales and expenses in the year ended December 31, 2002 were
$693.9 million compared with $703.3 million in 2001, a decrease of $9.4 million
or 1.3%. In local currency, cost of sales and expenses in 2002 approximated
(pound)294.3 million compared with (pound)314.9 million in 2001, a decrease of
(pound)20.6 million or 6.5%. The majority of the decrease is due to a reduction
in newsprint and compensation costs. The decrease in newsprint costs results
from a reduction in consumption due to lower pagination as a result of lower
advertising revenue, and a reduction in the average price per tonne of newsprint
of 9.9%. Lower compensation costs in 2002 result primarily from reduced staff
levels, mainly in editorial, which occurred at the end of 2001, as well as a
general salary level freeze in 2002.

     Depreciation and amortization in 2002 was $35.9 million compared with $63.9
million in 2001, a reduction of $28.0 million. The reduction is primarily the
result of the adoption, effective January 1, 2002, of new accounting standards,
which resulted in goodwill and other intangible assets with indefinite useful
lives not being amortized in 2002. Amortization expense of approximately $25.9
million in 2001 related to such assets.

     Operating income in 2002 totaled $74.8 million compared with $33.9 million
in 2001, an increase of $40.9 million. The increase in operating income, in
local currency, is the result of lower newsprint and compensation costs and
reduced amortization expense resulting from the adoption of new accounting
standards, reduced by lower advertising revenue. In addition, the strength of
the pound sterling on average in 2002 compared with the Canadian dollar, further
improved operating income in Canadian dollars.

CANADIAN NEWSPAPER GROUP

     Sales revenue at the Canadian Newspaper Group in 2002 was $109.1 million
compared with $305.1 million in 2001, a decrease of $196.0 million. The
operating loss was $5.3 million in 2002 compared with an operating loss of $50.4
million in 2001, a decrease of $45.1 million. The results for 2001 included the
results of the National Post and other Canadian newspaper properties, all of
which were sold during 2001. The newspapers that were sold accounted for the
majority of the decrease in year-over-year sales revenue and the net reduction
in year-over-year operating loss. The 2001 operating loss included a $57.3
million operating loss for the National Post for the period January 1 to August
31, when the National Post was sold. Sales revenue for operations owned
throughout 2001 and 2002 was $108.8 million in 2002 and $114.1 million in 2001,
a decrease of $5.3 million or 4.6%. The decrease primarily resulted from lower
sales revenue at the Business Information Group.

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COMMUNITY GROUP

     In 2002, sales revenue was $20.8 million and the operating loss was $8.2
million compared with sales revenue of $29.6 million and an operating loss of
$5.3 million in 2001. The results for 2001 include the last remaining U.S.
Community Group newspaper which had operating revenue of U.S. $0.8 million and
an operating loss of U.S. $0.2 million in 2001. Sales revenue at the Jerusalem
Post in 2002 was U.S.$13.2 million compared with U.S. $19.1 million in 2001, a
decrease of U.S. $5.9 million. Advertising revenue declined U.S. $1.9 million,
circulation revenue declined U.S. $1.7 million and printing revenue declined
U.S.$2.3 million, each due to the poor economic climate in Israel. In addition
in the past, Jerusalem Post derived a relatively high percentage of its revenues
from printing as a result of a long-term contract to print and bind copies of
the Golden Pages, Israel's equivalent of a Yellow Pages telephone directory.
During 2002, Golden Pages effectively cancelled this agreement and has ceased
placing printing orders. An action was commenced by the Jerusalem Post in 2003
seeking damages for the alleged breach of contract. In addition, amortization
expense in the amount of $0.9 million at the Jerusalem Post in 2001 was not
incurred in 2002 as a result of new accounting standards for goodwill.

RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001 COMPARED TO 2000

    NET EARNINGS (LOSS). The Company had a net loss of $131.9 million in 2001 or
a loss of $3.91 per retractable common share compared with net earnings of
$189.4 million in 2000 or $5.11 per retractable common share. The results of
both years included a large number of unusual items. In 2001, the net loss from
unusual items after income taxes and minority interest amounted to $74.0 million
compared with net income from unusual items after income taxes and minority
interest, in 2000 of $219.5 million. Excluding the net effect of unusual items,
the net loss in 2001 was $57.9 million compared with a net loss of $30.1 million
in 2000.

    SALES REVENUE. Sales revenue in 2001 was $1,822.1 million compared with
$3,158.3 million in 2000, a decrease of $1,336.2 million. The overall decrease
in sales revenue was primarily due to the sale of Canadian Newspaper Group
properties in both 2000 and 2001 and the 2000 sale of Community Group newspaper
properties. In addition, lower sales revenue at the U.K. Newspaper Group and the
Chicago Group on a same store basis contributed to the decrease. However, the
acquisition of Fox Valley Publications Inc. (formerly Copley Group) in December
2000 increased total Chicago Group sales revenue.

    COST OF SALES AND EXPENSE. Total cost of sales and expenses in 2001 were
$1,730.1 million compared with $2,586.2 million in 2000, a decrease of $856.1
million. The decrease in costs primarily results from the sales of Canadian
Newspaper Group properties in both 2000 and 2001 and the sale of Community Group
newspaper properties in 2000. In addition newsprint expense in respect of
properties owned throughout both 2000 and 2001 was lower mainly as a result of
lower consumption at the U.K. Newspaper Group and the Chicago Group. Cost of
sales and expenses are net of betterments capitalized. On completion of a
detailed impairment analysis of the cumulative betterments capitalized,
principally in respect of the U.K. Newspaper Group, a write-down of $37.8
million was taken in the fourth quarter of 2001 and included in cost of sales
and expenses. This partly offsets the decreases noted above.

    DEPRECIATION AND AMORTIZATION. Depreciation and amortization in 2001 totaled
$144.7 million compared with $219.9 million in 2000, a decrease of $75.2
million. Lower depreciation and amortization resulting from the sale of
properties in both the Community Group and Canadian Newspaper Group was in part
offset by increased depreciation at the Chicago Group related to the new
printing facility and increased depreciation and amortization resulting from the
Fox Valley Publications Inc. acquisition in December 2000.

    INVESTMENT AND OTHER INCOME. Investment and other income in 2001 totaled
$97.3 million compared with $28.1 million in 2000, an increase of $69.2 million.
Investment and other income in 2001 included interest on the CanWest debentures
until the sale of participation interests in August and December, interest on
the remaining CanWest debentures, dividends on CanWest shares and bank interest
on the significant cash balance primarily accumulated from the proceeds of the
sale in 2001 of Canadian newspaper properties and the sale of CanWest shares and
participation interests in CanWest debentures. In 2000, interest and dividend
income on CanWest investments was received only for the period November 17 to
December 31.

    INTEREST ON LONG-TERM DEBT. Interest on long-term debt amounted to $122.7
million in 2001 compared with $220.0 million in 2000, a decrease of $97.3
million. This decrease primarily results from the significantly lower debt

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levels during 2001 compared with 2000. In November 2000, International repaid
U.S.$972.0 million of its senior credit facility with the proceeds from the sale
of properties to CanWest.

    UNUSUAL ITEMS. Unusual items in 2001 amounted to a loss of $295.4 million
compared with a gain of $700.9 million in 2000. Unusual items in 2001 included a
loss on sale of investments of $240.1 million, being primarily the loss on sale
of participations in CanWest debentures and a loss on sale of CanWest shares, a
net loss of $23.0 million on sale of publishing interests including the loss on
sale of National Post, partly offset by gains on sales of Canadian properties, a
$79.9 million write-off of investments, a $29.6 million realized loss on
International's Total Return Equity Swap, a pension and post retirement plan
liability adjustment of $16.8 million primarily in respect of retired former
Southam employees, redundancy, rationalization and other costs of $16.9 million
and $7.2 million of duplicated costs resulting from operating two plants during
the start-up of a new plant in Chicago. These unusual losses were reduced by a
$59.4 million gain on the effective sale of International shares and a $58.7
million accounting gain resulting from a decrease in the required pension
valuation allowance in respect of Canadian Newspaper Group pension plans due to
a decline in the value of plan assets.

    Unusual items in 2000 included $697.9 million of gains on sales of
publishing interests, being primarily the sale of Canadian properties to CanWest
and the sale of most of the remaining United States Community Group newspaper
properties, a $47.9 million gain on sale of investments, a $28.5 million gain on
the effective sales of International shares and a $25.8 million gain on the
dilution of the investment in Interactive Investor International. These gains
were reduced by a loss on the write-off of investments of $31.4 million,
redundancy, rationalization and other costs of $41.5 million, the write-off of
financing fees of $16.1 million and $10.1 million of duplicated costs resulting
from operating two plants during the start-up of the new plant in Chicago.

    INCOME TAXES. In 2001, the effective tax rate was lower than the effective
tax rate in 2000 due to the impact of significantly higher losses of the
National Post, for which a tax benefit is not being recorded.

    MINORITY INTEREST. Minority interest in 2001 was a recovery of $233.5
million compared with an expense of $331.1 million in 2000. Minority interest
primarily represents the minority share of the results of International, and the
net earnings of the Partnership and in 2001, the minority's share of the
National Post losses. In 2001, International reported a significant net loss
including unusual losses whereas in 2000 International reported net earnings
including unusual gains. Minority interest reflects the minority's share of
these results.

RESULTS OF OPERATIONS BY SEGMENT FOR THE YEAR ENDED DECEMBER 31, 2001 COMPARED
TO 2000

CHICAGO GROUP

    Sales revenue in 2001 was $686.3 million compared with $596.8 million in
2000, an increase of $89.5 million. In United States dollars, sales revenue was
US$442.9 million in 2001 compared with US$401.4 million, an increase of US$41.5
million. Advertising revenue was US$338.5 million in 2001 compared with US$305.0
million in 2000, an increase of US$33.5 million. Circulation revenue was US$92.7
million in 2001 compared with US$80.3 million in 2000, an increase of US$12.4
million. Printing and other revenue was US$11.7 million in 2001 compared with
US$16.1 million in 2000, a decrease of US$4.4 million.

    Chicago Group results are based on standard accounting periods, which for
2000 resulted in a 53-week year for the reported results of the Chicago Group
only. The effect of the 53rd week in 2000 was to add US$6.0 million to sales
revenue and US$6.2 million to operating costs and expenses. On December 15,
2000, the acquisition of Chicago Suburban Newspapers from Copley Group was
completed and operating results of this group have been included since that
time. Revenues for operations owned in both years, excluding Chicago Suburban
Newspapers ("same store") and based on a 52-week year in 2000, were US$363.6
million for 2001, compared with US$392.0 million in 2000. Advertising revenue in
2001, on a same store 52-week basis, was US$20.0 million or 6.7% lower than in
2000. Circulation revenue on a same store 52-week basis, in 2001, was US$2.7
million or 3.5% lower than in 2000. Chicago Sun-Times average daily circulation
in 2001 was higher than in 2000; however, circulation revenue for 2001 was lower
than in 2000 as a result of price discounting to build and maintain market share
in response to competitive activity. Printing and other revenue, on a same store
52-week basis was US$10.1 million in 2001 compared with US$15.8 million in 2000,
a decrease of US$5.7 million.

    Cost of sales and expenses in 2001 were $623.0 million compared with $504.1
million in 2000, an increase of $118.9 million. In US dollars, costs of sales
and expenses were US$402.1 million in 2001 compared with US$339.0

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<PAGE>

million in 2000, an increase of US$63.1 million. Newsprint expense in 2001 was
US$76.4 million compared with US$69.2 million in 2000, an increase of US$7.2
million. Compensation costs were US$178.7 million in 2001 compared with US$150.9
million in 2000, an increase of US$27.8 million. Other operating costs were
US$147.0 million in 2001 compared with US$118.9 million in 2000, an increase of
US$28.1 million. On a same store 52-week basis, cost of sales and expenses were
US$328.5 million compared with US$329.9 million in 2000, a decrease of US$1.4
million or 0.4%. Same store newsprint expense in 2001 was US$67.5 million,
compared to US$67.6 million in 2000. Average newsprint prices in 2001 were
approximately 11% higher than in 2000. In 2001, newsprint consumption was
significantly less than in 2000 as a result of lower page counts due to reduced
advertising revenue, a reduction in commercial printing, and general cost
controls. On a same store 52-week basis, compensation and other costs decreased
US$1.3 million or 0.5% year over year. The lower compensation costs result from
staff reductions across the Chicago Group offset in part by increased medical
costs and workers compensation costs. Other operating costs are lower as a
result of reduced commercial printing production costs, and general cost
reductions across all areas. On a same store basis depreciation and amortization
increased US$6.3 million mainly as a result of higher depreciation charges
related to the new Chicago printing facility.

     Operating income in 2001 totaled $9.8 million compared with $55.4 million
in 2000, a decrease of $45.6 million. On a same store 52-week basis in United
States dollars, operating income was US$16.9 million in 2001 compared with
US$37.0 million in 2000, a decrease of US$20.1 million. The decrease results
primarily from lower sales revenue, increased depreciation and amortization
offset in part by lower compensation and other operating costs. The acquisition
of Chicago Suburban Newspapers in 2000 added US$79.3 million to sales revenue
and operating income of US$2.4 million in 2001.

U.K. NEWSPAPER GROUP

     In 2001, sales revenue for the U.K. Newspaper Group was $801.1 million
compared with $882.2 million in 2000, a decrease of $81.1 million or 9.2%. In
2001 compared to 2000, the pound sterling on average weakened compared with
the Canadian dollar. In pounds sterling, sales revenue was (pound)358.9 million
in 2001 compared with (pound)392.3 million in 2000, a decrease of (pound)33.4
million or 8.5%. The decrease in revenue was almost entirely the result of lower
advertising revenue. Advertising revenue in 2001 was (pound)228.7 million
compared with (pound)255.9 million in 2000, a decrease of (pound)27.2 million or
10.6%. Circulation revenue in 2001 was (pound)94.5 million compared with
(pound)95.7 million in 2000. On September 5, 2001, the price of The Daily
Telegraph on Monday to Friday increased from 45 pence to 50 pence and on
September 8, 2001, the price of The Daily Telegraph on Saturday increased from
75 pence to 85 pence. The price increases improved circulation revenue in the
last quarter of 2001.

     Cost of sales and expenses in 2001 were $703.3 million compared with $684.9
million in 2000, an increase of $18.4 million or 2.7%. In local currency, cost
of sales and expenses in 2001 approximated (pound)314.9 million compared with
(pound)305.9 million in 2000, an increase of (pound)9.0 million or 2.9%.
Newsprint expense in local currency was (pound)64.7 million in 2001 compared
with (pound)60.6 million in 2000, an increase of (pound)4.1 million or 6.8%.
This increase results from the significant increase in newsprint prices in 2001
compared to 2000, offset in part by 4% lower consumption in 2001 compared to
2000. In addition, cost of sales and expenses are net of betterments
capitalized. On completion of a detailed impairment analysis during 2001 of the
cumulative betterments capitalized, a write down was taken in the fourth quarter
of 2001, resulting in a net reduction in betterments capitalized year over year
of (pound)9.8 million. The increased cost of sales and expenses in 2001 compared
with 2000 resulted from increased newsprint costs and the net reductions in
betterments capitalized reduced in part by lower other operating costs.

     Depreciation and amortization in 2001 was $63.9 million compared with $58.1
million in 2000, an increase of $5.8 million.

     Operating income in 2001 totaled $33.9 million compared with $139.1 million
in 2000, a decrease of $105.2 million. The decrease in operating income, is
primarily the result of lower advertising revenue, increased newsprint costs,
the net reduction in betterments capitalized and increased depreciation and
amortization offset in part by lower other operating costs.

CANADIAN NEWSPAPER GROUP

     Sales revenue in the Canadian Newspaper Group was $305.1 million in 2001
compared with $1,579.2 million in 2000 and in 2001 there was an operating loss
of $50.4 million compared with operating income of $174.1 million in 2000. The
significant decrease in both sales revenue and operating income was largely a
result of the sale of

                                       46
<PAGE>

newspaper assets in November 2000 to CanWest, the sale of UniMedia Company
completed in January 2001, the July and November 2001 sales of operations to
Osprey and the August 31, 2001 sale of the National Post.

Included in the $50.4 million operating loss for the year ended December 31,
2001, are overhead costs of approximately $3.8 million that are not expected to
be incurred in 2002. Also included is a $2.6 million expense in respect of
employee benefit costs of retired former Southam employees.

COMMUNITY GROUP

     Sales revenue and operating income were $29.6 million and a loss of $5.3
million in 2001, compared to $100.1 million and operating income of $6.7 million
in 2000. The significant decrease in both sales revenue and operating income
results almost entirely from the sale of Community Group properties that
occurred primarily during 2000. During the third quarter of 2001, the last
remaining U.S. Community Group property was sold. At December 31, 2001, the
Jerusalem Post was the only Community Group property still owned by the Company.

B.  LIQUIDITY AND CAPITAL RESOURCES

FINANCIAL CONDITION AND CASH FLOWS

     The Company is an international holding company and its assets consist
primarily of investments in its subsidiaries and affiliated companies. As a
result, the Company's ability to meet its future financial obligations, on a
non-consolidated basis, is dependent upon the availability of cash flows
principally from International through dividends and other payments.
International and the Company's other subsidiaries and affiliated companies are
under no obligation to pay dividends. International's ability to pay dividends
on its common stock may be limited as a result of its dependence on the receipt
of dividends and other receipts primarily from Publishing. Publishing and its
principal United States and foreign subsidiaries are subject to statutory
restrictions and restrictions in debt agreements that limit their ability to pay
dividends. Substantially all of the assets of Publishing and its material U.S.
and U.K. subsidiaries have been pledged to the group's lenders. The Company's
right to participate in the distribution of assets of any subsidiary or
affiliated company upon its liquidation or reorganization will be subject to the
prior claims of the creditors of such subsidiary or affiliated company,
including trade creditors, except to the extent that the Company may itself be a
creditor with recognized claims against such subsidiary or affiliated company.

     On a non-consolidated basis, the Company has experienced a shortfall
between the dividends and fees received from its subsidiaries and its
obligations to pay its operating costs, including interest and dividends on its
preference shares, and such shortfalls are expected to continue in the future.
Accordingly, the Company is dependent upon the continuing financial support of
RMI to fund such shortfalls and, therefore, pay its liabilities as they fall
due. RMI is a wholly owned subsidiary of Ravelston, the Company's ultimate
parent company. On March 10, 2003, concurrent with the issue of U.S. $120.0
million Senior Secured Notes due 2011, RMI entered into a support agreement with
the Company. Under the agreement, RMI has agreed to make annual support payments
in cash to the Company on a periodic basis by way of contributions to the
capital of the Company (without the issuance of additional shares of the
Company) or subordinated debt. The annual support payments will be equal to the
greater of (a) the Company's negative net cash flow (as defined) for the
relevant period (which does not extend to outlays for retractions or
redemptions), determined on a non-consolidated basis, and (b) U.S.$14.0 million
per year (less any payments of management services fees by International
directly to the Company or NB Inc. and any excess in the net dividend amount
that the Company and NB Inc. receive from International over U.S.$4.65 million
per year), in either case as reduced by any permanent repayment of debt owing by
Ravelston to the Company. Pursuant to this arrangement, RMI has made payments to
the Company in respect of the period from March 10 to March 31, 2003 in the
amount of U.S.$1.1 million.

     RMI currently derives all of its income and operating cash flow from the
fees paid pursuant to Services Agreements with International and its
subsidiaries. RMI's ability to provide the required financial support under the
support agreement with the Company is dependent on RMI continuing to receive
sufficient fees pursuant to those Services Agreements. The Services Agreements
may be terminated by either party by giving 180 days notice. The fees in respect
of the Services Agreements are negotiated annually with and approved by the
audit committee of International. The fees to be paid to RMI for the year ending
December 31, 2003 amount to approximately U.S.$22.0 million to U.S.$24.0 million
and were approved in February 2003. The fees in respect of the periods after
December 31, 2003 have not yet been negotiated or approved.

     As described more fully above in "Hollinger International Inc. -- Recent
Developments", a shareholder of International has requested that the Board
investigate and, if determined to be advisable, take corrective action in
respect of certain matters, including the payment of fees by International
pursuant to management services agreements with RMI. Although the Board of
International has established a special committee of the Board of Directors to
conduct an independent review and investigation of the matters, the timing and
outcome of the process and the impact on the Company and RMI is uncertain at
this time. Under the terms of the Senior Secured Notes, if in any quarterly
period after April 1, 2003, the Company fails to receive in cash a minimum
aggregate amount of at least US$4.7 million from a) payments made by RMI
pursuant to the support agreement and b) dividends paid by International on its
shares held by the Company and NBI, the Company would be in default under its
Senior Secured Notes and they could become due and payable immediately.

     Based on the Company's current investment in International and the current
quarterly dividend paid by International of US$0.05 per share: (i) the minimum
support payment required to be made by RMI to avoid a default under the terms of
the Senior Secured Notes is approximately US$14.0 million annually and (ii) the
Company estimates the support payment required by RMI to fund its negative net
cash flow will approximate US$20.0 million for the twelve months ending June 30,
2004. This amount assumes payment by the Company of preference share dividends
of approximately US$5.0 million which have yet to be considered by the Board of
Directors and which depend on the Company having the ability under corporate law
to pay such dividends. The Company's ongoing liquidity on a non-consolidated
basis continues to depend to a large degree on support payments from RMI which
in turn depends on fees received pursuant to its services agreements with
International. If the Company does not receive support payments of at least
US$15.0 million for the twelve months ending June 30, 2004, based on the above
assumptions, then it will be required to dispose of assets of seek financing in
order to meet its non-consolidated obligations as they fall due.

     The Company is contemplating a variety of initiatives to address the
potential matters referred to above, however at this time there can be no
certainty that such initiatives will be completed.


                                       47
<PAGE>


Initially, the support amount to be contributed by RMI will be satisfied through
the permanent repayment by Ravelston of its approximate $16.4 million of
advances from the Company, which resulted from the use of proceeds of the
Company's issue of its Senior Secured Notes. Thereafter, all support amount
contributions by RMI will be made through contributions to the capital of the
Company, without receiving any additional shares of the Company, except that, to
the extent that the minimum payment exceeds the negative net cash flow of the
Company, the amounts will be contributed through an interest-bearing, unsecured,
subordinated loan to the Company. The support agreement terminates upon the
repayment of the Senior Secured Notes which mature in 2011. The Senior Secured
Notes are secured by a first priority lien on 10,108,302 shares of
International's Class A common stock and 14,990,000 shares of International's
Class B common stock owned by the Company and NB Inc. Therefore, at June 19,
2003, the Company and NB Inc., in total, hold only 1,148,236 shares of
International Class A common stock which are unencumbered, the current market
value of which approximates US$15.3 million. The Company has the right to redeem
up to 35% of the Senior Secured Notes with money raised from a public offering,
which would, in turn, result in a portion of the pledged shares of International
Class A common stock being released from this lien. The Company has no plans at
this time to conduct a public offering.

     On March 10, 2003, the Company repaid the amount due to Ravelston, made an
advance to Ravelston and repaid all borrowings under its revolving credit
facility and operating line of credit with the proceeds of its issuance of
Senior Secured Notes. Currently, the Company does not have a line of credit. The
Trust Indenture governing the Senior Secured Notes places certain limitations on
the Company's ability to incur additional indebtedness and the ability to
retract the Series II and III preference shares and the retractable common
shares.

     In addition, on March 10, 2003, Ravelston and RMI entered into a
contribution agreement with the Company. The contribution agreement is not
pledged to the trustee for the Notes, and holders of the Notes are not entitled
to any rights thereunder. The contribution agreement sets out the manner in
which RMI will make support payments to the Company as described above.
Ravelston has guaranteed RMI's obligations under the contribution agreement and
its obligation to make support payments to the Company under the support
agreement. Ravelston's guarantee will not enure to the benefit of, or be
enforceable by, the trustee for the Notes or holders of the Notes. The Company
has pledged the benefit of this guarantee as security for its obligations under
the indebtedness of NB Inc. due to International. The contribution agreement
will terminate upon the repayment in full of the Notes, the termination of the
support agreement or if the Company ceases to be a public company.

     On May 22, 2003, International and the Company announced that they had
reached an agreement in principle whereby the Company would sell some of its
holding of International's Class A shares to Southeastern Asset Management Inc.
("Southeastern"), and would seek certain phased changes in voting rights of
International's Class B shares over five years. There were also, prior and
subsequent to May 22, 2003, tentative agreements on the optimal scale of
management fees, Southeastern nominations to International's Board of Directors,
and on certain other matters, including possible consideration to the Company
for varying the super-voting rights that attach to International's Class B
shares. These discussions have evolved substantially but in a manner generally
consistent with what was announced May 22, 2003. As a result of publicity
accorded these discussions and International's affairs generally, other entities
have initiated conversations on matters related to the subjects of the
Southeastern discussions. All of these conversations are in progress, but it is
impossible at this time to foretell whether they will reach an executable
agreement, or what the nature of such an agreement might be.

RETRACTABLE SHARES.

     The Company's issued capital stock consists of Series II preference shares,
Series III preference shares and retractable common shares, each of which is
retractable at the option of the holder. There is continuing uncertainty
regarding the Company's future ability to complete retractions and redemptions
of preference shares and retractable common shares. Dividends on the preference
shares are not payable until declared by the Board of Directors which will take
into account when dividends are considered from time to time, among other
things, the support payments to be made to it by RMI. Under corporate law, the
Company cannot redeem shares (either on a retraction or on the April 30, 2004
redemption date in the case of the Series III Preference Shares) or declare or
pay dividends in certain circumstances, including if there are reasonable
grounds for believing that the Company is, or would after the payment be, unable
to pay its liabilities as they become due. In such circumstances, shareholders
do not become creditors of the Company and, in the case of shares submitted for
retraction or in the case of the Series III Preference Shares to be redeemed on
April 30, 2004, holders thereof remain as shareholders until such time as the
retraction or redemption is able to be completed under applicable law. The
Company's uncertain ability to make payments on future retractions and
redemptions of shares or dividends on shares is due to the fact that liquidity
of its assets is limited at present, given that substantially all of its shares
of International common stock were provided as security for the Senior Secured
Notes.

     During the six months ended June 30, 2003, the Company was able to complete
the retraction of 504,989 Series II preference shares for 232,293 shares of
International Class A common stock, 300,000 Series II preference shares for cash
consideration of $1,585,000 being the cash equivalent value of 0.46 of a share
of Class A common stock of International for which each Series II preference
share was exchangeable, at the time of retraction, 876,050 Series III preference
shares for approximately $7.7 million in cash and 22,500 retractable common
shares for cash of $124,000. This completed all retraction notices received up
to and including April 30, 2003.

                                       48
<PAGE>
     After careful deliberation, the Company concluded at the current time that
it was not able to complete the retractions of shares submitted after April 30,
2003 without unduly impairing its liquidity. Since April 30, 2003 and up to and
including August 5, 2003, the Company has received retraction notices from
holders of 3,680,193 Series III preference shares of which 1,387,139 retraction
notices were subsequently withdrawn, leaving retraction notices from holders of
2,293,054 Series III preference shares for aggregate retraction proceeds of
approximately $21.8 million which are unable to be completed at the current
time. In addition, during the same time period, retraction notices were received
from the holders of 401,712 Series II preference shares for aggregate retraction
proceeds of 184,787 shares of International Class A common stock or cash of
approximately $2.9 million, which are unable to be completed at the current
time. Also, during the same period, retraction notices were received from
holders of 318 retractable common shares for aggregate retraction proceeds of
$1000, which are unable to be completed at the current time.

     Giving effect to the retractions completed as of September 4, 2003, there
continues to be outstanding 3,775,990 Series II preference shares (exchangeable
for 1,736,955 shares of Class A common stock of International), 9,271,175 Series
III preference shares and 33,891,404 retractable common shares.

     The Company's Series III preference shares have a fixed redemption date on
April 30, 2004 for a cash payment of $10.00 per share plus any accrued and
unpaid dividends to that date. The total cost to redeem all of the issued and
outstanding Series III preference shares would be $92.7 million. The Company
made an offer to exchange all of its Series III preference shares for newly
issuable Series IV preference shares having comparable terms, except for a
higher dividend rate (8% compared to 7% for the Series III preference shares)
and a longer term to mandatory redemption (April 30, 2008 compared to April 30,
2004). Holders will have the right at any time to retract Series IV preference
shares for a retraction price payable in cash which, during the first four years
will be calculated using 95% of prices for Government of Canada Bonds having a
comparable yield and term, and during the fifth year will be $9.50 per share
(plus unpaid dividends in each case). On June 9, 2003, the Company announced
that it was permitting the exchange offer to expire because holders of at least
5,000,000 of the Series III preference shares had not accepted the offer.

     The Company will periodically review its liquidity position to determine if
and when further retractions can be completed. The Company will not complete
retractions or redemptions if to do so would unduly impair its liquidity.
Retractions of Series II preference shares and Series III preference shares will
be processed on a combined basis in order determined by their retraction date
(with equal ranking of the series) in advance of any retractable common shares
that are submitted for retraction. Following the satisfaction of all pending
retracted Series II preference shares and Series III preference shares,
retractions of the retractable common shares will be processed in order
determined by their retraction date. Accordingly, retractions of retractable
common shares cannot be completed as long as there are pending and unsatisfied
retractions of Series II preference shares and Series III preference shares.

RETRACTION PRICE OF RETRACTABLE COMMON SHARES OF HOLLINGER INC.

     The retractable common shares of the Company have terms equivalent to
common shares, except that they are retractable at any time by the holder for
their retraction price in exchange for shares of the Company's holding of
International Class A common stock of equivalent value. The Company has the
right to settle the retraction price by cash payment. The retraction price
determined each quarter (or, in certain specific cases more frequently) by the
Company's Retraction Price Committee, is between 90% and 100% of the Company's
current value, being the aggregate fair market value of all of its assets less
the aggregate of (i) the maximum amount payable at such date by the Company on
its liquidation, dissolution or winding-up in respect of outstanding preference
shares other than the retractable common shares, and (ii) its liabilities,
including any tax liabilities that would arise on a sale of all or substantially
all of its assets, which, in the opinion of the Board, would not be refundable
at such date, divided by the number of retractable common shares outstanding on
such date.

     Currently the Company and its wholly owned subsidiaries, which excludes
International, have assets which consist principally of the investment in
International together with other miscellaneous investments. The Company as at
June 19, 2003 directly and indirectly owned 11,256,538 shares of Class A common
stock and 14,990,000

                                       49
<PAGE>
shares of Class B common stock of International with a then market value of
approximately U.S.$294.2 million. The Company's significant liabilities include
U.S.$120.0 million 11 7/8% Senior Secured Notes due 2011, Series II preference
shares, which are exchangeable into 1,736,955 shares of International Class A
common stock with a current value of approximately U.S.$19.5 million and Series
III preference shares which are redeemable on April 30, 2004 for an aggregate of
$92.7 million.

     The retraction price of the retractable common shares during 2002 and early
2003 was as follows:

<TABLE>
<CAPTION>
                             Per Retractable
                               Common Share
<S>                          <C>
January 10, 2002                 $ 7.50
April 11, 2002                   $ 9.50
July 9, 2002                     $ 7.50
October 3, 2002                  $ 5.50
January 7, 2003                  $ 5.50
April 2, 2003                    $ 1.75
</TABLE>

     The decline in the retraction price of the retractable common shares from
$5.50 per share on January 7, 2003 to $1.75 per share on April 2, 2003 primarily
results from the lower market price of shares of International Class A common
stock and a strengthening of the Canadian dollar relative to the U.S. dollar.

     Since at the current time the Company is unable to complete retractions in
respect of retraction notices received for Series III preference shares, the
Company would be unable to complete any retraction notices received in the
future in respect of retractable common shares until all preference share
retraction notices, received by the Company and not withdrawn, are completed.

     At June 19, 2003 there are 33,891,404 retractable common shares issued and
outstanding, of which 26,516,886 are held by Ravelston and its affiliates.

WORKING CAPITAL

     Working capital consists of current assets less current liabilities. At
June 30, 2003, working capital excluding the current portion of long-term debt
obligations was a deficiency of $384.1 million compared to working capital,
excluding the current portion of long-term debt obligations and the related
funds held in escrow at December 31, 2002, which was a deficiency of $604.4
million. The decrease in the working capital deficiency is due to the
refinancing of the Company's bank indebtedness and the repayment of the amount
due to Ravelston with the proceeds of the issue of Senior Secured Notes. Current
assets, excluding funds held in escrow, were $628.3 million at June 30, 2003
compared to $618.1 million at December 31, 2002. Current liabilities, excluding
debt obligations, but including short-term bank indebtedness and retractable
preference shares, were $1,012.4 million at June 30, 2003, compared with
$1,222.5 million at December 31, 2002. Current liabilities, at June 30, 2003,
include $118.1 million in respect of retractable preference shares. These
retractable preference shares are included in current liabilities since they are
retractable at any time at the option of the holder. Also included in current
liabilities is approximately $500.9 million of income taxes that has primarily
been provided on gains on sales of assets computed on tax bases that result in
higher gains for tax purposes than for accounting purposes. Strategies have been
and may be implemented that may also defer and/or reduce these taxes but the
effects of these strategies have not been reflected in the accounts. While the
timing of the payment of such income taxes, if any, is uncertain, the Company
does not expect any significant amounts to be paid in 2003.

     At December 31, 2002, working capital, excluding the current portion of
long-term debt obligations and the related funds held in escrow, was a
deficiency of $604.4 million compared to working capital of $133.6 million at
December 31, 2001. Current assets excluding funds held in escrow were $618.1
million at December 31, 2002 compared with $1,223.8 million at December 31,
2001. Current liabilities, excluding debt obligations, but including short-term
bank indebtedness, were $1,222.5 million at December 31, 2002, compared with
$1,090.2 million at December 31, 2001. Current liabilities at December 31, 2002
include $147.3 million in respect of retractable preference shares and the
related deferred unrealized gain. Also included in current liabilities at
December 31, 2002 are approximately $436.7 million of income taxes that have
been provided on gains on sales of assets computed on tax bases that result in
higher gains for tax purposes than for accounting purposes. Strategies have been
and may be implemented that may also defer and/or reduce these taxes but the
effects of these strategies have not been reflected in the accounts. While the
timing of the payment of such income taxes, if any, is uncertain, the Company
does not expect any significant amounts to be paid in 2003.

     The reduction in working capital in 2002, excluding the current portion of
long-term debt obligations and related funds held in escrow, is primarily the
result of the retractable preference shares being included in current
liabilities and the reduction in cash and cash equivalents as a result of the
pay-down of long-term debt since December 31, 2001, offset by the reduction in
bank indebtedness. During the year ended December 31, 2002, approximately
U.S.$370.8 million of cash and cash equivalents, which included both principal
repayments and related premiums, was used to retire a portion of Publishing's
long-term debt.

     During January 2002, the Company's revolving bank credit facility was
reduced to $81.9 million from $120.4 million at December 31, 2001, using
proceeds from the sale of 2,000,000 shares of International's Class A common
stock. During 2001, the Company reduced its bank indebtedness by $142.0 million
with proceeds from the sale of

                                       50
<PAGE>

7.1 million shares of International's Class A common stock to International for
cancellation and from the December 2001 sale to third parties of 2,000,000
shares of International's Class A common stock.

     At December 31, 2002, the Company had fully borrowed on its bank operating
line that provided for up to $10.0 million of borrowings and its revolving bank
credit facility that provided for up to $80.8 million in borrowings. The
Company's revolving bank credit facility was secured by International shares
owned by the Company and bore interest at the prime rate plus 2.5% or the
bankers' acceptance ("BA") rate plus 3.5%. Under the terms of the revolving bank
credit facility, the Company and its wholly owned subsidiaries were subject to
restrictions on the incurrence of additional debt. The revolving bank credit
facility was amended and restated on August 30, 2002 and was to mature on
December 2, 2002. A mandatory repayment of the revolving bank credit facility in
the amount of $50.0 million was required by December 2, 2002 and if such payment
was made, the lenders could have consented to an extension of the maturity date
to December 2, 2003 in respect of the principal outstanding. On December 2,
2002, the lenders extended the $50.0 million principal repayment date to
December 9, 2002. This repayment was not made, and on December 9, 2002, the bank
credit facility was amended to require a principal repayment of $44.0 million on
February 28, 2003 with the balance maturing on December 2, 2003. As a result of
the impending closing of the Company's Senior Secured Note issue, the lenders
further extended the due date for the repayment of $44.0 million to March 14,
2003. On March 10, 2003, the revolving bank credit facility in the amount of
$80.8 million and the bank operating line of $10.0 million were repaid with part
of the proceeds of the Company's issue of Senior Secured Notes.

     On October 3, 2002, International entered into a term lending facility and
borrowed U.S.$50.0 million ($79.6 million). As a result of International's
borrowing under this term lending facility, the Company was in default of a
covenant under its revolving bank credit facility which, while in default,
resulted in borrowings being due on demand. The Company's banks waived the
default and on December 23, 2002 International repaid the full amount borrowed
under the term lending facility.

LONG-TERM DEBT

     Long-term debt, including the current portion, was $1,789.3 million at
December 31, 2002 compared with $1,351.6 million at December 31, 2001.

     On March 10, 2003, the Company issued U.S. $120.0 million aggregate
principal amount of 11 7/8% Senior Secured Notes due 2011. The total net
proceeds were used to repay the Company's revolving bank credit facility and
bank operating line, repay amounts due to Ravelston and to make an advance
to Ravelston. The Senior Secured Notes are fully and unconditionally guaranteed
by RMI and are secured by a first priority lien on 10,108,302 shares of
International's Class A Common stock and 14,990,000 shares of Class B common
stock owned by the Company NB Inc.

     On December 23, 2002, certain of International's subsidiaries entered into
an amended and restated U.S. $310.0 million Senior Credit Facility with a group
of financial institutions arranged by Wachovia Bank, N.A. (the "Senior Credit
Facility").

     The Senior Credit Facility consists of (a) a U.S. $45.0 million revolving
credit facility, which matures on September 30, 2008 (the "Revolving Credit
Facility"), (b) a U.S. $45.0 million Term Loan A, which matures on September 30,
2008 ("Term Loan A") and (c) a U.S. $220.0 million Term Loan B, which matures on
September 30, 2009 ("Term Loan B"). Publishing (a wholly owned direct
subsidiary) and Telegraph Group Limited ("Telegraph Group", a wholly owned
indirect United Kingdom subsidiary) are the borrowers under the Revolving Credit
Facility and First DT Holdings Ltd. ("FDTH", a wholly owned indirect U.K.
subsidiary) is the borrower under Term Loan A and Term Loan B. The Revolving
Credit Facility and Term Loans bear interest at either the Base Rate (U.S.) or
U.S. $ LIBOR, plus an applicable margin. Cross-currency floating to fixed rate
swaps from U.S.$ LIBOR to Sterling fixed rate have been purchased in respect of
all amounts advanced under the Senior Credit Facility. No amounts have currently
been drawn under the Revolving Credit Facility

     Publishing's borrowings under the Senior Credit Facility are guaranteed by
Publishing's material U.S. subsidiaries, while FDTH's and Telegraph Group's
borrowings under the Senior Credit Facility are guaranteed by Publishing and its
material U.S. and U.K. subsidiaries. International is also a guarantor of the
Senior Credit Facility. Publishing's borrowings under the Senior Credit Facility
are secured by substantially all of the assets of Publishing and its material
U.S. subsidiaries, a pledge of all of the capital stock of Publishing and its
material U.S. subsidiaries and a pledge of 65% of the capital stock of certain
foreign subsidiaries. FDTH's and Telegraph Group's borrowings

                                       51
<PAGE>

under the Senior Credit Facility are secured by substantially all of the assets
of Publishing and its material U.S. and U.K. subsidiaries and a pledge of all of
the capital stock of Publishing and its material U.S. and U.K. subsidiaries.
International's assets in Canada have not been pledged as security under the
Senior Credit Facility.

     The Senior Credit Facility loan documentation requires Publishing to comply
with certain covenants which include, without limitation and subject to certain
exceptions, restrictions on additional indebtedness; liens; certain types of
payments (including without limitation, capital stock dividends and redemptions,
payments on existing indebtedness and intercompany indebtedness), and on
incurring or guaranteeing debt of an affiliate, making certain investments and
paying management fees; mergers, consolidations, sales and acquisitions;
transactions with affiliates; conduct of business, except as permitted; sale and
leaseback transactions; changing fiscal year; changes to holding company status;
creating or allowing restrictions on taking action under the Senior Credit
Facility loan documentation; and entering into operating leases, subject to
certain baskets and exceptions. The Senior Credit Facility loan documentation
also contains customary events of default.

     On December 23, 2002, Publishing issued U.S. $300.0 million aggregate
principal amount of 9% senior unsecured notes due 2010 (the "9% Senior Notes")
at par to certain qualified institutional buyers ("QIBs") pursuant to Rule 144A
under the Securities Act of 1933, as amended. The aggregate commissions were
U.S. $8.3 million. The proceeds from the sale of the 9% Senior Notes, together
with drawdowns under the Senior Credit Facility and available cash balances,
were used to redeem approximately U.S. $239.9 million of Publishing's Senior
Subordinated Notes due 2006 and approximately U.S. $265.0 million of
Publishing's Senior Subordinated Notes due 2007, plus applicable premium and
accrued interest to the date of redemption, and to make a distribution of U.S.
$100.0 million to International. International used the distribution (a) to
repay all amounts borrowed by International on October 3, 2002 under its loan
agreement with Trilon International Inc., (b) to retire the equity forward
purchase agreements between International and certain Canadian chartered banks
(the "Total Return Equity Swap") made as of October 1, 1998, as amended, and (c)
for other general corporate purposes. The trust indenture in respect of the 9%
Senior Notes contains customary covenants and events of default, which are
comparable to those under the Senior Credit Facility.

     On February 14, 2002, Publishing commenced a cash tender offer for any and
all of its outstanding 8.625% Senior Notes due 2005. In March 2002, Senior Notes
in the aggregate principal amount of U.S. $248.9 million had been validly
tendered pursuant to the offer and these Senior Notes were paid out in full. In
addition, in 2002, Publishing purchased for retirement an additional U.S.$41.1
million in aggregate principal amount of the Senior Notes and Senior
Subordinated Notes. The total principal amount of Publishing's Senior Notes and
Senior Subordinated Notes retired during 2002 was U.S. $290.0 million. The
premiums paid to retire the debt totaled U.S. $27.1 million, which, together
with a write-off of U.S. $8.3 million of related deferred financing costs, have
been presented as an unusual item.

AMOUNT DUE TO INTERNATIONAL FROM NB INC.

     The amount due to International from NB Inc. at December 31, 2002,
including accrued interest, totaled U.S.$45.8 million. On March 10, 2003
International repurchased for cancellation, from NB Inc., 2,000,000 shares of
Class A common stock of International at U.S.$8.25 per share for total proceeds
of U.S.$16.5 million and redeemed from NB Inc., pursuant to a redemption
request, all of the 93,206 outstanding shares of Series E Redeemable Convertible
Preferred Stock of International at the fixed redemption price of $146.63 per
share. Proceeds from the repurchase and redemption were offset against the debt
due to International from NB Inc., resulting in net outstanding debt due to
International of approximately U.S.$20.4 million as of March 10, 2003. The
remaining debt of U.S.$20.4 million was subordinated in right of payment to the
11 7/8% Senior Secured Notes due 2011 and the interest rate amended to 14.25% if
paid in cash and 16.5% if paid in kind.

     The debt due to International originated on July 11, 2000 and represented
amounts loaned by International to NBI in connection with the cash purchase by
the Company of Hollinger Canadian Publishing Holdings Inc. special shares.
Following the receipt of an independent fairness opinion and a review by a
committee of the Board of Directors of International, composed entirely of
independent directors, of all aspects of the transaction relating to the changes
in the debt arrangements with the Company and the subordination of this
remaining debt, the committee approved the new debt arrangements.


     International and the Company previously reported that the committee of
independent directors of International referred to had agreed to a partial
offset to the remaining US$20.4 million of debt against amounts owed by
International to RMI, and further stated that the offset was effected April 30,
2003. Although management of International and the Company believed final
approval had been given to the offset by the committee of independent directors
of International, the committee has advised that final approval of any offset
remains subject to appropriate due diligence and receipt of a further
independent fairness opinion. The due diligence process has not yet been
concluded and accordingly, the accompanying interim consolidated financial
statements do not reflect the completion of the offset.

                                       52
<PAGE>
     International is indebted to RMI as a consequence of the sale of NP
Holdings Company ("NP Holdings") and its related tax losses to RMI on July 3,
2002. Prior to the sale, NP Holdings had no significant assets or liabilities
except for its tax losses and an obligation to CanWest for $22.5 million. To
structure NP Holdings such that it had no material net assets or liabilities
except for its tax losses upon its sale to RMI, immediately prior to the sale
International contributed $22.5 million as equity to NP Holdings and then
borrowed that amount from NP Holdings by way of promissory note. As that note
was offset by the CanWest obligation, NP Holdings had no net material assets or
liabilities apart from its tax losses upon sale. Notwithstanding these
transactions, International may have continuing direct exposure to CanWest in
respect of the $22.5 million obligation.

     As a result of an understanding that the partial offset had been completed
on April 30, 2003, NBI did not pay interest on the full principal amount of the
debt due to International and Ravelston did not make a payment of US$600,000 due
on June 30, 2003 into a cash collateral account securing the debt. International
is in discussions with NBI and Ravelston regarding these matters.

CASH FLOWS

     Cash flows provided by operating activities were $149.4 million in 2002,
and cash flows used for operating activities were $334.9 million in 2001.
Improved operating results and lower cash interest costs and cash taxes resulted
in improved year-over-year cash flows provided by operating activities. The cash
flows used in operating activities in 2001 primarily resulted from the sales of
Canadian Newspaper Group properties and Community Group properties, lower
operating results at the Company's remaining operations and the non-cash
interest income received on the CanWest debentures.

     Cash flows used in financing activities were $751.4 million in 2002 and
$239.5 million in 2001. In 2002, International repaid U.S. $290.0 million of
long-term debt primarily from available cash balances and repaid U.S. $100.0
million to terminate the Total Return Equity Swaps. The cash flows used in
financing activities in 2001 included the repurchase of shares of
International's Class A common stock and the redemption of retractable common
and preferred shares totalling $72.4 million.

     Cash flows used in investing activities were $18.8 million in 2002 compared
to cash flows provided by investing activities of $1,132.5 million in 2001. The
cash flows used in investing activities in 2002 resulted primarily from
purchases of fixed assets and investments partially offset by proceeds from the
sale of 2,000,000 shares of International's Class A common stock in January 2002
and proceeds on the sale of fixed assets. The cash flows provided by investing
activities in 2001 resulted principally from the sales of Canadian newspaper
operations and sale of investments offset in part by additions to investments
and fixed assets.

CAPITAL RESOURCES AND NEEDS

     Additions to capital assets amounted to $64.0 million, $91.0 million and
$113.0 million in 2002, 2001 and 2000, respectively. These additions are
principally in respect of International's operations. The following is a summary
of the major capital expenditures during these periods:

<TABLE>
<CAPTION>
                                                                2002              2001              2000
                                                              Million $         Million $         Million $
                                                              ---------         ---------         ---------
<S>                                                           <C>               <C>               <C>
Chicago Sun-Times plant...................................    $     3           $      6          $    38
Montreal presses..........................................          -                  -               26
National Post.............................................          -                  -                4
Printing joint venture-- new presshall and mailroom.......          -                 20                -
Airplane..................................................          -                 18                -
Jerusalem Post press......................................          5                  -                -
Fox Valley - printing facility............................          6                  -                -
Other capital additions and routine capital expenditures..         50                 47               45
                                                              ---------         ---------         ---------
                                                              $    64           $     91          $   113
                                                              =========         =========         =========
</TABLE>

CAPITAL EXPENDITURES AND ACQUISITION FINANCING.

     In the past three years, the Chicago Group, the Community Group, the U.K.
Newspaper Group and the Canadian Newspaper Group have funded their capital
expenditures and acquisition and investment activities out of cash provided by
their respective operating activities and in 2000 through borrowings. In 2003
International expects to invest approximately U.S.$20 million in capital
expenditures primarily through available cash flow.

     Capital expenditures at the Chicago Group amounted to $24.3 million, $19.3
and $38.2 million in 2002, 2001 and 2000, respectively. International began
construction of a new printing facility in Chicago during 1998, which became
partially operational in 2000 and fully operational in 2001. The capital
expenditures in 2001 and 2000 are primarily related to the construction of this
facility.

                                       53
<PAGE>

     Capital expenditures at the Community Group amounted to $7.9 million, $0.5
million and $4.9 million in 2002, 2001 and 2000, respectively. The capital
expenditures in 2002 were primarily for the acquisition of a new press by the
Jerusalem Post.

     Capital expenditures at the U.K. Newspaper Group were $27.7 million, $48.8
million and $24.1 million in 2002, 2001 and 2000, respectively.

     Capital expenditures at the Canadian Newspaper Group were $3.6 million,
$4.4 million and $42.8 million in 2002, 2001 and 2000, respectively.

     Capital expenditures at the Corporate Group were $0.1 million, $18.4
million and $2.6 million in 2002, 2001 and 2000, respectively. Expenditures in
2001 were primarily in respect of a new airplane to replace an older airplane
that was sold in early 2002.

DERIVATIVE INSTRUMENTS

     The Company or its subsidiaries may enter into various swap, option and
forward contracts from time to time when management believes conditions warrant.
Management does intend, however, that such contracts will be limited to those
that relate to the actual exposure to commodity prices, interest rates and
foreign currency risks. If, in management's view, the conditions that made such
arrangements worthwhile no longer exist, the contracts may be closed.

     On December 27, 2002, FDTH, entered into two cross-currency floating to
fixed rate swap transactions to hedge principal and interest payments on U.S.
dollar borrowings by FDTH under the December 23, 2002 Senior Credit Facility.
The contracts have a total foreign currency obligation notional value of U.S.
$265.0 million, fixed at a rate of U.S. $1.5922 to (pound)1, convert the
interest rate on such borrowings from floating rate to a fixed blended interest
rate of 8.47%, and expire as to U.S. $45.0 million on December 29, 2008 and as
to U.S. $220.0 million on December 29, 2009. The swaps were purchased to take
advantage of low rates on this type of instrument and to provide certainty on
interest charges to the operations of the U.K. Newspaper Group in a time of soft
advertising sales.

     On January 22, 2003 and February 6, 2003, Publishing entered into interest
rate swaps to convert U.S. $150.0 million and U.S. $100.0 million, respectively,
of the total U.S.$300.0 million Senior Notes issued in December 2002, from fixed
to floating rates for the period to December 15, 2010, subject to early
termination notice, with the objective of reducing the cost of borrowing.
Interest for the first six months has been set at 5.98% and floats, for
subsequent periods, at the six-month LIBOR rate plus a blended spread of 4.61%.

     A further discussion of the Company's derivative instruments can be found
in note 24 to the Company's audited consolidated financial statements included
elsewhere in this Annual Report.

OFF-BALANCE SHEET ARRANGEMENTS

     HOLLINGER PARTICIPATION TRUST. As part of its November 16, 2000 purchase
and sale agreement with CanWest, International was prohibited from selling the
CanWest debentures received in partial consideration prior to May 15, 2003. In
order to monetize this investment, International entered into a participation
agreement in August 2001 pursuant to which it sold participation interests in
$540.0 million (U.S. $350.0 million) principal amount of CanWest debentures to
the Participation Trust administered by an arm's-length trustee. That sale of
participation interests was supplemented by a further sale of participation
interests in $216.8 million (U.S. $140.5 million) principal amount of CanWest
debentures in December 2001. International remains the record and beneficial
owner of the participated CanWest debentures and is required to make payments to
the Participation Trust with respect to those debentures if and to the extent it
receives payment in cash or kind on the debentures from CanWest. Coincident with
the Participation Trust's purchase of the participation interests, the
Participation Trust sold senior notes to arm's-length third parties to finance
the purchase of the participation interests. These transactions resulted in net
cash proceeds to International of $621.8 million and for accounting purposes
have been accounted for as sales of CanWest debentures. The net loss on the
transactions amounted to $97.4 million and is included in unusual items in 2001.

     At any time up to November 5, 2005, CanWest may elect to pay interest on
the debentures by way of additional CanWest debentures or through the issuance
of non-voting common shares of CanWest. Further, at any time after

                                       54
<PAGE>

May 15, 2003, the holders of the Participation Trust senior notes may, under the
terms of the Participation Trust request that the Participation Trust require
International to complete an outright transfer to the Participation Trust of the
CanWest debentures. The unrealized foreign exchange losses recognized at
December 31, 2002 and 2001 are classified as deferred credits in the
consolidated balance sheet.

     On May 11, 2003, CanWest redeemed $265 million of the debentures of which
U.S.$159.8 million has been delivered to the Participation Trust and the balance
of US$27.6 million has been received by International and the Partnership, a
portion of which must be retained until November 4, 2010. This will reduce the
Company's obligation to the Participation Trust and hence its exposure to
changes in the U.S. dollar to Canadian dollar exchange rate.

COMMERCIAL COMMITMENTS AND CONTRACTUAL OBLIGATIONS.

     The Telegraph Group has guaranteed the printing joint venture partners'
share of leasing obligations to third parties, which amounted to $1.0 million
(L0.4 million) at December 31, 2002. These obligations are also guaranteed
jointly and severally by each joint venture partner.

     In connection with International's insurance program, letters of credit are
required to support certain projected workers' compensation obligations. At
December 31, 2002, letters of credit in the amount of $4.4 million were
outstanding.

     In special circumstances, International's newspaper operations may engage
freelance reporters to cover stories in locales that carry a high risk of
personal injury or death. Subsequent to December 31, 2002, the Telegraph has
engaged a number of journalists and photographers to report from the Middle
East. As a term of their engagement, The Telegraph has agreed to provide a death
benefit which, in the aggregate for all freelancers engaged, amounts to $13.1
million (L5.1 million). This exposure is uninsured. Precautions have been
taken to avoid a concentration of the freelancers in any one location.

     In connection with certain of its cost and equity method investments,
International is committed to fund approximately $1.9 million (U.S.$1.2 million)
to those investees in 2003.

     Set out below is a summary of the amounts due and committed under
contractual cash obligations, other than in respect of the retractable common
shares at December 31, 2002:

<TABLE>
<CAPTION>
                                                                                       Due         Due
                                                                       Due in        between     between
                                                                       1 year         1 and       4 and      Due over
                                                            Total      or less       3 years     5 years      5 years
                                                       ------------- ----------    ----------  -----------  ----------
                                                                            (Dollars in thousands)
<S>                                                    <C>           <C>           <C>         <C>          <C>
Existing Senior and Senior Subordinated Notes(1).....  $ 1,279,781   $  797,751    $    8,030  $         -  $   474,000
Other long-term debt.................................      443,954        4,886        40,014       45,212      353,842
Capital lease obligations............................       65,586       12,157        17,165       11,909       24,355
Series II preference shares(2).......................       33,827       33,827             -            -            -
Series III preference shares(3)......................      101,472      101,472             -            -            -
Operating leases.....................................      257,251       27,095        45,590       35,125      149,441
                                                       -----------   ----------    ----------  -----------  -----------
Total contractual cash obligations...................  $ 2,181,871   $  977,188    $  110,799  $    92,246  $ 1,001,638
                                                       ===========   ==========    ==========  ===========  ==========
</TABLE>

(1)    During 2002, Publishing purchased for retirement approximately
       $406.8 million (U.S.$254.9 million) of the existing Senior Notes due
       2005. The balance of those notes outstanding, approximately $8.0
       million (U.S.$5.1 million) will mature in 2005. Included in the
       total of notes outstanding is $797.8 million (U.S.$504.9 million) of
       Senior Subordinated Notes with maturities in 2006 and 2007. At
       December 31, 2002, the borrowings under the Senior Credit Facility
       and the 9% Senior Notes due 2010 were held in escrow pending and for
       the purpose of redemption of the Senior Subordinated Notes.
       Consequently, outstanding balances for the Senior Subordinated
       Notes, irrespective of their maturity date, have been reflected as
       due in one year or less. Refer to "long-term debt" for a discussion
       of the new $489.8 million (U.S.$310 million) Senior Credit Facility
       maturing in 2008 and 2009.

(2)    The Company has Series II preference shares that are exchangeable at
       the holder's option for 0.46 of a share of International's Class A
       common stock for each Series II preference share. The Company has
       the option

                                       55
<PAGE>

       to make a cash payment of equivalent value on redemption of any of
       the Series II preference shares. As at December 31, 2002, the market
       value of the shares of International's Class A common stock that
       they are exchangeable into totals $33.8 million. While it is
       uncertain as to when, if ever, the preference shares will be
       retracted, because the retraction can occur at any time at the
       option of the holder, the outstanding balance has been reflected as
       due in one year or less.

(3)    The Company has Series III preference shares which provide for a
       mandatory redemption on the fifth anniversary of issue (April 30,
       2004) for $10.00 cash per share (plus unpaid dividends) and an
       annual cumulative dividend, payable quarterly, of $0.70 per share
       per annum (or 7%) during their five-year term. The Company had the
       right at its option to redeem all or any part of the Series III
       preference shares at any time after three years (April 30, 2002) for
       $10.00 cash per share (plus unpaid dividends). Holders have the
       right at any time to retract Series III preference shares for a
       retraction price payable in cash which, until April 30, 2003,
       fluctuated by reference to two benchmark Government of Canada bonds
       having a comparable yield and term to the shares, and during the
       year ending April 30, 2004, will be $9.50 per share (plus unpaid
       dividends in each case). While it is uncertain as to when, if ever,
       the preference shares will be retracted, because the retraction can
       occur at any time at the option of the holder, the outstanding
       balance has been reflected as due in one year or less.

     In addition to amounts committed under contractual cash obligations, the
Company and International have also assumed a number of contingent obligations
by way of guarantees and indemnities in relation to the conduct of their
business. The more significant guarantees and indemnities include those for
lease obligations of a 50% owned joint venture producing many of International's
U.K. publications; in support of representations and warranties on the
disposition of operations; against changes in laws affecting returns to certain
lenders; and against fluctuations in foreign currency exchange rates in respect
of the Participation Trust. For more information on our contingent obligations,
refer to note 27 h) - the Company's audited consolidated financial statements,
included elsewhere in this Annual Report.


                                       56
<PAGE>
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.   MAJOR SHAREHOLDERS

To the knowledge of the directors and officers of the Company, there is no
beneficial owner or person who exercises control or direction over more than 5%
of the outstanding retractable common shares of the Company except as follows.
Ravelston exercises control or direction over a total of 26,516,886 retractable
common shares or 78.2% of the outstanding retractable common shares of the
Company. Lord Black indirectly controls Ravelston and therefore beneficially
owns or exercises control or direction over 78.2% of the outstanding retractable
common shares of the Company. The address of Ravelston is 10 Toronto Street,
Toronto, Ontario, M5C 2B7.


                                       57
<PAGE>

B.  RELATED PARTY TRANSACTIONS

International and its subsidiaries have entered into Services Agreements with
Ravelston, whereby Ravelston acts as manager of International and its
subsidiaries and carries out head office and executive responsibilities. These
Services Agreements were assigned on July 5, 2002 to RMI, a wholly-owned
subsidiary of Ravelston. Ravelston and RMI billed International and its
subsidiaries $37.3 million in 2002 pursuant to these agreements ($44.9 million
in 2001 and $49.9 million in 2000). In addition, certain executives of Ravelston
and Moffat Management and Black-Amiel Management, affiliates of Ravelston and
RMI, have separate Services Agreements with certain subsidiaries of
International. During 2002, amounts paid directly by subsidiaries of
International pursuant to such agreements were $3.0 million ($2.6 million in
2001 and $5.4 million in 2000). The fees under Ravelston's and RMI's services
agreement and the fees paid directly to executives and affiliates of Ravelston,
have been negotiated and approved by International's independent directors.

In addition to the amounts referred to in the preceding paragraph, during 2001
and 2000 there were further remuneration paid directly by subsidiaries of
International to certain Ravelston executives of $2.6 million and $6.3 million,
respectively (2002-nil).

Similarly, Ravelston carries out head office and executive responsibilities for
the Company and its subsidiaries, other than International and its subsidiaries.
In 2002 and 2001, no amounts were charged by Ravelston for such services. In
2000, the Company received $10.7 million, net, from Ravelston pursuant to a
services agreement which was terminated on December 31, 2000.

In 2002, expenses are net of $2.4 million received from Ravelston and RMI as a
reimbursement of certain head office expenses incurred on behalf of Ravelston
and RMI ($2.0 million in 2001). Such expenses were not incurred on behalf of
Ravelston in 2000.

During 2001 and 2000, in connection with the sales of properties, the Company,
Ravelston, International, Lord Black and three senior executives entered into
non-competition agreements with the purchasers in return for cash consideration
paid.

                                       58
<PAGE>

During the three months ended March 31, 2003, International made a venture
capital investment of US$2.5 million in a company in which a director of
International has a minority interest.

     On March 10, 2003, prior to the issue of Senior Secured Notes, NB Inc. sold
its shares of Class A common stock and Series E redeemable preferred stock of
International to RMI. Such shares were in turn sold back to NB Inc. from RMI at
the same price with a resulting increase in the tax basis of the shares of
International and a taxable gain to RMI.

     All of the Services Agreements were negotiated in the context of a
parent-subsidiary relationship and, therefore, were not the result of arm's
length negotiations between independent parties. The terms of the Services
Agreements may therefore not be as favorable to International and its
subsidiaries as the terms that might be reached through negotiations with
non-affiliated third parties.

ASSET SALES

     On July 3, 2002, NP Holdings Company ("NP Holdings"), a subsidiary of
International, was sold to RMI for cash consideration of $5,750,000. The net
assets of NP Holdings primarily included Canadian tax losses. The tax losses,
only a portion of which were previously recognized for accounting purposes, were
effectively sold at their carrying value. Due to the inability of NP Holdings to
utilize its own tax losses prior to their expiry, as a result of its disposing
of its interest in the National Post, it sold these losses to a company which
would be able to utilize the losses. The only other potential purchaser for
these losses, CanWest, declined the opportunity to acquire the losses. The terms
of the sale of the tax losses to RMI were negotiated with and approved by the
independent directors of International.

     In two separate transactions in July and November, 2001, International and
the Partnership completed the sale of most of their remaining Canadian
newspapers to Osprey for total sale proceeds of approximately $255 million plus
closing adjustments primarily for working capital. The former Chief Executive
Officer of the Partnership is a minority shareholder and Chief Executive Officer
of Osprey. International's independent directors approved the terms of these
transactions.

     In connection with the above two sales of Canadian newspaper properties to
Osprey and to satisfy a closing condition, International, the Company, and Lord
Black and three senior executives entered into non-competition agreements with
Osprey pursuant to which each agreed not to compete directly or indirectly in
Canada with the Canadian businesses sold to Osprey for a five-year period,
subject to certain limited exceptions, for aggregate consideration of $7.9
million. Such consideration was paid to Lord Black and the three senior
executives and was approved by International's independent directors.

     On November 16, 2000, International, together with its affiliates, Southam
and the Partnership, completed the sale of most of their Canadian newspapers and
related assets to CanWest. The aggregate sale price of these properties at fair
value was approximately $2.8 billion, plus closing adjustments for working
capital at August 31, 2000 and cash flow and interest for the period September 1
to November 16, 2000 which in total at December 31, 2000 approximated an
additional $40.7 million.

     In connection with the sale to CanWest, Ravelston entered into a management
services agreement with CanWest and National Post pursuant to which it agreed to
continue to provide management services to the Canadian businesses sold to
CanWest in consideration for an annual fee of $6 million payable by CanWest.
CanWest will be obligated to pay Ravelston a termination fee of $45 million in
the event that CanWest chooses to terminate the management services agreement or
$22.5 million in the event that Ravelston chooses to terminate the agreement.
Further, CanWest required as a condition to the transaction that International,
Ravelston, the Company, Lord Black and three senior executives enter into
non-competition agreements with CanWest pursuant to which each agreed not to
compete directly or indirectly in Canada with the Canadian business sold to
CanWest for a five-year period, subject to certain limited exceptions, for
aggregate consideration of $80 million paid by CanWest in addition to the
purchase price referred to above of which $38 million was paid to Ravelston and
$42 million was paid to Lord Black and the three senior executives.
International's independent directors approved the terms of these payments.

     During 2001, International transferred two publications to Horizon
Publications Inc. in exchange for net working capital. Horizon Publications Inc.
is managed by former Community Group executives and controlled by

                                       59

<PAGE>

certain members of the Board of Directors of International. The terms of theses
transactions were approved by the independent directors of International.

     During 2000, International sold most of its remaining U.S. community
newspaper properties, for total proceeds of approximately US$215 million. In
connection with those sales, to satisfy a closing condition, International, Lord
Black and three senior executives entered into non-competition agreements with
the purchasers to which each agreed not to compete directly or indirectly in the
United States with the United States businesses sold to purchasers for a fixed
period, subject to certain limited exceptions, for aggregate consideration paid
in 2001 of US$0.6 million. These amounts were in addition to the aggregate
consideration paid in respect of these non-competition agreements in 2000 of
US$15 million. International's independent directors approved the terms of these
payments. Included in these dispositions during 2000 International sold four
U.S. community newspapers for an aggregate consideration of US $38.0 million
($56.5 million) to Bradford Publishing Company, a company formed by a former
U.S. Community Group executive and in which some of International's directors
are shareholders. The terms of this transaction were approved by the independent
directors of International.

     International issued to a subsidiary of the Company in connection with the
1995 Reorganization in which International acquired the Company's interest in
The Telegraph and Southam, 739,500 shares of Series A preferred stock. The
Series A preferred stock was subsequently exchanged for Series D preferred
stock. During 1998, 408,551 shares of Series D preferred stock were converted
into 2,795,165 shares of Class A common stock. In February 1999, 196,823 shares
of Series D preferred stock were redeemed for cash of US$19.4 million. In May
1999, the remaining 134,126 shares of Series D preferred stock were converted
into 134,126 shares of Series E preferred stock. In September 2001, 40,920
shares of Series E preferred stock were redeemed for cash of US$3.8 million. The
shares of Series E preferred stock were redeemable in whole or in part, at any
time and from time to time, subject to restrictions in International's credit
facilities, by International or by a holder of such shares. As described above,
the remaining Series E preferred stock was redeemed on March 10, 2003.

     Pursuant to a January 1997 transaction wherein International acquired
Canadian publishing assets from the Company, International issued 829,409 shares
of Series C preferred stock. The stated value of each share was $108.51. On June
1, 2001, International converted all the Series C preferred stock at the
conversion ratio of 8.503 shares of Class A common stock per share of Series C
preferred stock into 7,052,464 shares of Class A common stock. On September 5,
2001, International purchased for cancellation, from the Company, the 7,052,464
shares of Class A common stock for a total cost of US$92.2 million or US$13.07
per share which represented 98% of the September 5, 2001 closing price.

     International has reviewed its procedures for ensuring that transactions
with affiliates of Publishing (other than its subsidiaries) comply with the
covenants under its debt instruments existing prior to the December 2002
refinancing, including the indentures governing outstanding debt securities.
Based on this review, International has determined that in one related-party
transaction, although International satisfied the requirement to obtain the
approval of the independent directors of International's Board of Directors that
the transaction was being undertaken on an arm's length basis, International did
not obtain a fairness opinion although the transaction exceeded the relevant
threshold for delivering such an opinion by US$23 million. In light of the
various intercompany transactions and arrangements within the Hollinger group
and the related party transactions that have occurred from time to time in the
past and may occur in the future, International intends to strengthen its
controls for monitoring compliance with those covenants under the 9% Senior
Notes and other debt instruments by which International, Publishing and our
other subsidiaries are bound that are applicable to such transactions and
arrangements.

     Lord Black controls Ravelston and, through Ravelston and its subsidiaries,
together with his associates, he exercises control or direction over 78.2% of
our outstanding retractable common shares.

RIGHTS OF FIRST REFUSAL

     Ravelston has rights of first refusal in respect of any retractable common
shares of the Company that may be issued on exercise of options held to acquire
retractable common shares should the holders decide to exercise their options
and dispose of the retractable common shares.

PRINCIPAL AGREEMENTS WITH INTERNATIONAL

                                       60
<PAGE>

     Services Agreements. Two Services Agreements govern the provision of
certain advisory, consultative, procurement and administrative services to
International and its subsidiaries by RMI. Services provided include, among
other things, strategic advice and planning and financial services (including
advice and assistance with respect to acquisitions) and assistance in
operational matters. The Services Agreements will be in effect until terminated
by either party under certain specified circumstances. The Services Agreements
may be terminated by either party giving 180 days notice. Payments by
International and its subsidiaries made pursuant to the Services Agreements are
subject to the review and approval of the Audit Committee of the Board of
Directors of International.

     Business Opportunities Agreement. The Business Opportunities Agreement
provides that International will be the Company's principal vehicle for engaging
in and effecting acquisitions in newspaper businesses and in related media
businesses in the United States, Israel and, through The Telegraph, the European
Community, Australia and New Zealand (the "Telegraph Territory"). The Company
has reserved to itself the ability to pursue newspaper and all media acquisition
opportunities outside the United States, Israel and the Telegraph Territory, and
media acquisition opportunities unrelated to the newspaper business in the
United States, Israel and the Telegraph Territory. The Business Opportunities
Agreement does not restrict newspaper companies in which the Company has a
minority investment from acquiring newspaper or media businesses in the United
States, Israel or the Telegraph Territory, nor does it restrict subsidiaries of
the Company from acquiring up to 20% interests in publicly held newspaper
businesses in the United States. The Business Opportunities Agreement will be in
effect for so long as the Company holds at least 50% of the voting power of
International, subject to termination by either party under specified
circumstances. The Company assigned its rights and obligations under the
Business Opportunities Agreement to a wholly-owned subsidiary on September 22,
1997 with the consent of International.

     Co-operation Agreement. In connection with the listing of The Telegraph's
shares on the London Stock Exchange in July 1992, the Company and The Telegraph
entered into the Co-operation Agreement which sets forth the basis upon which
the Company and The Telegraph will divide their respective newspaper and other
media interests world-wide. Under this agreement, The Telegraph and the Company
have agreed not to engage in, or hold a significant interest in an enterprise
engaging in, the newspaper, magazine, radio or television business where the
other has existing operations, except in specified circumstances. For purposes
of this agreement, The Telegraph's areas of operation are the United Kingdom,
the rest of the European Union, Australia and New Zealand; the Company's areas
of operation are the United States, Canada, the Caribbean and Israel.
International, which assumed the Company's position under the Co-operation
Agreement in 1995, has agreed not to violate the Co-operation Agreement.

RELATED PARTY INDEBTEDNESS

The Company and its subsidiaries have amounts due to related parties of $103.3
million and $72.8 million as at December 31, 2002 and 2001 respectively.
Included in these amounts are unsecured demand loans and advances, including
accrued interest owing to Ravelston of $75.8 million and $59.1 million as at
December 31, 2002 and 2001, respectively, which were borrowed to partially fund
the Company's operating costs, including interest and preference share dividend
obligations. The loans bear interest at the bankers' acceptance rate plus 3.75%
per annum or 6.68% at December 31, 2002. In addition, International owes $5.0
million and $13.7 million at December 31, 2002 and 2001, respectively, to
Ravelston or RMI in connection with fees payable pursuant to the Services
Agreements as noted below. The amounts due to related parties at December 31,
2002 also include $22.5 million owing to RMI in connection with the assumption
by RMI, as a result of its purchase of NP Holdings (as noted below), of a
liability of $22.5 million owing to CanWest. As at December 31, 2002, this
amount is due on demand, is unsecured and is stated to bear interest at an
annual rate of the bankers' acceptance rate plus 4%.

On July 11, 2000, International loaned US$36.8 million to a subsidiary of the
Company in connection with the cash purchase by the Company of HCPH Co. Special
shares. The loan is payable on demand and to December 31, 2001, interest was
payable at the rate of 13% per annum at which time, with the approval of the
independent directors, it was changed to LIBOR plus 3% per annum. This loan,
together with accrued interest, totaled US$45.8 million at December 31, 2002. On
March 10, 2003, prior to the closing of the offering of 117/8% Senior Secured
Notes, International repurchased for cancellation, from NB Inc., 2,000,000
shares of Class A common stock at US$8.25 per share for total proceeds of $24.2
million (US $16.5 million) and redeemed, from NB Inc., pursuant to a redemption
request, all of the 93,206 outstanding shares of Series E redeemable convertible
preferred stock of International at the fixed redemption price of $146.63 per
share for total proceeds of $13.6 million (US$9.3 million). The proceeds from
the repurchase and redemption were used to repay US$25.4 million of the loan
resulting in the net outstanding debt due to International of approximately
$29.9 million (US$20.4 million) as of March 10, 2003. The remaining

                                       61
<PAGE>

debt bears interest at 14.25% or, if paid in additional notes, 16.5% and is
subordinated to the Company's Senior Secured Notes (so long as the Senior
Secured Notes are outstanding), guaranteed by Ravelston and secured by certain
assets of Ravelston. Following a review by a special committee of the Board of
Directors of International, comprised entirely of independent directors, of all
aspects of the transaction relating to the changes in the debt arrangements with
NB Inc. and the subordination of this remaining debt, the special committee
approved the new debt arrangements, including the subordination.

Effective April 30, 2003, US$15.7 million principal amount of subordinated debt
owing to Hollinger International by NB Inc. was transferred by Hollinger
International to HCPH Co., a subsidiary of Hollinger International, and
subsequently transferred to RMI by HCPH Co. in satisfaction of a loan due from
HCPH Co. to RMI (note 23d). International and the Company previously reported
that the committee of independent directors of International had agreed to the
US$15.7 million offset to the remaining US$20.4 million of debt against amounts
owed by International to RMI, and further stated that the offset was effected
April 30, 2003. Although management of International and the Company believed
final approval had been given to the offset by the committee of independent
directors of International, the committee has advised that final approval of any
offset remains subject to appropriate due diligence and receipt of a further
independent fairness opinion. The due diligence process has not yet been
concluded and accordingly, the offset has not been completed as at August 25,
2003. The debt owing by NB Inc. to Hollinger International of US$20.4 million
bears interest at the rate of 14.25% if interest is paid in cash and 16.50% if
it is paid in kind. The debts is subordinated to the Senior Secured Notes for so
long as the Senior Secured Notes are outstanding, and is guaranteed by RCL and
the Company. Hollinger International entered into a subordination agreement with
the Company and NB Inc. pursuant to which Hollinger International has
subordinated all payments of principal, interest and fees on the debt owed to it
by NB Inc. to the payment in full of principal, interest and fees on the Senior
Secured Notes, provided that payments with respect to principal and interest can
be made to International to the extent permitted in the indenture governing the
Senior Secured Notes.

In response to the 1998 issuer bid, all options held by executives were
exercised. As at December 31, 2002, included in accounts receivable is $5.8
million (2001-$5.8 million) due from Lord Black and F. David Radler, which bear
interest at the prime rate plus 1/2%. The receivables are fully secured by a
pledge of the shares held by the executives.

In 1999, companies controlled by Lord Black and F. David Radler invested in the
Partnership. As at December 31, 2002, included in accounts receivable is $0.4
million (2001-$0.4 million) due from these companies, which bears interest at
the prime rate plus 1/2%. The receivables are partially secured by a pledge of
the units held in the Partnership.

Included in Other Assets at December 31, 2002 is $6.5 million (US$4.1 million)
owing to International from Bradford Publishing Company ("Bradford"), a company
in which certain of the Company's and International's directors are significant
shareholders. Such amount represents the present value of the remaining amounts
owing under a non-interest bearing note receivable granted to International in
connection with a non-competition agreement entered into on the sale of certain
operations to Bradford during 2000. The amount receivable is unsecured, due over
the period to 2010 and is subordinated to Bradford's lenders.

Included in Other Assets at December 31, 2002 is $7.7 million (US$4.9 million)
owed by Horizon Publications Inc. ("Horizon"), a company controlled by certain
members of the Board of Directors of International and the Company. Such amount
represents the unpaid purchase price payable to International in connection with
the sale of certain operations to Horizon during 1999. The loan receivable is
unsecured, bears interest at the lower of LIBOR plus 2% and 8% per annum and is
due in 2007.

    During 2002, the Company paid to Horizon a management fee in the amount of
$0.3 million in connection with certain administrative services provided by
Horizon. The fee was approved by International's independent directors.

ITEM 18. FINANCIAL STATEMENTS

See our consolidated financial statements and the notes thereto beginning on
page F-1 of this Form 20-F/A, which we incorporate herein by reference.


                                       62
<PAGE>
ITEM 18.      FINANCIAL STATEMENTS

                         INDEX TO FINANCIAL STATEMENTS
<Table>
<S>                                                           <C>
HOLLINGER INC.
Audited Consolidated Financial Statements
  Report of KPMG LLP, Independent Auditors..................    F-2
  Consolidated Balance Sheets as of December 31, 2001 and
     2002...................................................    F-4
  Consolidated Statements of Earnings (Losses) for the Year
     Ended December 31, 2000, 2001 and 2002.................    F-5
  Consolidated Statements of Deficit for the Years Ended
     December 31, 2000, 2001 and 2002.......................    F-6
  Consolidated Statements of Cash Flows for the Years Ended
     December 31, 2000, 2001 and 2002.......................    F-7
  Notes to Consolidated Financial Statements................    F-8

</Table>

                                       F-1
<PAGE>

                                AUDITORS' REPORT

To the Board of Directors of Hollinger Inc.

     We have audited the consolidated balance sheets of Hollinger Inc. as at
December 31, 2001 and 2002 and the consolidated statements of earnings (losses),
deficit and cash flows for each of the years in the three-year period ended
December 31, 2002. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

     We conducted our audits in accordance with Canadian generally accepted
auditing standards and United States generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance 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.

     In our opinion, these consolidated financial statements present fairly, in
all material respects, the financial position of the Company as at December 31,
2001 and 2002 and the results of its operations and its cash flows for each of
the years in the three-year period ended December 31, 2002 in accordance with
Canadian generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.

Toronto, Canada

April 1, 2003, except
as to note 29, which is
as of June 19, 2003 other than                                     /s/ KPMG LLP
note 29 e), which is as of August 25, 2003                Chartered Accountants

                                       F-2
<PAGE>

                     COMMENTS BY AUDITORS FOR U.S. READERS
                    ON CANADA -- U.S. REPORTING DIFFERENCES

     In the United States, reporting standards for auditors require the addition
of an explanatory paragraph (following the opinion paragraph) when there is a
change in accounting principles that has a material effect on the comparability
of the Company's financial statements, such as the changes described in note 2,
or when there is a retroactive adjustment such as those described in note 26v),
to the consolidated financial statements as at December 31, 2001 and 2002 and
for each of the years in the three-year period ended December 31, 2002. Our
report to the shareholders dated April 1, 2003 is expressed in accordance with
Canadian reporting standards, which do not require a reference to such changes
in accounting principles in the auditors' report when the change is properly
accounted for and adequately disclosed in the financial statements.

Toronto, Canada                                                     /s/ KPMG LLP
April 1, 2003                                              Chartered Accountants

                                       F-3
<PAGE>

                                 HOLLINGER INC.

                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                    DECEMBER 31
                                                              -----------------------
                                                                 2001         2002
                                                              ----------   ----------
                                                                 (IN THOUSANDS OF
                                                                 CANADIAN DOLLARS)
<S>                                                           <C>          <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents (note 3)..........................  $  806,347   $  188,852
Escrow deposits (note 10a)).................................          --      859,128
Accounts receivable.........................................     336,438      355,031
Amounts due from related parties (note 23d))................      26,874       23,640
Prepaid expenses............................................      17,604       28,499
Inventory...................................................      36,506       22,058
                                                              ----------   ----------
                                                               1,223,769    1,477,208
INVESTMENTS (note 5)........................................     259,435      210,145
CAPITAL ASSETS (note 6).....................................     666,501      660,501
GOODWILL (note 7)...........................................     174,324      913,327
OTHER INTANGIBLE ASSETS (note 7)............................   1,177,544      185,143
DEFERRED FINANCING COSTS AND OTHER ASSETS (note 8)..........     154,543      193,537
                                                              ----------   ----------
                                                              $3,656,116   $3,639,861
                                                              ==========   ==========
LIABILITIES
CURRENT LIABILITIES
Bank indebtedness (note 9)..................................  $  129,475   $   90,810
Accounts payable and accrued expenses.......................     358,444      337,086
Amounts due to related parties (note 23d))..................      72,793      103,295
Income taxes payable........................................     463,853      476,387
Deferred revenue............................................      65,627       67,612
Retractable preference shares (note 11).....................          --      135,299
Deferred unrealized gain on retractable preference shares
  (note 11a))...............................................          --       11,983
Senior Subordinated Notes due 2006 and 2007 (note 10a)).....          --      797,751
Current portion of long-term debt (note 10).................      10,020       16,800
                                                              ----------   ----------
                                                               1,100,212    2,037,023
LONG-TERM DEBT (note 10)....................................   1,341,606      974,770
RETRACTABLE PREFERENCE SHARES (note 11).....................     147,472           --
DEFERRED UNREALIZED GAIN ON RETRACTABLE PREFERENCE SHARES
  (note 11a))...............................................       7,670           --
FUTURE INCOME TAXES (note 18)...............................     486,937      375,479
OTHER LIABILITIES AND DEFERRED CREDITS (note 12)............     109,761      130,648
                                                              ----------   ----------
                                                               3,193,658    3,517,920
                                                              ----------   ----------
MINORITY INTEREST...........................................     725,928      473,272
                                                              ----------   ----------
SHAREHOLDERS' DEFICIENCY
Capital stock (note 13).....................................     271,774      273,759
Deficit.....................................................    (485,313)    (605,145)
                                                              ----------   ----------
                                                                (213,539)    (331,386)
Equity adjustment from foreign currency translation (note
  14).......................................................     (49,931)     (19,945)
                                                              ----------   ----------
                                                                (263,470)    (351,331)
                                                              ----------   ----------
                                                              $3,656,116   $3,639,861
                                                              ==========   ==========
Commitments (note 15)
Contingencies (note 16)
Subsequent events (notes 1, 9, 10a), 16d) and 29)
</Table>

                                       F-4
<PAGE>

                                 HOLLINGER INC.

                  CONSOLIDATED STATEMENTS OF EARNINGS (LOSSES)

<Table>
<Caption>
                                                                YEAR ENDED DECEMBER 31
                                                       ----------------------------------------
                                                          2000           2001           2002
                                                       ----------     ----------     ----------
                                                          (IN THOUSANDS OF CANADIAN DOLLARS
                                                              EXCEPT PER SHARE AMOUNTS)
<S>                                                    <C>            <C>            <C>
REVENUE
  Sales..............................................  $3,158,280     $1,822,060     $1,628,198
  Investment and other income........................      28,146         97,282         29,729
                                                       ----------     ----------     ----------
                                                        3,186,426      1,919,342      1,657,927
                                                       ----------     ----------     ----------
EXPENSES
  Cost of sales and expenses.........................   2,586,183      1,730,108      1,453,894
  Depreciation and amortization......................     219,932        144,716         88,193
  Interest on long-term debt.........................     219,970        122,701         92,625
  Other interest.....................................      54,361         55,225         29,122
                                                       ----------     ----------     ----------
                                                        3,080,446      2,052,750      1,663,834
                                                       ----------     ----------     ----------
NET LOSS IN EQUITY-ACCOUNTED COMPANIES...............     (14,115)       (18,571)        (1,233)
                                                       ----------     ----------     ----------
NET FOREIGN CURRENCY LOSSES..........................     (12,288)        (7,470)       (19,741)
                                                       ----------     ----------     ----------
EARNINGS (LOSS) BEFORE THE UNDERNOTED................      79,577       (159,449)       (26,881)
  Unusual items (note 17)............................     700,945       (295,434)       (62,630)
  Income tax (expense) recovery (note 18)............    (260,091)        89,477       (124,025)
  Minority interest..................................    (331,058)       233,508        124,896
                                                       ----------     ----------     ----------
NET EARNINGS (LOSS)..................................  $  189,373     $ (131,898)    $  (88,640)
                                                       ==========     ==========     ==========
EARNINGS (LOSS) PER RETRACTABLE COMMON SHARE (note
  19)
  Basic..............................................  $     5.11     $    (3.91)    $    (2.76)
                                                       ==========     ==========     ==========
  Diluted............................................  $     5.05     $    (4.17)    $    (2.79)
                                                       ==========     ==========     ==========
</Table>

                                       F-5
<PAGE>

                                 HOLLINGER INC.

                       CONSOLIDATED STATEMENTS OF DEFICIT

<Table>
<Caption>
                                                                   YEAR ENDED DECEMBER 31
                                                            ------------------------------------
                                                               2000         2001         2002
                                                            ----------   ----------   ----------
                                                             (IN THOUSANDS OF CANADIAN DOLLARS)
<S>                                                         <C>          <C>          <C>
DEFICIT AT BEGINNING OF YEAR
  As previously reported..................................  $(180,732)   $(310,988)   $(485,313)
  Adjustment of prior years' deficit (note 2).............   (291,004)          --           --
                                                            ---------    ---------    ---------
  As restated.............................................   (471,736)    (310,988)    (485,313)
Net earnings (loss).......................................    189,373     (131,898)     (88,640)
                                                            ---------    ---------    ---------
                                                             (282,363)    (442,886)    (573,953)
Adjustment to deficit related to transitional impairment
  charge, net of minority interest (note 1)...............         --           --      (12,071)
Dividends -- retractable common shares....................    (22,177)     (20,216)     (19,220)
Gain (premium) on retraction of retractable common shares
  (notes 13b), 13d) and 13e)).............................     (6,448)     (22,211)         141
Share issue costs.........................................         --           --          (42)
                                                            ---------    ---------    ---------
DEFICIT AT END OF YEAR....................................  $(310,988)   $(485,313)   $(605,145)
                                                            =========    =========    =========
</Table>

                                       F-6
<PAGE>

                                 HOLLINGER INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                    YEAR ENDED DECEMBER 31
                                                              -----------------------------------
                                                                 2000         2001        2002
                                                              -----------   ---------   ---------
                                                              (IN THOUSANDS OF CANADIAN DOLLARS)
<S>                                                           <C>           <C>         <C>
CASH PROVIDED BY (USED FOR):
OPERATING ACTIVITIES
CASH FLOWS PROVIDED BY (USED FOR) OPERATIONS BEFORE THE
  UNDERNOTED (note 20a))....................................  $   153,579   $(120,211)  $  59,628
Change in non-cash operating working capital (note 20b))....      (82,456)   (144,429)     41,328
Other costs.................................................      (42,188)    (70,234)     48,474
                                                              -----------   ---------   ---------
                                                                   28,935    (334,874)    149,430
                                                              -----------   ---------   ---------
FINANCING ACTIVITIES
Redemption and cancellation of capital stock................         (700)       (273)     (1,064)
Redemption and cancellation of retractable preference
  shares....................................................       (5,133)       (317)       (277)
Premium on retirement of senior notes.......................           --          --     (56,287)
Capital stock of subsidiaries purchased for cancellation by
  subsidiaries..............................................           --     (71,767)   (157,056)
Issue of partnership units and common shares of
  subsidiaries..............................................        8,166      10,637       6,667
Decrease in long-term debt and deferred liabilities.........   (1,280,475)         --          --
Redemption of HCPH Special shares...........................     (140,429)         --          --
Repayment of long-term debt.................................           --    (176,383)   (582,920)
Proceeds from long-term debt................................           --     152,778     514,343
Proceeds from issuance of notes.............................           --          --     474,000
Payment of debt issue costs.................................           --      (7,230)    (24,666)
Escrow deposits and restricted cash.........................           --          --    (859,128)
Dividends...................................................      (22,177)    (20,216)    (16,031)
Dividends and distributions paid by subsidiaries to minority
  interest..................................................     (127,390)   (126,478)    (48,721)
Other.......................................................           --        (204)       (249)
                                                              -----------   ---------   ---------
                                                               (1,568,138)   (239,453)   (751,389)
                                                              -----------   ---------   ---------
INVESTING ACTIVITIES
Proceeds on disposal of fixed assets........................       18,813         157      17,024
Purchase of fixed assets....................................     (112,661)    (91,406)    (63,603)
Proceeds on sale of investment in subsidiary................           --      31,417      38,637
Proceeds on disposal of investments.........................       87,465     919,567       7,188
Additions to investments....................................      (92,735)    (99,040)    (17,636)
Additions to circulation....................................      (37,667)     (3,920)         --
Decrease (increase) in other assets.........................          779      (1,132)       (450)
Investment in newspaper operations..........................     (175,376)         --          --
Proceeds on disposal of newspaper and magazine operations...    2,016,885     376,865          --
                                                              -----------   ---------   ---------
                                                                1,705,503   1,132,508     (18,840)
                                                              -----------   ---------   ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
  EQUIVALENTS...............................................       (6,825)     14,250       3,304
                                                              -----------   ---------   ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............      159,475     572,431    (617,495)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR..............       74,441     233,916     806,347
                                                              -----------   ---------   ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR....................  $   233,916   $ 806,347   $ 188,852
                                                              ===========   =========   =========
CASH FLOW PROVIDED BY (USED FOR) OPERATIONS PER RETRACTABLE
  COMMON SHARE (note 19)
SUPPLEMENTAL DISCLOSURE OF FINANCING AND INVESTING
  ACTIVITIES
  Interest paid.............................................  $   244,592   $ 153,972   $ 108,159
  Income taxes paid.........................................  $    69,710   $ 122,087   $  14,095
</Table>

                                       F-7
<PAGE>

                                 HOLLINGER INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

1.  SIGNIFICANT ACCOUNTING POLICIES

GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

     These consolidated financial statements have been prepared in accordance
with generally accepted accounting principles ("GAAP") in Canada, which vary in
certain significant respects from United States GAAP. A description of
significant differences, as applicable to the Company is included in note 26.

BASIS OF PREPARATION

     These consolidated financial statements have been prepared in accordance
with Canadian generally accepted accounting principles using a basis of
presentation which assumes that the Company will continue in operation for the
foreseeable future and be able to realize its assets and discharge its
liabilities and commitments in the normal course of business. The Company is an
international holding company and its assets consist primarily of investments in
its subsidiaries and affiliated companies. As a result, the Company's ability to
meet its future financial obligations, on a non-consolidated basis, is dependent
upon the availability of cash flows from its Canadian and foreign subsidiaries
through dividends, management fees and other payments. On a non-consolidated
basis during 2002, the Company experienced a shortfall between the dividends and
fees received from its subsidiaries and its obligations to pay its operating
costs, including interest and dividends on its preference shares and such
shortfalls were expected to continue in the future. Accordingly, the Company is
dependent upon the continuing financial support of Ravelston Management Inc.
("RMI") to fund such shortfalls and, therefore, pay its liabilities as they fall
due. RMI is a wholly owned subsidiary of The Ravelston Corporation Limited
("Ravelston"), the Company's ultimate parent company.

     On March 10, 2003, the date of issue of US $120,000,000 aggregate principal
amount of Senior Secured Notes due 2011, RMI entered into a Support Agreement
with the Company. Under the agreement, RMI has agreed to make annual support
payments in cash to the Company on a periodic basis by way of contributions to
the capital of the Company (without receiving any shares of the Company) or
subordinated debt. The amount of the annual support payments will be equal to
the greater of (a) the non-consolidated negative net cash flow of the Company
(which does not extend to outlays for retractions or redemptions) and (b)
US$14.0 million per year (less any future payments of services agreements fees
directly to the Company or to any of the Company's wholly owned restricted
subsidiaries, as they are defined in the indenture governing the Company's
Senior Secured Notes due 2011, and any excess in the net dividend amount
received by the Company and 504468 N.B. Inc. ("NB Inc.") on the shares of
Hollinger International Inc. ("Hollinger International") that the Company and NB
Inc. own that is over US$4.65 million per year), in either case, reduced by any
permanent repayment of debt owing by Ravelston to the Company. Initially, the
support amount to be contributed by RMI is expected to be satisfied through the
permanent repayment by Ravelston of its approximate $16.4 million of advances
from the Company resulting from the use of proceeds of the Company's offering of
Senior Secured Notes. Thereafter, all support amount contributions by RMI will
be made through contributions to the capital of the Company without receiving
any additional shares of the Company, except that, to the extent that the
support payment exceeds the negative net cash flow of the Company, the amounts
will be contributed through an interest-bearing, unsecured, subordinated loan to
the Company. The support agreement terminates upon the repayment of the Senior
Secured Notes, which mature in 2011.

     RMI currently derives all of its income and operating cash flow from the
fees paid pursuant to services agreements with Hollinger International and its
subsidiaries. RMI's ability to provide the required financial support under the
Support Agreement with the Company is dependent on RMI continuing to receive
sufficient fees pursuant to those services agreements. The services agreements
may be terminated by either party by giving 180 days notice. The fees in respect
of the services agreements are negotiated annually with and approved by the
audit committee of Hollinger International. The fees to be paid to RMI for the
year ending
                                       F-8
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

December 31, 2003 amount to approximately US$22.0 million to US$24.0 million and
were approved in February 2003. The fees in respect of the periods after
December 31, 2003 have not yet been negotiated or approved. If, in any quarterly
period after April 1, 2003, the Company fails to receive in cash a minimum
aggregate amount of at least US$4.7 million from a) payments made by RMI
pursuant to the Support Agreement and b) dividends paid by Hollinger
International on its shares held by the Company, net of dividends paid by the
Company on its Series 11 preference shares, the Company would be in default
under its Senior Secured Notes. Based on the Company's current investment in
Hollinger International and the current quarterly dividend paid by Hollinger
International of US$0.05 per share, the minimum support payment required to be
made by RMI to avoid such a default is approximately US$3.5 million per quarter
or US$14.0 million annually. This default could cause the Senior Secured Notes
to become due and payable immediately.

     The Company's issued capital stock consists of Series II preference shares,
Series III preference shares and retractable common shares each of which is
retractable at the option of the holder. On retraction, the Series II preference
shares are exchangeable into a fixed number of shares of the Company's Class A
common stock of Hollinger International or at the Company's option, cash of
equivalent value. The Series III preference shares are currently retractable at
the option of the holder for a retraction price payable in cash, which
fluctuates by reference to two benchmark Government of Canada bonds having a
comparable yield and term to the shares and, after May 1, 2003, for a cash
payment of $9.50 per share. The retractable common shares are retractable at any
time at the option of the holder at their retraction price (which is fixed from
time to time) in exchange for the Company's shares of Hollinger International
Class A common stock of equivalent value or, at the Company's option, cash.
There is uncertainty regarding the Company's ability to meet future retractions
of preference shares and retractable common shares. Under corporate law, the
Company is not required to make any payment to redeem any shares in certain
circumstances, including if the Company is, or after the payment, the Company
would be, unable to pay its liabilities as they come due. If at the time of
future retractions, the Company does not have sufficient cash or sufficient
available Hollinger International shares of Class A common stock to both fund
such retractions and continue to pay its liabilities as they come due,
shareholders would not become creditors of the Company but would remain as
shareholders until such time as the retraction is able to be completed under
applicable law. On May 20, 2003, the Company concluded it was not able to
complete retractions of shares submitted after April 30, 2003, without unduly
impairing its liquidity (note 29f)).

     The Company's uncertain ability to make payments on future retractions and
redemptions of shares is due to the fact that liquidity of its assets is limited
at present given that substantially all of its shares of Hollinger International
common stock were provided as security for the Senior Secured Notes.

GENERAL BUSINESS

     Hollinger Inc. publishes, prints and distributes newspapers and magazines
in Canada, the United Kingdom, the United States of America, and Israel through
subsidiaries and associates. In addition, Hollinger Inc. has developed related
websites on the Internet. The consolidated financial statements include the
accounts of Hollinger Inc., its subsidiaries, other controlled entities and its
pro rata share of assets, liabilities,

                                       F-9
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

revenue and expenses of joint ventures (collectively, the "Company"). The
Company's significant subsidiaries and controlled entities are set out below:

<Table>
<Caption>
                                                              PERCENTAGE OWNED AS AT DECEMBER 31,
                                                              -----------------------------------
                                                               2000          2001          2002
                                                              -------       -------       -------
<S>                                                           <C>           <C>           <C>
Hollinger International Inc. ("Hollinger International")....    47.5%(3)      36.0%(3)      31.8%(3)
Hollinger International Publishing Inc. ("Publishing")......   100.0%(1)     100.0%(1)     100.0%(1)
The Sun-Times Company.......................................   100.0%(1)     100.0%(1)     100.0%(1)
Jerusalem Post Publications Limited ("Jerusalem Post")......   100.0%(1)     100.0%(1)     100.0%(1)
Hollinger Canadian Publishing Holdings Co. ("HCPH
  Co.")(2)..................................................   100.0%(1)     100.0%(1)     100.0%(1)
The National Post Company ("National Post") (note 5c))......    50.0%(1)        --            --
Telegraph Group Limited ("Telegraph").......................   100.0%(1)     100.0%(1)     100.0%(1)
Hollinger Canadian Newspapers, Limited Partnership
  ("Hollinger L.P.")........................................    87.0%(1)      87.0%(1)      87.0%(1)
</Table>

---------------

(1) Percent owned by Hollinger International.

(2) During 2001 HCPH Co. (formerly Hollinger Canadian Publishing Holdings Inc.
    ("HCPH")) became the successor to the operations of XSTM Holdings (2000)
    Inc. (formerly Southam Inc. ("Southam")).

(3) Represents the Company's equity interest in Hollinger International. The
    Company's voting percentage at December 31, 2002 is 72.8% (2001 -- 71.8% and
    2000 -- 73.3%).

FOREIGN CURRENCY TRANSLATION

     Monetary items denominated in foreign currency are translated to Canadian
dollars at exchange rates in effect at the balance sheet date and non-monetary
items are translated at exchange rates in effect when the assets were acquired
or obligations incurred. Revenues and expenses are translated at exchange rates
in effect at the time of the transactions. Foreign exchange gains and losses are
included in income.

     The financial statements of foreign subsidiaries, all of which are
self-sustaining, are translated using the current rate method, whereby all
assets and liabilities are translated at year-end exchange rates, with items in
the consolidated statements of earnings translated at the weighted average
exchange rates for the year. Exchange gains or losses arising from the
translation of balance sheet items are deferred and disclosed separately within
shareholders' equity. These exchange gains or losses are not included in
earnings unless they are actually realized through a reduction of the Company's
net investment in the foreign subsidiary. Exchange gains or losses on the
translation of exchangeable preference shares are deferred as they have been
designated as a hedge of the Company's investment in shares of Hollinger
International Class A common stock for which they are exchangeable.

     Effective January 1, 2002, the Company adopted, on a retroactive basis, The
Canadian Institute of Chartered Accountants ("CICA") amended Handbook Section
1650, "Foreign Currency Translations" ("Section 1650"), which eliminates the
deferral and amortization of foreign currency translation gains and losses on
long-term monetary items denominated in foreign currencies, with a fixed or
ascertainable life. There was no impact to the Company upon adoption of this
standard as at January 1, 2002 or any period presented.

CASH EQUIVALENTS

     Cash equivalents consist of certain highly liquid investments with original
maturities of three months or less.

                                       F-10
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

INVENTORY

     Inventory, principally printing material, is valued at the lower of cost
and net realizable value. Cost is determined using the first-in, first-out
(FIFO) method.

CAPITAL ASSETS

     Capital assets are stated at cost. Cost represents the cost of acquisition
or construction, including the direct costs of financing until the asset is
ready for use.

     Leases which transfer substantially all of the benefits and risks of
ownership to the Company or its subsidiaries are recorded as assets, together
with the obligations, based on the present value of future rental payments,
excluding executory costs.

     Capital assets, including assets under capital leases, are depreciated over
their estimated useful lives as follows:

<Table>
<S>                                         <C>
Buildings                                   straight line over 25 to 40 years
Machinery and equipment                     straight line over 4 to 20 years or 7% to
                                            12% on the diminishing-balance basis
Leasehold interests                         straight line over the term of the lease
                                            ranging from 5 to 40 years
</Table>

GOODWILL AND OTHER INTANGIBLE ASSETS

     Goodwill represents the excess of acquisition costs over estimated fair
value of net assets, including definite lived intangibles, acquired in business
combinations. Until December 31, 2001, goodwill amortization was calculated
using the straight-line method over the respective estimated useful lives to a
maximum of 40 years.

     Prior to January 1, 2002, circulation represented the long-term readership
of paid newspapers and the Company allocated a portion of the purchase price
discrepancy in each business acquired to the cost of circulation. In addition,
the Company capitalized costs incurred to increase the long-term readership.
Circulation was amortized on a straight-line basis over periods ranging from 10
to 40 years.

     Effective January 1, 2002, the Company adopted the CICA Handbook Section
3062, "Goodwill and Other Intangible Assets" ("Section 3062") and certain
transitional provisions of CICA Handbook Section 1581, "Business Combinations"
("Section 1581"). The new standards require that goodwill and intangible assets
with indefinite useful lives no longer be amortized, but instead be tested for
impairment at least annually. The standards also specify criteria that
intangible assets must meet to be recognized and reported apart from goodwill.
In addition, Section 3062 requires that intangible assets with estimable useful
lives be amortized over their respective estimated useful lives to their
estimated residual values and reviewed for impairment by assessing the
recoverability of the carrying value.

     As of the date of adoption of Section 3062 and certain transitional
provisions of Section 1581, the Company has discontinued amortization of all
existing goodwill, evaluated existing intangible assets and has reclassified
from circulation amounts in respect of non-competition agreements and subscriber
and advertiser relationships, which meet the new criteria for recognition of
intangible assets apart from goodwill. The balance of circulation has been
reclassified to goodwill effective January 1, 2002.

     In connection with the Section 3062 transitional impairment evaluation, the
Company was required to assess whether goodwill was impaired as of January 1,
2002. The fair values of the Company's reporting units were determined primarily
using a multiple of maintainable normalized cash earnings. As a result of this

                                       F-11
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

transitional impairment test, and based on the methodology adopted, the Company
has determined that the carrying amount of the Jerusalem Post was in excess of
the estimated fair value at January 1, 2002. Accordingly, the value of goodwill
attributable to the Jerusalem Post of $32.0 million has been written down in its
entirety. Such loss, net of related minority interest amounted to $12.1 million
and has been recorded as a charge to the opening deficit as at January 1, 2002.
The Company has determined that the fair value of all other reporting units is
in excess of the respective carrying amounts, both on adoption and at year end
for purposes of the annual impairment test.

     In addition to the transitional goodwill impairment test as of January 1,
2002, the Company is required to test goodwill for impairment on an annual basis
for each of its reporting units. The Company is also required to evaluate
goodwill for impairment between annual tests if an event occurs or circumstances
change that would more likely than not reduce the fair value of a reporting unit
below its carrying amount. Certain indicators of potential impairment that could
impact the Company's reporting units include, but are not limited to, the
following: (a) a significant long-term adverse change in the business climate
that is expected to cause a substantial decline in advertising spending, (b) a
permanent significant decline in a reporting unit's newspaper readership, (c) a
significant adverse long-term negative change in the demographics of a reporting
unit's newspaper readership and (d) a significant technological change that
results in a substantially more cost-effective method of advertising than
newspapers.

     Effective January 1, 2002, the Company had unamortized goodwill in the
amount of $873.7 million, which is no longer being amortized. This amount
reflects the transitional impairment loss of $32.0 million relating to the
Jerusalem Post.

     This change in accounting policy cannot be applied retroactively and the
amounts presented for prior periods have not been restated for this change. If
this change in accounting policy were applied to the reported consolidated
statement of earnings for the years ended December 31, 2000 and 2001, the impact
of the change, in respect of goodwill and intangible assets not being amortized,
would be as follows:

<Table>
<Caption>
                                                                2000       2001
                                                              --------   ---------
<S>                                                           <C>        <C>
Net earnings (loss) -- as reported..........................  $189,373   $(131,898)
Add goodwill and intangible asset amortization, net of
  income taxes and minority interest........................    31,384      16,978
                                                              --------   ---------
Adjusted net earnings (loss)................................  $220,757   $(114,920)
                                                              ========   =========
Basic earnings (loss) per share -- as reported..............  $   5.11   $   (3.91)
                                                              ========   =========
Basic adjusted earnings (loss) per share....................  $   5.97   $   (3.41)
                                                              ========   =========
Diluted earnings (loss) per share -- as reported............  $   5.05   $   (4.17)
                                                              ========   =========
Diluted adjusted earnings (loss) per share..................  $   5.90   $   (3.64)
                                                              ========   =========
</Table>

     Adjusted net earnings (loss), noted above, reflects only the reduction in
amortization expense of intangibles now classified as goodwill and does not give
effect to the impact that this change in accounting policy would have had on the
gains and losses resulting from the disposal of operations during 2000 and 2001,
nor the expensing of the costs previously capitalized to increase long-term
readership in 2000 and 2001.

INVESTMENTS

     Investments are accounted for at cost, except for investments in which the
Company exercises significant influence which are accounted for by the equity
method. Investments are written down when declines in value are considered to be
other than temporary. Dividend and interest income are recognized when earned.

                                       F-12
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

     Prior to the adoption of new accounting standards for goodwill on January
1, 2002, as described above, the excess of acquisition costs over the Company's
share of the fair value of net assets at the acquisition date of an equity
method investment was amortized on a straight-line basis over its estimated
useful life. Effective January 1, 2002, such equity method goodwill is no longer
amortized. The Company recognizes a loss when there is other than a temporary
decline in the fair value of the investment below its carrying value.

DEFERRED FINANCING COSTS

     Deferred financing costs consist of certain costs incurred in connection
with debt financings. Such costs are amortized on a straight-line basis over the
term of the related debt.

DERIVATIVES

     The Company uses derivative financial instruments to manage risks generally
associated with interest rate and foreign currency exchange rate market
volatility. The Company does not hold or issue derivative financial instruments
for trading purposes. None of the derivatives has been designated as a hedge.
All derivatives are recorded at their fair value with changes in fair value
reflected in the consolidated statements of earnings, other than Hollinger
International's forward share purchase contracts (described in note 24b)).

STOCK-BASED COMPENSATION AND OTHER STOCK-BASED PAYMENTS

     The Company and certain of its subsidiaries have employee stock-based
compensation plans. Until December 31, 2001, compensation expense was not
recognized on the grant or modification of options under these plans.

     Effective January 1, 2002, the Company adopted the new CICA Handbook
Section 3870, "Stock-based Compensation and Other Stock-based Payments"
("Section 3870"). Under Section 3870, the Company is required to adopt, on a
prospective basis, the fair value-based method to account for all stock-based
payments made by the Company to non-employees, including employees of Ravelston,
the parent company, and employee awards that are direct awards of stock, call
for settlement in cash or other assets, or are stock appreciation rights that
call for settlement by the issuance of equity instruments, granted on or after
January 1, 2002. For all other stock-based payments, the Company has elected to
use the settlement method of accounting, whereby cash received on the exercise
of stock options is recorded as capital stock.

     Under the fair value-based method, stock options granted to employees of
Ravelston by the Company and its subsidiaries are measured at the fair value of
the consideration received, or the fair value of the equity instruments issued,
or liabilities incurred, whichever is more reliably measurable. Such fair value
determined is recorded as a dividend-in-kind in the Company's financial
statements with no impact on the Company's net earnings. Section 3870 has been
applied prospectively to all stock-based payments to non-employees granted on or
after January 1, 2002.

EMPLOYEE BENEFIT PLANS

     The Company accrues its obligations under employee benefit plans and the
related costs, net of plan assets. The following policies are applied in
accounting for employee benefit plans:

     -  The cost of pensions and other retirement benefits earned by employees
        is actuarially determined using the projected benefit method pro-rated
        on service and management's best estimate of expected plan investment
        performance, salary escalation, retirement ages of employees and
        expected health care costs.

     -  For the purpose of calculating the expected return on plan assets, those
        assets are valued at fair value.

                                       F-13
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

     -  Past service costs from plan amendments are amortized on a straight-line
        basis over the average remaining service period of employees active at
        the date of amendment.

     -  The excess of the net actuarial gain (loss) over 10% of the greater of
        the benefit obligation and the fair value of plan assets is amortized
        over the average remaining service period of active employees. The
        average remaining service period of the active employees covered by the
        plans ranges from 8 to 17 years.

INCOME TAXES

     Future income tax assets and liabilities are recognized for the future
income tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Future income tax assets and liabilities are measured
using enacted or substantively enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. A valuation allowance is recorded against any future
income tax asset if it is more likely than not that the asset will not be
realized. Income tax expense is the sum of the Company's provision for current
income taxes and the difference between opening and ending balances of future
income tax assets and liabilities. The effect on future tax assets and
liabilities for change in tax rates is recognized in income in the period that
includes the enactment date.

REVENUE RECOGNITION

     The Company's principal sources of revenue comprise advertising,
circulation and job printing. As a general principle, revenue is recognized when
the following criteria are met: (a) persuasive evidence of an arrangement
exists, (b) delivery has occurred and services have been rendered, (c) the price
to the buyer is fixed or determinable, and (d) collectibility is reasonably
assured or is probable. Advertising revenue, being amounts charged for space
purchased in the Company's newspapers, is recognized upon publication of the
advertisements. Circulation revenue from subscribers, billed to customers at the
beginning of a subscription period, is recognized on a straight-line basis over
the term of the related subscription. Deferred revenue represents subscription
receipts that have not been earned. Circulation revenue from single copy sales
is recognized at the time of distribution. In both cases, circulation revenue is
recorded net of fees or commissions paid to distributors and retailers and less
an allowance for returned copies. Job printing revenue, being charges for
printing services provided to third parties, is recognized upon delivery.

LOSS PER SHARE

     Basic loss per share is computed by dividing the net loss by the weighted
average shares outstanding during the year. Diluted loss per share is computed
similar to the basic loss per share except that the weighted average shares
outstanding is increased to include additional shares from the assumed exercise
of stock options of Hollinger Inc., if dilutive and the net loss is increased to
reflect the impact of additional shares of Hollinger International being issued
from the exercise of its stock options and Series E preferred shares, if
dilutive. The number of additional shares is calculated by assuming that
outstanding stock options were exercised and that the proceeds from such
exercises were used by Hollinger International to acquire shares of common stock
of Hollinger International at the average market price during the year.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     The preparation of consolidated financial statements requires the Company
to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenue and expenses, and related disclosure of contingent assets
and liabilities. On an ongoing basis, the Company evaluates its estimates,
including those related to bad debts, investments, intangible assets, income
taxes, restructuring, pensions and other post-
                                       F-14
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

retirement benefits, contingencies and litigation. The Company relies on
historical experience and on various other assumptions that are believed to be
reasonable under the circumstances in making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions.

     The Company believes the following critical accounting policies affect its
more significant judgments and estimates used in the preparation of its
consolidated financial statements.

     The Company maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. If the
financial condition of the Company's customers were to deteriorate, resulting in
an impairment of their ability to make payments, additional allowances could be
required.

     The Company holds minority interests in both publicly traded and not
publicly traded Internet-related companies. Some of the publicly traded
companies have highly volatile share prices. The Company records an investment
impairment charge when it believes an investment has experienced a decline in
value that is other than temporary. Future adverse changes in market conditions
or poor operating results of underlying investments may not be reflected in an
investment's current carrying value, thereby possibly requiring an impairment
charge in the future.

     The Company has significant goodwill recorded in its accounts. Certain of
its newspapers operate in highly competitive markets. The Company is required to
determine annually whether or not there has been any impairment in the value of
these assets. Changes in long-term readership patterns and advertising
expenditures may affect the value and necessitate an impairment charge. Certain
indicators of potential impairment that could impact the Company's reporting
units include, but are not limited to, the following: a) a significant long-term
adverse change in the business climate that is expected to cause a substantial
decline in advertising spending, b) a permanent significant decline in a
reporting unit's newspaper readership, c) a significant adverse long-term
negative change in the demographics of a reporting unit's newspaper readership,
and d) a significant technological change that results in a substantially more
cost-effective method of advertising than newspapers.

     The Company sponsors several defined benefit pension and post-retirement
benefit plans for domestic and foreign employees. These defined benefit plans
include pension and post-retirement benefit obligations, which are calculated
based on actuarial valuations. In determining these obligations and related
expenses, key assumptions are made concerning expected rates of return on plan
assets and discount rates. In making these assumptions, the Company evaluated,
among other things, input from actuaries, expected long-term market returns and
current high-quality bond rates. The Company will continue to evaluate the
expected long-term rates of return on plan assets and discount rates at least
annually and make adjustments as necessary, which could change the pension and
post-retirement obligations and expenses in the future.

     Unrecognized actuarial gains and losses in respect of pension and
post-retirement benefit plans are recognized by the Company over a period
ranging from 8 to 17 years, which represents the weighted average remaining
service life of the employee groups. Unrecognized actuarial gains and losses
arise from several factors, including experience, assumption changes in the
obligations and from the difference between expected returns and actual returns
on assets. At the end of 2002, the Company had unrecognized net actuarial losses
of $233.4 million. These unrecognized amounts could result in an increase to
pension expense in future years depending on several factors, including whether
such losses exceed the corridor in accordance with CICA Section 3461, "Employee
Future Benefits".

     The Company recognized a pension valuation allowance for any excess of the
prepaid benefit cost over the expected future benefit. Increases or decreases in
global capital markets and interest rate fluctuations could increase or decrease
any excess of the prepaid benefit cost over the expected future benefit
resulting in
                                       F-15
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

an increase or decrease to the pension valuation allowance. Changes in the
pension valuation allowance are recognized in earnings immediately.

2.  CHANGE IN ACCOUNTING POLICIES

     a)  Earnings per share

        Effective January 1, 2001, the Company adopted, retroactively with
        restatement, the recommendations of the CICA Section 3500 with respect
        to earnings per share. Under the revised standard, the treasury stock
        method is used instead of the imputed earnings approach for determining
        the dilutive effect of options, issued warrants or other similar
        instruments.

        The change in the method of calculation of earnings per share did not
        impact the previously reported basic earnings per share for 2000.
        Diluted earnings per share for 2000 were increased from $4.49 per share
        to $5.05 per share.

     b)  Income taxes

        Effective January 1, 2000, the CICA changed the accounting standard
        relating to the accounting for income taxes. The new standard adopted
        the liability method of accounting for future income taxes. Prior to
        January 1, 2000, income tax expense was determined using the deferral
        method.

        The Company adopted the new income tax accounting standard retroactively
        on January 1, 2000, and did not restate the financial statements of any
        prior periods. As a result, the Company has recorded an increase to
        deficit of $291,004,000, an increase to the future tax liability of
        $516,113,000 and a decrease to minority interest of $225,109,000 as at
        January 1, 2000.

     c)  Goodwill and other intangible assets

        Effective January 1, 2002, the Company adopted CICA Handbook Section
        3062, "Goodwill and Other Intangible Assets" ("Section 3062") and
        certain transitional provisions of CICA Handbook Section 1581, "Business
        Combinations" ("Section 1581"). The new standards must be adopted
        prospectively and require that goodwill and intangible assets with
        indefinite useful lives no longer be amortized, but instead be tested
        for impairment at least annually. The standards also specify criteria
        that intangible assets must meet to be recognized and reported apart
        from goodwill. The impact of this change in accounting policy is
        discussed under "Goodwill and Other Intangible Assets" in note 1.

3.  RESTRICTED CASH

     Cash and cash equivalents at December 31, 2001 included US$7,500,000
($11,944,000) of restricted cash deposited with an escrow agent under the terms
of one of Hollinger International's forward share purchase contracts (note
24b)), which were terminated in 2002.

     In addition, US$5,000,000 ($7,963,000) of cash was pledged as security at
December 31, 2001 for Hollinger International's US$5,000,000 Restated Credit
Facility (note 10f)) under which no amounts were permitted to be borrowed at
December 31, 2001. At December 31, 2002, restricted cash includes US$2,000,000
($3,160,000) deposited in connection with outstanding letters of credit.

4.  ACQUISITIONS AND DISPOSITIONS

     a)  In January 2002, the Company sold 2,000,000 shares of Hollinger
         International Class A common stock to third parties for total cash
         proceeds of $38.6 million. This transaction, together with the
         retraction of Series II preference shares of the Company for shares of
         Hollinger International
                                       F-16
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

         Class A common stock (note 11a)), resulted in a pre-tax gain on the
         effective sales of the Hollinger International shares of $20.1 million
         (note 17).

     b)  In January 2001, Hollinger L.P. completed the sale of UniMedia Company
         to Gesca Limited, a subsidiary of Power Corporation of Canada, for cash
         consideration. The publications sold represented the French language
         newspapers of Hollinger L.P., including three paid circulation dailies
         and 15 weeklies published in Quebec and Ontario. A pre-tax gain of
         approximately $75.1 million was recognized on this sale (note 17).

     c)  In two separate transactions in July and November 2001, the Company and
         Hollinger L.P. completed the sale of most of its remaining Canadian
         newspapers to Osprey Media Group Inc. ("Osprey") for total cash
         proceeds of approximately $255.0 million plus closing adjustments
         primarily for working capital. Included in these sales were community
         newspapers in Ontario such as The Kingston Whig-Standard, The Sault
         Star, the Peterborough Examiner, the Chatham Daily News and The
         Observer (Sarnia). Pre-tax gains of approximately $1.5 million were
         recognized on these sales (note 17). The former Chief Executive Officer
         of Hollinger L.P. is a minority shareholder of Osprey. Hollinger
         International's independent directors have approved the terms of these
         transactions.

        In connection with the two sales of Canadian newspaper properties to
        Osprey in 2001, to satisfy a closing condition, the Company, Hollinger
        International, Lord Black of Crossharbour, PC(C), OC, KCSG and three
        senior executives entered into non-competition agreements with Osprey
        pursuant to which each agreed not to compete directly or indirectly in
        Canada with the Canadian businesses sold to Osprey for a five-year
        period, subject to certain limited exceptions, for aggregate
        consideration of $7.9 million. Such consideration was paid to Lord Black
        and the three senior executives and has been approved by Hollinger
        International's independent directors.

     d)  In August 2001, the Company entered into an agreement to sell to
         CanWest Global Communications Corp. ("CanWest") its 50% interest in the
         National Post. In accordance with the agreement, the Company's
         representatives resigned from their executive positions at the National
         Post effective September 1, 2001. Accordingly, from September 1, 2001,
         the Company had no influence over the operations of the National Post
         and the Company no longer consolidated or recorded on an equity basis
         its share of earnings or losses. The results of operations of the
         National Post are included in the consolidated results to August 31,
         2001. A pre-tax loss of approximately $120.7 million was recognized on
         the sale and is included in unusual items (note 17).

     e)  During 2001, Hollinger International converted all of its Series C
         Preferred Stock which was held by the Company, at the conversion ratio
         of 8.503 shares of Hollinger International Class A common stock per
         share of Series C Preferred Stock into 7,052,464 shares of Hollinger
         International Class A common stock. The 7,052,464 shares of Class A
         common stock of Hollinger International were subsequently purchased for
         cancellation by Hollinger International for a total of US$92.2 million
         ($143.8 million). The purchase price per share was 98% of the closing
         price of the shares of Hollinger International Class A common stock and
         was approved by Hollinger International's independent directors. The
         Company used the proceeds to reduce its bank indebtedness by $142.0
         million (note 9).

        On September 27, 2001, Hollinger International redeemed 40,920 shares of
        its Series E preferred stock held by the Company at their stated
        redemption price of $146.63 per share for a total cash payment of $6.0
        million.

                                       F-17
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        In December 2001, the Company sold 2,000,000 shares of Hollinger
        International Class A common stock to third parties for total cash
        proceeds of $31.4 million and reduced its bank indebtedness by the same
        amount (note 9).

        The above transactions, together with the retraction of retractable
        common shares of the Company in exchange for shares of Hollinger
        International Class A common stock (note 13d)) and the retraction of
        Series II preference shares of the Company for shares of Class A common
        stock of Hollinger International (note 11a)), resulted in a total
        pre-tax gain on the effective sales of the Hollinger International
        shares of $59.4 million (note 17).

     f)  During 2001, Hollinger International transferred two publications to
         Horizon Publications Inc. in exchange for net working capital. Horizon
         Publications Inc. is managed by former Community Group executives and
         controlled by certain members of the Board of Directors of Hollinger
         International. The terms of these transactions were approved by the
         independent directors of Hollinger International.

     g)  On November 16, 2000, Hollinger International and its affiliates,
         Southam and Hollinger L.P. ("Hollinger Group") completed the sale of
         most of its Canadian newspapers and related assets to CanWest. Included
         in the sale were the following assets of the Hollinger Group:

        -  a 50% interest in National Post, with Hollinger International
           continuing as managing partner;

        -  the metropolitan and a large number of community newspapers in Canada
           (including the Ottawa Citizen, The Vancouver Sun, The Province
           (Vancouver), the Calgary Herald, the Edmonton Journal, The Gazette
           (Montreal), The Windsor Star, the Regina Leader Post, the Star
           Phoenix and the Times-Colonist (Victoria); and

        -  the operating Canadian Internet properties, including canada.com.

        The sale resulted in the Hollinger Group receiving approximately $1.7
        billion cash, approximately $425 million in voting and non-voting shares
        of CanWest at fair value, and subordinated non-convertible debentures of
        a holding company in the CanWest group with a fair value of
        approximately $697 million. The aggregate sale price of these properties
        at fair value was approximately $2.8 billion, plus closing adjustments
        for working capital at August 31, 2000 and cash flow and interest for
        the period September 1 to November 16, 2000 which in total was estimated
        as an additional $63 million at December 31, 2000. The cash proceeds
        were used to pay down outstanding debt on Hollinger International's Bank
        Credit Facility (note 10). The sale resulted in a pre-tax gain of
        approximately $566.0 million in 2000 which was included in unusual items
        (note 17).

        In 2001, certain of the closing adjustments were finalized, resulting in
        an additional pre-tax gain in 2001 of approximately $29.1 million which
        is included in unusual items (note 17). At December 31, 2002,
        approximately $60.7 million (2001 -- $57.3 million) in respect of
        closing adjustments remained due to the Company and is included in
        accounts receivable. Certain closing adjustments have not yet been
        finalized. Amounts due bear interest at a rate of approximately 9%. The
        amount outstanding is subject to negotiation between CanWest and the
        Company. Adjustments to the balance due, if any, resulting from further
        negotiations will be recorded as an unusual item.

        In connection with the sale to CanWest, The Ravelston Corporation
        Limited ("Ravelston"), a holding company controlled by Lord Black,
        entered into a management services agreement with CanWest and National
        Post pursuant to which it agreed to continue to provide management
        services to the Canadian businesses sold to CanWest in consideration for
        an annual fee of $6 million payable by CanWest. In addition, CanWest
        will be obligated to pay Ravelston a termination fee of $45 million, in
        the event that CanWest chooses to terminate the management services
        agreement or
                                       F-18
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        $22.5 million, in the event that Ravelston chooses to terminate the
        agreement (which cannot occur before December 31, 2002). Also, as
        required by CanWest as a condition to the transaction, the Company,
        Ravelston, Hollinger International, Lord Black and three senior
        executives entered into non-competition agreements with CanWest pursuant
        to which each agreed not to compete directly or indirectly in Canada
        with the Canadian businesses sold to CanWest for a five-year period,
        subject to certain limited exceptions, for aggregate consideration of
        $80 million paid by CanWest in addition to the purchase price referred
        to above, of which $38 million was paid to Ravelston and $42 million was
        paid to Lord Black and the three senior executives. The independent
        directors of Hollinger International have approved the terms of these
        payments.

     h)  On November 1, 2000, Southam converted the convertible promissory note
         in Hollinger L.P. in the principal amount of $225,753,000 into
         22,575,324 limited partnership units of Hollinger L.P., thereby
         increasing Hollinger International's interest in Hollinger L.P. to
         87.0%.

     i)   During 2000, Hollinger International sold most of its remaining U.S.
          community newspaper properties, including 11 paid dailies, three paid
          non-dailies and 31 free distribution publications for total proceeds
          of approximately US$215,000,000 ($325,166,000). Pre-tax gains
          totalling $75,114,000 were recognized on these sales and were included
          in unusual items in 2000 (note 17).

       In connection with the sales of United States newspaper properties in
       2000, to satisfy a closing condition, Hollinger International, Lord Black
       and three senior executives entered into non-competition agreements with
       the purchasers pursuant to which each agreed not to compete directly or
       indirectly in the United States with the United States businesses sold to
       the purchasers for a fixed period, subject to certain limited exceptions,
       for aggregate consideration paid in 2001 of US$600,000 ($917,000). These
       amounts were in addition to the aggregate consideration paid in respect
       of these non-competition agreements in 2000 of US$15.0 million ($22.5
       million). All such amounts were paid to Lord Black and the three senior
       executives. The independent directors of Hollinger International have
       approved the terms of these payments.

     j)   Included in the dispositions during 2000 described in note 4i),
          Hollinger International sold four U.S. community newspapers for an
          aggregate consideration of US$38.0 million ($56.5 million) to Bradford
          Publishing Company, a Company formed by a former U.S. Community Group
          executive and in which some of Hollinger International's directors are
          shareholders. The terms of this transaction were approved by the
          independent directors of Hollinger International.

     k)  On February 17, 2000, Interactive Investor International, in which
         Hollinger International owned 51.7 million shares or a 47% equity
         interest, completed its initial public offering ("IPO") issuing 52
         million shares and raising L78,000,000 ($181,000,000). The IPO reduced
         Hollinger International's equity ownership to 33% and resulted in a
         dilution gain of $25,775,000 for accounting purposes. Subsequently,
         Hollinger International sold five million shares of its holding,
         reducing its equity interest to 28.5% and resulting in a pre-tax gain
         in 2000 of $2,400,000. Both the dilution gain and gain on sale were
         included in unusual items in 2000 (note 17). The balance of the
         investment was sold in 2001 resulting in an additional pre-tax gain in
         2001 of $14.7 million (note 17).

     l)   In December 2000, Hollinger International acquired four paid daily
          newspapers, one paid non-daily and 12 free distribution publications
          in the Chicago suburbs for total cash consideration of US$111,000,000
          ($166,744,000). Of the aggregate purchase price, $78,781,000 was
          ascribed to circulation and $48,244,000 to goodwill.

       All of the Company's acquisitions have been accounted for using the
       purchase method with the results of operations included in these
       consolidated financial statements from the dates of acquisition.
                                       F-19
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        The details of the acquisitions including those detailed above are as
        follows:

<Table>
<Caption>
                                                                2000     2001   2002
                                                              --------   ----   ----
<S>                                                           <C>        <C>    <C>
Assets acquired, at fair value
  Current assets............................................  $ 19,444    $--    $--
  Fixed assets..............................................    51,724    --     --
  Circulation...............................................    78,781    --     --
  Goodwill and other assets.................................    57,418    --     --
                                                              --------    --     --
                                                               207,367    --     --
                                                              --------    --     --
Less liabilities assumed
  Current liabilities.......................................    16,269    --     --
  Long-term liabilities.....................................    15,722    --     --
                                                              --------    --     --
                                                                31,991    --     --
                                                              --------    --     --
Net cost of investments.....................................  $175,376    $--    $--
                                                              ========    ==     ==
</Table>

5.  INVESTMENTS

<Table>
<Caption>
                                                                2001       2002
                                                              --------   --------
<S>                                                           <C>        <C>
ASSOCIATED COMPANIES, AT EQUITY
  The Company
     Cayman Free Press Ltd. -- 40% interest.................  $ 11,245   $ 11,314
  Telegraph
     Trafford Park Printers Limited ("Trafford Park"), West
       Ferry Printers Limited ("West Ferry"), Paper Purchase
       Management Limited ("PPM") and handbag.com Limited
       (handbag) joint ventures -- 50% interests............    29,110     27,763
  Internet-related investments..............................     8,205      8,012
  Other.....................................................     1,490      1,886
                                                              --------   --------
                                                                50,050     48,975
                                                              --------   --------
MARKETABLE INVESTMENTS, AT COST
  CanWest debentures a).....................................    72,259     85,664
  Internet-related investments..............................     6,680      5,812
                                                              --------   --------
                                                                78,939     91,476
                                                              --------   --------
OTHER NON-MARKETABLE INVESTMENTS, AT COST
  Internet and telephony-related investments................    78,272     36,282
  Other.....................................................    52,174     33,412
                                                              --------   --------
                                                               130,446     69,694
                                                              --------   --------
                                                              $259,435   $210,145
                                                              ========   ========
</Table>

     a)  The CanWest debentures were issued by a wholly owned subsidiary of
         CanWest and are guaranteed by CanWest. The debentures were received on
         November 16, 2000 as partial consideration for the operations sold to
         CanWest. Interest on the CanWest debentures is calculated, compounded
         and payable semi-annually in arrears at a rate of 12.125% per annum. At
         any time prior to November 5, 2005, CanWest may elect to pay interest
         on the debentures by way of non-voting shares of CanWest, debentures in
         substantially the same form as the CanWest debentures, or cash.
         Subsequent to November 5, 2005, interest is to be paid in cash. The
         debentures are due November 15, 2010, but

                                       F-20
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

         are redeemable at any time prior to May 15, 2003 for cash at CanWest's
         option at 100% of the principal amount.

        CanWest debentures at December 31, 2002 had a principal face amount of
        $93.0 million (2001 -- $77.2 million), including $15.8 million of
        additional debentures received in 2002 (2001 -- $67.1 million) in
        payment of the interest due on existing debentures held by the Company,
        a portion of which related to 2001. These debentures have been recorded
        at their fair value at the time they are received.

        As part of Hollinger International's November 16, 2000 purchase and sale
        agreement with CanWest, Hollinger International was prohibited from
        selling CanWest debentures prior to May 15, 2003. In order to monetize
        the debentures, Hollinger International entered into a participation
        agreement in August 2001 pursuant to which it sold participation
        interests in $540.0 million (US$350.0 million) principal amount of
        CanWest debentures to a special purpose trust (the "Participation
        Trust") administered by an arm's-length trustee. That sale of
        participation interests was supplemented by a further sale of $216.8
        million (US$140.5 million) in December 2001 for a total of $756.8
        million (US$490.5 million). Both sales were conducted at a fixed rate of
        exchange of US$0.6482 for each $1. Hollinger International remains the
        record owner of the participated CanWest debentures and is required to
        make payments to the Participation Trust with respect to those
        debentures if and to the extent it receives payment in cash or in kind
        on the debentures from CanWest. These payments are not reflected in the
        Company's accounts.

        Coincident with the Participation Trust's purchase of the participation
        interests, the Participation Trust sold senior notes to arm's-length
        third parties to finance the purchase of the participation interests.
        These transactions resulted in net proceeds to Hollinger International
        of $621.8 million and for accounting purposes have been accounted for as
        sales of CanWest debentures. The net loss on the 2001 transactions,
        including realized holding losses on the debentures, amounted to $97.4
        million and has been included in unusual items (note 17). Hollinger
        International believes that the participation arrangement does not
        constitute a prohibited sale of debentures as legal title was not
        transferred. CanWest has advised Hollinger International that it accepts
        that position.

        Hollinger International has not retained an interest in the
        Participation Trust nor does it have any beneficial interest in the
        assets of the Participation Trust. The Participation Trust and its
        investors have no recourse to Hollinger International's other assets in
        the event that CanWest defaults on its debentures. Under the terms of
        the Participation Trust, the interest payments received by Hollinger
        International in respect of the underlying CanWest debentures will be
        paid to the Participation Trust. However, after May 15, 2003, Hollinger
        International may be required to deliver to the Participation Trust
        CanWest debentures with a face value equivalent to US$490.5 million
        based on then current rates of exchange. The CanWest debentures are
        denominated in Canadian dollars and, consequently, there is a currency
        exposure on the debentures subject to the delivery provision. A
        substantial portion of that exposure was previously hedged; however, the
        hedge instrument (a forward foreign exchange contract) was terminated in
        contemplation of and in conjunction with Publishing's placement of
        Senior Notes (note 10a)) and amendment of Publishing's Senior Credit
        Facilities (note 10b)). During 2001 and 2002, the net loss before tax,
        realized on the mark to market of both the obligation to the
        Participation Trust and the related hedge contract was $0.7 million and
        $10.4 million, respectively, and has been included in net foreign
        currency losses in the consolidated statement of earnings. In 2002, the
        loss before tax is net of cash received on the termination of the hedge
        of $9.9 million.

                                       F-21
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        Pursuant to the terms of the Participation Trust, the Company is unable
        to sell to an unaffiliated third party until at least November 4, 2010
        the equivalent of US$50.0 million ($79.0 million at December 31, 2002)
        principal amount of CanWest debentures.

     b)  CanWest shares at December 31, 2000 consisted of 2,700,000 multiple
         voting preferred shares and 27,000,000 non-voting shares. The
         non-voting shares were publicly traded and the multiple voting shares
         were not publicly traded but were convertible into non-voting shares at
         the rate of 0.15 non-voting share for each voting preferred share or a
         total additional 405,000 non-voting shares. The non-voting shares and
         voting preferred shares represented an approximate 15.6% equity
         interest and 5.7% voting interest in CanWest. On November 28, 2001,
         Hollinger International sold the 2,700,000 multiple voting preferred
         shares and 27,000,000 non-voting shares in CanWest for total cash
         proceeds of approximately $271.3 million. The sale resulted in a
         realized pre-tax loss of $157.5 million which is included in unusual
         items (note 17).

6.  CAPITAL ASSETS

<Table>
<Caption>
                                                                 2001         2002
                                                              ----------   ----------
<S>                                                           <C>          <C>
COST
  Land......................................................  $   54,878   $   52,050
  Buildings and leasehold interests.........................     326,449      340,886
  Machinery and equipment...................................     803,345      848,576
                                                              ----------   ----------
                                                               1,184,672    1,241,512
                                                              ----------   ----------
ACCUMULATED DEPRECIATION AND AMORTIZATION
  Buildings and leasehold interests.........................      58,680       66,373
  Machinery and equipment...................................     459,491      514,638
                                                              ----------   ----------
                                                                 518,171      581,011
                                                              ----------   ----------
NET BOOK VALUE..............................................  $  666,501   $  660,501
                                                              ==========   ==========
OWNED ASSETS
  Cost......................................................  $  898,007   $  887,484
  Accumulated depreciation and amortization.................     330,240      352,956
                                                              ----------   ----------
  Net book value............................................  $  567,767   $  534,528
                                                              ==========   ==========
LEASED ASSETS
  Cost......................................................  $  286,665   $  354,028
  Accumulated depreciation and amortization.................     187,931      228,055
                                                              ----------   ----------
  Net book value............................................  $   98,734   $  125,973
                                                              ==========   ==========
</Table>

     Depreciation and amortization of capital assets totalled $116,760,000,
$78,450,000 and $74,352,000 in 2000, 2001 and 2002, respectively. Hollinger
International capitalized interest in 2000, 2001 and 2002 amounting to
$4,653,000, $129,000 and nil, respectively, related to the construction and
equipping of production facilities for its newspapers in Chicago.

7.  GOODWILL AND OTHER INTANGIBLE ASSETS

     As described in note 1 to the consolidated financial statements, the
Company adopted Section 3062 and certain transitional provisions of Section 1581
effective January 1, 2002.

                                       F-22
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

     The changes in the carrying amount of goodwill by reportable segment for
the year ended December 31, 2002 are as follows:

<Table>
<Caption>
                                                         U.K.       CANADIAN
                                CHICAGO    COMMUNITY   NEWSPAPER   NEWSPAPER    CONSOLIDATED
                                 GROUP       GROUP       GROUP       GROUP         TOTAL
                                --------   ---------   ---------   ----------   ------------
<S>                             <C>        <C>         <C>         <C>          <C>
Balance as at January 1,
  2002........................  $234,320    $31,975    $569,013     $70,333       $905,641
Transitional impairment loss
  -- Jerusalem Post (note
  1)..........................        --    (31,975)         --          --        (31,975)
                                --------    -------    --------     -------       --------
Revised balance as at January
  1, 2002.....................   234,320         --     569,013      70,333        873,666
Adjustment of excess
  acquisition reserves........   (19,477)        --          --          --        (19,477)
Repurchase of shares of
  Hollinger International
  Class A common stock by
  Hollinger International
  (note 24b)).................     3,344         --       8,240          --         11,584
Foreign exchange and other....    (1,534)        --      48,809         279         47,554
                                --------    -------    --------     -------       --------
Balance as at December 31,
  2002........................  $216,653    $    --    $626,062     $70,612       $913,327
                                ========    =======    ========     =======       ========
</Table>

     Upon adoption of Section 3062, intangible assets totalling $978,569,000,
which were previously ascribed to circulation, net of $247,252,000 of deferred
taxes, were reclassified to goodwill. Intangible assets with a total net book
value at January 1, 2002 of $198,975,000 previously ascribed to circulation,
consisting of non-competition agreements of $12,195,000 net of accumulated
amortization of $8,360,000 and subscriber and advertiser relationships of
$186,780,000 net of accumulated amortization of $35,261,000 were recognized as
identifiable intangible assets apart from goodwill upon adoption of Section
3062.

     The Company's amortizable other intangible assets consist of
non-competition agreements with former owners of acquired newspapers which are
amortized using the straight-line method over the term of the respective
non-competition agreements which range from three to five years, and subscribers
and advertiser relationships which are amortized using the straight-line method
over 30 years. The components of other amortizable intangible assets at December
31, 2002 are as follows:

<Table>
<Caption>
                                                       GROSS
                                                      CARRYING   ACCUMULATED    NET BOOK
                                                       AMOUNT    AMORTIZATION    VALUE
                                                      --------   ------------   --------
<S>                                                   <C>        <C>            <C>
Amortizable other intangible assets:
  Non-competition agreements........................  $ 22,120     $15,049      $  7,071
  Subscriber and advertiser relationships...........   220,485      42,413       178,072
                                                      --------     -------      --------
                                                      $242,605     $57,462      $185,143
                                                      ========     =======      ========
</Table>

     Amortization of non-competition agreements for the year ended December 31,
2002 was $6,689,000. Amortization of advertiser and subscriber relationships for
the year ended December 31, 2002 was $7,152,000. Future amortization of
amortizable intangible assets is as follows: 2003 -- $13,895,000, 2004 --
$7,483,000, 2005 -- $7,235,000, 2006 -- $7,195,300, and 2007 -- $7,195,000.

     Amortization of goodwill and other intangible assets in total for the year
ended December 31, 2001 was $66,266,000 (2000 -- $103,172,000).

                                       F-23
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

8.  DEFERRED FINANCING COSTS AND OTHER ASSETS

<Table>
<Caption>
                                                                2001       2002
                                                              --------   --------
<S>                                                           <C>        <C>
Deferred pension asset (note 22)............................  $ 83,459   $123,230
Deferred finance costs, net of amortization of $38,494,000
  (2001 -- $36,512,000).....................................    52,484     52,759
Deferred foreign exchange loss on exchangeable shares.......     1,446      1,234
Other assets................................................    17,154     16,314
                                                              --------   --------
                                                              $154,543   $193,537
                                                              ========   ========
</Table>

     Amortization of deferred finance costs, included in other interest expense,
totalled $18,504,000, $18,648,000 and $11,347,000 in 2000, 2001 and 2002,
respectively.

9.  BANK INDEBTEDNESS

<Table>
<Caption>
                                                                2001      2002
                                                              --------   -------
<S>                                                           <C>        <C>
The Company.................................................  $129,475   $90,810
                                                              ========   =======
</Table>

     At December 31, 2002, the Company has a bank operating line which provides
for up to $10.0 million of borrowings and a revolving bank credit facility which
provides for up to $80.8 million of borrowings. The Company's revolving bank
credit facility is secured by shares of Hollinger International Class A and
Class B common stock owned by the Company and bears interest at the prime rate
plus 2.5% or the banker's acceptance ('BA') rate plus 3.5%. Under the terms of
the revolving bank credit facility, the Company and its subsidiaries are subject
to restrictions on the incurrence of additional debt.

     The revolving bank credit facility was amended and restated on August 30,
2002 and was to mature on December 2, 2002. A mandatory repayment of the
revolving bank credit facility in the amount of $50.0 million was required by
December 2, 2002 and if such payment was made, the lenders could have consented
to an extension of the maturity date to December 2, 2003 in respect of the
principal outstanding. On December 2, 2002, the lenders extended the $50.0
million principal repayment date to December 9, 2002. This repayment was not
made and on December 9, 2002, the bank credit facility was amended to require a
principal payment of $44.0 million on February 28, 2003 with the balance
maturing on December 2, 2003. As a result of the impending closing of the
Company's Senior Secured Note issue, the lenders further extended the due date
for the repayment of the $44.0 million to March 14, 2003. On March 10, 2003, the
revolving bank credit facility in the amount of $80.8 million and the bank
operating line of $10.0 million were repaid with part of the proceeds of the
Company's issue of Senior Secured Notes (note 29a)).

     On October 3, 2002, Hollinger International entered into a term lending
facility and borrowed US$50.0 million ($79.6 million). As a result of Hollinger
International's borrowing under this term facility, the Company was in default
of a covenant under its revolving bank credit facility which, while in default,
resulted in the Company's borrowings being due on demand. The banks waived the
default and on December 23, 2002, Hollinger International repaid the full amount
borrowed under its term lending facility (note 10d)).

     During 2001, the Company reduced its bank indebtedness by $142,000,000 with
proceeds from the sale, to Hollinger International for cancellation, of
7,052,464 million of its shares of Class A common stock (note 4e)). In December
2001, the Company sold 2,000,000 shares of Hollinger International Class A
common stock to third parties for total cash proceeds of $31,400,000 (note 4e))
and reduced bank indebtedness by the same amount. During January 2002, the
Company sold a further 2,000,000 shares of

                                       F-24
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

Class A common stock of Hollinger International and reduced bank indebtedness by
an additional $38,600,000 (note 4a)).

10.  LONG-TERM DEBT

<Table>
<Caption>
                                                                 2001         2002
                                                              ----------   ----------
<S>                                                           <C>          <C>
Hollinger International
  Senior Notes due 2010 (US$300,000,000)....................  $       --   $  474,000
  Senior Credit Facility (US$265,000,000)...................          --      418,698
  Senior Notes due 2005 (US$5,082,000) (2001 --
     US$260,000,000)........................................     414,050        8,030
  Senior Subordinated Notes due 2006 (US$239,900,000) (2001
     -- US$250,000,000).....................................     398,125      379,051
  Senior Subordinated Notes due 2007 (US$265,000,000) (2001
     -- US$290,000,000).....................................     461,825      418,700
  Other.....................................................      16,933        5,103
Other.......................................................      15,346       20,152
Obligations under capital leases
  Printing joint ventures...................................      37,914       60,096
  Other.....................................................       7,433        5,491
                                                              ----------   ----------
                                                               1,351,626    1,789,321
Less:
  Current portion included in current liabilities...........      10,020       16,800
  Senior Subordinated Notes (note 10a)).....................          --      797,751
                                                              ----------   ----------
                                                              $1,341,606   $  974,770
                                                              ==========   ==========
</Table>

     a)  On December 23, 2002, Publishing issued US$300,000,000 of 9% Senior
         Notes due 2010 guaranteed by Hollinger International. Net proceeds of
         the issue of US$291,700,000 plus cash on hand and borrowings under
         Publishing's Senior Credit Facility (note 10b)) were used in December
         2002 to retire Hollinger International's equity forward share purchase
         contracts (Total Return Equity Swaps (note 24b)) and to repay amounts
         borrowed under its term facility maturing December 31, 2003 (note 10d))
         and in January 2003 to retire, in their entirety, Publishing's
         outstanding Senior Subordinated Notes due 2006 and 2007 with the
         balance available for general corporate purposes.

        The Senior Notes bear interest at 9% payable semi-annually and mature on
        December 15, 2010. The Senior Notes are redeemable at the option of
        Publishing anytime after December 15, 2006 at 104.5% of the principal
        amount, after December 15, 2007 at 102.25% of the principal amount and
        after December 15, 2008 at 100% of the principal amount.

        On December 23, 2002, Publishing gave notice of redemption to both the
        holders of the Senior Subordinated Notes due 2006 with a principal
        remaining outstanding of US$239.9 million and to the holders of the
        Senior Subordinated Notes due 2007 with a principal remaining
        outstanding of US$265.0 million. Such notes were retired in January 2003
        with a payment of $859.1 million (US$543.8 million), including early
        redemption premiums and accrued interest. At December 31, 2002, the
        notes remained outstanding and have been disclosed as a current
        liability. The proceeds from the December 2002 issue of Publishing's
        Senior Notes and borrowings under the Senior Credit Facility used to
        fund the redemption were held in escrow at December 31, 2002 and have
        been disclosed as escrow deposits in current assets.

                                       F-25
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        Unamortized deferred financing costs in the amount of $28.0 million and
        the $31.1 million premium related to the retirement of the Senior
        Subordinated Notes will be charged to earnings in 2003 on extinguishment
        of the notes.

        The Indentures relating to the 9% Senior Notes contain financial
        covenants and negative covenants that limit Publishing's ability to,
        among other things, incur indebtedness, pay dividends or make other
        distributions on its capital stock, enter into transactions with related
        companies, and sell assets, including stock of a restricted subsidiary.
        The Indentures provide that upon a change of control (as defined in the
        Indentures), each noteholder has the right to require Publishing to
        purchase all or any portion of such noteholder's notes at a cash
        purchase price equal to 101% of the principal amount of such notes, plus
        accrued and unpaid interest. The Senior Credit Facility (note 10b))
        restricts Publishing's ability to repurchase these notes even when
        Publishing may be required to do so under the terms of the Indenture
        relating to the 9% Senior Notes in connection with a change of control.

        On January 22, 2003 and February 6, 2003, Publishing entered into
        interest rate swaps to convert US$150.0 million and US$100.0 million,
        respectively, of the 9% Senior Notes issued in December 2002 to floating
        rates for the period to December 15, 2010, subject to early termination
        notice.

        The Trust Indenture in respect of the 9% Senior Notes contains customary
        covenants and events of default, which are comparable to those under the
        Senior Credit Facility.

     b)  On December 23, 2002, Publishing and certain of its subsidiaries
         entered into a senior credit facility with an aggregate commitment of
         US$310,000,000 (the "Senior Credit Facility").

        The Senior Credit Facility consists of i) US$45,000,000 revolving credit
        facility which matures on September 30, 2008 (the "Revolving Credit
        Facility"), ii) a US$45,000,000 Term Loan A which matures on September
        30, 2008 ("Term Loan A") and iii) a US$220,000,000 Term Loan B which
        matures on September 30, 2009 ('Term Loan B'). Publishing and Telegraph
        are the borrowers under the Revolving Credit Facility and First DT
        Holdings Ltd. ("FDTH"), a wholly owned indirect U.K. subsidiary) is the
        borrower under Term Loan A and Term Loan B. The Revolving Credit
        Facility and Term Loans bear interest at either the Base Rate (U.S.) or
        U.S. LIBOR, plus an applicable margin. Interest is payable quarterly.

        At December 31, 2002, FDTH had a total US$265,000,000 of borrowings
        outstanding under Term Loan A and Term Loan B.

        On December 27, 2002, a United Kingdom subsidiary of the Company entered
        into two cross-currency rate swap transactions to hedge principal and
        interest payments on U.S. dollar borrowings under the December 23, 2002
        Senior Credit Facility. The contracts have a total foreign currency
        obligation notional value of US$265.0 million, fixed at a rate of
        US$1.5922 to L1, convert the interest rate on such borrowing from
        floating to fixed, and expire as to US$45.0 million on December 29, 2008
        and as to US$220.0 million on December 29, 2009.

        Publishing's borrowings under the Senior Credit Facility are guaranteed
        by Publishing's material U.S. subsidiaries, while FDTH's and Telegraph's
        borrowings under the Senior Credit Facility are guaranteed by Publishing
        and its material U.S. and U.K. subsidiaries. Hollinger International is
        also a guarantor of the Senior Credit Facility. Publishing's borrowings
        under the Senior Credit Facility are secured by substantially all of the
        assets of Publishing and its material U.S. subsidiaries, a pledge of all
        of the capital stock of Publishing and its material U.S. subsidiaries
        and a pledge of 65% of the capital stock of certain foreign
        subsidiaries. FDTH's and Telegraph's borrowings under the Senior Credit
        Facility are secured by substantially all of the assets of Publishing
        and its material U.S. and U.K. subsidiaries and a pledge of all of the
        capital stock of Publishing and its material U.S. and

                                       F-26
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        U.K. subsidiaries. Hollinger International's assets in Canada have not
        been pledged as security under the Senior Credit Facility.

        The Senior Credit Facility agreement requires Publishing to comply with
        certain covenants which include, without limitation and subject to
        certain exceptions, restrictions on additional indebtedness; liens,
        certain types of payments (including without limitation, capital stock
        dividends and redemptions, payments on existing indebtedness and
        intercompany indebtedness), and on incurring or guaranteeing debt of an
        affiliate, making certain investments and paying management fees;
        mergers, consolidations, sales and acquisitions; transactions with
        affiliates; conduct of business except as permitted; sale and leaseback
        transactions; changing fiscal year; changes to holding company status;
        creating or allowing restrictions on taking action under the Senior
        Credit Facility loan documentation; and entering into operating leases,
        subject to certain basket calculations and exceptions. The Senior Credit
        Facility loan agreement also contains customary events of default.

        As of December 31, 2002, Hollinger International's aggregate annual
        rental payments under operating leases exceeded the amounts permitted
        under the covenants to the Senior Credit Facility. Hollinger
        International has been advised by the Administrative Agent of the Senior
        Credit Facility that the lenders have agreed to amend the Senior Credit
        Facility effective March 28, 2003, to increase the amount permitted
        under the operating lease covenant and have agreed to a waiver of any
        default or event of default in connection therewith. Based on the
        amended covenant, Hollinger International would have been in compliance
        as of December 31, 2002.

     c)  On February 14, 2002, Publishing commenced a cash tender offer for any
         and all of its outstanding 8.625% Senior Notes due 2005. The tender
         offer was made upon the terms and conditions set forth in the Offer to
         Purchase and Consent Solicitation Statement dated February 14, 2002.
         Under the terms of the offer, Hollinger International offered to
         purchase the outstanding notes at a price to be determined three
         business days prior to the expiration date of the tender offer by
         reference to a fixed spread of 87.5 basis points over the yield to
         maturity of the 7.50% U.S. Treasury Notes due February 15, 2005, plus
         accrued and unpaid interest up to, but not including the day of payment
         for the notes. The purchase price totalled US$1,101.34 for each
         US$1,000 principal amount of notes. Included in the purchase price was
         a consent payment equal to US$40 per US$1,000 principal amount of the
         notes, payable to those holders who validly consented to the proposed
         amendments to the indenture governing the notes. In connection with the
         tender offer, Publishing solicited consents from the holders of the
         notes to amend the Indenture governing the notes by eliminating most of
         the restrictive provisions. On March 15, 2002, $397.2 million (US$248.9
         million) in the aggregate principal amount had been validly tendered
         pursuant to the offer and on March 18, 2002, these noteholders were
         paid out in full. In addition, during the year, Publishing purchased
         for retirement an additional $9.6 million (US$6.0 million) in aggregate
         principal amount of the 8.625% Senior Notes due 2005.

        During 2002, Publishing purchased for retirement $16.1 million (US$10.1
        million) in aggregate principal amount of the 9.25% Senior Subordinated
        Notes due 2006 and $39.9 million (US$25.0 million) in the aggregate
        principal amount of its 9.25% Senior Subordinated Notes due 2007.

        The total principal amount of the above Publishing Senior and Senior
        Subordinated Notes retired during 2002 was $462.8 million (US$290.0
        million). The premiums paid to retire the debt totalled $43.0 million
        which, together with a write-off of $13.3 million of related deferred
        financing costs, have been presented as an unusual item (note 17).

                                       F-27
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        As at December 31, 2001, Hollinger International did not meet a
        financial test set out in the Trust Indentures for Publishing's Senior
        Notes due 2005 and Senior Subordinated Notes. As a result, Publishing
        and its subsidiaries were unable to incur additional indebtedness, make
        restricted investments, make advances, pay dividends or make other
        distributions on their capital stock.

     d)  In October 2002, Hollinger International borrowed on an unsecured basis
         $79,600,000 (US$50,000,000) at 10.5% under a term facility maturing
         December 31, 2003. Proceeds from Publishing's aforementioned Senior
         Credit Facility and the issue of 9% Senior Notes were used, in part, to
         repay these borrowings in December 2002.

     e)  Amounts borrowed under a former short-term credit facility of
         $191,100,000 (US$120,000,000) entered into by Hollinger International
         in 2001 were repaid during that year.

     f)  In June 2000, Publishing, HCPH, Telegraph, Southam, HIF Corp., a wholly
         owned subsidiary of Publishing, and a group of financial institutions
         increased the term loan component of the Fourth Amended and Restated
         Credit Facility ("Restated Credit Facility") by US$100,000,000 to
         US$975,000,000. On November 16, 2000, using the proceeds from the
         CanWest transaction (note 4(g)) US$972,000,000 of borrowings were
         repaid and the Restated Credit Facility was reduced to US$5,000,000.
         The Restated Credit Facility was secured by the collateralization of
         US$5,000,000 of Hollinger International's positive cash balance (note
         3). At December 31, 2001, no amounts were owing under the Restated
         Credit Facility. During 2002, the Restated Credit Facility was
         terminated.

     g)  Principal amounts payable on long-term debt, excluding obligations
         under capital leases, for each of the five years subsequent to December
         31, 2002 are as follows:

<Table>
    <S>                                                            <C>
    2003 (including the extinguishment of Senior Subordinated
      Notes)....................................................   $802,637
    2004........................................................   $ 20,268
    2005........................................................   $ 27,776
    2006........................................................   $ 22,109
    2007........................................................   $ 23,103
    Subsequent..................................................   $827,841
</Table>

     h)  Minimum lease commitments, together with the present value of
         obligations under capital leases, are as follows:

<Table>
    <S>                                                            <C>
    2003........................................................   $ 15,044
    2004........................................................     12,245
    2005........................................................      9,454
    2006........................................................      9,084
    2007........................................................      6,379
    Subsequent..................................................     28,913
                                                                   --------
    Total future minimum lease payments.........................     81,119
    Less imputed interest and executory costs...................    (15,532)
                                                                   --------
    Present value of minimum lease payments discounted at an
      average rate of 6.9%......................................     65,587
    Less current portion included in current liabilities........    (11,914)
                                                                   --------
                                                                   $ 53,673
                                                                   ========
</Table>

                                       F-28
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

11.  RETRACTABLE PREFERENCE SHARES

<Table>
<Caption>
                                                                2001       2002
                                                              --------   --------
<S>                                                           <C>        <C>
4,580,979 Series II preference shares (2001 -- 5,366,979)...  $ 46,000   $ 33,827
10,147,225 Series III preference shares 2001 --
  10,147,225)...............................................   101,472    101,472
                                                              --------   --------
                                                              $147,472   $135,299
                                                              ========   ========
</Table>

<Table>
<Caption>
                                                                       HCPH
                                                                     SPECIAL
                                            SERIES II   SERIES III    SHARES      TOTAL
                                            ---------   ----------   --------   ---------
<S>                                         <C>         <C>          <C>        <C>
Balance, January 1, 2000..................  $129,168     $104,622    $ 51,421   $ 285,211
Redeemed/retracted........................   (69,502)      (3,150)    (54,482)   (127,134)
Accretion.................................        --           --       3,061       3,061
Unrealized loss...........................    28,815           --          --      28,815
                                            --------     --------    --------   ---------
Balance, January 1, 2001..................    88,481      101,472          --     189,953
Redeemed/retracted........................   (27,135)          --          --     (27,135)
Unrealized gain...........................   (15,346)          --          --     (15,346)
                                            --------     --------    --------   ---------
Balance, December 31, 2001................    46,000      101,472          --     147,472
Redeemed/retracted........................    (7,860)          --          --      (7,860)
Unrealized gain...........................    (4,313)          --          --      (4,313)
                                            --------     --------    --------   ---------
Balance, December 31, 2002................  $ 33,827     $101,472    $     --   $ 135,299
                                            ========     ========    ========   =========
</Table>

     a)  The Series II preference shares are exchangeable non-voting preference
         shares issued at $10.00 per share. On May 12, 1999, the Series II
         preference shares became redeemable at the holder's option for 0.46 of
         a share of Class A common stock of Hollinger International for each
         Series II preference share. The Company has the option to make a cash
         payment of equivalent value on the redemption of any of the Series II
         preference shares. Each Series II preference share entitles the holder
         to a dividend equal to the amount of any dividend on 0.46 of a share of
         Class A common stock of Hollinger International (less any U.S.
         withholding tax thereon payable by the Company or any subsidiary). In
         2002, these retractable preference shares are included in current
         liabilities since they are retractable at any time at the option of the
         holder.

        During 2002, 750,000 Series II preference shares were retracted in
        exchange for 345,000 shares of Hollinger International Class A common
        stock which, together with the Hollinger International share sale
        described in note 4a), resulted in a gain on effective sale of Hollinger
        International shares of $20,103,000 (note 17). In addition, 36,000
        Series II preference shares were retracted for the cash equivalent value
        of 0.46 of a Class A common share of Hollinger International at the time
        of retraction, which totalled $277,000.

        During 2001, 2,685,465 Series II preference shares were retracted in
        exchange for 1,235,312 of shares of Hollinger International Class A
        common stock which, together with the retraction of retractable common
        shares in exchange for shares of Hollinger International Class A common
        stock (note 13d)) and Hollinger International share redemptions and
        sales described in note 4e), resulted in a gain on effective sale of
        Hollinger International shares of $59,449,000 (note 17). In addition,
        28,038 Series II preference shares were retracted for the cash
        equivalent value of 0.46 of a share of Class A common stock of Hollinger
        International at the time of retraction, which totalled $317,000.

        During 2000, a total of 6,710,817 Series II preference shares were
        retracted in exchange for 3,086,971 shares of Hollinger International
        Class A common stock which, together with the

                                       F-29
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        retraction of retractable common shares in exchange for shares of
        Hollinger International common stock (note 13e)), resulted in a gain on
        effective sale of Hollinger International shares of $28,450,000 (note
        17). In addition, 239,435 Series II preference shares were retracted for
        the cash equivalent value of 0.46 of a share of Class A common stock of
        Hollinger International at the time of retraction, which totalled
        $2,385,000.

        The Series II preference shares represent a financial liability and are
        recorded in the accounts at their fair value, being the market value of
        the shares of Class A common stock of Hollinger International for which
        they are exchangeable. At December 31, 2002, the market value of the
        shares of Class A common stock of Hollinger International into which the
        4,580,979 Series II preference shares were exchangeable was $33,827,000
        or $11,983,000 less than the issue price. At December 31, 2001, the
        market value of the shares of Class A common stock of Hollinger
        International into which the 5,366,979 Series II preference shares are
        exchangeable was $46,000,000 or $7,670,000 less than issue price.

        As at December 31, 2002, the cumulative deferred unrealized gains of
        $11,983,000 have been deferred as the Series II preference shares are
        hedged by the Company's investment in shares of Hollinger International
        Class A common stock, which it intends to deliver in future Series II
        preference share retractions, if any. Delivery of shares of Hollinger
        International Class A common stock on such retractions would result in a
        dilution gain to the Company which would be included in unusual items.

     b)  The Series III preference shares provide for a mandatory redemption on
         the fifth anniversary of issue being April 30, 2004 for $10.00 cash per
         share (plus unpaid dividends) and an annual cumulative dividend,
         payable quarterly, of $0.70 per share per annum (or 7%) during the
         five-year term. The Company has the right at its option to redeem all
         or any part of the Series III preference shares at any time after April
         30, 2002, for $10.00 cash per share (plus unpaid dividends). Holders
         have the right at any time to retract Series III preference shares for
         a retraction price payable in cash which, until April 30, 2003,
         fluctuates by reference to two benchmark Government of Canada bonds
         having a comparable yield and term to the Series III preference shares,
         and during the year ending April 30, 2004, the retraction price will be
         $9.50 per share (plus unpaid dividends in each case).

        During 2000, 315,000 Series III preference shares were retracted for
        cash of $2,748,000. The resulting gain of $402,000 was included in
        unusual items (note 17).

     c)  Certain of the HCPH Special shares, issued in 1997, represented a
         financial liability of the Company which was hedged by the Company's
         investment in shares of Class A common stock of Hollinger
         International. In June 2000, the Company exercised its option to pay
         cash on the mandatory exchange of these Special shares in the amount of
         US$36.8 million. The previously deferred foreign exchange loss arising
         from translating the U.S. dollar obligation was written off to unusual
         items (note 17).

        In addition, in connection with the acquisition of Southam shares in
        1997, HCPH issued 6,552,425 Special shares valued at $10.00 per share at
        the time of issue. In accordance with the terms of these shares,
        Hollinger International was required to deliver cash or common shares of
        Hollinger International upon the exchange of the Special shares and
        accordingly, they did not represent a financial liability of the Company
        and were presented as minority interest. These shares were exchangeable
        at the option of the holder at any time prior to June 26, 2000, into
        newly issued Class A subordinate voting shares of Hollinger
        International. On June 12, 2000, Hollinger International exercised its
        option to pay cash on the mandatory exchange of the HCPH Special shares.
        Pursuant to the terms of the indenture governing the Special shares,
        each Special share was

                                       F-30
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        exchanged for cash of US$8.88 resulting in a payment to Special
        shareholders by Hollinger International of US$58.2 million.

12.  OTHER LIABILITIES AND DEFERRED CREDITS

<Table>
<Caption>
                                                                2001       2002
                                                              --------   --------
<S>                                                           <C>        <C>
Deferred gains..............................................  $  3,189   $  2,536
Pension obligations (note 22)...............................     8,182     12,863
Accrued post-retirement cost (note 22)......................    62,092     60,506
Other benefit obligations...................................    35,607     18,824
Liability for amounts due to Participation Trust (notes 5a)
  and 24d)).................................................       691     21,444
Liability for cross currency swap (note 24d))...............        --     14,475
                                                              --------   --------
                                                              $109,761   $130,648
                                                              ========   ========
</Table>

     Deferred gains represent a lease inducement, which is being recognized in
income over the term of the lease, and a portion of the gain arising on the
Telegraph's transfer of certain equipment to the Trafford Park joint venture,
which is being recognized in income as the assets are depreciated and/or sold by
the joint venture.

13.  CAPITAL STOCK

<Table>
<Caption>
                                                                2001       2002
                                                              --------   --------
<S>                                                           <C>        <C>
AUTHORIZED
  Unlimited number of retractable common shares and an
     unlimited number of preference shares
ISSUED AND FULLY PAID
PREFERENCE SHARES
  4,580,979 Series II (2001 -- 5,366,979) (note 11).........  $     --   $     --
  10,147,225 Series III (2001 -- 10,147,225) (note 11)......        --         --
RETRACTABLE COMMON SHARES
  32,352,047 (2001 -- 32,068,937)...........................   271,774    273,759
                                                              --------   --------
                                                              $271,774   $273,759
                                                              ========   ========
</Table>

     a)  The retractable common shares have terms equivalent to common shares,
         except that they are retractable at any time by the holder for their
         retraction price, which is fixed from time to time, in exchange for the
         Company's shares of Hollinger International Class A common stock of
         equivalent value or, at the Company's option, cash. The retraction
         price each quarter (or, in certain specific cases more frequently) is
         between 90% and 100% of the Company's current value, as determined by
         the Retraction Price Committee in accordance with the share conditions.

     b)  During 2002, 141,000 and 1,148 retractable common shares were retracted
         for cash of $7.50 per share and $5.50 per share, respectively. The
         total retractions in 2002 of 142,148 retractable common shares resulted
         in a gain on retraction of $141,000, which has been included in the
         consolidated statements of deficit.

     c)  In December 2002, the Company paid a stock dividend of 10 cents per
         retractable common share, resulting in 425,258 retractable common
         shares being issued for $3,189,000 with a corresponding amount booked
         to dividends paid.

                                       F-31
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

     d)  During 2001, 20,015 retractable common shares were retracted for cash
         amounts ranging between $8.00 and $14.50 per share for total cash
         consideration of $273,000. In addition, a further 1,809,500 and
         2,476,035 retractable common shares were retracted for $14.50 and
         $13.00 per share, respectively, and were settled with the delivery of
         an aggregate of 2,570,002 shares of Hollinger International Class A
         common stock. This, together with the retraction of Series II
         preference shares for Hollinger International Class A common stock
         (note 11a)) and the Hollinger International share redemptions and sales
         described in note 4e), resulted in a gain on effective sale of the
         Hollinger International shares of $59,449,000 (note 17). The total
         retractions in 2001 of 4,305,550 retractable common shares resulted in
         a premium on retraction of $22,211,000, which has been charged to
         deficit.

     e)  During 2000, 13,210 and 33,918 retractable common shares were retracted
         for cash of $10.00 per share and $16.75 per share, respectively. In
         addition, a further 51,100 and 723,700 retractable common shares were
         retracted for $11.50 and $16.75, respectively, and were settled with
         the delivery of 554,927 shares of Hollinger International Class A
         common stock. This, together with the retraction of Series II
         preference shares for Hollinger International shares (note 11a)),
         resulted in a gain on effective sale of the Hollinger International
         shares of $28,450,000 (note 17). The total retractions in 2000 of
         821,928 retractable common shares resulted in premium on retraction of
         $6,448,000 which has been charged to deficit.

     f)  The Company and certain of its subsidiaries have stock option plans for
         their employees.

        i)   Details of the Hollinger Inc. stock option plan are as follows:

           The Company has one Executive Share Option Plan ("Plan"), under which
           the Company may grant options to certain key executives of the
           Company, its subsidiary or affiliated companies or its parent
           company, for up to 5,560,000 retractable common shares.

           These options give the holder the right to purchase, subject to the
           executives' entitlement to exercise, one retractable common share of
           the Company for each option held. The options are exercisable to the
           extent of 25% thereof at the end of each of the first through fourth
           years following granting, on a cumulative basis. Options expire six
           years after the date of grant. Unexercised options expire one month
           following the date of termination of the executives' employment,
           except in the case of retirement at normal retirement age, death or
           certain offers made to all or substantially all of the holders of
           retractable common shares of the Company, in which events, all
           unexercised options become exercisable in full.

           Stock option activity with respect to the Company's stock options is
           as follows

<Table>
<Caption>
                                                                    NUMBER
                                                                      OF      EXERCISE
                                                                    SHARES     PRICE
                                                                    -------   --------
        <S>                                                         <C>       <C>
        Options outstanding as at December 31, 1999, 2000 and
          2001....................................................  928,000    $13.72
        Options expired in 2002...................................  (15,000)    13.72
                                                                    -------    ------
        Options outstanding as at December 31, 2002...............  913,000    $13.72
                                                                    =======    ======
        Options exercisable at December 31, 2000..................  464,000    $13.72
                                                                    =======    ======
        Options exercisable at December 31, 2001..................  696,000    $13.72
                                                                    =======    ======
        Options exercisable at December 31, 2002..................  913,000    $13.72
                                                                    =======    ======
</Table>

           Options outstanding at December 31, 2000, 2001 and 2002 had a
           remaining contractual life of four, three and two years,
           respectively.

                                       F-32
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        ii)  Details of Hollinger International's stock option plan are as
             follows:

           Hollinger International's Incentive Plan is administered by its
           independent committee ("Committee") of its Board of Directors. The
           Committee has the authority to determine the employees to whom awards
           will be made, the amount and type of awards, and the other terms and
           conditions of the awards. In 1999, the Company adopted the 1999 Stock
           Incentive Plan ("1999 Stock Plan") which superseded its previous two
           plans.

           The 1999 Stock Plan authorizes the grant of incentive stock options
           and nonqualified stock options. The exercise price for stock options
           must be at least equal to 100% of the fair market value of the shares
           of Hollinger International Class A common stock on the date of grant
           of such option.

           Under Section 3870, stock options granted to employees of Ravelston,
           the parent company of the Company, must be measured at fair value and
           recorded as a dividend-in-kind by Hollinger International. On
           February 5, 2002, Hollinger International granted 1,309,000 stock
           options to employees of Ravelston with an exercise price of US$11.13
           per share. The aggregate fair value of these options was $9,594,000
           (US$6,111,000) and this has been recorded by Hollinger International
           as an in-kind dividend (with no impact on the accounts of the
           Company) during the year. On April 2, 2001, Hollinger International
           granted 1,402,500 stock options to employees of Ravelston with an
           exercise price of US$14.37 per share. The aggregate fair value of
           these options was $12,090,000 (US$7,800,000) and was recorded by
           Hollinger International as an in-kind dividend in 2001.

           For all other series of stock options, no compensation cost has been
           recognized by Hollinger International.

           Stock option activity with respect to Hollinger International's stock
           options is as follows:

<Table>
<Caption>
                                                                NUMBER        WEIGHTED
                                                                  OF          AVERAGE
                                                                SHARES     EXERCISE PRICE
                                                              ----------   --------------
                                                                              (IN US$)
        <S>                                                   <C>          <C>
        Options outstanding at December 31, 1999............   5,149,500       $11.88
        Options granted.....................................   2,559,250        10.57
        Options exercised...................................    (471,063)       11.67
        Options cancelled...................................    (536,374)       12.11
                                                              ----------       ------
        Options outstanding at December 31, 2000............   6,701,313        11.38
        Options granted.....................................   2,418,000        14.40
        Options exercised...................................    (624,162)       11.01
        Options cancelled...................................     (82,750)       12.33
                                                              ----------       ------
        Options outstanding at December 31, 2001............   8,412,401        12.26
        Options granted.....................................   2,227,000        11.14
        Options exercised...................................     (75,375)       10.81
        Options cancelled...................................    (168,688)       12.64
                                                              ----------       ------
        Options outstanding at December 31, 2002............  10,395,338       $12.03
                                                              ==========       ======
        Options exercisable at December 31, 2000............   1,989,548       $11.51
                                                              ==========       ======
        Options exercisable at December 31, 2001............   3,032,682       $11.48
                                                              ==========       ======
        Options exercisable at December 31, 2002............   4,739,994       $11.85
                                                              ==========       ======
</Table>

                                       F-33
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        iii) Had the Company determined compensation expense based on the fair
             value method at the grant date for stock options granted to
             employees, consistent with the method prescribed under Section
             3870, the Company's net earnings (loss) for the year and the
             earnings (loss) per share would have been reported as the pro forma
             amounts indicated below. This compensation expense takes into
             account all options granted by the Company and Hollinger
             International, including those granted prior to January 1, 2002.
             The fair value of the options is amortized over the vesting period.

<Table>
<Caption>
                                                        2000       2001        2002
                                                      --------   ---------   --------
        <S>                                           <C>        <C>         <C>
        Net earnings (loss), as reported............  $189,373   $(131,898)  $(88,640)
        Stock-based compensation expense --
          Hollinger Inc.............................      (478)       (239)       (72)
        Stock-based compensation expense --
          Hollinger International Inc...............    (4,712)     (4,711)    (3,985)
                                                      --------   ---------   --------
        Pro forma net earnings (loss)...............  $184,183   $(136,848)  $(92,697)
                                                      ========   =========   ========
        Net earnings (loss) per share:
          As reported...............................  $   5.11   $   (3.91)  $  (2.76)
          Effect of stock-based compensation
             expense................................     (0.14)      (0.15)     (0.13)
                                                      --------   ---------   --------
        Pro forma basic net earnings (loss) per
          share.....................................  $   4.97   $   (4.06)  $  (2.89)
                                                      ========   =========   ========
        Diluted net earnings (loss) per share, as
          reported..................................  $   5.05   $   (4.17)  $  (2.79)
        Pro forma diluted net earnings (loss) per
          share.....................................  $   4.91   $   (4.32)  $  (2.92)
                                                      ========   =========   ========
</Table>

           The fair value of each Hollinger International stock option granted
           during 2000, 2001 and 2002 was estimated on the date of grant for pro
           forma disclosure purposes using the Black-Scholes option-pricing
           model with the following weighted average assumptions used for grants
           in fiscal 2000, 2001 and 2002, respectively: dividend yield of 3.4%,
           4.6% and 3.6%, expected volatility of 43.3%, 55.2% and 68.3%,
           risk-free interest rates of 5.1%, 5.0% and 4.5% and expected lives of
           10 years. Weighted average fair value of options granted by Hollinger
           International during 2000, 2001 and 2002 was $6.12 (US$4.12), $8.79
           (US$5.67) and $8.87 (US$5.65), respectively.

14.  EQUITY ADJUSTMENT FROM FOREIGN CURRENCY TRANSLATION

     As described in note 1 under "Foreign currency translation", this amount
results principally from the accounting treatment for self-sustaining foreign
subsidiaries. The change in the amount from December 31, 2001 to December 31,
2002 primarily reflects the weakening of the Canadian dollar against the British
pound partly offset by the strengthening of the Canadian dollar against the U.S.
dollar and the recognition in unusual items (note 17) of a realized foreign
exchange gain arising on the reduction of net investments in foreign
subsidiaries. The amount at December 31, 2002 is unrealized and bears no
relationship to the underlying value of the Company's investment in foreign
subsidiaries.

                                       F-34
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

15.  COMMITMENTS

     a)  Future minimum lease payments subsequent to December 31, 2002 under
         operating leases are as follows:

<Table>
<S>                                                            <C>
2003........................................................   $ 27,095
2004........................................................   $ 23,976
2005........................................................   $ 21,614
2006........................................................   $ 18,229
2007........................................................   $ 16,896
2008 and subsequent.........................................   $149,441
</Table>

     b)  In connection with certain of its cost and equity investments (note 5),
         Hollinger International and its subsidiaries are committed to fund
         approximately $1.9 million to those investees in 2003.

16.  CONTINGENCIES

     a)  The Telegraph has guaranteed to third parties, the joint venture
         partners' share of operating lease obligations of both the West Ferry
         and Trafford Park joint ventures, which amounted to $948,000 (L372,000)
         at December 31, 2002. These obligations are also guaranteed jointly and
         severally by each joint venture partner.

     b)  In connection with the Company's insurance program, letters of credit
         are required to support certain projected workers' compensation
         obligations. At December 31, 2002, letters of credit in the amount of
         $4,384,500 were outstanding.

     c)  A number of libel and legal actions against the Company and its
         subsidiaries are outstanding. The Company believes there are valid
         defences to these proceedings or sufficient insurance to protect it
         from material loss.

     d)  In special circumstances, the Company's newspaper operations may engage
         freelance reporters to cover stories in locales that carry a high risk
         of personal injury or death. Subsequent to December 31, 2002, the
         Telegraph has engaged a number of journalists and photographers to
         report from the Middle East. As a term of their engagement, the
         Telegraph has agreed to provide a death benefit which, in the aggregate
         for all freelancers engaged, amounts to $13,100,000 (L5,153,000). This
         exposure is uninsured. Precautions have been taken to avoid a
         concentration of the journalists and photographers in any one location.
         The uninsured exposure was reduced to $3,820,000 (L2,600,000) as of
         March 31, 2003.

                                       F-35
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

17.  UNUSUAL ITEMS

<Table>
<Caption>
                                                                2000       2001        2002
                                                              --------   ---------   --------
<S>                                                           <C>        <C>         <C>
Net gain on dilution of investments.........................  $ 25,775   $      --   $     --
Gain (loss) on sale of investments..........................    47,921    (240,060)        --
Gain on sales of interest in Hollinger International (notes
  4a), 4e), 11a) and 13d))..................................    28,450      59,449     20,103
Net gain (loss) on sales of Publishing interests............   697,871     (22,963)        --
Loss on retirement of Senior Notes (note 10c))..............        --          --    (56,287)
New Chicago plant pre-operating costs.......................   (10,097)     (7,237)      (661)
Write-off of financing fees.................................   (16,088)         --         --
Write-off of investments....................................   (31,381)    (79,943)   (63,609)
Decrease in pension valuation allowance (note 22)...........        --      58,704     34,402
Realized loss on Total Return Equity Swap (note 24b)).......        --     (29,646)   (43,313)
Pension and post-retirement plan liability adjustment.......        --     (16,823)        --
Net foreign exchange gain on reduction of net investment in
  foreign subsidiaries......................................        --          --     44,548
Other income (expense), net.................................   (41,506)    (16,915)     2,187
                                                              --------   ---------   --------
                                                              $700,945   $(295,434)  $(62,630)
                                                              ========   =========   ========
</Table>

     The income tax expense related to unusual items amounted to $229,812,000 in
2000, and an income tax recovery of $76,849,000 and $8,043,000 in 2001 and 2002,
respectively. The minority interest expense in unusual items after income taxes
amounted to $251,628,000 in 2000, and a minority interest recovery of
$144,634,000 and $48,570,000 in 2001 and 2002, respectively, resulting in net
earnings (loss) from unusual items after income taxes and minority interest of
$219,505,000, ($73,951,000) and ($6,017,000) in 2000, 2001 and 2002,
respectively.

18.  INCOME TAXES

     Income tax expense (recovery) attributable to income from continuing
operations consists of:

<Table>
<Caption>
                                                        2000       2001        2002
                                                      --------   ---------   --------
<S>                                                   <C>        <C>         <C>
Current.............................................  $617,694   $  56,304   $ (2,615)
Future..............................................  (357,603)   (145,781)   126,640
                                                      --------   ---------   --------
                                                      $260,091   $ (89,477)  $124,025
                                                      ========   =========   ========
</Table>

                                       F-36
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

     The income tax expense (recovery) in the consolidated statements of
earnings varies from the amount that would be computed by applying the basic
federal and provincial income tax rates to loss before income taxes and minority
interest as shown in the following table:

<Table>
<Caption>
                                                        2000       2001        2002
                                                      --------   ---------   --------
<S>                                                   <C>        <C>         <C>
Earnings (loss) before income taxes and minority
  interest..........................................  $780,522   $(454,883)  $(89,511)
                                                      ========   =========   ========
Basic income tax rate...............................     43.95%      41.75%     41.00%
                                                      ========   =========   ========
Computed income tax expense (recovery)..............  $343,039   $(189,914)  $(36,700)
Decrease (increase) in income tax expenses
  (recovery) resulting from:
     Different tax rate on earnings of
       subsidiaries.................................   (83,949)     22,075     17,834
     Tax gain in excess of book gain................  (244,030)     24,293        949
     Potential tax benefit of current year's losses
       not recorded.................................    29,255          --         --
     Large Corporations Tax.........................    15,531         940      1,079
     Loss on Total Return Equity Swap...............        --      12,377     17,758
     Change in valuation allowance..................        --      42,841     74,043
     Minority interest in earnings of Hollinger
       L.P..........................................   (26,669)     (2,001)    (1,214)
     Permanent differences..........................   226,914         (88)    50,276
                                                      --------   ---------   --------
Income tax expense (recovery).......................  $260,091   $ (89,477)  $124,025
                                                      ========   =========   ========
Effective tax rate..................................     33.32%      19.67%    138.56%
                                                      ========   =========   ========
</Table>

     The Company's Canadian subsidiaries have operating losses carried forward
for tax purposes of approximately $76,892,000, the tax benefit of which has not
been reflected in the accounts. These losses expire as follows:

<Table>
<S>                                                            <C>
2004........................................................   $     5
2005........................................................       586
2006........................................................     7,452
2007........................................................     3,365
2008........................................................    40,112
2009........................................................    25,372
                                                               -------
                                                               $76,892
                                                               =======
</Table>

     The Company has recorded a valuation allowance of $74,043,000 in the
current year related to net operating loss carryforwards and other deferred tax
assets in the Canadian group. The valuation allowance in the prior year related
entirely to net operating losses of N.P. Holdings Company, a subsidiary of the
Company. As described in note 23c), this subsidiary was sold to an affiliate
during the year. The tax losses were sold at their carrying value.

                                       F-37
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

     The tax effects of temporary differences that give rise to significant
portions of the future tax assets and future tax liabilities are presented
below:

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   ---------
<S>                                                           <C>         <C>
Future tax assets:
  Net operating loss carryforwards..........................  $ 127,753   $  37,283
  Compensation and accrued pension..........................      7,459       6,952
  Investments...............................................     20,717      51,676
  Post-retirement benefit obligations.......................     28,044      28,050
  Other.....................................................     86,046      30,933
                                                              ---------   ---------
Gross future tax assets.....................................    270,019     154,894
Less valuation allowance....................................    (28,539)    (74,043)
                                                              ---------   ---------
Net future tax assets.......................................    241,480      80,851
                                                              ---------   ---------
Future tax liabilities:
  Property, plant and equipment, principally due to
     differences in depreciation............................     94,037     107,671
  Intangible assets, principally due to differences in basis
     and amortization.......................................    469,564     189,365
  Pension assets............................................      7,746      47,266
  Long-term advances under joint venture printing
     contract...............................................     20,801      20,290
  Deferred gain on exchange of assets.......................     56,009      40,342
  Other.....................................................     80,260      51,396
                                                              ---------   ---------
Gross future tax liabilities................................    728,417     456,330
                                                              ---------   ---------
Future income tax liabilities...............................  $(486,937)  $(375,479)
                                                              =========   =========
</Table>

19.  LOSS AND CASH FLOWS PER RETRACTABLE COMMON SHARE

     The following tables reconcile the numerator and denominator for the
calculation of basic and diluted loss per share for the years ended December 31,
2000, 2001 and 2002:

<Table>
<Caption>
                                                        YEAR ENDED DECEMBER 31, 2000
                                                   ---------------------------------------
                                                     INCOME         SHARES       PER SHARE
                                                   (NUMERATOR)   (DENOMINATOR)    AMOUNT
                                                   -----------   -------------   ---------
                                                    (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                <C>           <C>             <C>
Basic EPS
Net earnings available to common shareholders....   $189,373        37,041         $5.11
Effect of dilutive securities
  Stock options of subsidiary....................     (2,161)           --         (0.06)
                                                    --------        ------         -----
Diluted EPS
Net earnings available to common shareholders....   $187,212        37,041         $5.05
                                                    ========        ======         =====
</Table>

                                       F-38
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

<Table>
<Caption>
                                                        YEAR ENDED DECEMBER 31, 2001
                                                   ---------------------------------------
                                                     INCOME         SHARES       PER SHARE
                                                   (NUMERATOR)   (DENOMINATOR)    AMOUNT
                                                   -----------   -------------   ---------
                                                    (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                <C>           <C>             <C>
Basic EPS
Net loss available to common shareholders........   $(131,898)      33,740        $(3.91)
Effect of dilutive securities
  Stock options of subsidiary....................      (8,651)          --         (0.26)
                                                    ---------       ------        ------
Diluted EPS
Net loss available to common shareholders........   $(140,549)      33,740        $(4.17)
                                                    =========       ======        ======
</Table>

<Table>
<Caption>
                                                        YEAR ENDED DECEMBER 31, 2002
                                                   ---------------------------------------
                                                     INCOME         SHARES       PER SHARE
                                                   (NUMERATOR)   (DENOMINATOR)    AMOUNT
                                                   -----------   -------------   ---------
                                                    (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                <C>           <C>             <C>
Basic EPS
Net loss available to common shareholders........   $(88,640)       32,064        $(2.76)
Effect of dilutive securities
  Stock options of subsidiary....................       (885)           --         (0.03)
                                                    --------        ------        ------
Diluted EPS
Net loss available to common shareholders........   $(89,525)       32,064        $(2.79)
                                                    ========        ======        ======
</Table>

     For 2000, 2001 and 2002, the effect of potentially dilutive options of the
Company were excluded from the computation of diluted loss per share as their
effect is anti-dilutive.

<Table>
<Caption>
                                                              YEAR ENDED DECEMBER 31
                                                              ----------------------
                                                              2000     2001    2002
                                                              -----   ------   -----
<S>                                                           <C>     <C>      <C>
Cash flows provided by (used for) operations per retractable
  common share
  Basic.....................................................  $4.15   $(3.56)  $1.86
  Diluted...................................................  $4.09   $(3.82)  $1.83
</Table>

     Cash flows provided by (used for) operations per retractable common share
is based on the cash flows provided by (used for) operations as computed in note
20. Diluted cash flows provided by (used for) operations utilize the effect of
dilutive securities on income, as disclosed in note 19. Cash flows provided by
(used for) operations per retractable common share calculations utilize the
weighted average number of retractable common shares outstanding during the year
of 37,040,670, 33,740,182 and 32,064,151, in 2000, 2001 and 2002, respectively.

                                       F-39
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

20.  CASH FLOWS

     a)  Cash flows provided by (used for) operations is before any increase or
         decrease in non-cash operating working capital and other costs. These
         items are included in the consolidated statements of cash flows. Cash
         flows provided by (used for) operations is determined as follows:

<Table>
<Caption>
                                                        2000       2001        2002
                                                      --------   ---------   --------
<S>                                                   <C>        <C>         <C>
Net earnings (loss).................................  $189,373   $(131,898)  $(88,640)
Unusual items (note 17).............................  (700,945)    295,434     62,630
Current income taxes related to unusual items.......   459,831     (15,155)       149
Items not involving cash:
  Depreciation and amortization.....................   219,932     144,716     88,193
  Amortization of deferred financing costs..........    18,504      18,648     11,347
  Future income taxes...............................  (357,603)   (145,781)   126,640
  Minority interest.................................   307,079    (249,439)  (131,187)
  Net earnings in equity-accounted companies, net of
     dividends received.............................    14,115      36,789      1,233
  Non-cash interest income on CanWest debentures....    11,463     (67,517)    (9,239)
  Miscellaneous.....................................    (8,170)     (6,008)    (1,498)
                                                      --------   ---------   --------
                                                      $153,579   $(120,211)  $ 59,628
                                                      ========   =========   ========
</Table>

     b)  The change in non-cash operating working capital is determined as
         follows:

<Table>
<Caption>
                                                          YEAR ENDED DECEMBER 31,
                                                      -------------------------------
                                                        2000        2001       2002
                                                      ---------   --------   --------
<S>                                                   <C>         <C>        <C>
Changes in current assets and current liabilities,
  net of acquisitions and dispositions:
  Accounts receivable...............................  $ (77,880)  $ 23,666   $  1,061
  Inventory.........................................    (11,152)    (3,886)    14,704
  Prepaid expenses..................................        903     (2,594)    (4,337)
  Amounts due to related parties....................     (5,897)        --     14,775
  Accounts payable and accrued expenses.............    (38,678)    55,373    (26,223)
  Income taxes payable..............................     53,466    (77,980)    31,821
  Deferred revenue..................................       (933)   (11,726)    (1,307)
  Bank indebtedness.................................     10,340   (150,813)     1,094
  Other.............................................    (12,625)    23,531      9,740
                                                      ---------   --------   --------
                                                      $ (82,456)  $(144,429) $ 41,328
                                                      =========   ========   ========
</Table>

21.  SEGMENTED INFORMATION

     The Company operates principally in the business of publishing, printing
and distribution of newspapers and magazines and holds investments principally
in companies which operate in the same business as the Company. Other
investments held by the Company either do not represent a business segment or
are not sufficiently significant to warrant classification as a separate segment
and are included within Corporate and Other. HCPH Co., Hollinger L.P. and, until
August 31, 2001, National Post make up the Canadian Newspaper Group. The U.S.
Community Group includes the results of the Jerusalem Post and the last
remaining U.S. Community paper until it was sold in August 2001. The following
is a summary of the reportable segments of the Company.

                                       F-40
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

<Table>
<Caption>
                               UNITED STATES
                            --------------------     U.K.       CANADIAN
YEAR ENDED                  CHICAGO    COMMUNITY   NEWSPAPER   NEWSPAPER    CORPORATE   CONSOLIDATED
DECEMBER 31, 2000            GROUP       GROUP       GROUP       GROUP      AND OTHER      TOTAL
-----------------           --------   ---------   ---------   ----------   ---------   ------------
<S>                         <C>        <C>         <C>         <C>          <C>         <C>
Sales revenue.............  $596,759   $100,104    $882,196    $1,579,200   $     21     $3,158,280
Cost of sales and
  expenses................   504,079     85,702     684,900     1,294,975     16,527      2,586,183
                            --------   --------    --------    ----------   --------     ----------
Sales revenue less cost of
  sales and expenses......    92,680     14,402     197,296       284,225    (16,506)       572,097
Depreciation and
  amortization............    37,328      7,653      58,148       110,112      6,691        219,932
                            --------   --------    --------    ----------   --------     ----------
Operating income (loss)...  $ 55,352   $  6,749    $139,148    $  174,113   $(23,197)    $  352,165
                            ========   ========    ========    ==========   ========     ==========
Expenditures on capital
  assets..................  $ 38,177   $  5,038    $ 24,039    $   42,812   $  2,595     $  112,661
                            ========   ========    ========    ==========   ========     ==========
</Table>

<Table>
<Caption>
                               UNITED STATES
                            --------------------      U.K.      CANADIAN
YEAR ENDED                  CHICAGO    COMMUNITY   NEWSPAPER    NEWSPAPER   CORPORATE   CONSOLIDATED
DECEMBER 31, 2001            GROUP       GROUP       GROUP        GROUP     AND OTHER      TOTAL
-----------------           --------   ---------   ----------   ---------   ---------   ------------
<S>                         <C>        <C>         <C>          <C>         <C>         <C>
Sales revenue.............  $686,266    $29,619    $  801,053   $305,073    $     49     $1,822,060
Cost of sales and
  expenses................   622,974     31,950       703,296    337,383      34,505      1,730,108
                            --------    -------    ----------   --------    --------     ----------
Sales revenue less cost of
  sales and expenses......    63,292     (2,331)       97,757    (32,310)    (34,456)        91,952
Depreciation and
  amortization............    53,537      2,962        63,855     18,134       6,228        144,716
                            --------    -------    ----------   --------    --------     ----------
Operating income (loss)...  $  9,755    $(5,293)   $   33,902   $(50,444)   $(40,684)    $  (52,764)
                            ========    =======    ==========   ========    ========     ==========
Total assets..............  $973,279    $85,291    $1,257,805   $691,568    $648,173     $3,656,116
                            ========    =======    ==========   ========    ========     ==========
Expenditures on capital
  assets..................  $ 19,343    $   463    $   48,788   $  4,405    $ 18,407     $   91,406
                            ========    =======    ==========   ========    ========     ==========
</Table>

<Table>
<Caption>
                              UNITED STATES
                           --------------------      U.K.      CANADIAN
YEAR ENDED                 CHICAGO    COMMUNITY   NEWSPAPER    NEWSPAPER   CORPORATE    CONSOLIDATED
DECEMBER 31, 2002           GROUP       GROUP       GROUP        GROUP     AND OTHER       TOTAL
-----------------          --------   ---------   ----------   ---------   ----------   ------------
<S>                        <C>        <C>         <C>          <C>         <C>          <C>
Sales revenue............  $693,690    $20,781    $  804,584   $109,121    $       22    $1,628,198
Cost of sales and
  expenses...............   591,628     25,259       693,895    112,723        30,389     1,453,894
                           --------    -------    ----------   --------    ----------    ----------
Sales revenue less cost
  of sales and
  expenses...............   102,062     (4,478)      110,689     (3,602)      (30,367)      174,304
Depreciation and
  amortization...........    42,378      3,682        35,939      1,713         4,481        88,193
                           --------    -------    ----------   --------    ----------    ----------
Operating income
  (loss).................  $ 59,684    $(8,160)   $   74,750   $ (5,315)   $  (34,848)   $   86,111
                           ========    =======    ==========   ========    ==========    ==========
Total assets.............  $895,917    $59,173    $1,120,023   $411,891    $1,152,857    $3,639,861
                           ========    =======    ==========   ========    ==========    ==========
Expenditures on capital
  assets.................  $ 24,344    $ 7,888    $   27,680   $  3,575    $      116    $   63,603
                           ========    =======    ==========   ========    ==========    ==========
</Table>

     Corporate and Other includes results of miscellaneous operations.

22.  EMPLOYEE BENEFIT PLANS

DEFINED CONTRIBUTION PENSION PLANS

     Hollinger International sponsors six defined contribution plans, three of
which have provisions for Hollinger International matching contributions. For
the years ended December 31, 2000, 2001 and 2002,

                                       F-41
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

Hollinger International contributed $2,372,000, $2,402,000 and $3,330,000,
respectively. Hollinger International sponsors 11 defined contribution plans in
Canada and contributed $3,069,000, $261,500 and $241,000 to the plans in 2000,
2001 and 2002, respectively.

     The Telegraph sponsors a defined contribution plan for the majority of its
employees, as well as a defined contribution plan to provide pension benefits
for senior executives. For 2000, 2001 and 2002, contributions to the defined
contribution plan are included as part of the service cost of the defined
benefit plan. For the years ended December 31, 2000, 2001 and 2002, the
Telegraph contributed $874,000, $803,000 and $835,000, respectively, to the
Telegraph Executive Pension Scheme. The Telegraph plan's assets consist
principally of U.K. and overseas equities, unit trusts and bonds.

DEFINED BENEFIT PENSION PLANS

     The Company's subsidiaries have ten foreign and seven domestic
single-employer defined benefit plans and contribute to various union-sponsored,
collectively bargained multi-employer pension plans. The Company's subsidiaries'
contributions to these plans for the years ended December 31, 2000, 2001 and
2002 were:

<Table>
<Caption>
                                                           2000      2001      2002
                                                          -------   -------   -------
<S>                                                       <C>       <C>       <C>
Single-employer plans...................................  $20,010   $15,737   $20,166
                                                          =======   =======   =======
Multi-employer plans....................................  $ 9,324   $ 1,938   $    --
                                                          =======   =======   =======
</Table>

     The Telegraph has a defined benefit plan that was closed to new
participants on July 1, 1991 and provides only benefits accrued up to that date.
The liabilities of the plan have been actuarially valued as at December 31,
2002. At that date, the market value of the plan assets was $191,742,000,
representing 91% of the estimated cost of purchasing the plan's benefits from an
insurance company. The actuary assumed a discount rate of 5.6%. Increases to
pension payments are discretionary and are awarded by the trustees, with the
Telegraph's consent, from surpluses arising in the fund from time to time.
Contributions to the plan were $9,900,000 $10,034,000 and $10,616,000 in 2000,
2001 and 2002, respectively.

     West Ferry and Trafford Park have defined benefit plans, the West Ferry
Printers Pension Scheme and the Trafford Park Printers Pension Scheme,
respectively, of which 50%, being the Telegraph's share in the joint venture, of
the pension costs and obligations are included in the Company's financial
statements. Pursuant to the West Ferry joint venture agreement, the Telegraph
has a commitment to fund 50% of the obligation under West Ferry's defined
benefit plan.

SINGLE-EMPLOYER PENSION PLANS

     The benefits under the subsidiary companies' single-employer pension plans
are based primarily on years of service and compensation levels. These companies
fund the annual provisions which are deductible for income tax purposes. The
plans' assets consist principally of marketable equity securities and corporate
and government debt securities.

                                       F-42
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

     The components of the net period cost (benefit) for the years ended
December 31, 2000, 2001 and 2002 are as follows:

<Table>
<Caption>
                                                         2000       2001       2002
                                                       --------   --------   --------
<S>                                                    <C>        <C>        <C>
Service cost.........................................  $ 22,076   $ 15,308   $ 15,930
Interest cost........................................    64,590     49,433     49,541
Expected return on plan assets.......................   (90,011)   (56,133)   (52,422)
Amortization of prior service costs..................       900        583        782
Settlement and curtailment...........................     6,487      2,272         --
Amortization of net (gain) loss......................      (304)     1,516      6,200
Change in valuation allowance against prepaid benefit
  cost...............................................    97,258    (59,106)   (34,729)
                                                       --------   --------   --------
Net period cost (benefit)............................  $100,996   $(46,127)  $(14,698)
                                                       ========   ========   ========
</Table>

     The table below sets forth the reconciliation of the benefit obligation as
of December 31, 2001 and 2002:

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   --------
<S>                                                           <C>         <C>
Benefit obligation at the beginning of the year.............  $ 864,839   $780,138
Adjustments to opening balance..............................      7,243         --
Service cost................................................     15,308     15,930
Interest cost...............................................     49,433     49,541
Participant contributions...................................      9,027      7,539
Divestitures................................................   (122,131)        --
Plan amendments.............................................         28      9,629
Settlement gain.............................................    (12,973)        --
Exchange rate differences...................................     17,860     33,314
Changes in assumptions......................................         --     (1,000)
Actuarial loss (gain).......................................     17,402    (21,064)
Benefits paid...............................................    (65,898)   (69,670)
                                                              ---------   --------
Benefit obligation at the end of the year...................  $ 780,138   $804,357
                                                              =========   ========
</Table>

     The 2001 settlement gain was related to the sale of Canadian newspapers.
The 2000 curtailment and settlement gains were related to the sale of Canadian
and Community Group newspapers.

     The table below sets forth the change in plan assets for the years ended
December 31, 2001 and 2002:

<Table>
<Caption>
                                                                2001        2002
                                                              ---------   --------
<S>                                                           <C>         <C>
Fair value of plan assets at the beginning of the year......  $ 971,208   $757,751
Adjustment to opening balance...............................         --      4,897
Actual return on plan assets................................    (37,943)   (67,865)
Exchange rate differences...................................     16,969     27,529
Employer contributions......................................     15,737     20,166
Participant contributions...................................      9,027      7,539
Settlement gain.............................................    (15,245)        --
Divestitures................................................   (136,104)        --
Benefits paid...............................................    (65,898)   (69,670)
                                                              ---------   --------
Fair value of plan assets at the end of the year............  $ 757,751   $680,347
                                                              =========   ========
</Table>

                                       F-43
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

     The following table provides the amounts recognized in the consolidated
balance sheet as of December 31, 2001 and 2002:

<Table>
<Caption>
                                                                2001       2002
                                                              --------   ---------
<S>                                                           <C>        <C>
Plan deficit................................................  $(22,387)  $(124,010)
Unrecognized net actuarial loss.............................   133,110     233,369
Unrecognized prior service cost.............................     3,699       3,039
Unrecognized net transition obligation......................      (331)      2,054
                                                              --------   ---------
Prepaid benefit cost........................................   114,091     114,452
Valuation allowance.........................................   (38,814)     (4,085)
                                                              --------   ---------
Prepaid benefit cost, net of valuation allowance............  $ 75,277   $ 110,367
                                                              ========   =========
</Table>

     The above prepaid benefit cost is classified in the consolidated balance
sheet as follows:

<Table>
<Caption>
                                                               2001       2002
                                                              -------   --------
<S>                                                           <C>       <C>
Deferred pension asset (note 8).............................  $83,459   $123,230
Pension obligations (note 12)...............................   (8,182)   (12,863)
                                                              -------   --------
Prepaid benefit cost, net of valuation allowance............  $75,277   $110,367
                                                              =======   ========
</Table>

     The ranges of assumptions on the Company's foreign plans were as follows:

<Table>
<Caption>
                                                2000          2001           2002
                                             -----------   -----------   ------------
<S>                                          <C>           <C>           <C>
Discount rate..............................  6.0% - 8.0%   6.0% - 8.0%   5.6% - 6.75%
Expected return on plan assets.............  6.0% - 9.0%   6.0% - 9.0%   5.6% - 8.25%
Compensation increase......................  3.0% - 3.5%   2.5% - 3.5%   2.5% - 3.30%
                                             -----------   -----------   ------------
</Table>

     The ranges of assumptions used for the Company's domestic plans were as
follows:

<Table>
<Caption>
                                                2000          2001           2002
                                             -----------   -----------   ------------
<S>                                          <C>           <C>           <C>
Discount rate..............................         7.0%          6.5%          7.00%
Long-term rate of return on plan assets....  7.0% - 9.0%   7.0% - 9.0%   6.5% - 7.00%
Compensation increase......................  3.5% - 4.0%   4.0% - 4.5%   4.0% - 4.50%
                                             -----------   -----------   ------------
</Table>

VALUATION ALLOWANCE

     As a result of the 2000 sale of Canadian newspapers to CanWest, the
expected future benefits to be derived from the plan surplus at that time were
significantly reduced and a valuation allowance of $97.9 million was provided
for. Due to the reduction in the plan surplus in 2001 and 2002 as a result of a
decline in the market value of the assets in the plan, the valuation allowance
required against the pension asset has been reduced by $58.7 million and $34.4
million, respectively. This change in the valuation allowance, in respect of the
HCPH Co. pension plans, has been recognized in income in 2001 and 2002 as an
unusual item (note 17).

     Approval by the various provincial pension regulatory bodies has not yet
been granted for the transfer of pension assets related to the operations
previously sold. To the extent pension surpluses are required to be transferred
for the CanWest properties, the Company is entitled to a cash payment from
CanWest for a portion of that amount. The Company anticipates that these
transfers will be made in 2003.

                                       F-44
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

MULTI-EMPLOYER PENSION PLANS

     Certain U.S. employees were covered by union-sponsored multi-employer
pension plans, all of which are defined benefit plans. Contributions were
determined in accordance with the provisions of negotiated labour contracts and
are generally based on the number of man-hours worked. Pension expense for these
plans was $1,828,000, nil and nil for the years ended December 31, 2000, 2001
and 2002, respectively. The newspaper properties participating in these
multi-employer plans were sold in 2000. The passage of the Multi-employer
Pension Plan Amendments Act of 1980 (the "Act") may, under certain
circumstances, cause Hollinger International to become subject to liabilities in
excess of the amounts provided for in the collective bargaining agreements.
Generally, liabilities are contingent upon withdrawal or partial withdrawal from
the plans. Hollinger International has not undertaken to withdraw or partially
withdraw from any of the plans as of December 31, 2002. Under the Act,
withdrawal liabilities would be based upon Hollinger International's
proportional share of each plan's unfunded vested benefits. As of the date of
the latest actuarial valuations, Hollinger International's share of the unfunded
vested liabilities of each plan was zero.

POST-RETIREMENT BENEFITS

     The Company's subsidiaries sponsor two post-retirement plans that provide
post-retirement benefits to certain employees in Canada.

     The components of net period post-retirement cost (benefit) for the years
ended December 31, 2000, 2001 and 2002 are as follows:

<Table>
<Caption>
                                                            2000      2001      2002
                                                          --------   -------   ------
<S>                                                       <C>        <C>       <C>
Service cost............................................  $  1,021   $   186   $  133
Interest cost...........................................     4,044     2,966    2,801
Amortization of gains...................................      (199)   (3,700)    (500)
Settlement/curtailment..................................   (18,250)   (2,671)      --
                                                          --------   -------   ------
Net period post-retirement cost (benefit)...............  $(13,384)  $(3,219)  $2,434
                                                          ========   =======   ======
</Table>

     The table below sets forth the reconciliation of the accumulated
post-retirement benefit obligation as of December 31, 2001 and 2002:

<Table>
<Caption>
                                                               2001      2002
                                                              -------   -------
<S>                                                           <C>       <C>
Accumulated post-retirement benefit obligation at the
  beginning of the year.....................................  $65,766   $65,160
Adjustment to opening balance...............................    9,580     4,461
Service cost................................................      186       133
Interest cost...............................................    2,966     2,801
Actuarial gains.............................................   (2,192)   (1,152)
Benefits paid...............................................   (2,860)   (3,103)
Divestitures................................................   (8,286)       --
                                                              -------   -------
Accumulated post-retirement benefit obligation at the end of
  the year..................................................  $65,160   $68,300
                                                              =======   =======
</Table>

     The fair value of plan assets was $1,200,000 and $5,449,000 at December 31,
2001 and 2002, respectively.

                                       F-45
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

     The table below sets forth the plan's funded status reconciled to the
amounts recognized in the Company's financial statements:

<Table>
<Caption>
                                                                2001       2002
                                                              --------   --------
<S>                                                           <C>        <C>
Unfunded status.............................................  $(63,960)  $(62,851)
Unrecognized net loss.......................................     1,868      2,345
                                                              --------   --------
Accrued post-retirement liability (note 12).................  $(62,092)  $(60,506)
                                                              ========   ========
</Table>

     The weighted average discount rate used in determining the accumulated
post-retirement benefit obligation was 6.75%, 6.5% and 6.25% for 2000, 2001 and
2002, respectively. All benefits under the plans are paid for by contributions
to the plans. For measuring the expected post-retirement benefit obligation of
former Southam employees, an 8% annual rate of increase in the per capita claims
was assumed for 2002, 9% for 2001, and 10% for 2000.

     Assumed health care cost trend rates have a significant effect on the
amounts reported for health care plans. If the health care cost trend rate was
increased 1%, the accumulated post-retirement benefit obligation as of December
31, 2001 and 2002 would have increased $3,390,000 and $2,846,000, respectively,
and the effect of this change on the aggregate of service and interest cost for
2001 and 2002 would have been an increase of $220,000 and $260,000,
respectively. If the health care cost trend rate was decreased 1%, the
accumulated post-retirement benefit obligation as of December 31, 2001 and 2002
would have decreased by $2,098,000 and $2,556,000, respectively, and the effect
of this change on the aggregate of service and interest cost for 2001 and 2002
would have been a decrease of $160,000 and $233,000, respectively.

23.  RELATED PARTY TRANSACTIONS

     a)  Lord Black controls Ravelston and, through Ravelston and its
         subsidiaries, together with his associates, he exercises control or
         direction over 78.2% (2000 -- 68.6%; 2001 -- 77.8%) of the outstanding
         retractable common shares of the Company.

        Ravelston has rights of first refusal in respect of any retractable
        common shares of the Company that may be issued on exercise of options
        held to acquire retractable common shares should the holders decide to
        exercise their options and dispose of the retractable common shares.

        Hollinger International and its subsidiaries have entered into a
        services agreement with Ravelston, whereby Ravelston acts as manager of
        the Company and carries out head office and executive responsibilities.
        The services agreement was assigned on July 5, 2002 to RMI, a wholly
        owned subsidiary of Ravelston. Ravelston and RMI billed to Hollinger
        International and its subsidiaries fees totalling $49,943,000,
        $44,853,000 and $37,272,000 for 2000, 2001 and 2002, respectively,
        pursuant to this agreement.

        Similarly, Ravelston carries out head office and executive
        responsibilities for the Company and its subsidiaries, other than
        Hollinger International and its subsidiaries. In 2001 and 2002, no
        amounts were charged by Ravelston for such services. In 2000, the
        Company received $10.7 million, net, from Ravelston pursuant to a
        services agreement which was terminated on December 31, 2000.

        Expenses of the Company are net of $2.0 million and $2.4 million in 2001
        and 2002, respectively, received from Ravelston and RMI as a
        reimbursement of certain head office expenses incurred on behalf of
        Ravelston and RMI. Such expenses were not incurred on behalf of
        Ravelston in 2000.

        Certain executives of Ravelston and Moffat Management and Black-Amiel
        Management, affiliates of Ravelston and RMI, have separate services
        agreements with certain subsidiaries of Hollinger International. Amounts
        paid directly by subsidiaries of Hollinger International pursuant to
        such

                                       F-46
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        agreements were $5,436,000, $2,629,000 and $2,976,000 for 2000, 2001 and
        2002, respectively. The fees under Ravelston's and RMI's services
        agreement and the fees paid directly to executives and affiliates of
        Ravelston, in aggregate, are negotiated with and approved by Hollinger
        International's independent committee.

        In addition to all of the amounts referred to above, during 2000 and
        2001, there was further remuneration paid directly by subsidiaries of
        Hollinger International to certain Ravelston executives of $6,293,000
        and $2,592,000, respectively (2002 -- nil).

     b)  On July 11, 2000, Hollinger International loaned US $36,817,000 to a
         subsidiary of the Company in connection with the cash purchase by the
         Company of HCPH Co. Special shares. The loan is payable on demand and
         to December 31, 2001 interest was payable at the rate of 13% per annum.
         Effective January 1, 2002, the interest rate was adjusted to LIBOR plus
         3% per annum. This loan, together with accrued interest, totalled US
         $45,848,000 at December 31, 2002. On March 10, 2003, a portion of this
         loan has been settled and the terms of the loan have been amended as
         described in note 29c).

     c)  On July 3, 2002, N.P. Holdings Company ("NP Holdings"), a subsidiary of
         Hollinger International, was sold for cash consideration of $5.75
         million to RMI. The net assets of NP Holdings primarily included
         Canadian tax losses. The tax losses, only a portion of which was
         previously recognized for accounting purposes, were effectively sold at
         their carrying value. Due to the inability of NP Holdings to utilize
         its own tax losses prior to their expiry, as a result of its disposing
         of its interest in the National Post, it sold these losses to a company
         which would be able to utilize the losses. The only other potential
         purchaser for these losses, CanWest, declined the opportunity to
         acquire the losses. The terms of the sale of the tax losses to RMI were
         approved by the independent directors of Hollinger International.

     d)  The Company and its subsidiaries have unsecured demand loans and
         advances, including accrued interest owing to Ravelston totalling $59.1
         million and $75.8 million at December 31, 2001 and 2002, respectively.
         At December 31, 2000, the Company and its subsidiaries have unsecured
         demand loans and advances receivable of $1.0 million. The Company has
         borrowed the majority of these funds from Ravelston to partially fund
         its operating costs, including interest and preference share dividend
         obligations. The loans bear interest at the bankers' acceptance rate
         plus 3.75% per annum or 6.68% as at December 31, 2002.

         Hollinger International owes $11.6 million, $13.7 million and $5.0
         million at December 31, 2000, 2001 and 2002, respectively, to Ravelston
         or RMI in connection with fees payable pursuant to the services
         agreement. As at December 31, 2002, HCPH Co. also owes RMI $22.5
         million in connection with the assumption by RMI, as a result of its
         purchase of NP Holdings (note 23c)), of a liability of $22.5 million
         owing to CanWest. This amount is due on demand, is unsecured and is
         stated to bear interest at an annual rate of the bankers' acceptance
         rate plus 4%.

     e)  In response to the 1998 issuer bid, all options held by executives were
         exercised. As at December 31, 2000, 2001 and 2002, included in accounts
         receivable is $5,866,000, $5,843,000 and $5,892,000, respectively, due
         from executives, which bears interest at the prime rate plus  1/2%. The
         receivables are fully secured by a pledge of the shares held by the
         executives.

     f)  In 1999, executive-controlled companies invested in Hollinger L.P. As
         at December 31, 2000, 2001 and 2002, included in accounts receivable is
         $681,000, $436,000 and $373,000 due from these companies, which bears
         interest at the prime rate plus 1/2%. The receivables are partially
         secured by a pledge of the units held in Hollinger L.P.

                                       F-47
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

     g)  During 2000 and 2001, in connection with the sales of properties
         described in note 4c), 4g) and 4i), the Company, Ravelston, Hollinger
         International, Lord Black and three senior executives entered into
         non-competition agreements with the purchasers in return for cash
         consideration paid.

     h)  As described in note 4c), 4f) and 4j), during 2001, the Company sold
         newspaper properties to certain related parties.

     i)   As described in note 4e), during 2001, Hollinger International
          redeemed certain of its shares held by the Company and converted
          preference shares held by the Company into shares of Hollinger
          International Class A common stock. The shares of Class A common stock
          were subsequently purchased by Hollinger International from the
          Company for cancellation.

     j)   Included in Other Assets at December 31, 2002 is $6,525,000
          (US$4,130,000), owing to Hollinger International from Bradford
          Publishing Company ('Bradford'), a company in which certain of the
          Company's and Hollinger International's directors are significant
          shareholders. Such amount represents the present value of the
          remaining amounts owing under a non-interest bearing note receivable
          granted to Hollinger International in connection with a
          non-competition agreement entered into on the sale of certain
          operations to Bradford during 2000. The note receivable is unsecured,
          due over the period to 2010 and is subordinated to Bradford's lenders.

     k)  Included in Other Assets at December 31, 2002 is $7,677,000
         (US$4,859,000) owed by Horizon Publications Inc. ("Horizon"), a company
         controlled by certain members of the Board of Directors of Hollinger
         International and the Company. Such amount represents the unpaid
         purchase price payable to Hollinger International in connection with
         the sale of certain operations to Horizon during 1999. The loan
         receivable is unsecured, bears interest at the lower of LIBOR plus 2%
         and 8% per annum and is due in 2007.

     l)   During 2002, the Company paid to Horizon a management fee in the
          amount of $256,000 in connection with certain administrative services
          provided by Horizon. Such fee was approved by Hollinger
          International's independent directors.

     m) Additional related party transactions occurring subsequent to year end
        are described in note 29.

24.  FINANCIAL INSTRUMENTS

     a)  Risk management activities

        i)   Credit risk

           The Company does not have a significant exposure to any individual
           customer or counterparty. The Company is exposed to credit risk in
           the event of non-performance by counterparties in connection with its
           foreign currency contracts and interest rate swap agreements. The
           Company does not obtain collateral or other security to support
           financial instruments subject to credit risk but mitigates this risk
           by dealing only with financially sound counterparties and,
           accordingly, does not anticipate loss due to non-performance.

        ii)  Interest rate and currency risk

           The Company and its subsidiaries have entered into interest rate
           swaps, forward foreign exchange contracts and cross-currency rate
           swaps, as described in detail in notes 24c) and 24d) below.

                                       F-48
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        iii) Market risk

           During 1999, the Company's Series II exchangeable preference shares
           became exchangeable for a fixed number of shares of Hollinger
           International Class A common stock. As a result, such shares are
           valued at an amount equivalent to the market price of the underlying
           shares of Hollinger International Class A common stock for which they
           are exchangeable. While the carrying value of these exchangeable
           shares will fluctuate with the market price of the shares of
           Hollinger International Class A common stock, this market risk is
           mitigated by the Company's holding of such Hollinger International
           shares.

     b)  Forward share purchase contracts

        At December 31, 2000, Hollinger International had arrangements with four
        banks pursuant to which the banks had purchased 14,109,905 shares of
        Hollinger International's Class A common stock at an average price of
        US$14.17. Hollinger International had the option, quarterly, up to and
        including September 30, 2000, to buy the shares from the banks at the
        same cost or to have the banks resell those shares in the open market.
        These arrangements were extended from time to time for periods
        ultimately ending between February 28, 2003 and June 30, 2003. In the
        event the banks resold the shares, any gain or loss realized by the
        banks would be for Hollinger International's account. Under the
        arrangements, until Hollinger International purchased the shares or the
        banks resold the shares, dividends paid on shares belonged to Hollinger
        International and Hollinger International paid interest to the banks,
        based on their purchase price at the rate of LIBOR plus a spread.

        In August 2001, Hollinger International purchased for cancellation from
        one of the banks 3,602,305 shares of Class A common stock for
        US$50,000,000 or US$13.88 per share. The market value of these shares on
        the date of purchase was US$47,000,000 or US$13.05 per share.

        In November 2001, one of the banks sold in the open market 3,556,513
        shares of Hollinger International Class A common stock for US$34,200,000
        or an average price of US$9.62 per share. This resulted in a loss to the
        bank of US$15,800,000, which, in accordance with the arrangement, was
        paid in cash by Hollinger International.

        At December 31, 2001, Hollinger International had two forward equity
        swap arrangements remaining with banks for a total of US$100,000,000. Of
        that total, US$10,000,000 was prepaid during the course of 2002 from
        available cash on hand. In October 2002, a further US$50,000,000 was
        prepaid using the proceeds from borrowings in that month referred to in
        note 10d). In December 2002, the forward equity swap arrangements were
        terminated when Hollinger International purchased for cancellation from
        the banks approximately 7.0 million shares of Class A common stock of
        Hollinger International for a total cost of US$100,000,000 (including
        the US$60,000,000 prepaid during 2002). The additional US$40,000,000
        payment was paid from a portion of the proceeds received in December
        2002 from Publishing's Senior Credit Facility and 9% Senior Notes (note
        10). This resulted in a realized loss of $43,313,000, on the 2002
        termination of the contracts, which has been included in unusual items
        (note 17). During 2001, a realized loss of $29,646,000 on contracts
        terminated in 2001 was included in unusual items (note 17).

        The Total Return Equity Swaps were originally entered into as a
        structure for the repurchase of Hollinger International's shares over an
        extended time frame based on a price fixed at the outset of the
        arrangement. Hollinger International does not presently intend to enter
        into further similar arrangements.

                                       F-49
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

     c)  Fair values of financial instruments

        The Company has entered into various types of financial instruments in
        the normal course of business. Fair value estimates are made at a
        specific point in time, based on assumptions concerning the amount and
        timing of estimated future cash flows and assumed discount rates
        reflecting the country of origin and varying degrees of perceived risk.
        The estimates are subjective in nature and involve uncertainties and
        matters of significant judgment and, therefore, may not accurately
        represent future realizable values.

        The carrying value and estimated fair value of the Company's financial
        instruments at December 31, 2001 and 2002 are as follows:

<Table>
<Caption>
                                                2001                      2002
                                       -----------------------   -----------------------
                                        CARRYING                  CARRYING
                                         VALUE      FAIR VALUE     VALUE      FAIR VALUE
                                       ----------   ----------   ----------   ----------
    <S>                                <C>          <C>          <C>          <C>
    Marketable securities (note 5)...  $   78,939   $   65,871   $   91,476   $   90,032
    Long-term debt (note 10).........   1,351,626    1,288,199    1,789,321    1,651,150
    Retractable preference shares
      (note 11)......................     147,472      147,472      135,299      135,299
    Liability for interest rate
      swaps..........................       1,567        1,567           --           --
    Foreign currency obligation (note
      12)............................      25,442       25,442       21,444       21,444
    Forward foreign exchange contract
      -- asset (note 12).............      24,751       24,751           --           --
    Forward share purchase contracts
      -- liability (note 24b)).......          --       29,735           --           --
    Cross-currency swap -- liability
      (note 12)......................          --           --       14,475       14,475
</Table>

        The carrying values of cash and cash equivalents, escrow deposits,
        accounts receivable, bank indebtedness, accounts payable and accrued
        expenses and amounts due to related parties approximate their fair
        values, due to the relatively short periods to maturity of the
        instruments.

        The fair value of marketable securities is based on the closing market
        value of such securities at the year end.

        Fair values for long-term debt have been determined based on the future
        contractual cash payments at the respective operation's current
        borrowing rate. The fair value of the long-term debt related to the
        Senior Subordinated Notes at December 31, 2002 is the value at which
        they were retired in January 2003. Fair value of the retractable
        preference shares is based on the market value of the shares of
        Hollinger International Class A common stock or the cash proceeds for
        which they are retractable or redeemable.

        The fair value of the cross-currency swaps, interest rate swaps, forward
        share purchase contracts, and forward foreign exchange contracts is the
        estimated amount that the Company would pay or receive to terminate the
        agreements. Interest rate swaps were considered a hedge until the hedged
        debt was repaid in 2000. Subsequent to the debt repayment, the estimated
        cost to terminate the swap has been included in income. Such swaps were
        terminated in 2002. The foreign currency obligation and forward foreign
        exchange contract are in connection with the sale of participations in
        the CanWest debentures, which is described in note 5. The cross-currency
        swap is in connection with the Service Credit Facility, as described in
        note 10b). The carrying values of all other financial instruments at
        December 31, 2002 and 2001 approximate their estimated fair values.

                                       F-50
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

     d)  Derivative instruments

        The Company may enter into various swaps, options and forward contracts
        from time to time when management believes conditions warrant. Such
        contracts are limited to those that relate to the Company's actual
        exposure to commodity prices, interest rates and foreign currency risks.
        If, in management's view, the conditions that made such arrangements
        worthwhile no longer exist, the contracts may be closed. At the end of
        2001, there were no material contracts or arrangements of these types,
        other than the forward exchange contract related to the Participation
        Trust as described in note 5. The contract was terminated as at
        September 30, 2002. The contract was marked to market and the related
        gains and losses included in foreign exchange losses during the year.
        The cumulative loss on the Company's obligation under the Participation
        Trust as at December 31, 2002 is $21,444,000 (2001 -- $691,000) and is
        included in the consolidated balance sheet in other liabilities and
        deferred credits (note 12).

        As described in note 10b), the Company entered into two cross-currency
        rate swaps to offset principal and interest payments on U.S. dollar
        borrowings by a U.K. subsidiary under Publishing's December 2002 Senior
        Credit Facility. The fair value of the contracts as of December 31, 2002
        of $14,475,000 million is included in the consolidated balance sheet in
        other liabilities and deferred credits (note 12).

25.  RECENT ACCOUNTING PRONOUNCEMENTS

     a)  Foreign currency and hedging

        In November 2001, the CICA issued Accounting Guideline 13, "Hedging
        Relationships" ("AcG 13"). AcG 13 establishes new criteria for hedge
        accounting and will apply to all hedging relationships in effect on or
        after July 1, 2003. On January 1, 2004, the Company will reassess all
        hedging relationships to determine whether the criteria are met or not
        and will apply the new guidance on a prospective basis. To qualify for
        hedge accounting, the hedging relationship must be appropriately
        documented at the inception of the hedge and there must be reasonable
        assurance, both at the inception and throughout the term of the hedge,
        that the hedging relationship will be effective. The Company is in the
        process of formally documenting all hedging relationships and has not
        yet determined whether any of their current hedging relationships will
        not meet the new hedging criteria.

     b)  Impairment of long-lived assets

        In December 2002, the CICA issued Handbook Section 3063, "Impairment of
        Long-Lived Assets" and revised Section 3475, "Disposal of Long-Lived
        Assets and Discontinued Operations". These sections supersede the
        write-down and disposal provision of Section 3061, "Property, Plant and
        Equipment", and Section 3475, "Discontinued Operations". The new
        standards are consistent with U.S. GAAP. Section 3063 establishes
        standards for recognizing, measuring and disclosing impairment of
        long-lived assets held for use. An impairment is recognized when the
        carrying amount of an asset to be held and used exceeds the projected
        future net cash flows expected from its use and disposal and is measured
        as the amount by which the carrying amount of the asset exceeds its fair
        value. Section 3475 provides specific criteria for and requires separate
        classification for assets held for sale and for these assets to be
        measured at the lower of their carrying amounts and fair value, less
        costs to sell. Section 3475 also broadens the definition of discontinued
        operations to include all distinguishable components of an entity that
        will be eliminated from operations. Section 3063 is effective for the
        Company's 2004 fiscal year; however, early application is permitted.
        Revised Section 3475 is applicable to disposal activities committed to
        by the Company after May 1, 2003;

                                       F-51
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        however, early application is permitted. The Company expects that the
        adoption of these standards will have no material impact on its
        financial position, results of operations or cash flow at this time.

     c)  Disclosure of guarantees

        In February 2003, the CICA issued Accounting Guideline 14, "Disclosure
        of Guarantees" ("AcG 14"). AcG 14 requires certain disclosures to be
        made by a guarantor in its interim and annual financial statements for
        periods beginning after January 1, 2003. AcG 14 is generally consistent
        with the disclosure requirements for guarantees in the U.S. (Financial
        Accounting Standards Board ("FASB") Interpretation No. 45) but, unlike
        the FASB's guidance, does not encompass recognition and measurement
        requirements. The Company has evaluated the impact of adoption of AcG 14
        and the disclosures are included in note 27h).

26.  SCHEDULE OF RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (GAAP)

     The following represents additional information to the consolidated
financial statements of the Company that were prepared in accordance with
Canadian GAAP. Set out below are the material adjustments (net of deferred
income taxes, minority interest and foreign exchange rate adjustments where
applicable) to net earnings (loss) for the years ended December 31, 2000, 2001
and 2002 and to shareholders' deficiency at December 31, 2001 and 2002 in order
to conform to accounting principles generally accepted in the United States
("U.S. GAAP").

<Table>
<Caption>
                                                                  YEAR ENDED DECEMBER 31,
                                                         ------------------------------------------
                                                              2000             2001
                                                         (RESTATED-(V))   (RESTATED-(V))     2002
                                                         --------------   --------------   --------
<S>                                                      <C>              <C>              <C>
NET EARNINGS (LOSS)
Net earnings (loss) for the year based on Canadian
  GAAP.................................................    $ 189,373        $(131,898)     $(88,640)
Capitalization of betterments, net of related
  amortization(a)......................................       (4,633)           5,230            --
Gain on sale of shares, gain on subsidiary's issue of
  shares or sale of assets(c)(v).......................       13,868           30,920         4,505
Foreign exchange(d)....................................        6,406           10,086        (7,293)
Cost of acquisitions, net of amortization(e)...........           42               42            42
Compensation to employees(f)...........................       (1,127)             918            --
Net earnings (loss) in equity accounted companies(g)...       (7,882)           7,882            --
Adjustment to tax provision(h)(v)......................     (162,764)         (41,893)           --
Business combinations(i)(v)............................       29,932           56,932            --
Financial instruments(j)...............................        2,421            9,294         8,185
Total return equity swap(k)(v).........................       (9,112)         (15,316)       17,789
Valuation allowance against prepaid pension
  asset(l)(v)..........................................       29,757          (14,244)       (6,277)
                                                           ---------        ---------      --------
Net earnings (loss) for the year based on U.S. GAAP,
  before accounting change, as restated(v).............       86,281          (82,047)      (71,689)
Cumulative effect of accounting change for
  goodwill(q)..........................................           --               --       (12,071)
                                                           ---------        ---------      --------
Net earnings (loss) for the year based on U.S. GAAP, as
  restated(v)..........................................    $  86,281        $ (82,047)     $(83,760)
                                                           =========        =========      ========
</Table>

                                       F-52
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

<Table>
<Caption>
                                                                     DECEMBER 31,
                                                              ---------------------------
                                                                   2001           2002
                                                              --------------- --------------
                                                             (RESTATED-26V))  (RESTATED-26V))
<S>                                                           <C>               <C>
SHAREHOLDERS' DEFICIENCY
Shareholders' deficiency based on Canadian GAAP.............     $(263,470)     $(351,331)
Capitalization of betterments, net of related
  amortization(a)...........................................      (182,807)      (195,166)
Amortization of intangible assets(b)........................       (24,175)       (24,175)
Gain on sale of shares, gain on subsidiary's issue of shares
  or sale of assets(c)(v)...................................       117,854        122,359
Foreign exchange(d).........................................        (1,569)        (1,404)
Cost of acquisitions, net of amortization(e)................        (1,890)        (1,848)
Compensation to employees(f)................................        (2,764)        (2,764)
Net loss in equity accounted companies(g)...................        (1,389)        (1,389)
Income taxes(h)(v)..........................................        63,699         63,699
Business combinations(i)(v).................................         4,603          4,603
Financial instruments(j)....................................        18,707         23,019
Total return equity swap(k)(v)..............................       (17,789)            --
Valuation allowance against prepaid pension asset(l)(v).....         8,513          2,236
Capital stock(m)............................................      (271,774)      (273,759)
Investments(n)..............................................        (3,755)          (839)
Minimum pension liability adjustment(o).....................       (11,552)       (25,612)
                                                                 ---------      ---------
Shareholders' deficiency based on U.S. GAAP, as
  restated(v)...............................................     $(569,558)     $(662,371)
                                                                 =========      =========
</Table>

<Table>
<Caption>
                                                                               YEAR ENDED
                                                                               DECEMBER 31,
                                                                                  2002
                                                                              --------------
<S>                                                                             <C>
U.S. GAAP shareholders' deficiency, beginning of year........................   $(569,558)
U.S. GAAP net loss for the year..............................................     (83,760)
Dividends -- retractable common shares.......................................     (19,220)
Dividends -- Series II and Series III preference shares(j)...................      (8,185)
Premium on retraction of retractable common shares...........................         141
Net increase in deferred marked to market adjustment in respect
    of the Series II preference shares(j)....................................       4,312
Movement in deferred foreign exchange loss on Series II and Series III
    preference shares presented outside of shareholders' deficiency
    for Canadian GAAP purposes(j)............................................         172
Share issue costs............................................................         (42)

Other comprehensive income items:
Change in equity adjustment from foreign currency translation(d).............      24,914
Net unrealized loss on investments held for sale(c)..........................       2,915
Net minimum pension liability adjustment(o)..................................     (14,060)
                                                                                ---------
U.S. GAAP shareholders' deficiency, end of year..............................   $(662,371)
                                                                                =========
</Table>

BALANCE SHEET DIFFERENCES:

     The following material balance sheet differences exist between Canadian and
U.S. GAAP.

     1)  Other intangible assets:

<Table>
<Caption>
                                                                  DECEMBER 31,
                                                              ---------------------
                                                                 2001        2002
                                                              ----------   --------
<S>                                                           <C>          <C>
Canadian GAAP...............................................  $1,177,544   $185,143
Adjustment for capitalization of betterments, net of related
  amortization(a)...........................................    (394,246)        --
Adjustment for amortization(b)..............................     (24,175)        --
Adjustment for cost of acquisitions(e)......................      (1,876)        --
Adjustment for business combinations(i)(v)..................       4,603         --
                                                              ----------   --------
U.S. GAAP...................................................  $  761,850   $185,143
                                                              ==========   ========
</Table>

                                       F-53
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

     2)  Goodwill:

<Table>
<Caption>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2001       2002
                                                              --------   --------
<S>                                                           <C>        <C>
Canadian GAAP...............................................  $174,324   $913,327
Adjustment for capitalization of betterments, net of related
  amortization(a)...........................................        --   (424,589)
Adjustment for amortization(b)..............................        --    (24,175)
Adjustment for cost of acquisitions(e)......................        --     (1,809)
Adjustment for income taxes(h)(v)...........................    63,699     63,699
Adjustment for business combinations(i)(v)..................        --      4,603
                                                              --------   --------
U.S. GAAP...................................................  $238,023   $531,056
                                                              ========   ========
</Table>

     3)  Minority interest:

<Table>
<Caption>
                                                                  DECEMBER 31,
                                                              ---------------------
                                                                2001        2002
                                                              ---------   ---------
<S>                                                           <C>         <C>
Canadian GAAP...............................................  $ 725,928   $ 473,272
Adjustment for minority interest(v).........................   (252,886)   (235,969)
                                                              ---------   ---------
U.S. GAAP...................................................  $ 473,042   $ 237,303
                                                              =========   =========
</Table>

     4)  Future income tax liabilities:

<Table>
<Caption>
                                                                  DECEMBER 31,
                                                              ---------------------
                                                                2001        2002
                                                              ---------   ---------
<S>                                                           <C>         <C>
Canadian GAAP...............................................  $ 486,937   $ 375,479
Adjustment for income taxes.................................   (107,399)   (122,637)
                                                              ---------   ---------
U.S. GAAP...................................................  $ 379,538   $ 252,842
                                                              =========   =========
</Table>

     5)  Deferred pension asset:

<Table>
<Caption>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2001       2002
                                                              --------   --------
<S>                                                           <C>        <C>
Canadian GAAP...............................................  $ 83,459   $123,230
Adjustment for change in valuation allowance against prepaid
  asset(l)(v)...............................................    38,487      3,758
                                                              --------   --------
U.S. GAAP...................................................  $121,946   $126,988
                                                              ========   ========
</Table>

     6)  Total return equity swap liability:

<Table>
<Caption>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2001       2002
                                                              --------   --------
<S>                                                           <C>        <C>
Canadian GAAP...............................................  $     --   $     --
Adjustment for unrealized losses(k)(v)                          55,912         --
                                                              --------   --------
U.S. GAAP...................................................  $ 55,912   $     --
                                                              ========   ========
</Table>

     7)  Capital stock:

<Table>
<Caption>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2001       2002
                                                              --------   --------
<S>                                                           <C>        <C>
Canadian GAAP...............................................  $271,774   $273,759
Adjustment to reclassify retractable common shares(m).......  (271,774)  (273,759)
                                                              --------   --------
U.S. GAAP...................................................  $     --   $     --
                                                              ========   ========
</Table>

                                       F-54
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

SUMMARY OF ACCOUNTING POLICY DIFFERENCES:

     The areas of material difference between Canadian and U.S. GAAP and their
impact on the consolidated financial statements of the Company are set out
below:

     a)  Capitalization of betterments

        Effective January 1, 1990, the Company capitalized as circulation the
        costs incurred to increase the long-term readership of its publications
        ("betterments"). U.S. GAAP does not permit capitalization of these
        costs. As a result of new Canadian accounting standards, effective
        January 1, 2002, the Company no longer capitalizes these costs under
        Canadian GAAP.

     b)  Amortization of intangible assets

        Prior to the adoption on January 1, 2002 of new U.S. and Canadian
        accounting standards for goodwill described below, U.S. GAAP required
        the amortization of all intangible assets acquired on a straight-line
        basis over a period not exceeding 40 years. Under Canadian GAAP, prior
        to December 31, 1990, there was no requirement to amortize intangible
        assets, such as circulation, that were considered to have an indefinite
        life. Effective January 1, 1991, Canadian GAAP required that all
        intangible assets be amortized. As a result, commencing January 1, 1990
        under Canadian GAAP, the Company amortized the cost of circulation on a
        straight-line basis over periods ranging from 10 to 40 years.

        Effective January 1, 2002, the Company adopted new Canadian accounting
        standards for Goodwill and Other Intangible Assets and certain
        transitional provisions for Business Combinations. These new Canadian
        standards are substantially consistent with the new U.S. accounting
        standards SFAS 141 and SFAS 142, except that under U.S. GAAP, any
        transitional impairment charge is recognized in earnings as a cumulative
        effect of a change in accounting principle. The new standards require
        that goodwill and intangible assets with indefinite useful lives no
        longer be amortized, but instead be tested for impairment at least
        annually. The standards also specify criteria that intangible assets
        must meet to be recognized and reported apart from goodwill. In
        addition, the standard requires that intangible assets with estimable
        useful lives be amortized over their respective estimated useful lives
        to their estimated residual values, and that such assets are reviewed
        for impairment by assessing the recoverability of the carrying value.

        Effective January 1, 2002, the Company has discontinued amortization of
        all existing goodwill, evaluated existing intangible assets and has made
        the necessary reclassifications in order to conform with the new
        criteria for recognition of intangible assets apart from goodwill.
        Amounts previously ascribed to circulation, including costs capitalized
        to increase long-term readership and certain other intangible assets
        have now been reclassified to goodwill, net of the related deferred
        income taxes, effective January 1, 2002.

        This change in accounting policy cannot be applied retroactively and the
        amounts presented for prior periods have not been restated for this
        change. If this change in accounting policy were applied to the reported
        net earnings (loss) under U.S. GAAP for the years ended December 31,
        2000 and

                                       F-55
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        2001, the impact of the change, in respect of the U.S. GAAP goodwill and
        intangible assets with indefinite useful lives not being amortized,
        would be as follows:

<Table>
<Caption>
                                                                    DECEMBER 31,
                                                              -------------------------
                                                                 2000          2001
                                                              -----------   -----------
                                                              (IN THOUSANDS, EXCEPT PER
                                                                       SHARE)
<S>                                                           <C>           <C>
U.S. GAAP net earnings (loss), as reported..................   $ 86,281      $(82,047)
Add U.S. GAAP amortization, net of income tax and minority
  interest..................................................     38,668        17,548
                                                               --------      --------
Adjusted U.S. GAAP net earnings (loss)......................   $124,949      $(64,499)
                                                               ========      ========
U.S. GAAP basic net earnings (loss) per share, as
  reported..................................................   $   1.52      $  (2.33)
Adjusted U.S. GAAP basic net earnings (loss) per share......   $   2.56      $  (1.81)
U.S. GAAP diluted net earnings (loss) per share, as
  reported..................................................   $   1.42      $  (2.62)
Adjusted U.S. GAAP diluted net earnings (loss) per share....   $   2.46      $  (2.10)
</Table>

        Adjusted net earnings (loss), noted above, reflects only the reduction
        in amortization expense in respect of intangibles now classified as
        goodwill and does not give effect to the impact that this change in
        accounting policy would have had on the gains and losses resulting from
        the disposal of operations during 2001 and 2000.

     c)  Gain on sale of shares, gain on subsidiary's issue of shares or sale of
         assets

        As a result of the adjustments in a) and b) above, and for periods
        subsequent to January 1, 2002, as a result of adjustments (h) and (i),
        the carrying value of the investments in Hollinger L.P., Southam and
        Hollinger International are lower under U.S. GAAP, resulting in the gain
        on sale of properties by Hollinger International, Southam and Hollinger
        L.P., gains on the sale by the Company of shares of Hollinger
        International, and gains on dilution of investments in Hollinger
        International and Hollinger L.P., being higher under U.S. GAAP.

     d)  Foreign exchange

        Under Canadian GAAP, a portion of the equity adjustment from foreign
        currency translation, included in shareholders' deficiency, is required
        to be transferred to income whenever there is a reduction in the net
        investment in a foreign entity or repayment of foreign currency
        denominated long-term intercompany loans. U.S. GAAP requires the
        transfer of a portion of this account to income only when the reduction
        in net investment is due to a sale or complete or substantially complete
        liquidation. While there may be differences in the timing of the
        recognition of such foreign exchange gains and losses under Canadian and
        U.S. GAAP, this difference in accounting has no effect on total
        shareholders' deficiency.

     e)  Cost of acquisitions

        Under Canadian GAAP, the Company previously had a policy of including
        certain internal acquisition costs as part of the purchase price of
        businesses acquired. U.S. GAAP does not permit capitalization of these
        costs.

     f)  Compensation to employees

        The Company and Hollinger International have various stock option and
        stock purchase plans for executives. Under Canadian GAAP, compensation
        is not recognized on the grant or modification of any employee option.
        In accordance with U.S. GAAP, options granted to employees of the parent
        company are measured using the fair value based method and treated as a
        dividend in kind with no resulting impact on either net earnings (loss)
        or shareholders' deficiency. For all other employee

                                       F-56
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        options, the compensation element is measured under U.S. GAAP using the
        intrinsic value based method of accounting and is apportioned over the
        period of service to which the compensation is related. As a result of a
        previous reduction in the exercise price of Hollinger International's
        options, compensation expense was recorded under U.S. GAAP in 2000 and a
        reversal of compensation was recorded under U.S. GAAP in 2001.

     g)  Equity accounted companies

        Under U.S. GAAP the compensation element of executive stock options
        related to equity accounted companies is measured and apportioned over
        the period of service to which the compensation is related. Under
        Canadian GAAP, compensation is not recognized for stock options. In
        addition, betterments, net of related amortization, related to equity
        accounted companies were capitalized under Canadian GAAP until January
        1, 2002. This is not permitted under U.S. GAAP.

        As a result of the above adjustments, the carrying value of equity
        accounted investments is lower under U.S. GAAP, resulting in the gain on
        the disposition of these investments in 2001 being higher under U.S.
        GAAP. The adjustments for 2000 and 2001 are in respect of the Company's
        investment in Interactive Investor International.

     h)  Income taxes

        Effective January 1, 2000, the Company adopted, on a retroactive basis,
        new Canadian accounting standards for income taxes, which now require
        income taxes to be accounted for using the asset and liability method,
        consistent with U.S. GAAP. Previously, under Canadian GAAP, the deferral
        method of providing for income taxes was used.

        Under Canadian accounting standards for income taxes, the Company is not
        required to restate its comparative figures for prior years and the
        cumulative effect of this change in accounting policy of $291,004,000
        (net of related minority interest) has been charged directly to retained
        earnings as at January 1, 2000. Of this adjustment, $276,215,000 was
        attributable to future income tax liabilities established in respect of
        amounts ascribed to circulation on business acquisitions which are
        largely not deductible for income tax purposes. Under U.S. GAAP, the
        establishment of such future tax liabilities on business acquisitions
        would have resulted in additional goodwill being recorded for an
        equivalent amount. Under U.S. GAAP, the deferred tax recovery recorded
        in respect of circulation amortization is fully offset by the related
        goodwill amortization, with no net impact on U.S. GAAP net earnings.
        Effective January 1, 2002, on the adoption of the new Canadian and U.S.
        accounting standards for Goodwill and Business combinations (note b)),
        amounts ascribed to circulation have been reclassified to goodwill,
        which is no longer being amortized.

        The new Canadian accounting standard for income taxes adopted January 1,
        2000 does not require the restatement of prior years' business
        acquisitions and permits the adjustment, otherwise made to goodwill
        under U.S. GAAP, to be made directly to retained earnings (net of
        related minority interest). As a result of not restating comparative
        figures, the $276,215,000 net deferred tax impact of circulation
        recorded on January 1, 2000 as a charge against retained earnings under
        Canadian GAAP would have been recorded as goodwill under U.S. GAAP. This
        difference, in turn, resulted in higher goodwill amortization or
        write-off charges under U.S. GAAP in the amount of $162,764,000 and
        $41,893,000 for the years ended December 31, 2000 and 2001,
        respectively.

        Accordingly, while there may not be any new material differences between
        Canadian and U.S. GAAP with respect to income taxes for periods
        subsequent to January 1, 2000, there will continue to be a difference
        between Canadian and U.S. GAAP in respect of the remaining

                                       F-57
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        $63.7 million of deferred taxes which will eliminate subsequent to
        January 1, 2002 only when the underlying operation is sold or the
        Company's interest in the underlying operations is diluted.

        U.S. GAAP income tax expense would have differed from the amounts
        computed by applying the basic federal and provincial income tax rates
        to U.S. GAAP earnings (loss) before income taxes, minority interest and
        cumulative effect of change in accounting principle as shown in the
        following table:

<Table>
<Caption>
                                                       2000       2001        2002
                                                     --------   ---------   ---------
<S>                                                  <C>        <C>         <C>
Earnings (loss) before income taxes, minority
  interest and cumulative effect of change in
  accounting principle.............................  $896,205   $(417,688)  $(140,394)
                                                     ========   =========   =========
Basic income tax rate..............................     43.95%      41.75%      41.00%
                                                     ========   =========   =========
Computed income tax expense (recovery).............  $393,882   $(174,385)  $ (57,562)
Change in income tax expense (recovery) resulting
  from:
Different tax rate on earnings of subsidiaries.....   (89,178)     19,565      15,144
Tax gain in excess of book gain....................   (82,350)     52,158         949
Potential tax benefit of current year's losses not
  recorded.........................................    29,255          --          --
Large Corporations Tax.............................    15,531         940       1,079
Loss on total return equity swap...................     8,013      27,134      (4,844)
Change in valuation allowance......................        --      42,841      74,043
Minority interest earnings in Hollinger L.P........   (26,669)     (2,001)     (1,214)
Permanent differences..............................   208,778     (35,810)     56,983
                                                     --------   ---------   ---------
Income tax expense (recovery)......................  $457,262   $ (69,558)  $  84,578
                                                     ========   =========   =========
Effective tax rate.................................     51.02%      16.65%      60.24%
                                                     ========   =========   =========
</Table>

        Canadian and foreign components of earnings (loss) before income taxes,
        minority interest and cumulative effect of change in accounting
        principle are presented below:

<Table>
<Caption>
                                                       2000       2001        2002
                                                     --------   ---------   ---------
<S>                                                  <C>        <C>         <C>
Canadian...........................................  $886,301   $(255,352)  $  10,020
Foreign............................................     9,904    (162,336)   (150,414)
                                                     --------   ---------   ---------
                                                     $896,205   $(417,688)  $(140,394)
                                                     ========   =========   =========
</Table>

                                       F-58
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        Income tax expense (recovery) for the periods shown below consists of:

<Table>
<Caption>
                                                     CURRENT    DEFERRED      TOTAL
                                                     --------   ---------   ---------
<S>                                                  <C>        <C>         <C>
Year ended December 31, 2000:
  Canadian.........................................  $529,497   $(167,453)  $ 362,044
  Foreign..........................................    88,198       7,020      95,218
                                                     --------   ---------   ---------
                                                     $617,695   $(160,433)  $ 457,262
                                                     ========   =========   =========
Year ended December 31, 2001:
  Canadian.........................................  $  7,153   $(147,773)  $(140,620)
  Foreign..........................................    49,151      21,911      71,062
                                                     --------   ---------   ---------
                                                     $ 56,304   $(125,862)  $ (69,558)
                                                     ========   =========   =========
Year ended December 31, 2002:
  Canadian.........................................  $ (5,503)  $  92,301   $  86,798
  Foreign..........................................     2,888      (5,108)     (2,220)
                                                     --------   ---------   ---------
                                                     $ (2,615)  $  87,193   $  84,578
                                                     ========   =========   =========
</Table>

     i)   Business combinations

        Under Canadian GAAP, the Company was required to treat the transfer in
        1997 of the Canadian newspapers to Hollinger International as a
        disposition at fair value. This resulted in the recognition of a gain to
        the extent there is a minority interest in Hollinger International.

        U.S. GAAP requires that the transfer of the Canadian Newspapers to a
        subsidiary company be accounted for at historical values using "as-if"
        pooling of interest accounting. As a result, the revenues and expenses
        for the periods prior to January 1, 1997 would be restated to give
        effect to the transfer of the Canadian Newspapers to Hollinger
        International and the gross gain, prior to deducting expenses, of
        $114,000,000 on the sale of the properties and the increase in
        intangible assets of an equivalent amount would not have been recorded
        for U.S. GAAP purposes. However, such gain would be recognized for U.S.
        GAAP purposes as the underlying Canadian newspaper operations were sold
        to third parties, or there was a further dilution in the Company's
        interest in Hollinger International.

        In addition, because the consideration received by the Company in 1997
        included shares of Hollinger International, the Company was required to
        treat this as an acquisition of an additional interest in Hollinger
        International, which resulted in $20,500,000 being ascribed to
        circulation and additional annual amortization expense of $932,000.
        Effective January 1, 2002, upon adoption of the new Canadian and U.S.
        accounting standards for Goodwill and Business Combinations (note 26b)),
        amounts ascribed to circulation have been reclassified to goodwill,
        which is no longer being amortized. Accordingly, there would be no
        difference between Canadian and U.S. GAAP with respect to this item for
        periods subsequent to January 1, 2002 unless the underlying operation is
        sold, or the Company's interest in the underlying operations is diluted.

     j)   Financial instruments

        Canadian GAAP requires the value ascribed to certain subsidiary Special
        shares outstanding during 2000 to be increased over the life of the
        shares to the Company's optional cash settlement amount through a
        periodic charge to earnings. Under U.S. GAAP, the shares are recorded at
        their fair value on the date of issue and such a charge to increase
        their carrying amount is not required, until the shares were settled in
        2000.

                                       F-59
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        Under Canadian GAAP, the $11,054,000, $9,294,000, $8,185,000 of
        dividends on mandatory redeemable preferred stock in 2000, 2001 and
        2002, respectively, must be recorded as interest expense. Under U.S.
        GAAP, such dividends are charged against shareholders' deficiency.

        Under U.S. GAAP, the mark to market and foreign exchange adjustments
        totalling a gain of $7,670,000 at December 31, 2001 and a gain of
        $11,983,000 at December 31, 2002 to the carrying value of the Series II
        preference shares, which reflect the value of the underlying Hollinger
        International shares for which they are exchangeable, must be recorded
        within shareholders' deficiency. Under Canadian GAAP, such adjustments
        are deferred and recorded on the balance sheet outside of shareholders'
        deficiency.

     k)  Total return equity swap

        During 2000, U.S. GAAP clarified the accounting for certain derivative
        financial instruments indexed to, and potentially settled, in a
        company's own stock, that require a cash payment by the issuer upon the
        occurrence of future events outside the control of the issuer. This new
        U.S. GAAP guidance applies to new contracts entered into after September
        30, 2000. Consequently, the extension of Hollinger International's
        forward share purchase contracts on October 1, 2000 resulted in such
        contracts being accounted for using the asset and liability method after
        that date. Under this method, the derivative forward contract was marked
        to market subsequent to October 1, 2000. The unrealized loss during the
        period, October 1 to December 31, 2000, net of minority interest,
        totalled $9,112,000 and was charged to earnings for U.S. purposes.

        During 2001, the mark to market losses for the contracts totalled
        $95,267,000 of which $59,920,000 of losses were realized when certain
        forward share purchase contracts were settled, resulting in a U.S. GAAP
        difference, net of related minority interest, of $15,316,000.

        In December 2002, the total return equity swaps were settled and the
        losses realized.

        For Canadian GAAP, no adjustment was required to reflect the mark to
        market adjustment for such forward purchase contracts and losses were
        recognized only when realized upon the settlement of the contract.

     l)   Valuation allowance against prepaid pension asset

        Canadian GAAP requires recognition of a pension valuation allowance for
        any excess of the prepaid benefit expense over the expected future
        benefit. Changes in the pension valuation allowance are recognized in
        earnings under Canadian GAAP immediately. U.S. GAAP does not permit the
        recognition of pension valuation allowances.

     m) Capital stock

        U.S. GAAP requires that common shares which are retractable at the
        option of the holder be presented in the consolidated balance sheet
        outside of shareholders' deficiency. Canadian GAAP permits these
        retractable common shares to be shown as equity.

     n)  Unrealized holding gains (losses) on investments available for sale

        Under Canadian GAAP, the Company accounts for all of its investments,
        which consist of corporate debt and equity securities, at historical
        cost. U.S. GAAP requires those investments in marketable securities
        which are available for sale, other than those investments accounted for
        on an equity basis, to be recorded at fair value. Unrealized holding
        gains and losses, net of the related tax and minority interest effect,
        on available for sale securities are excluded from earnings and are
        reported as a separate component of other comprehensive income and
        shareholders' equity until realized. Realized

                                       F-60
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        gains and losses from the sale of available-for-sale securities are
        determined on a specific identification basis.

     o)  Minimum pension liability adjustment

        Under U.S. GAAP, the Company is required to record an additional minimum
        pension liability for certain of its defined benefit pension plans to
        reflect the excess of the accumulated benefit obligations over the fair
        value of the plan assets with a corresponding charge against other
        comprehensive income included in shareholders' deficiency (note 26u)).
        No such adjustment is required under Canadian GAAP.

     p)  Interest in joint ventures

        Canadian GAAP requires the proportionate consolidation of interests in
        joint ventures. Proportionate consolidation is not permitted under U.S.
        GAAP and interests in joint ventures are accounted for on the equity
        basis.

        Although the adoption of proportionate consolidation has no impact on
        net earnings (loss) or shareholders' deficiency, it does increase
        assets, liabilities, revenues, expenses and cash flows from operations
        from those amounts otherwise reported under U.S. GAAP.

     q)  Change in accounting principle

        Under U.S. GAAP, the transitional provisions of SFAS 142 require the
        write-down resulting from the impairment test upon adoption on January
        1, 2002 to be reflected in the consolidated statement of earnings as a
        cumulative effect of a change in accounting principle. However, Canadian
        GAAP requires the same loss to be recorded as a charge to the opening
        deficit as at January 1, 2002. As described in note 1, goodwill
        attributable to Jerusalem Post was written down in its entirety upon
        adoption of SFAS 142.

     r)  Unusual items

        Included in Unusual items on the consolidated statements of earnings
        under Canadian GAAP are certain items which under U.S. GAAP must be
        classified as either operating costs, non-operating income or
        non-operating expenses. In particular, the unusual items (note 17) would
        have been classified as follows: net gain on dilution of investments as
        non-operating expenses, gains and losses on sale of investments and
        publishing interests as non-operating income or expenses, net, gain on
        effective sale of interest in Hollinger International as non-operating
        income and partially non-operating expense, loss on retirement of Senior
        Notes as non-operating expenses, new Chicago plant pre-operating costs
        as operating costs, write-off of financing fees as non-operating
        expenses, write-off of investments as non-operating expenses, realized
        loss on total return equity swap as non-operating costs, pension and
        post-retirement plan liability adjustment as operating costs and
        redundancy, rationalization and other costs as operating costs.

                                       F-61
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

     s)  Net earnings (loss) per retractable common share

<Table>
<Caption>
                                                              YEARS ENDED DECEMBER 31
                                                              -----------------------
                                                              2000     2001     2002
                                                              -----   ------   ------
                                                                (DOLLARS PER SHARE)
<S>                                                           <C>     <C>      <C>
Basic net earnings (loss) per retractable common share:
  Earnings (loss) before cumulative effect of change in
     accounting principles..................................  $1.52   $(2.33)  $(2.32)
  Net earnings (loss) for the year..........................  $1.52   $(2.33)  $(2.70)
Diluted earnings (loss) per retractable common share:
  Earnings (loss) before cumulative effect of change in
     accounting principles..................................  $1.42   $(2.62)  $(2.35)
  Net earnings (loss) for the year..........................  $1.42   $(2.62)  $(2.73)
</Table>

        Earnings (loss) per retractable common share amounts in accordance with
        U.S. GAAP are based on U.S. GAAP net earnings. The weighted average
        number of outstanding shares for purposes of calculating basic and
        diluted net earnings (loss) per share is the same under both Canadian
        and U.S. GAAP (note 19).

        Under U.S. GAAP, the change in the unrealized mark to market gain (loss)
        on the Series II preference shares of ($19,048,000), $12,759,000 and
        $5,431,000 as at December 31, 2000, 2001 and 2002 must be treated as an
        adjustment to dividends paid for purposes of calculating basic and
        diluted net earnings (loss) per share. Such adjustment is not required
        under Canadian GAAP.

     t)  Statement of cash flows

        Canadian GAAP permits the disclosure of the amount of funds provided by
        operations before changes in non-cash operating working capital and
        certain other items to be included in the consolidated statements of
        cash flows as a subtotal.

        In addition, Canadian GAAP permits the disclosure of cash flows provided
        by operations per retractable common share. U.S. GAAP does not permit
        disclosure of these items.

        Canadian GAAP requires proportionate consolidation of interests in joint
        ventures, which is not permitted under U.S. GAAP. As a result, under
        U.S. GAAP, the total funds provided by operations (including the changes
        in non-cash working capital and other items) for the years ended
        December 31, 2000, 2001 and 2002 would have decreased by $25,280,000,
        $25,102,000 and $6,282,000, respectively.

                                       F-62
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

     u)  Comprehensive income (loss)

        Total comprehensive income (loss) in accordance with U.S. GAAP is as
        follows:

<Table>
<Caption>
                                                                 YEARS ENDED DECEMBER 31
                                                              ------------------------------
                                                                2000       2001       2002
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Net earnings (loss) based on U.S. GAAP, as restated (v).....  $ 86,281   $(82,047)  $(83,760)
Other comprehensive net earnings (loss), net of tax, being:
  Unrealized gain (loss) on investments held for sale, net
     of related tax recovery of $20,390, $29,002 and $2,372
     and minority interest of $38,990, $77,542 and $5,701 in
     2000, 2001 and 2002, respectively......................   (35,244)   (54,066)     2,256
  Reclassification adjustment for realized loss reclassified
     out of accumulated comprehensive income, net of related
     tax recovery of nil, $47,102 and $832 and minority
     interest of nil, $118,041 and $1,384 in 2000, 2001 and
     2002, respectively.....................................        --     83,005        659
                                                              --------   --------   --------
                                                               (35,244)    28,939      2,915
Change in the equity adjustment from foreign currency
  translation...............................................   (64,559)    10,527     24,914
Minimum pension liability adjustment, net of a related tax
  recovery of nil, $11,726 and $24,897 and minority interest
  of $1,570, $13,055 and $29,504 in 2000, 2001 and 2002,
  respectively..............................................    (1,570)    (9,982)   (14,060)
                                                              --------   --------   --------
Comprehensive loss based on U.S. GAAP.......................  $(15,092)  $(52,563)  $(69,991)
                                                              ========   ========   ========
</Table>

     v)  Restatements

        Shareholder's deficiency and net earnings (loss) based on U.S. GAAP as
        at December 31, 2000 and 2001 and for the years ended December 31, 2000
        and 2001 differ from the amounts previously reported as follows:

        i)   In 2001, adjustments described in note 26k), were previously
             computed without giving effect to the full amount of the realized
             losses, which would have already been recognized in the net loss
             for Canadian GAAP purposes. The dilution gain adjustment recorded
             in 2001 (note 26c)) has also been effected as a consequence of this
             adjustment. This restatement reduced the previously reported U.S.
             GAAP net loss in fiscal 2001 by $20,098,000.

        ii)  In 2000, the Company recorded a valuation allowance against the
             excess of the prepaid benefit expense for certain of its Canadian
             operations, over the expected future benefit. U.S. GAAP does not
             specifically address pension valuation allowances and the Company
             had believed that such valuation allowance was appropriate under
             U.S. GAAP. Recently U.S. regulators have interpreted there to be a
             difference between Canadian and U.S. GAAP in this area. In light of
             these recent developments, the Company retroactively adjusted for
             the changes in the valuation allowance and the related impact on
             the dilution gain, which resulted in an increase to reported U.S.
             GAAP net earnings for fiscal 2000 of $29,757,000 and an increase to
             reported U.S. GAAP net loss for fiscal 2001 of $5,670,000, each net
             of related income tax and minority interest.

        iii) In addition to giving effect to the matters noted above, certain
             basic and diluted earnings per share figures for 2000, and 2001
             have been restated from amounts previously reported due to an error
             in the computation of the unrealized mark to market adjustment on
             the Series II preference shares (note 26s)) as well as a
             restatement of the dilutive effect of certain dilutive securities
             of International.

                                       F-63
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        iv) As described in note 26i), in 1997 the Company recorded for Canadian
            GAAP purposes, a gain on the sale of certain Canadian newspapers to
            Hollinger International. Under U.S. GAAP, no gain could be
            recognized in 1997. However, such gain should have been recognized
            as the underlying Canadian newspaper operations were sold to third
            parties, or there was a further dilution in the Company's interest
            in Hollinger International.

            In the years 1998 through 2001, the Company did not appropriately
            recognize such gains for U.S. GAAP purposes and has restated its
            U.S. GAAP results for these years to reflect such gains. In
            addition, as a result of this matter, the Company has also
            retroactively restated the adjustment to the income tax provision
            for U.S. GAAP purposes. As a result of these two items, the Company
            has retroactively decreased the previously reported U.S. GAAP
            shareholder's deficiency as at December 31, 1999 by a net $21.1
            million and increased reported U.S. GAAP net earnings for fiscal
            2000 by $21.1 million and increased reported U.S. GAAP net earnings
            for fiscal 2001 by $40.8 million.

        v)  In 2001 and 2002, the Company originally presented its retractable
            common shares as part of shareholders' deficiency. Under U.S. GAAP
            the retractable common shares do not qualify as permanent equity due
            to the retractable features being effective at the option of the
            holder. As a result, the retractable common shares are required to
            be reclassified outside of shareholders' deficiency.

            In addition, under U.S. GAAP loans receivable from employees
            relating to share purchases were originally presented in the
            consolidated balance sheet as a deduction from capital stock. As a
            result of the presentation of retractable common shares outside of
            shareholders' deficiency for U.S. GAAP purposes, the loans
            receivable from employees relating to share purchases are no longer
            required to be deducted from capital stock.

            The Company has retroactively restated its U.S. GAAP shareholders'
            deficiency in respect of these changes in presentation, the net
            impact of which was to increase to the shareholders' deficiency in
            2001 by $265,931 to $569,558.

       The net effect of all these restatements to basic and diluted net
       earnings (loss) for the years ended December 31, 2000 and 2001 is
       summarized below:

<Table>
<Caption>
                                                                          YEARS ENDED
                                                                          DECEMBER 31
                                                                      -------------------
                                                                        2000       2001
                                                                      --------   --------
                                                                      (DOLLARS PER SHARE)
        <S>                                                           <C>        <C>
        U.S. GAAP basic earnings (loss) per retractable common
          share:
          As previously reported....................................   $(0.12)    $(3.89)
          Restated..................................................   $ 1.52     $(2.33)
        U.S. GAAP diluted loss per retractable common share:
          As previously reported....................................   $(0.49)    $(4.11)
          Restated..................................................   $ 1.42     $(2.62)
</Table>

     w)  Recent pronouncements

       In June 2001, the FASB issued FAS 143, "Accounting for Asset Retirement
       Obligations" ("FAS 143"), which addresses financial accounting and
       reporting for obligations associated with the retirement of tangible
       long-lived assets and the associated asset retirement costs. FAS 143
       requires the Company to record the fair value of an asset retirement
       obligation as a liability in the period in which it incurs a legal
       obligation associated with the retirement of tangible long-lived assets
       that result from the acquisition, construction, development and/or normal
       use of the assets. The fair value of the liability is added to the
       carrying amount of the associated asset and this additional carrying
       amount is depreciated over the life of the asset. Subsequent to the
       initial measurement of the asset retirement obligation, the obligation
       will be adjusted at the end of each period to reflect the passage of time
       and changes in the estimated future cash flows underlying the obligation.
       If the obligation is settled to other than the carrying amount of the
       liability, the Company will recognize a gain or loss on settlement. The
       Company is required to adopt the provisions of FAS 143 for the quarter
       ending March 31, 2003. To accomplish this, the Company must identify all
       legal obligations for asset retirement obligations, if any, and determine
       the fair value of these obligations on the date of adoption. The
       determination of fair value is complex and will require the Company to
       gather market information and develop cash flow models. Additionally, the
       Company will be required to develop processes to track and monitor these
       obligations. The Company has determined that the adoption of FAS 143 does
       not have a material impact on its financial statements.

                                       F-64
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        In April 2002, the FASB issued FAS 145 which rescinded FAS 4, "Reporting
        Gains and Losses from Extinguishment of Debt" ("FAS 145"). FAS 145
        addresses, among other things, the income statement treatment of gains
        and losses related to debt extinguishments, requiring that such expenses
        no longer be treated as extraordinary items, unless the items meet the
        definition of extraordinary per APB Opinion No. 30, "Reporting the
        Results of Operations -- Reporting the Effects of Disposal of a Segment
        of a Business, and Extraordinary, Unusual and Infrequently Occurring
        Events and Transactions". Upon adoption, any gain or loss on
        extinguishment of debt that was classified as an extraordinary item, in
        prior periods presented, that does not meet the criteria in Opinion 30
        for classification as an extraordinary item, is required to be
        reclassified to non-operating expense. The Company retroactively adopted
        the new presentation requirements of FAS 145 effective January 1, 2002.
        The adoption of such accounting standard did not impact the Company's
        U.S. GAAP net earnings as information regarding extraordinary losses
        under U.S. GAAP on debt extinguishment was presented for disclosure
        purposes only.

        In July 2002, the FASB issued FAS 146, "Accounting for Costs Associated
        with Exit or Disposal Activities" ("FAS 146"), which is effective for
        exit or disposal activities that are initiated after December 31, 2002.
        FAS 146 nullifies Emerging Issues Task Force Issue No. 94-3 ("EITF
        94-3"), "Liability Recognition for Certain Employee Termination Benefits
        and Other Costs to Exit an Activity (including Certain Costs Incurred in
        Restructuring)". The principal difference between FAS 146 and EITF 94-3
        related to the recognition of a liability for a cost associated with an
        exit or disposal activity. FAS 146 requires that a liability be
        recognized for exit or disposal costs only when the liability is
        incurred, whereas under EITF 94-3, the liability was recognized when a
        company commits to an exit plan, and that the liability be initially
        measured at fair value. The Company is currently assessing the impact of
        the new standards.

        In January 2003, the FASB issued Interpretation No. 46, "Consolidation
        of Variable Interest Entities" ("VIE'S") ("FIN 46"), which requires the
        companies that control another entity through interests other than
        voting interest should consolidate the controlled entity. In the absence
        of clear control through a voting equity interest, a company's exposure
        (variable interests) to the economic risk and the potential rewards from
        a VIE's assets and activities are the best evidence of a controlling
        financial interest. VIE's created after January 31, 2003 must be
        consolidated immediately. VIE's existing prior to February 1, 2003 must
        be consolidated by the Company commencing with its third quarter 2003
        financial statements. The Company has not yet determined whether it has
        any VIE's which will require consolidation.

        In December 2002, the FASB issued SFAS No. 148, "Accounting for
        Stock-Based Compensation -- Transition and Disclosure", an amendment of
        FASB Statement No. 123. This Statement amends SFAS No. 123, "Accounting
        for Stock-Based Compensation", to provide alternative methods of
        transition for a voluntary change to the fair value method of accounting
        for stock-based employee compensation. The Company plans to continue to
        use the intrinsic value method for U.S. GAAP purposes. In addition, this
        Statement amends the disclosure requirements of SFAS No. 123 to require
        prominent disclosures in both annual and interim financial statements.
        Certain of the disclosure modifications are required for fiscal years
        ending after December 15, 2002 and are included in note 27e).

                                       F-65
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

27.  ADDITIONAL DISCLOSURES REQUIRED UNDER U.S. GAAP

     a)  Accounting policy

        Issuance of a Subsidiary's Stock

        The Company accounts for the issuance of a subsidiary's stock as a
        dilution gain or loss which is included in the statement of earnings.

     b)  Marketable equity and debt securities

        All marketable equity and debt securities are classified as available
        for sale, recorded at fair value, and presented as non-current assets.
        Available for sale securities consist of the following:

<Table>
<Caption>
                                                                       GROSS
                                                        AMORTIZED   UNREALIZED     FAIR
                                                          COST         LOSS        VALUE
                                                        ---------   -----------   -------
<S>                                                     <C>         <C>           <C>
December 31, 2001
Internet-related securities...........................   $ 6,680     $ (4,873)    $ 1,807
Can-West debentures...................................    72,259       (9,931)     62,328
                                                         -------     --------     -------
                                                         $78,939     $(14,804)    $64,135
                                                         =======     ========     =======
</Table>

<Table>
<Caption>
                                                                       GROSS
                                                        AMORTIZED   UNREALIZED     FAIR
                                                          COST      GAIN (LOSS)    VALUE
                                                        ---------   -----------   -------
<S>                                                     <C>         <C>           <C>
December 31, 2002
Internet-related equity securities....................   $ 5,812      $   940     $ 6,752
Can-West debentures...................................    85,664       (2,384)     83,280
                                                         -------      -------     -------
                                                         $91,476      $(1,444)    $90,032
                                                         =======      =======     =======
</Table>

        During 2001, the Company disposed of certain available-for-sale
        securities resulting in gross realized losses of $139,586,000. In
        computing the realized losses, cost was determined based on average
        cost.

     c)  Accounts receivable

        Accounts receivable consist of the following:

<Table>
<Caption>
                                                                2001       2002
                                                              --------   --------
<S>                                                           <C>        <C>
Customer trade receivables..................................  $255,336   $272,537
Other.......................................................   107,240    115,167
                                                              --------   --------
Gross accounts receivable...................................   362,576    387,704
Allowance for doubtful accounts.............................   (26,138)   (32,673)
                                                              --------   --------
Accounts receivable.........................................  $336,438   $355,031
                                                              ========   ========
</Table>

                                       F-66
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

     d)  Accounts payable and accrued expenses

        Accounts payable and accrued expenses consist of the following:

<Table>
<Caption>
                                                                2001       2002
                                                              --------   --------
<S>                                                           <C>        <C>
Trade payables..............................................  $175,418   $173,236
Accrued payroll and benefits................................    32,205     40,297
Accrued interest............................................    41,116     28,102
Other accrued expenses......................................   109,705     95,451
                                                              --------   --------
                                                              $358,444   $337,086
                                                              ========   ========
</Table>

     e)  Stock based compensation

        Under U.S. GAAP, FIN 44, "Accounting for Certain Transactions involving
        Stock Compensation" was effective July 1, 2000 and required repriced
        options to be treated as variable stock option awards. As a result, the
        Company has recorded, net of minority interest, $1,127,000 of
        compensation expense for 2000 and a reversal of compensation expense of
        $918,000 for 2001, in respect of certain repriced options of Hollinger
        International. For all other stock options granted by the Company and
        its subsidiaries, no compensation cost has been recognized. Had the
        Company determined compensation costs based on the fair value at the
        grant date of its stock options under Statement of Financial Accounting
        Standards No. 123 ("FAS 123") "Accounting for Stock-Based Compensation",
        the Company's U.S. GAAP net earnings (loss) and earnings (loss) per
        share would have been reduced to the pro forma amounts indicated in the
        following table:

<Table>
<Caption>
                                                          2000       2001        2002
                                                        --------   ---------   ---------
                                                        (IN THOUSANDS, EXCEPT PER SHARE)
<S>                                                     <C>        <C>         <C>
Net earnings (loss) as restated (note 26v))...........  $86,281    $(82,047)   $(83,760)
Add compensation expense, as reported.................    1,071        (763)         --
Deduct pro forma compensation expense.................   (5,190)     (4,950)     (4,057)
                                                        -------    --------    --------
Pro forma U.S. GAAP net earnings (loss)...............  $82,162    $(87,760)   $(87,817)
                                                        =======    ========    ========
U.S. GAAP basic net earnings (loss) per share as
  reported............................................  $  1.52    $  (2.33)   $  (2.70)
U.S. GAAP diluted net earnings (loss) per share as
  reported............................................  $  1.42    $  (2.62)   $  (2.70)
U.S. GAAP pro forma basic net earnings (loss) per
  share...............................................  $  1.41    $  (2.50)   $  (2.82)
U.S. GAAP pro forma diluted net earnings (loss) per
  share...............................................  $  1.30    $  (2.79)   $  (2.82)
</Table>

        The Company has not granted any options since 1998. The weighted average
        fair value of stock options granted during 2000, 2001 and 2002 by
        Hollinger International was estimated to be US$4.12, US $5.67 and
        US$5.65, respectively, on the date of grant using the Black-Scholes
        option-pricing model with the following weighted average assumptions:
        dividend yield 3.4%, 4.6% and 3.6%, expected volatility 43.3%, 55.2% and
        68.3%, risk free interest rates of 5.1%, 5.0% and 4.5%, and expected
        lives of 10 years in each of those same years.

     f)  Rent expense

        Rent expense was $28,440,000, $22,589,000, and $26,790,000 for 2000,
        2001 and 2002, respectively.

     g)  Derivatives

        For U.S. GAAP reporting purposes, the Company adopted SFAS No. 133,
        "Accounting for Derivative Instruments and Hedging Activities," as
        amended by SFAS No. 137 and SFAS No. 138

                                       F-67
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        ("SFAS No. 133") on January 1, 2001. There was no impact on results of
        operations or financial position upon adoption.

        The Company may enter into various swap, option and forward contracts
        from time to time when management believes conditions warrant, as
        described in note 24d). Such derivative contracts have not been
        designated as effective hedges, and therefore the changes in their fair
        value are recorded in earnings under both Canadian and U.S. GAAP.

        On December 27, 2002, a United Kingdom subsidiary of the Company entered
        into two cross-currency rate swap transactions to hedge principal and
        interest payments on U.S. dollar borrowings under Publishing's December
        2002 Senior Credit Facility. The contracts have a total foreign currency
        obligation notional value of U.S.$265 million, fixed at a rate
        U.S.$1.5922 to L1, convert the interest rate on such borrowing from
        floating to fixed, and expire as to of U.S.$45 million on December 29,
        2008 and as to U.S.$220 million on December 29, 2009.

        On January 22, 2003 and February 6, 2003, Publishing entered into
        interest rate swaps to convert U.S.$150 million and U.S.$100 million,
        respectively, of the Publishing Notes issued in December 2002 to
        floating rates for the period to December 15, 2010, subject to early
        termination notice.

        Changes in the value of derivatives comprising the forward exchange
        contract described in note 5a) and cross-currency swaps described above
        amounted to a gain of $24.3 million and a loss of $28.5 million in 2001
        and 2002, respectively. The fair values of all derivative contracts are
        disclosed in note 24c).

     h)  Guarantees

        In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"),
        "Guarantor's Accounting and Disclosure Requirements for Guarantees,
        Including Indirect Guarantees of Indebtedness of Others", which
        establishes and clarifies requirements for disclosure of most guarantees
        and the recognition of an initial liability for the fair value of
        obligations a guarantor assumes under guarantees. The initial liability
        recognition and measurement provisions are effective in respect of
        guarantees entered into or modified after December 31, 2002. FIN 45
        provides guidance regarding the identification of guarantees and
        requires a guarantor to disclose the significant details of guarantees
        that have been given regardless of whether it will have to make payments
        under the guarantees.

        Senior Secured Notes

        In connection with the issuance in 2003 of 11 7/8% Senior Secured Notes
        due 2011, the Company and certain of its subsidiaries have agreed to
        indemnify its lenders against any losses or damages resulting from
        inaccuracy of financial statements, environmental matters, taxes and
        compliance with Securities Act. The Company and its subsidiaries also
        indemnified the Noteholders against any related tax liabilities arising
        from payments made with respect to the Notes, except taxes on
        Noteholder's income. These indemnifications generally extend for the
        term of the Senior Secured Notes and do not provide for any limit on the
        maximum potential liability.

        The Company is unable to estimate the maximum potential liability for
        these types of indemnifications as the Notes indenture does not specify
        a maximum amount and the amounts are dependent upon future contingent
        events, the nature and likelihood of which cannot be determined at this
        time. No amount has been accrued in the interim consolidated financial
        statements with respect to these indemnifications and the Company is
        unable to estimate amounts due for withholding taxes, if any, at this
        time. Any such amounts will increase the future effective cost of
        borrowing.
                                       F-68
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        The Company has indemnified the lenders and their affiliates from and
        against all losses as a result of any obligations of any of the
        borrowers and guarantors under the Company's Senior Secured Notes.

        Property Leases

        A subsidiary of the Company has agreed to indemnify lessors of its
        operating leases against liabilities, damages, costs, claims and actions
        resulting from damaged property, violations of any lease covenants or
        any accident or injury occurring on the leased premises.

        The Company is unable to estimate the maximum exposure for these types
        of indemnifications as the operating leases do not specify a maximum
        amount and the amounts are dependent upon future contingent events, the
        nature and likelihood of which cannot be determined at this time. No
        amount has been accrued in the interim consolidated financial statements
        with respect to these indemnifications.

        Joint Ventures

        The Telegraph Group Limited ("Telegraph") has guaranteed the printing
        joint venture partners' share of equipment leasing obligations to third
        parties, which amounted to approximately $948,000 (L372,000) at December
        31, 2002. These obligations are guaranteed jointly and severally by each
        joint venture partner.

        Land leased by the Telegraph under a Head Lease under which the property
        is held until July 2183 has been sublet to West Ferry Printers, one of
        the Telegraph's printing joint ventures. The sublease is for a term of
        34 years from 1987. Although the sublease has been consented to by the
        landlord, it has not released Telegraph from its obligation under the
        lease and, accordingly, Telegraph is contingently liable for performance
        by West Ferry Printers. Annual rents under the lease are based on a
        percentage of immoveable assets, currently L600,000 per year.

        Pursuant to a joint venture agreement in the United Kingdom, the
        Telegraph has agreed to guarantee up to L0.5 million, if required, in
        connection with borrowing by the joint venture. To date, the joint
        venture has made no request for the supporting guarantee.

        Pursuant to the West Ferry joint venture agreement, the Telegraph has a
        commitment to fund 50% of the obligation under West Ferry's defined
        benefit plan.

        Dispositions

        In connection with certain dispositions of assets and/or businesses, the
        Company has provided customary representations and warranties whose
        terms range in duration and may not be explicitly defined. The Company
        has also retained certain liabilities for events occurring prior to
        sale, relating to tax, environmental, litigation and other matters.
        Generally, the Company has indemnified the purchasers in the event that
        a third party asserts a claim against the purchaser that relates to a
        liability retained by the Company. These types of indemnification
        guarantees typically extend for a number of years.

        The Company is unable to estimate the maximum potential liability for
        these indemnifications as the underlying agreements do not always
        specify a maximum amount and the amounts are dependent upon the outcome
        of future contingent events, the nature and likelihood of which cannot
        be determined at this time.

        Historically, the Company has not made any significant indemnification
        payments under such agreements and no amount has been accrued in the
        accompanying interim consolidated financial

                                       F-69
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        statements with respect to these indemnification guarantees. The Company
        continues to monitor the conditions that are subject to guarantees and
        indemnifications to identify whether it is probable that a loss has
        occurred, and would recognize any such losses under any guarantees or
        indemnifications when those losses are probable and estimable.

        Amended and Restated Credit Agreement

        The Company and its subsidiaries also indemnified the Borrower against
        any related tax liabilities arising from payments made with respect to
        the revolving bank credit facility, except taxes on Borrower's income.
        These indemnifications generally extended for the term of the revolving
        bank credit facility and did not provide for any limit on the maximum
        potential liability. The revolving bank credit facility was repaid in
        March 2003.

        Credit Facilities

        Under Hollinger International's Senior Credit Facility, Hollinger
        International has agreed to indemnify its lenders under that facility
        against certain costs or losses resulting from changes in laws and
        regulations which would increase the lenders' costs or reduce the rate
        of return otherwise available to them in respect of the loans to
        Hollinger International. Hollinger International has further agreed to
        indemnify certain lenders against existing loans to the extent that such
        loans impose an obligation for withholding tax or similar charge on
        interest, should such tax or charge not be recoverable by the lenders.
        These indemnifications generally extend for the term of the credit
        facilities and do not provide for any limit on the maximum potential
        liability.

        Hollinger International is unable to estimate the maximum potential
        liability for these types of indemnifications as the credit agreements
        do not specify a maximum amount and the amounts are dependent upon
        future contingent events, the nature and likelihood of which cannot be
        determined at this time.

        No amount has been accrued in the accompanying interim consolidated
        financial statements with respect to these indemnifications.
        International is unable to estimate amounts due for withholding taxes at
        this time. Any such amounts will increase the future effective cost of
        borrowing.

        Hollinger International has indemnified the lenders and their affiliates
        from and against all losses as a result of any obligations of any of the
        borrowers and guarantors under its Senior Credit Facility.

        Participation Trust

        In connection with the participation agreement, International has agreed
        to indemnify the Participation Trust and its trustee, in the event the
        participation agreement entitles the issuer to fail to make payments
        with respect to the debentures. Although the indemnity has not been
        capped, the Company estimates the liability is limited to the amount of
        participation interests sold, totalling US$490.5 million, plus accrued
        interest and any further debentures received as paid-in-kind interest.

        Other

        The Company licenses some of the content it publishes for use by third
        parties. In doing so, the Company warrants that it is entitled to
        license that content and indemnifies the licensee against claims against
        improper use. The number of quantum of such claims cannot be reasonably
        estimated. Historically, claims of this nature have not been
        significant.

        In special circumstances, the Company's newspaper operations may engage
        freelance reporters to cover stories in locales that carry a high risk
        of personal injury or death. Telegraph has engaged a number of
        journalists and photographers to report from the Middle East. As a term
        of engagement,

                                       F-70
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

        Telegraph has agreed to provide a death benefit which, in the aggregate
        for all freelancers engaged, amounts to L2,600,000. This exposure is
        uninsured. Precautions have been taken to avoid a concentration of the
        freelancers in any one location.

28.  COMPARATIVE FIGURES

     Certain comparative figures have been reclassified to conform with the
financial statement presentation adopted in the current period.

29.  SUBSEQUENT EVENTS

     a)  On March 10, 2003, the Company issued US$120,000,000 aggregate
         principal amount of 11 7/8% Senior Secured Notes due 2011. These notes
         are secured by 10,108,302 shares of Hollinger International Class A
         common stock and all 14,990,000 shares of Hollinger International Class
         B common stock. The total net proceeds were used to repay existing bank
         indebtedness, to repay amounts due to Ravelston and make an advance to
         Ravelston. The Senior Secured Notes are fully and unconditionally
         guaranteed by RMI, a wholly owned subsidiary of Ravelston. The Company
         and RMI entered into a support agreement, under which RMI is required
         to make an annual support payment in cash to the Company on a periodic
         basis by way of contributions to the capital of the Company (without
         receiving any shares of the Company) or subordinated debt. The amount
         of the annual support payment will be equal to the greater of a) the
         non-consolidated negative net cash flow of the Company (which does not
         include outlays for retractions or redemptions) and b) US$14.0 million
         per year (less any future payments of services agreements fees NB Inc.
         and any excess in the net dividend amount received by the Company or
         any of the Company's wholly owned restricted subsidiaries, as they are
         defined in the indenture governing the Company's Senior Secured Notes
         due 2011, on the shares of Hollinger International that the Company and
         NB Inc. own that is over US$4.65 million per year), in either case,
         reduced by any permanent repayment of debt owing by Ravelston to the
         Company. Initially, the support amount to be contributed by RMI is
         expected to be satisfied through the permanent repayment by Ravelston
         of its approximate $16.4 million of advances from the Company, which
         resulted from the use of proceeds of the Company's offering of its
         Senior Secured Notes. Thereafter, all support amount contributions by
         RMI will be made through contributions to the capital of the Company,
         without receiving any additional shares of the Company, except that, to
         the extent that the minimum payment exceeds the negative net cash flow
         of the Company, the amounts will be contributed through an
         interest-bearing, unsecured, subordinated loan to the Company. The
         support agreement terminates upon the repayment of the Senior Secured
         Notes, which mature in 2011.

        All aspects of this transaction have been reviewed and approved by a
        special committee of the Board of Directors of the Company, comprised
        entirely of independent directors.

     b)  On March 10, 2003, prior to the closing of the above offering, NB Inc.
         sold its shares of Class A common stock and Series E redeemable
         preferred stock of Hollinger International to RMI. Such shares were in
         turn sold back to NB Inc. from RMI at the same price with a resulting
         increase in the tax basis of the shares of Hollinger International and
         a taxable gain to RMI. As the exchange of the Hollinger International
         shares with RMI represents a transfer between companies under common
         control, NB Inc. will record in 2003, contributed surplus of
         approximately $1.4 million, being the tax benefit associated with the
         increase in the tax value of the shares of Hollinger International.

     c)  On March 10, 2003, Hollinger International repurchased shares of its
         Class A common stock and redeemed shares of Series E preferred stock
         from the Company and has revised certain debt

                                       F-71
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

         arrangements it had in place with the Company. These transactions were
         completed in conjunction with the Company closing a private placement
         of Senior Secured Notes (note 29a)).

        Contemporaneously with the closing of the issue of Senior Secured Notes,
        Hollinger International:

        i)   repurchased for cancellation, from NB Inc., 2,000,000 shares of
             Class A common stock of Hollinger International at US$8.25 per
             share for total proceeds of $24.2 million (US$16.5 million); and

        ii)  redeemed, from NB Inc., pursuant to a redemption request, all of
             the 93,206 outstanding shares of Series E redeemable convertible
             preferred stock of Hollinger International at the fixed redemption
             price of $146.63 per share being a total of $13.6 million (US$9.3
             million).

        As a result, the Company's equity and voting interest in Hollinger
        International is 30.3% and 72.6%, respectively. The dilution gain
        arising on this effective sale will be recorded in 2003.

        Proceeds from the repurchase and redemption were offset against debt due
        to Hollinger International from NB Inc. (note 23b)), resulting in net
        outstanding debt due to Hollinger International of approximately $29.9
        million (US$20.4 million) as of March 10, 2003. The remaining debt bears
        interest at 14.25% or, if paid in additional notes, 16.5% and is
        subordinated to the Company's Senior Secured Notes (so long as the Notes
        are outstanding), guaranteed by Ravelston and secured by certain assets
        of Ravelston.

        Following a review by a special committee of the Board of Directors of
        Hollinger International, comprised entirely of independent directors, of
        all aspects of the transaction relating to the changes in the debt
        arrangements with NB Inc. and the subordination of this remaining debt,
        the special committee approved the new debt arrangements, including the
        subordination.

     d)  On April 21, 2003, the Company made an offer to exchange its Series III
         preference shares into Series IV preference shares on a share-for-share
         basis. The terms of the new Series IV preference shares will provide
         for a mandatory redemption on April 30, 2008 for $10.00 cash per share
         (plus unpaid dividends) and an annual cumulative dividend, payable
         quarterly, of $0.80 per share per annum (or 8%) during the five-year
         term. As with the Series III preference shares, i) the Company will
         have the right at its option to redeem all or part of the Series IV
         preference shares at any time after three years for $10.00 cash per
         share (plus unpaid dividends) and ii) holders will have the right at
         any time to retract the Series IV preference shares for a retraction
         price payable in cash which, during the first four years, will be
         calculated by reference to Government of Canada bonds having a
         comparable yield and term to the shares, and during the fifth year, the
         retraction price will be $9.50 per share (plus unpaid dividends in each
         case). The offer was conditional upon acceptance by holders of at least
         50% of the outstanding Series III preference shares. The bid originally
         expired on May 27, 2003 and was extended until June 9, 2003. This
         condition was not met and, accordingly, the offer was terminated.

     e)  Effective April 30, 2003, US$15.7 million principal amount of
         subordinated debt owing to Hollinger International by NB Inc. was
         transferred by Hollinger International to HCPH Co., a subsidiary of
         Hollinger International, and subsequently transferred to RMI by HCPH
         Co. in satisfaction of a loan due from HCPH Co. to RMI (note 23d)).
         International and the Company previously reported that the committee of
         independent directors of International had agreed to the US$15.7
         million offset to the remaining US$20.4 million of debt against amounts
         owed by International to RMI, and further stated that the offset was
         effected April 30, 2003. Although management of International and the
         Company believed final approval had been given to the offset by the
         committee of independent directors of International, the committee has
         advised that final approval of any offset remains subject to
         appropriate due diligence and receipt of a further independent fairness
         opinion. The due diligence process has not yet been concluded and
         accordingly, the offset has not been completed as at August 25, 2003.
         The debt owing by NB Inc. to Hollinger International of U.S.$20.4
         million bears interest at the rate of 14.25% if interest is paid in
         cash and 16.50% if it is paid in kind. The debt is subordinated to the
         Senior Secured Notes for so long as the Senior Secured Notes are


                                       F-72
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

         outstanding, and is guaranteed by RCL and the Company. Hollinger
         International entered into a subordination agreement with the Company
         and NB Inc. pursuant to which Hollinger International has subordinated
         all payments of principal, interest and fees on the debt owed to it by
         NB Inc. to the payment in full of principal, interest and fees on the
         Senior Secured Notes, provided that payments with respect to principal
         and interest can be made to International to the extent permitted in
         the indenture governing the Senior Secured Notes.

     f)  During the period April 1, 2003 to May 16, 2003, holders of 3,651,784
         Series III preference shares, holders of 504,989 Series II preference
         shares and holders of 22,500 retractable common shares submitted
         retraction notices to the Company. As of May 20, 2003, the Company
         completed or announced that it was able to complete the retraction of
         504,989 Series II preference shares for 232,293 shares of Hollinger
         International Class A common stock, 876,050 Series III preference
         shares for approximately $7.7 million in cash and 22,500 retractable
         common shares for cash of $124,000. This completed all retraction
         notices received up to and including April 30, 2003.

        On May 20, 2003, after careful deliberation, the Company concluded that
        it was not able to complete the retractions of shares submitted after
        April 30, 2003 without unduly impairing its liquidity. Since April 30,
        2003 and up to and including June 19, 2003, the Company has received
        retraction notices from holders of 2,939,593 Series III preference
        shares, of which 1,281,239 retraction notices were subsequently
        withdrawn, leaving retraction notices from the holders of 1,658,354
        Series III preference shares, for aggregate retraction proceeds of $15.8
        million, which were unable to be completed at the current time. In
        addition, during the same time period, retraction notices were received
        from the holders of 357,958 Series II preference shares for aggregate
        retraction proceeds of 164,660 shares of Hollinger International Class A
        common stock or cash of $2.5 million, which were unable to be completed
        at the current time.

        The Company will periodically review its liquidity position to determine
        if and when further retractions can be completed. The Company will not
        complete the retractions or redemptions if to do so would unduly impair
        its liquidity. Retractions of Series II preferences shares and Series
        III preference shares will be processed on a combined basis in order
        determined by their retraction date (with equal ranking of the series)
        in advance of any retractable common shares that are submitted for
        retraction. Following the satisfaction of all pending retracted Series
        II preference shares and Series III preference shares, retractions of
        the retractable common shares will be processed in order determined by
        their retraction date. Accordingly, retractions of retractable common
        shares cannot be completed as long as there are pending and unsatisfied
        retractions of Series II preference shares and Series III preference
        shares.

     g)  On May 11, 2003, 3815668 Canada Inc., a subsidiary of CanWest (the
         Issuer of the 12 1/8% Subordinated Debentures due 2010 received by the
         Company in partial consideration on sale of the Company's Canadian
         newspaper operations to CanWest in November 2000) redeemed $265.0
         million principal amount of the 12 1/8% debentures, exclusive of
         interest accrued to the redemption date of $8.8 million. Of the total
         amount received, US$159.8 million has been delivered to the
         Participation Trust and the balance of US$27.6 million has been
         received by Hollinger International and Hollinger LP., a portion of
         which must be retained until November 4, 2010.

     h)  On May 19, 2003, a shareholder of Hollinger International filed a
         Schedule 13D with the U.S. Securities and Exchange Commission (the
         "SEC") and amongst other things, served a demand letter on the Board of
         Directors of Hollinger International (the "Board") requesting that the
         Board investigate and, if determined to be advisable, take corrective
         action in respect of
                                       F-73
<PAGE>
                                 HOLLINGER INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
   (TABULAR AMOUNTS ARE IN THOUSANDS OF CANADIAN DOLLARS EXCEPT WHERE NOTED)

         payments made to senior executives of Hollinger International in
         respect of non-competition agreements, that had been disclosed in the
         financial statements. On June 11, 2003, the same shareholder filed an
         Amendment to the Schedule 13D with the SEC reiterating the earlier
         demands as well as requesting that the Board investigate and, if
         determined to be advisable, take corrective action in respect of i) an
         asset sale by Hollinger International to an entity affiliated with
         certain officers and directors of Hollinger International, and (ii) the
         payment of fees by Hollinger International pursuant to various
         affiliated management services agreements. On June 17, 2003, in
         response to these requests, the Board established a special committee
         to conduct an independent review and investigation of those
         allegations. The potential impact of filing and the demand letters, on
         the financial statements of Hollinger International and the Company, is
         not known at the current time.

     i)   On May 22, 2003, Hollinger International and the Company announced
          that they had reached an agreement in principle, regarding a proposed
          transaction with Southeastern Asset Management Inc. ("Southeastern").
          Under the proposed transaction, Southeastern would purchase from the
          Company between five to ten million shares (as determined by the
          Company) of Hollinger International Class A common stock at a purchase
          price of US$11.60 per share. The terms of the shares of Class B common
          stock of Hollinger International, which currently have ten votes per
          share and represent approximately 67% of the voting power of Hollinger
          International, would be amended to allocate 35% of the voting power of
          Hollinger International to the shares of Class B common stock for a
          period of 3 1/2 years. The voting power of the shares of Class B
          common stock would then be reduced to two votes per share for 18
          months thereafter, after which time, the shares of Class B common
          stock would be converted on a share-for-share basis into shares of
          Class A common stock. Going forward, Ravelston management would be
          employed and paid directly by Hollinger International. An aggregate
          annual compensation level of US$20 million has received the support of
          Southeastern which would have the right to nominate three directors to
          the Board of Hollinger International.

        Completion of the transaction is subject to various conditions,
        including approval of the Board of Directors of Hollinger International
        and the Company, approval by the shareholders of Hollinger International
        and the execution of definitive agreements. If the requisite approvals
        are obtained, it is contemplated that the transaction would close on or
        before September 30, 2003.

        Since the proposed transaction is in its preliminary stages and has not
        yet been finalized, the Company has not yet determined the potential
        impact on its financial statements.

     j)   In 2003, Hollinger International made a venture capital investment of
          US$2.5 million in a corporation in which a director of Hollinger
          International has a minority interest.

     k)  Commencing April 3, 2003, Hollinger International began purchasing its
         own shares through the public market and holding the shares acquired as
         treasury stock. During the period April 3, 2003 to May 5, 2003,
         Hollinger International acquired 1,000,000 shares of its Class A common
         stock at an average price of U.S.$8.79 per share for total cash
         consideration of U.S.$8.8 million.

                                       F-74
<PAGE>

                                 HOLLINGER INC.

                SCHEDULE 1 -- CONDENSED UNCONSOLIDATED FINANCIAL
                           INFORMATION OF THE COMPANY

                   CONDENSED NON-CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                   DECEMBER 31
                                                              ---------------------
                                                                2001        2002
                                                              ---------   ---------
                                                                (IN THOUSANDS OF
                                                                CANADIAN DOLLARS)
<S>                                                           <C>         <C>
ASSETS
CURRENT ASSETS
Prepaid expenses and other assets...........................  $     978   $   1,751
Due from subsidiaries.......................................     22,620      26,616
                                                              ---------   ---------
                                                                 23,598      28,367
Equity investments in subsidiaries and affiliates...........    130,460     115,612
Other assets................................................      1,446       1,234
                                                              ---------   ---------
                                                              $ 155,504   $ 145,213
                                                              =========   =========
LIABILITIES
CURRENT LIABILITIES
Bank indebtedness...........................................  $ 129,475      90,810
Accounts payable and accrued expenses.......................      3,003       2,278
Retractable preference shares...............................         --     135,299
Deferred unrealized gain on retractable preference shares...         --      11,983
Due to subsidiaries (note 5)................................    107,174     210,085
Due to The Ravelston Corporation Limited....................     23,500      46,089
                                                              ---------   ---------
                                                                263,152     496,544
Retractable preference shares...............................    147,472          --
Deferred unrealized gain on retractable preference shares...      7,670          --
Future income taxes.........................................        680          --
                                                              ---------   ---------
                                                                418,974     496,544
                                                              ---------   ---------
SHAREHOLDERS' DEFICIENCY
Capital stock...............................................    271,774     273,759
Contributed surplus (note 2)................................     51,797      51,797
Deficit (note 3)............................................   (537,110)   (656,942)
                                                              ---------   ---------
                                                               (213,539)   (331,386)
Equity adjustment from foreign currency translation.........    (49,931)    (19,945)
                                                              ---------   ---------
                                                               (263,470)   (351,331)
                                                              ---------   ---------
                                                              $ 155,504   $ 145,213
                                                              =========   =========
</Table>

See accompanying notes to condensed non-consolidated financial statements.

                                       F-75
<PAGE>
                                 HOLLINGER INC.

                SCHEDULE 1 -- CONDENSED UNCONSOLIDATED FINANCIAL
                   INFORMATION OF THE COMPANY -- (CONTINUED)

           CONDENSED NON-CONSOLIDATED STATEMENTS OF EARNINGS (LOSSES)

<Table>
<Caption>
                                                                   YEARS ENDED DECEMBER 31
                                                              ----------------------------------
                                                                2000         2001        2002
                                                              ---------   ----------   ---------
                                                              (IN THOUSANDS OF CANADIAN DOLLARS)
<S>                                                           <C>         <C>          <C>
REVENUE
Interest income.............................................  $    183    $     388    $     26
                                                              --------    ---------    --------
EXPENSES
General and administrative expenses.........................     1,900        2,591       3,259
Amortization of deferred finance costs......................     1,177        1,963       2,560
Interest on exchangeable shares.............................    11,054        9,294       8,185
Interest on amounts due to The Ravelston Corporation
  Limited...................................................        --           --       2,045
Other interest..............................................    14,386       11,626       5,614
                                                              --------    ---------    --------
                                                                28,517       25,474      21,663
                                                              --------    ---------    --------
Net earnings (loss) in equity accounted companies...........   185,740     (165,899)    (66,773)
                                                              --------    ---------    --------
Net foreign currency gains (losses).........................        74          (16)         15
                                                              --------    ---------    --------
Earnings (loss) before the undernoted.......................   157,480     (191,001)    (88,395)
Unusual gains (losses), net (note 4)........................    32,969       54,670        (293)
Income tax recovery (expense)...............................    (1,076)       4,433          48
                                                              --------    ---------    --------
Net earnings (loss).........................................  $189,373    $(131,898)   $(88,640)
                                                              ========    =========    ========
</Table>

See accompanying notes to condensed non-consolidated financial statements.

                                       F-76
<PAGE>
                                 HOLLINGER INC.

                SCHEDULE 1 -- CONDENSED UNCONSOLIDATED FINANCIAL
                   INFORMATION OF THE COMPANY -- (CONTINUED)

              CONDENSED NON-CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                   YEARS ENDED DECEMBER 31
                                                              ----------------------------------
                                                                2000         2001        2002
                                                              ---------   ----------   ---------
                                                              (IN THOUSANDS OF CANADIAN DOLLARS)
<S>                                                           <C>         <C>          <C>
CASH PROVIDED BY (USED FOR):
OPERATING ACTIVITIES
Net earnings (loss).........................................  $189,373    $(131,898)   $(88,640)
Unusual gains (losses), net.................................   (32,969)     (54,670)        293
Other income (costs)........................................     1,444       (1,964)        212
                                                              --------    ---------    --------
                                                               157,848     (188,532)    (88,135)
Items not involving cash:
Amortization of deferred finance costs......................     1,177        1,963       2,560
Net (earnings) loss in equity accounted companies, net of
  amounts received..........................................   (96,193)     245,738      74,472
Change in non-cash operating working capital................      (343)      23,144      (1,499)
Other.......................................................     1,677           --          --
Future income taxes.........................................        --       (5,239)       (680)
                                                              --------    ---------    --------
                                                                64,166       77,074     (13,282)
FINANCING ACTIVITIES
Redemption and cancellation of capital stock................      (700)        (273)     (1,064)
Redemption and cancellation of exchangeable shares..........    (5,133)        (317)       (277)
Increase (decrease) in short-term borrowings................     4,039      (32,525)    (38,665)
Increase in amount due to Ravelston.........................     2,267       21,233      22,589
Change in amounts due to subsidiaries.......................    12,728      (63,713)     49,203
Dividends paid on retractable common shares.................   (22,177)     (20,216)    (16,031)
Redemption of HCPH special shares...........................   (54,482)          --          --
Other.......................................................        --           --      (2,473)
                                                              --------    ---------    --------
                                                               (63,458)     (95,811)     13,282
INVESTING ACTIVITIES
Proceeds on disposal of investments.........................        --       19,892          --
Additions to investments....................................        --       (1,155)         --
Increase in other assets....................................      (708)          --          --
                                                              --------    ---------    --------
                                                                  (708)      18,737          --
                                                              --------    ---------    --------
CASH AND CASH EQUIVALENTS AT END OF YEAR....................  $     --    $      --    $     --
                                                              ========    =========    ========
SUPPLEMENTAL DISCLOSURE
  Dividends received from subsidiaries......................  $ 89,547    $  79,839    $  7,699
                                                              ========    =========    ========
</Table>

See accompanying notes to condensed non-consolidated financial statements.

                                       F-77
<PAGE>

            NOTES TO CONDENSED NON-CONSOLIDATED FINANCIAL STATEMENTS

                SCHEDULE 1 -- CONDENSED UNCONSOLIDATED FINANCIAL
                           INFORMATION OF THE COMPANY
                  YEARS ENDED DECEMBER 31, 2000, 2001 AND 2002

1.  BASIS OF PRESENTATION:

     The accompanying condensed non-consolidated financial statements include
the accounts of Hollinger Inc. and, on an equity basis, its subsidiaries and
affiliates. These financial statements should be read in conjunction with the
consolidated financial statements of the Company.

     The Company is a holding company and its assets consist primarily of
investments in its wholly owned subsidiaries, including Hollinger International
and Publishing. As a result, the Company's ability to meet its future financial
obligations, including the retraction and redemption of shares, is dependent
upon the availability of cash flows from its United States and foreign
subsidiaries through dividends, intercompany advances, management fees and other
payments, as well as on the ongoing support of RMI. This is fully described in
note 1 to the Company's consolidated financial statements. As further described
in note 9 to the Company's consolidated financial statements, Publishing and its
principal United States and foreign subsidiaries are subject to statutory
restrictions and restrictions in debt agreements that limit their ability, among
other things, to incur indebtedness, pay dividends or make other distributions
on its capital stock, enter into transactions with related companies, and sell
assets, including stock of a restricted subsidiary. As a result, substantially
all of the net assets of the Company's subsidiaries are restricted.

     As further described in note 9 to the Company's consolidated financial
statements, on December 23, 2002, Publishing issued senior unsecured notes and
certain of Publishing's subsidiaries entered into a Senior Credit Facility.
These debt agreements also restrict Publishing's ability and the ability of
Publishing's restricted subsidiaries, to, among other things, incur additional
debt, make advances, pay dividends or distributions on, redeem or repurchase
capital stock, make investments, enter into transactions with affiliates, issue
stock of restricted subsidiaries, engage in unrelated lines of business, create
liens to secure debt; and transfer or sell assets or merge with or into other
companies.

2.  CONTRIBUTED SURPLUS:

     During 2000 and 2001, the Company sold certain of its investments in its
wholly-owned subsidiaries to other wholly-owned subsidiaries, for cash,
promissory notes and share consideration. The excess of or shortfall in the cash
and promissory notes received over the historical carrying value of the
Company's investment in the wholly-owned subsidiaries sold has been reflected as
contributed surplus.

3.  DEFICIT:

     As described in note 1 "Significant Accounting Policies -- Goodwill and
Other Intangible Assets" to the Company's consolidated financial statements, on
adoption of new accounting standards, Hollinger International has determined
that the carrying amount of the Jerusalem Post was in excess of the estimated
fair value at January 1, 2002. The impairment write down of goodwill, net of
related minority interest has been charged to opening deficit as at January 1,
2002.

4.  UNUSUAL GAINS (LOSSES), NET:

     In 2000 and 2001, unusual gains (losses), net are principally comprised of
the dilution gain arising on the sale of shares of Hollinger International and
gains resulting from the delivery of shares of Hollinger International on the
exchange of Series II preference shares.

5.  DUE TO SUBSIDIARIES:

     The amount due to subsidiaries includes $198,311,000 at December 31, 2002
($96,195,000 at December 31, 2001) to 504468 N.B. Inc., which results from
advances made to the Company from the
                                       F-78
<PAGE>
                                                                      SCHEDULE I

                                 HOLLINGER INC.

      NOTES TO CONDENSED NON-CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

                SCHEDULE 1 -- CONDENSED UNCONSOLIDATED FINANCIAL
                   INFORMATION OF THE COMPANY -- (CONTINUED)

proceeds from sales of shares of Hollinger International Class A common stock
and from dividends received by 504468 N.B. Inc. on its shares of Hollinger
International common stock. 504468 N.B. Inc. will declare a dividend to settle
the amount receivable from the Company and declare regular dividends in the
future to settle future funds advanced to the Company.

                                       F-79
<PAGE>
ITEM 19. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NUMBER          DESCRIPTION OF EXHIBIT
<S>                     <C>
1.1a*                   Certificate of Amalgamation and Articles of Amalgamation amalgamating Argcen Holdings Inc., Hollinger Argus
                        Limited and Labmin Resources Limited, dated September 17, 1985
1.1b*                   Amalgamation Agreement between Argcen Holdings Inc., Hollinger Argus Limited and Labmin Resources Limited,
                        dated August 23, 1985
1.1c*                   Certificate of Amendment and Articles of Amendment, dated June 14, 1989
1.1d*                   Certificate of Amendment and Articles of Amendment, dated May 30, 1996
1.1e*                   Certificate of Amendment and Articles of Amendment, dated September 11, 1997
1.1f*                   Certificate of Amendment and Articles of Amendment, dated November 7, 1997
1.1g*                   Certificate of Amendment and Articles of Amendment, dated June 3, 1998
1.1h*                   Certificate of Amendment and Articles of Amendment, dated April 28, 1999
1.1I*                   Certificate of Amendment and Articles of Amendment, dated April 22, 2003
1.2a*                   By-Law Number A24, dated March 14, 1984
1.2b*                   By-Law Number A25, dated June 28, 1984
1.2c*                   By-Law Number A26, dated February 27, 2002
4.1*                    Trust Indenture, dated as of March 10, 2003, among Hollinger Inc., Ravelston Management Inc., 504468 N.B.
                        Inc. and Wachovia Trust Company, National Association, Ravelston Corporation Limited and Sugra Limited
4.2*                    Registration Rights Agreement, dated as of March 5, 2003 among Hollinger Inc., Ravelston Management Inc.,
                        504468 N.B. Inc., and Wachovia Securities, Inc.
4.3*                    Form of Note
4.4                     Hollinger Inc. Non-Competition, Non-Solicitation and Confidentiality Agreement, dated as of November 15,
                        2000, between CanWest Global Communications Corporation, 3815668 Canada Inc. and Hollinger Inc.
                        (Incorporated by reference to Exhibit 4.4 to Amendment No. 1 to the Registration Statement on Form F-4
                        dated September 17, 2003).
4.5                     Contribution Agreement, dated as of March 10, 2003, between The Ravelston Corporation Limited,
                        Ravelston Management Inc. and Hollinger Inc. (Incorporated by reference to Exhibit 4.5 to Amendment
                        No. 1 to the Registration Statement on Form F-4 dated September 17, 2003).
4.6                     Support Agreement, dated as of March 10, 2003, between Ravelston Management Inc. and Hollinger Inc.
                        (Incorporated by reference to Exhibit 4.6 to Amendment No. 1 to the Registration Statement on
                        Form F-4 dated September 17, 2003).
8.1*                    List of Subsidiaries - see Item 4f. - "Organizational Structure"
12.1                    Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
12.2                    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
13.1                    Certification by the Chief Executive Officer of periodic financial report pursuant to 18 U.S.C. Section
                        1350, as mandated by Section 906 of the Sarbanes-Oxley Act
13.2                    Certification by the Chief Financial Officer of periodic financial report pursuant to 18 U.S.C. Section
                        1350, as mandated by Section 906 of the Sarbanes-Oxley Act
</TABLE>

* PREVIOUSLY FILED AS AN EXHIBIT TO, OR INCORPORATED BY REFERENCE AS INDICATED
IN, OUR ANNUAL REPORT ON FORM 20-F FOR THE YEAR ENDED DECEMBER 31, 2002 FILED ON
JUNE 27, 2003.

                                       64
<PAGE>
                                   SIGNATURES

     The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and it has duly caused and authorized the undersigned to
sign this amendment to the annual report on its behalf.



                                      HOLLINGER INC. (Registrant)



                                      By: /s/ Conrad M. Black
                                          --------------------------------------
                                          Lord Black of Crossharbour, PC(C),
                                          OC, KCSG
                                          Chairman and Chief Executive Officer

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