torstar - interim management’s discussion and analysis · 2020-02-04 · the media segment...

TORSTAR CORPORATION 2011 THIRD QUARTER REPORT 1

TORSTAR - Interim Management’s Discussion and Analysis

For the three and nine months ended September 30, 2011 and 2010 Dated: November 1, 2011 The following review and analysis of Torstar Corporation’s (the “Company” or “Torstar”) operations and financial position for the three and nine months ended September 30, 2011 and 2010 (the “MD&A”) is supplementary to, and should be read in conjunction with the audited consolidated financial statements of Torstar Corporation for the year ended December 31, 2010 set forth in the Company’s Annual Report for such fiscal year and incorporated by reference in the Company’s renewal Annual Information Form dated March 22, 2011. All references to “year to date” in this MD&A shall mean the nine months ended September 30, 2011. Torstar reports its financial results under International Financial Reporting Standards (“IFRS”) in Canadian dollars. Per share amounts are calculated using the weighted average number of shares outstanding for the applicable period. Torstar’s 2010 financial results included in this Interim MD&A have been restated to an IFRS basis. Non-IFRS measures In addition to operating profit, as presented in the consolidated statement of income, management uses EBITDA and operating earnings as measures to assess the consolidated performance and the performance of the reporting units and business segments. EBITDA (earnings before interest, taxes, depreciation and amortization) is a measure that is also used by many of Torstar’s shareholders, creditors, other stakeholders and analysts as a proxy for the amount of cash generated by Torstar’s operations or by a reporting unit or business segment. EBITDA is not the actual cash provided by operating activities and is not a recognized measure of financial performance under IFRS. Torstar calculates EBITDA as operating revenue less other operating costs and salaries and benefits as presented on the consolidated statement of income. EBITDA excludes restructuring and other charges. Torstar’s method of calculating EBITDA may differ from other companies and accordingly may not be comparable to measures used by other companies. Operating earnings is used by management to represent the results of ongoing operations and is not a recognized measure of financial performance under IFRS. Torstar calculates operating earnings as operating revenue less other operating costs, salaries and benefits and amortization and depreciation. Operating earnings excludes restructuring and other charges. Torstar’s method of calculating operating earnings may differ from other companies and accordingly may not be comparable to measures used by those other companies. Forward-looking statements Certain statements in this MD&A and in the Company’s oral and written public communications may constitute forward-looking statements that reflect management’s expectations regarding the Company’s future growth, results of operations, performance and business prospects and opportunities as of the date of this MD&A. Generally, these forward-looking statements can be identified by the use of forward-looking terminology such as “anticipate”, “believe”, “plan”, “forecast”, “expect”, “intend”, “would”, “could”, “if”, “may” and similar expressions. All such statements are made pursuant to the “safe harbour” provisions of applicable Canadian securities legislation. These statements reflect current expectations of management regarding future events and operating performance, and speak only as of the date of this MD&A. In addition, forward-looking statements are provided for the purpose of providing information about management’s current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes.

By their very nature, forward-looking statements require management to make assumptions and are subject to inherent risks and uncertainties. There is a significant risk that predictions, forecasts, conclusions or projections will not prove to be accurate, that management’s assumptions may not be accurate and that actual results, performance or achievements may differ significantly from such predictions, forecasts, conclusions or projections expressed or implied by such forward-looking statements. We caution readers not to place undue reliance on the forward-looking statements in this MD&A as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, outlooks, expectations, goals, estimates or intentions expressed in the forward-looking statements. These factors include, but are not limited to:

• general economic conditions in the principal markets in which the Company operates; • the Company’s ability to operate in highly competitive industries; • the Company’s ability to compete with other forms of media and media platforms; • the Company’s ability to attract and retain advertisers;



• the Company’s ability to retain and grow its digital audience and profitably develop its digital businesses; • cyclical and seasonal variations in the Company’s revenues; • labour disruptions; • newsprint costs; • the Company’s ability to reduce costs; • foreign exchange fluctuations; • credit risk; • restrictions imposed by existing credit facilities, debt financing and availability of capital; • pension fund obligations; • results of impairment tests; • reliance on its printing operations; • reliance on technology and information systems; • risks related to business development; • interest rates; • availability of insurance; • litigation; • environmental regulations; • dependence on key personnel; • loss of reputation; • privacy and confidential information; • product liability; • intellectual property rights; • control of the Company by the Voting Trust; and • uncertainties associated with critical accounting estimates.

We caution that the foregoing list is not exhaustive of all possible factors, as other factors could adversely affect our results. In addition, a number of assumptions, including those assumptions specifically identified throughout this MD&A, were applied in making the forward-looking statements set forth in this MD&A which the Company believes are reasonable as of the date of this MD&A. Some of the key assumptions include, without limitation, assumptions regarding the performance of the North American economy; tax laws in the countries in which we operate; continued availability of printing operations; continued availability of financing on appropriate terms; exchange rates; market competition; rates of return and discount rates relating to pension expense and pension plan obligations; royalty rates, expected future revenues, expected future cash flows and discount rates relating to valuation of goodwill and intangible assets; and successful development of new products. There is a risk that some or all of these assumptions may prove to be incorrect.

When relying on our forward-looking statements to make decisions with respect to the Company and its securities, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. The Company does not intend, and disclaims any obligation to, update any forward-looking statements, whether written or oral, or whether as a result of new information or otherwise, except as may be required by law.

OVERVIEW Torstar Corporation is a broadly based media and book publishing company listed on the Toronto Stock Exchange (TS.B). Torstar reports its operations in two segments: Media and Book Publishing. The Media Segment publishes over 100 newspapers including the Toronto Star, Canada’s largest daily newspaper, The Mississauga News, Oshawa This Week, The Hamilton Spectator and the English-language Metro newspapers. It also includes leading digital properties such as thestar.com, toronto.com, InsuranceHotline.com, Wheels.ca, flyerland.ca, goldbook.ca, Workopolis, Olive Media, eyeReturn Marketing and wagjag.com. The Book Publishing Segment represents Harlequin, a leading global publisher of books for women. Torstar also has investments in Canadian Press Enterprises Inc. (“Canadian Press”), Q-ponz Inc. and Black Press Limited (“Black Press”). Until April 1, 2011, Torstar also had an investment in CTV Inc. (“CTV”).



OPERATING RESULTS – Third quarter and year to date 2011 Overall performance The following tables set out, in $000’s, the segmented results for the three and nine months ended September 30, 2011 and 2010.

Third Quarter 2011 Third Quarter 2010

Media Book

Publishing Corporate Total Media Book

Publishing Corporate Total Operating revenue $262,980 $115,697 $378,677 $236,226 $117,484 $353,710 Other operating costs (130,414) (66,156) ($803) (197,373) (105,438) (69,206) ($954) (175,598)Salaries and benefits (99,817) (24,760) (3,036) (127,613) (96,181) (24,083) (2,709) (122,973)EBITDA 32,749 24,781 (3,839) 53,691 34,607 24,195 (3,663) 55,139 Amortization &

depreciation (7,461) (1,024) (15) (8,500) (6,648) (888) (19) (7,555)Operating earnings 25,288 23,757 (3,854) 45,191 27,959 23,307 (3,682) 47,584 Restructuring and

other charges (1,523) (438) (1,961) (2,525) (2,525)Operating profit $23,765 $23,319 ($3,854) $43,230 $25,434 $23,307 ($3,682) $45,059

Year to Date 2011 Year to Date 2010

Media Book

Publishing Corporate Total Media Book

Publishing Corporate Total Operating revenue $782,049 $341,372 $1,123,421 $718,136 $348,102 $1,066,238 Other operating costs (379,511) (201,877) ($2,574) (583,962) (315,127) (205,816) ($3,029) (523,972)Salaries and benefits (294,428) (74,632) (9,338) (378,398) (287,902) (72,081) (7,373) (367,356)EBITDA 108,110 64,863 (11,912) 161,061 115,107 70,205 (10,402) 174,910 Amortization &

depreciation (21,110) (2,811) (45) (23,966) (20,777) (3,003) (48) (23,828)Operating earnings 87,000 62,052 (11,957) 137,095 94,330 67,202 (10,450) 151,082 Restructuring and

other charges (5,310) (438) (5,748) (11,992) (357) (2,779) (15,128)Operating profit $81,690 $61,614 ($11,957) $131,347 $82,338 $66,845 ($13,229) $135,954

Revenue Total revenue was $378.7 million in the third quarter of 2011, up $25.0 million from $353.7 million in the third quarter of 2010. Excluding the $4.5 million increase from a change in reporting for Torstar’s share of Metro’s revenues and the $2.4 million decrease from the stronger Canadian dollar, total revenue would have been up $22.9 million or 6.5% in the quarter. Excluding these items, Media Segment revenues were up $22.3 million or 9.4% in the quarter with growth in product sales, digital and distribution revenues more than offsetting declines in print advertising revenue. Book Publishing revenues were up $0.6 million in the quarter with digital revenue growth more than offsetting declines in print retail and direct-to-consumer revenues. Year to date, total revenue was $1,123.4 million, up $57.2 million from $1,066.2 million in 2010. Excluding the $12.6 million increase from a change in reporting for Torstar’s share of Metro’s revenue and the $8.0 million decrease from the stronger Canadian dollar, total revenue would have been up $52.6 million or 4.9% in the first nine months of 2011. Excluding these items, Media Segment revenues were up $51.3 million year to date with growth in product sales, digital and distribution revenues more than offsetting declines in print advertising revenue. Book Publishing revenues were up $1.3 million year to date including the benefit of the acquisition of the other half of the German business at the beginning of the second quarter of 2010. Excluding that benefit, Book Publishing revenues were down $2.8 million year to date. EBITDA EBITDA was $53.7 million in the third quarter of 2011, down $1.4 million from $55.1 million in the third quarter of 2010. Year to date, EBITDA was $161.1 million, down $13.8 million from $174.9 million in 2010.



Operating earnings Operating earnings were $45.2 million in the third quarter of 2011, down $2.4 million from $47.6 million in the third quarter of 2010. Media Segment operating earnings were $25.3 million in the third quarter of 2011, down $2.7 million from $28.0 million in the third quarter last year. Revenue growth for the Media Segment was offset by related cost increases and net investment spending, primarily in the digital properties. Book Publishing operating earnings were $23.8 million in the third quarter of 2011, up $0.5 million from $23.3 million in the third quarter of 2010. Excluding a decline of $1.6 million from the impact of foreign exchange, Book Publishing operating earnings were up $2.0 million in the quarter. Higher North American results more than offset softness across many overseas markets. Corporate costs were $3.9 million in the third quarter of 2011, up $0.2 million from $3.7 million in the third quarter of 2010. Year to date, operating earnings were $137.1 million, down $14.0 million from $151.1 million in 2010. Media Segment operating earnings were $87.0 million in the first nine months of 2011, down $7.3 million from $94.3 million in the same period last year. Book Publishing operating earnings were $62.1 million in the first nine months of 2011, down $5.1 million from $67.2 million in the same period in 2010. Excluding a decline of $5.7 million from the impact of foreign exchange, Book Publishing operating earnings were up $0.5 million year to date including $0.7 million of benefit from the 2010 German acquisition. Year to date, corporate costs were $12.0 million, up $1.5 million from $10.5 million in 2010 primarily due to year over year differences in the mark-to-market of a share-based compensation hedging instrument partially offset by lower professional fees. Restructuring and other charges Restructuring and other charges of $2.0 million were recorded in the third quarter of 2011 and $5.7 million year to date. The third quarter charge included restructuring initiatives of $1.6 million in the Media Segment and $0.4 million in the Book Publishing Segment. Year to date restructuring and other charges included $2.9 million for restructuring initiatives in the Media Segment and a $2.4 million provision for rented space that the Media Segment will be vacating as reduced staff counts allow for space consolidation. The charge represents the discounted shortfall between the remaining obligation under the existing lease and the amounts to be received through a sublease arrangement. The annual cost savings from the space consolidation are approximately $1.3 million a year with $0.3 million expected to be realized in the fourth quarter of 2011. The 2011 restructuring initiatives in the Media Segment are expected to result in annualized savings of approximately $4.1 million (rent and salaries) and a reduction of approximately 39 positions. $1.6 million of the savings is expected to be realized in 2011 (with $0.7 million realized in the first nine months). The 2011 restructuring initiatives in the Book Publishing Segment are expected to result in annualized savings of approximately $0.5 million and a reduction of 5 positions. $0.2 million of the savings is expected to be realized in the fourth quarter of 2011. In 2010, restructuring and other charges of $2.5 million and $15.1 million were recorded in the third quarter and year to date respectively. The third quarter charge included $1.3 million related to restructuring provisions and a $1.2 million adjustment to a provision for litigation, both in the Media Segment. Restructuring and other charges in the first nine months of 2010 included $10.7 million for restructuring in the Media Segment, the $1.2 million litigation provision adjustment in the Media Segment, $2.8 million of costs related to Torstar’s bid to purchase the newspaper and digital business of Canwest Limited Partnership and $0.4 million related to transaction costs from Harlequin’s acquisition of the other half of the German publishing business. Operating profit Operating profit was $43.2 million in the third quarter of 2011, down $1.9 million from $45.1 million in 2010. Year to date, operating profit was $131.3 million, down $4.7 million from $136.0 million in 2010. Interest and financing costs Interest and financing costs were $1.8 million in the third quarter of 2011, down $5.1 million from $6.9 million in the third quarter of 2010. Year to date, interest and financing costs were $14.6 million, down $3.2 million from $17.8 million in 2010.



Third Quarter Year to Date (in $000’s) 2011 2010 2011 2010 Interest expense $1,195 $6,547 $8,789 $17,318 Interest accretion costs 619 315 1,985 489 Swap settlement charge 3,794 Interest and financing costs $1,814 $6,862 $14,568 $17,807

Interest expense was $1.2 million in the third quarter of 2011, down $5.3 million from $6.5 million in the third quarter of 2010. The lower expense reflects the significantly lower level of average net debt outstanding in the third quarter of 2011 and a lower effective interest rate. The average net debt (long-term debt and bank overdraft net of cash and cash equivalents) was $98.5 million in the third quarter of 2011, down $366.0 million from $464.5 million in the same period last year. Torstar’s effective interest rate on long-term debt was 3.4% in the third quarter of 2011 and 5.2% in the third quarter of 2010. Year to date, interest expense was $8.8 million, down $8.5 million from $17.3 million in 2010. The lower expense reflects the significantly lower level of average net debt outstanding in the second and third quarters of 2011, partially offset by a slightly higher effective interest rate. The average net debt (long-term debt and bank overdraft net of cash and cash equivalents) was $188.3 million in the first nine months of 2011, down $295.4 million from $483.7 million in 2010. Torstar’s effective interest rate on long-term debt was 4.7% in the first nine months of 2011 and 4.5% in the same period last year. Torstar’s effective interest rate in both periods has been impacted by the applicable interest rate spread and the mix of debt outstanding. A higher interest rate spread was applicable to Torstar’s debt starting in the first quarter of 2010 through the second quarter of 2011. Debt repayments over the past two years have been against the lower floating-rate debt leaving a larger proportion of outstanding debt at the higher fixed-rates. Net debt was $88.9 million at September 30, 2011, down $279.7 million from $368.6 million at December 31, 2010. Interest and financing costs included interest accretion on long-term restructuring provisions, deferred purchase price and contingent consideration obligations of $0.6 million in the third quarter of 2011 and $2.0 million year to date. Interest accretion of $0.3 million and $0.5 million was recorded in the third quarter and first nine months of 2010 respectively. Year to date, interest and financing costs also included the $3.8 million first quarter charge related to the settlement of Canadian dollar debt interest rate swaps. In 2006, in connection with the investment in CTV, Torstar had entered into interest rate swap agreements to fix the rate of interest on $250 million of Canadian dollar borrowings at 4.3% (plus the applicable interest rate spread based on Torstar’s long-term credit rating) through September 2011. The five-year swap arrangements required a resetting of pricing and debt instruments every ninety days with a reset date occurring in March 2011. In anticipation of the receipt of the funds from the completion of the CTV sale, the swap arrangements were not reset in March and Torstar settled the swaps. Adjustment to contingent consideration During the third quarter of 2011, Torstar revised the estimate of contingent consideration related to a 2010 acquisition in the Media Segment. The revision resulted in a $0.7 million income inclusion and the reduction of the provision for contingent consideration. Foreign exchange The non-cash foreign exchange gain or loss reported in the consolidated statement of income primarily relates to the translation of U.S. dollar denominated assets and liabilities held by Torstar’s Canadian operations into Canadian dollars. It does not include the translation of foreign currency (including U.S. dollars) denominated assets and liabilities of Torstar’s foreign operations or the translation of U.S. dollar debt that has been designated as a hedge against those net U.S. dollar denominated assets. The foreign exchange on the translation of those foreign-currency denominated assets and liabilities and the related hedge-designated debt into Canadian dollars



is reported through other comprehensive income. The amount of the non-cash foreign exchange gain or loss in any year will vary depending on the movement in the relative value of the Canadian dollar and on whether Torstar’s Canadian operations have a net asset or net liability position in U.S. dollars. Torstar reported a non-cash foreign exchange loss of $4.6 million in the third quarter of 2011 compared with a gain of $3.4 million in the third quarter of 2010. Year to date, Torstar reported a non-cash foreign exchange loss of $3.0 million compared with a gain of $0.4 million in 2010. Torstar’s Canadian operations were in a net liability position in U.S. dollars in both years however, the Canadian dollar weakened as at the end of the third quarter and first nine months of 2011 (relative to the beginning of each period) and strengthened as at the end of the third quarter and first nine months of 2010. Torstar’s net liability position in U.S. dollars was larger in 2010 as Torstar had not designated any of its U.S. dollar debt as a hedge against its net investment in U.S. dollar denominated operations thereby increasing the net liability position in U.S. dollars. Effective January 1, 2011, Torstar has designated $80.0 million of its U.S. dollar denominated debt as a hedge against its net investment in the Book Publishing businesses that have the U.S. dollar as their functional currency. This reduces Torstar’s net liability position in U.S. dollars. Loss of associated businesses The loss of associated businesses was $0.6 million in the third quarter of 2011 compared with a loss of $16.2 million in the third quarter of 2010. Year to date, the loss of associated businesses was $1.8 million compared with a loss of $27.9 million in 2010. The 2011 losses included Torstar’s share of Canadian Press losses. Torstar acquired a one-third interest in Canadian Press in the fourth quarter of 2010. Torstar ceased to equity account for its investment in CTV on September 10, 2010 and subsequently sold its investment on April 1, 2011. Torstar has not recorded any amounts related to CTV in the loss of associated businesses in 2011. Torstar’s share of CTV’s net loss was $16.3 million in the third quarter and $28.0 million for the first nine months of 2010. Torstar is also not currently recording its share of Black Press’s results due to a notional accounting negative carrying value. Torstar’s share of Black Press’s net income would have been a loss of $0.3 million in the third quarter of 2011 compared with a loss of $0.7 million in the third quarter of 2010. Year to date, Torstar’s share of Black Press’s net income would have been $1.2 million compared with a loss of $2.3 million in 2010. The 2010 loss included a $3.1 million impairment loss related to a customer-related intangible asset and goodwill related to a printing operation. Excluding the impairment loss in 2010, results were up slightly year over year. Gain on sale of CTV During the second quarter of 2011, Torstar recorded a gain of $190.1 million on its sale of its 20% interest in CTV. The transaction closed on April 1, 2011 and Torstar received cash proceeds of $291.6 million. Income and other taxes The reporting of the gain on the sale of CTV in 2011 and the loss of associated businesses from CTV in 2010 had an impact on Torstar’s effective tax rate in both years. There was no tax expense recorded against the gain on the sale as the gain was a reversal of prior year losses of associated businesses and impairment losses which had not been tax-affected. Excluding the impact of CTV in both years, Torstar’s effective tax rate was 31.6% in the third quarter of 2011 and 30.4% in the third quarter of 2010. Year to date, Torstar’s effective tax rate was 30.0% in 2011 and 31.8% in 2010. In both periods Torstar benefitted from the lower Canadian statutory tax rate. The Canadian statutory rate is lower in 2011, although Torstar only realizes a portion of the benefit as a large proportion of its income is taxed in foreign jurisdictions where tax rates remain unchanged. In the quarter, this benefit was offset by the impact of the non-deductible portion of capital losses in 2011 compared with the non-taxable portion of capital gains in 2010. Year to date the effective tax rate also benefited from the recognition of previously unrecognized losses. Net income attributable to equity shareholders Torstar reported net income attributable to equity shareholders of $25.2 million or $0.32 per share in the third quarter of 2011 up $10.7 million or $0.14 per share from $14.5 million or $0.18 per share in the third quarter of



2010. Year to date, Torstar reported net income attributable to equity shareholders of $269.0 million or $3.39 per share up $214.6 million or $2.70 per share from $54.4 million or $0.69 per share in 2010. The second quarter 2011 gain on the sale of CTV was $190.1 million or $2.40 per share. In 2010, Torstar recorded $16.3 million ($0.21 per share) in the third quarter and $28.0 million ($0.35 per share) year to date from CTV as part of the loss of associated businesses. Excluding the impact of CTV in both years, Torstar would have reported net income attributable to equity shareholders of $25.2 million or $0.32 per share in the third quarter of 2011 down $5.6 million or $0.07 per share from $30.8 million or $0.39 per share in the third quarter of 2010. Year to date, Torstar would have reported net income attributable to equity shareholders of $78.9 million or $0.99 per share down $3.5 million or $0.05 per share from $82.4 million or $1.04 per share in 2010. The average number of Class A and Class B non-voting shares outstanding was 79.5 million in the third quarter and 79.4 million in the first nine months of 2011 up slightly from 79.1 million in both periods last year. The following chart provides a continuity of net income attributable to equity shareholders per share from 2010 to 2011: Third Quarter Year to Date Net income attributable to equity shareholders per share 2010 $0.18 $0.69 • Loss from CTV (2010) 0.21 0.35 Adjusted net income attributable to equity shareholders per share 2010 0.39 1.04 Changes • Operations 0.03 (0.05) • Restructuring and other charges 0.01 0.09 • Settlement of interest rate swap contracts (0.03) • Non-cash foreign exchange (0.09) (0.04) • Adjustment to contingent consideration 0.01 0.01 • Gain on sale of assets (2010) (0.03) (0.03) Pre CTV gain net income attributable to equity shareholders per share $0.32 $0.99 • Gain on sale of CTV 2.40 Net income attributable to equity shareholders per share 2011 $0.32 $3.39 SEGMENT OPERATING RESULTS – MEDIA The Media Segment includes Star Media Group (SMG) and Metroland Media Group (MMG). Star Media Group includes the Toronto Star, Canada’s largest daily newspaper which is read in print and online (thestar.com) by more than 3 million readers every week. Online, thestar.com is one of the most-visited newspaper websites in Canada. Star Media Group also includes Torstar Syndication Services (which provides editorial content to newspapers and other media), Wheels.ca, InsuranceHotline.com, moneyville.ca, parentcentral.ca, healthzone.ca, yourhome.ca, toronto.com (an online destination for events and attractions in the Greater Toronto Area), Olive Media (a leader in online advertising sales in Canada with the ability to reach over 17 million unique Canadian visitors monthly on a portfolio of top-tier sites including thestar.com, nytimes.com, CNET.com, cyberpresse.ca, and auFeminin.ca), eyeReturn Marketing (a leading provider of online marketing services), wagjag.com (a daily deal website), travelalerts.ca (an online publisher of travel deals) and the Torstar Digital corporate group. In addition to the above operations, Star Media Group also includes Torstar’s proportionate interests in Sing Tao Daily, Metro, Workopolis and Tuango.ca. Sing Tao Daily publishes a Chinese language newspaper in Canada with editions in Toronto, Vancouver and Calgary. It is also involved in printing, outdoor advertising, Chinese language telephone directories, radio and weekly magazine publishing. Torstar jointly owns the Canadian operations of Sing Tao Daily with Sing Tao Holdings Limited. Metro is a free daily newspaper that is published by Free Daily News Group in Toronto, Vancouver, Ottawa, Calgary, Edmonton, London and Winnipeg, and pursuant to a joint venture with Transcontinental Media G.P., in Halifax Effective October 14, 2011, Torstar increased its ownership in Free Daily News Group to 90%. The remaining 10% is held by Metro International S.A. Torstar owns 50% of Workopolis, Canada’s leading provider of Internet recruitment and job search solutions. Square



Victoria Digital Properties (a subsidiary of Power Corporation) is Torstar’s partner in Workopolis. Torstar owns 50% of Tuango.ca, a Quebec-based daily deal website. Metroland Media Group publishes in print and online more than 100 weekly community newspapers including The Mississauga News and Oshawa This Week and three daily newspapers – The Hamilton Spectator, the Waterloo Region Record and the Guelph Mercury. Its online properties include flyerland.ca, HomeFinder.ca, gottarent.com, save.ca and a 50% interest in LeaseBusters.com. Metroland Media Group also participates in Wheels.ca, InsuranceHotline.com and wagjag.com. Metroland Media Group publishes the Gold Book print and online directories, a number of specialty publications and operates several consumer shows throughout Ontario. Metroland Media Group also operates Torstar Media Group Television (“TMGTV” - a teleshopping channel and a product sourcing and distribution business). Metroland Media Group has nine web press facilities which print the Metroland newspapers but also engage in commercial printing. The following tables set out, in $000’s, operating earnings for the Media Segment for the three and nine months ended September 30, 2011 and 2010.

Third Quarter 2011 Third Quarter 2010 MMG SMG Total MMG SMG Total Operating revenue $146,573 $116,407 $262,980 $127,900 $108,326 $236,226 Other operating costs (67,888) (62,526) (130,414) (50,538) (54,900) (105,438) Salaries and benefits (56,303) (43,514) (99,817) (55,105) (41,076) (96,181) EBITDA 22,382 10,367 32,749 22,257 12,350 34,607 Amortization & depreciation (2,946) (4,515) (7,461) (2,286) (4,362) (6,648) Operating earnings $19,436 $5,852 $25,288 $19,971 $7,988 $27,959

Year to Date 2011 Year to Date 2010 MMG SMG Total MMG SMG Total Operating revenue $420,059 $361,990 $782,049 $383,268 $334,868 $718,136 Other operating costs (184,805) (194,706) (379,511) (149,962) (165,165) (315,127) Salaries and benefits (165,261) (129,167) (294,428) (162,903) (124,999) (287,902) EBITDA 69,993 38,117 108,110 70,403 44,704 115,107 Amortization & depreciation (7,960) (13,150) (21,110) (7,858) (12,919) (20,777) Operating earnings $62,033 $24,967 $87,000 $62,545 $31,785 $94,330 Total revenue of the Media Segment was $263.0 million in the third quarter of 2011, up $26.8 million from $236.2 million in the third quarter of 2010. The revenue growth included $4.5 million from a change in reporting for Torstar’s share of Metro’s results. Excluding this change, Media Segment revenue was up $22.3 million in the quarter. Higher product sales in Metroland Media Group’s TMGTV operations provided $19.0 million of the revenue growth. Digital revenue growth and higher distribution revenues more than offset continued softness in print advertising revenues. Digital revenues grew 26.9% in the third quarter of 2011 and were 11.1% of the total Media Segment revenue in 2011, up from 9.7% in 2010. Year to date, total revenue of the Media Segment was $782.0 million, up $63.9 million from $718.1 million in 2010. The revenue growth included $12.6 million from a change in reporting for Torstar’s share of Metro’s results. Excluding this change, Media Segment revenue was up $51.3 million in the first nine months. Higher product sales in Metroland Media Group’s TMGTV operations provided $39.6 million of the revenue growth. As in the quarter, digital revenue growth and higher distribution revenues more than offset continued softness in print advertising revenues. Digital revenues grew 30.6% in the first nine months of 2011 and were 11.5% of the total Media Segment revenue in 2011, up from 9.6% in 2010. At the end of 2010, the jointly-owned Metro operations met certain milestones that resulted in a change in how Torstar reports its share of the results effective with the first quarter of 2011. The change results in a higher amount of revenue and expenses being reported by Torstar but with no change in operating earnings. The



impact on the Media Segment of the change in reporting was an increase of $4.5 million to both revenue and expenses in the third quarter and $12.6 million year to date. The Media Segment expenses were up $28.6 million in the third quarter of 2011 and $70.9 million year to date. Excluding the increase of $4.5 million in the quarter and $12.6 million year to date from the change in reporting for Metro, expenses were up $24.1 million in the quarter and $58.3 million year to date. The higher expenses included increased costs related to the TMGTV product sales (which have a lower margin), the higher distribution volumes and the impact of acquisitions and new markets. It also included an investment in staff and marketing costs in the digital properties (including the 2010 acquisitions) and the new Metro markets. Net savings of $3.2 million were realized in the quarter and $10.7 million year to date from prior and current year restructuring initiatives. Pension expense was up $0.5 million in the quarter and $1.3 million year to date. Newsprint pricing was flat in both the quarter and year to date. The Media Segment EBITDA was $32.7 million in the third quarter of 2011, down $1.9 million from $34.6 million in the third quarter of 2010. Year to date, Media Segment EBITDA was $108.1 million, down $7.0 million from $115.1 million in 2010. In both periods, the segment was impacted by investment spending, primarily in the digital businesses, while softness in print advertising revenues was mitigated by cost savings from prior year restructuring initiatives. Segment operating earnings were $25.3 million in the third quarter of 2011 down $2.7 million from $28.0 million in the same period last year. Year to date segment operating earnings were $87.0 million down $7.3 million from $94.3 million in 2010. Metroland Media Group Metroland Media Group revenues were $146.6 million in the third quarter of 2011 up $18.7 million from $127.9 million in the third quarter of 2010. This increase included $19.0 million of growth in product sales in the TMGTV operations. Digital revenues grew 35.2% in the third quarter and distribution revenues were up on higher volumes including the benefit of acquisitions and new markets. Print advertising revenues continued to be soft during the third quarter at both the daily and community newspapers with declines across all categories. Year to date, Metroland Media Group revenues were $420.1 million, up $36.8 million from $383.3 million in 2010. The increase included $39.6 million of growth in product sales in the TMGTV operations, digital revenue growth of 40.2% and higher distribution revenues offset by lower print advertising revenues. Metroland Media Group expenses were up $18.6 million in the third quarter of 2011 and $37.2 million year to date. The higher expenses included increased costs related to the TMGTV product sales (which have a lower margin), the higher distribution volumes and the impact of acquisitions and new markets. Net savings of $0.8 million were realized in the quarter and $2.8 million year to date from prior and current year restructuring initiatives. Pension expense was up $0.5 million in the quarter and $1.3 million year to date. Newsprint pricing was flat in both the quarter and year to date. Metroland Media Group’s EBITDA was $22.4 million in the third quarter of 2011, up $0.1 million from $22.3 million in the third quarter of 2010. Year to date, Metroland Media Group’s EBITDA was $70.0 million, down $0.4 million from $70.4 million in 2010. Operating earnings were $19.4 million in the third quarter of 2011, down $0.6 million from $20.0 million in the same period last year. Year to date, operating earnings were $62.0 million, down $0.5 million from $62.5 million in the same period last year. Star Media Group Star Media Group revenues were $116.4 million in the third quarter of 2011, up $8.1 million from $108.3 million in the third quarter of 2010. Year to date, Star Media Group revenues were $362.0 million, up $27.1 million from $334.9 million in 2010. Excluding the increase of $4.5 million in the quarter and $12.6 million year to date from the change in reporting for Metro, revenues were up $3.6 million in the quarter and $14.5 million year to date. Advertising revenues were down 6.0% in the quarter and 3.7% year to date at the Toronto Star. The declines were across all categories including National which had been relatively flat through the first six months of the year. Revenue at Star Media Group’s digital properties was up 22.3% in the quarter and 25.2% year to date. The digital revenue growth in both periods included revenues from the 2010 acquisitions of travelalerts.ca, wagjag.com and Tuango.ca (50% ownership as of April 2011) and improved revenue at Workopolis and Olive



Media. The jointly-owned Metro newspapers continued to have revenue growth in all their markets and also benefited from the new markets of London and Winnipeg that launched at the beginning of the second quarter. Sing Tao continued to have revenue growth through the third quarter. Star Media Group expenses were up $10.1 million in the third quarter of 2011 and $33.7 million year to date. Excluding the increase of $4.5 million in the quarter and $12.6 million year to date from the change in reporting for Metro, expenses were up $5.6 million in the quarter and $21.1 million year to date. The higher expenses included an investment in staff and marketing costs in the digital properties (including the 2010 acquisitions) and the new Metro markets. Net savings of $2.4 million in the quarter and $7.9 million year to date were realized from prior and current year restructuring initiatives. Pension expense and newsprint pricing were flat in both the quarter and year to date. Star Media Group EBITDA was $10.4 million in the third quarter of 2011, down $2.0 million from $12.4 million in the third quarter of 2010. Year to date, Star Media Group EBITDA was $38.1 million, down $6.6 million from $44.7 million in 2010. Operating earnings were $5.9 million in the third quarter of 2011, down $2.1 million from $8.0 million in the same period last year. Year to date, operating earnings were $25.0 million, down $6.8 million from $31.8 million in 2010. SEGMENT OPERATING RESULTS – BOOK PUBLISHING The Book Publishing Segment reports the results of Harlequin, a leading global publisher of books for women. Harlequin publishes books around the world in a variety of genres and formats, including digital. Harlequin sells books under several imprints including Harlequin, Silhouette, MIRA, HQN, LUNA, Spice, Kimani Press and Carina Press. Harlequin sells books through the retail channel, in stores and online, and directly to the consumer through its direct mail businesses and from its Internet sites (in North America – Harlequin.com). Harlequin’s publishing operations are comprised of two divisions: North America and Overseas. The following tables set out, in $000’s, a summary of operating earnings for the Book Publishing Segment and a continuity of revenue and operating earnings, including the impact of foreign currency movements, for the three and nine months ended September 30, 2011 and 2010. Third Quarter Year to Date 2011 2010 2011 2010 Operating revenue $115,697 $117,484 $341,372 $348,102 Other operating costs (66,156) (69,206) (201,877) (205,816)Salaries and benefits (24,760) (24,083) (74,632) (72,081)EBITDA 24,781 24,195 64,863 70,205 Amortization & depreciation (1,024) (888) (2,811) (3,003)Operating earnings $23,757 $23,307 $62,052 $67,202 Third Quarter Year to Date Reported revenue, prior year $117,484 $348,102 Impact of currency movements and foreign exchange contracts (2,394) (8,016) Change in underlying revenue 607 1,286 Reported revenue, current year $115,697 $341,372 Reported operating earnings $23,307 $67,202 Impact of currency movements and foreign exchange contracts (1,591) (5,670) Change in underlying operating earnings 2,041 520 Reported operating earnings $23,757 $62,052 In the third quarter of 2011, Book Publishing revenues were up $0.6 million excluding the impact of foreign exchange, with North America up $1.2 million and Overseas down $0.6 million. Book Publishing operating earnings were up $2.0 million in the third quarter excluding the impact of foreign exchange, with North America up $3.0 million and Overseas down $1.0 million.



Year to date, Book Publishing revenues were up $1.3 million excluding the impact of foreign exchange, with North America up $1.7 million and Overseas down $0.4 million. Book Publishing operating earnings were up $0.5 million year to date excluding the impact of foreign exchange, with North America up $1.9 million and Overseas down $1.4 million. North American division revenues were up $1.2 million in the third quarter of 2011 and $1.7 million year to date. Operating earnings were up $3.0 million in the third quarter and $1.9 million year to date excluding the impact of foreign exchange. Digital revenues were up $7.5 million in the quarter and $22.5 million year to date reflecting the continued growth of the e-book market. Sales of print books declined in the quarter and year to date. Retail print revenues were down $4.7 million in the quarter with lower volumes from the shift in format from physical to digital books partially offset by the impact of a negative prior period returns provision adjustment made in the third quarter of 2010. Year to date, retail print revenues were down $17.3 million from a combination of the shift in format from physical to digital books and lower positive adjustments to prior year returns provisions compared to the same period last year. Retail promotional spending was $0.8 million lower in the quarter. Year to date, retail promotional spending was higher by $0.6 million due to the timing of promotional spending. Direct-to-consumer revenues were down $1.6 million in the third quarter and $3.5 million year to date. The traditional direct mail business was down in the quarter and year to date reflecting the ongoing trend in the direct mail business. Overseas division revenues were down $0.6 million in the third quarter of 2011 and $0.4 million year to date. Operating earnings were down $1.0 million in the third quarter and $1.4 million year to date excluding the impact of foreign exchange. Excluding the benefit from the acquisition of the other half of the German business at the beginning of the second quarter of 2010, Overseas revenues were down $4.5 million and operating earnings were down $2.1 million year to date. The economic weakness in Europe continued to have a negative impact on Harlequin’s Overseas operations during the third quarter. The Overseas print retail businesses were down in the quarter across most markets. The decline was partially offset by growth in the U.K. digital business. The Overseas direct-to-consumer businesses were down in the quarter, consistent with the trends in North America. Year to date results benefited from higher digital sales in the U.K. and Japan and lower overhead costs in several markets. Global digital revenues were 15.8% of total revenue in the third quarter of 2011 and 14.8% year to date, up from 8.0% and 7.0% in the same periods last year. LIQUIDITY AND CAPITAL RESOURCES Overview Torstar uses the cash generated by its operations to fund capital expenditures, distributions to shareholders, acquisitions and debt repayment. Long-term debt is used to supplement funds from operations as required, generally for capital expenditures or acquisitions. Torstar’s long-term debt facility will mature in January 2012. As a result, all $136.0 million of debt outstanding under the facility at September 30, 2011 has been presented as a current obligation. It is expected that future cash flows from operating activities, combined with the renewal of the long-term debt facility will be adequate to cover forecasted financing requirements. In the third quarter of 2011, $44.6 million of cash was generated from operations, $10.3 million was used in investing activities and $17.7 million was used in financing activities. Cash and cash equivalents net of bank overdraft increased by $17.9 million in the quarter from $29.2 million to $47.1 million. In the first nine months of 2011, $68.6 million of cash was generated from operations, $239.1 million was received from investing activities and $298.6 million was used in financing activities. Cash and cash equivalents net of bank overdraft increased by $11.1 million in the nine months from $36.0 million to $47.1 million.



Operating Activities Operating activities provided cash of $44.6 million in the third quarter of 2011, up $5.4 million from $39.2 million in the third quarter of 2010. The higher amount in 2011 reflected a larger decrease in non-cash working capital as compared to the same period last year partially offset by higher employee benefits funding. Torstar’s non-cash working capital investment decreased $13.9 million in the third quarter of 2011 from a decrease in accounts receivable (third quarter revenues are lower than second quarter) and an increase in accounts payable (timing of payments) partially offset by a decrease in taxes payable (payments greater than tax provision) and restructuring provisions (timing of payments). In the third quarter of 2010, Torstar’s non-cash working capital investment decreased $4.4 million from an increase in accounts payable (timing of payments) and taxes payable (tax provision greater than payments) partially offset by a decrease in restructuring provisions (timing of payments) and an increase in accounts receivable (timing of collections). Payments of restructuring provisions were $4.5 million and $5.6 million in the third quarter of 2011 and 2010 respectively. Operating activities provided cash of $68.6 million in the first nine months of 2011, down $30.6 million from $99.2 million in the same period last year. The lower amount in 2011 reflected the higher employee benefits funding and lower operating results. Torstar’s non-cash working capital investment increased $10.6 million in the first nine months of 2011 from a decrease in accounts payable (timing of payments), taxes payable (payment of final 2010 taxes combined with current year payments greater than tax provision) and restructuring provisions (timing of payments) partially offset by a decrease in accounts receivable (a combination of Media Segment receivables which tend to peak at the end of the fourth quarter and revenue growth in digital revenues which have a shorter collection cycle). In the first nine months of 2010, Torstar’s non-cash working capital investment increased $12.8 million from a decrease in accounts payable (timing of payments) and restructuring provisions (timing of payments) partially offset by a decrease in accounts receivable (Media Segment receivables tend to peak at the end of the fourth quarter) and an increase in taxes payable (tax provision greater than payments). Payments of restructuring provisions were $17.3 million and $16.9 million in the first nine months of 2011 and 2010 respectively. Investing Activities During the third quarter of 2011, $10.3 million was used in investing activities. This included $9.3 million of additions to property, plant and equipment and intangible assets and $1.2 million for acquisitions. Year to date, $239.1 million was provided by investing activities. Excluding the $291.6 million received on the second quarter sale of CTV, $52.5 million was used in investing activities. This included $26.3 million of additions to property, plant and equipment and intangible assets and $26.1 million for acquisitions. Year to date additions to property, plant and equipment and intangible assets were $11.1 million higher than in the same period last year. The 2011 projects include a higher amount of spending on IT-related projects within the Media Segment and leasehold related spending on the reduction of space in some operations and expansion for others. During the first nine months of 2011, the Media Segment completed several acquisitions including Autocatch.com (a web-based classified advertising solution for vehicle dealers and sellers), Brant News (a community newspaper publishing and flyer distribution business operating in the Brantford area), Starmail Distributors (a distribution business operating in London, Ontario), the remaining 50% of Save.ca (an online coupon website providing consumers with savings on leading packaged goods brands), The Kit (a digital fashion and beauty magazine), Foodscrooge (an online group buying site focused on discounted food offerings) and exercised its option to purchase an additional 16.67% (bringing Torstar’s ownership interest to 50%) of Tuango.ca (a Quebec-based



daily deal business). The Media Segment also made a portfolio investment in Social Game Universe (a Toronto-based developer and publisher of social games). The total purchase price for acquisitions and investments during the first nine months of 2011 was $19.6 million of cash, $1.5 million of deferred payments and a $1.1 million estimate of the fair value of contingent consideration. The Media Segment also made $3.1 million of deferred and contingent purchase payments related to prior year acquisitions. The Book Publishing Segment made a $3.4 million deferred purchase payment related to its prior year acquisition of the remaining 50% of its German publishing business. Financing Activities Cash of $17.7 million was used in financing activities during the third quarter of 2011 including $8.3 million of debt repayment and $9.9 million for the payment of dividends. During the first nine months of 2011, cash of 298.6 million was used in financing activities including $272.9 million of debt repayment and $27.0 million for the payment of dividends. Torstar’s quarterly dividend increased in the second quarter of 2011 from $0.0925 to $0.125 per share. Net Debt Net debt was $88.9 million at September 30, 2011, down $19.2 million from $108.1 million at June 30, 2011, and down $279.7 million year to date. The decrease in the third quarter included $8.3 million of debt repayment, $16.6 million from changes in cash and bank overdraft balances partially offset by an increase of $5.7 million from the weakening Canadian dollar. Year to date the decrease included $272.9 million of debt repayment, $9.3 million from changes in cash and bank overdraft balances partially offset by an increase of $2.5 million from the weakening Canadian dollar. Long-term Debt At September 30, 2011, Torstar had $136.0 million of debt outstanding under its long-term debt facility. As the facility will mature in January 2012, the debt has been classified as current on the September 30, 2011 consolidated statement of financial position. The debt consisted of U.S. dollar bankers’ acceptances of $96.5 million and Canadian dollar bankers’ acceptances of $39.5 million. During the second quarter of 2011, Torstar received $291.6 million of cash proceeds from the completion of the sale of its interest in CTV to BCE Inc. The cash proceeds were used to repay debt as Canadian dollar bankers’ acceptances came due in early April. With the reduction in debt outstanding Torstar cancelled its $175 million revolving operating loan and reduced its revolving term loan to $275 million (from $425 million) in April. Torstar will renegotiate its long-term debt facility during the fourth quarter of 2011. The pricing of the new facility will be at market prices at the time of the negotiation. Torstar’s long-term credit facility of $275 million also acts as a standby line in support of letters of credit. At September 30, 2011, a total of $162.6 million was drawn under the facility, including a $25.2 million letter of credit relating to an executive retirement plan. As of September 30, 2011 there was approximately$112 million of available credit. Contractual Obligations The changes in Torstar’s significant contractual obligations during the first nine months of 2011 included additional office leases for the Media Segment’s digital businesses and new minimum revenue share obligations for Olive Media. The acquisitions obligations have been updated for new acquisition obligations related to current year acquisitions in the Media Segment and also to include contingent consideration provisions related to prior year acquisitions.



As of September 30, 2011, Torstar has the following significant contractual obligations (in $000’s1): Nature of the Balance of Obligation Total 2011 2012–2013 2014–2015 2016 + Office leases $133,538 $4,568 $37,346 $33,914 $57,710 Services 13,371 1,841 7,031 3,603 896 Acquisitions and

investments 14,342 867 13,475 Equipment leases 1,293 198 885 210 Subtotal 162,544 7,474 58,737 37,727 58,606 Foreign currency forward contracts: - payments 73,347 8,571 64,776 - receipts (72,265) (8,817) (63,448) - net 1,082 (246) 1,328 US $ Interest rate swaps 12,445 864 6,908 4,673 Long-term debt 136,017 136,017 Total $312,088 $8,092 $202,990 $42,400 $58,606

1 All foreign denominated obligations were translated at the September 30, 2011 spot rates. EMPLOYEE FUTURE BENEFITS During the third quarter of 2011, Torstar recorded, through other comprehensive income, an actuarial loss of $126.9 million ($94.8 million after tax) related to the defined benefit pension and the post employment benefit plans. Year to date, the actuarial loss was $142.0 million ($106.1 million after tax). These losses were estimated by management and reflected the lower rate of return on plan assets relative to the estimated long-term rate of return and the impact on employee future benefit liabilities from the decline in long-term interest rates. Based on actuarial reports that were completed as of December 31, 2010, Torstar’s 2011 funding obligation for its registered defined benefit pension plans is $46.0 million. Torstar will be required to prepare another set of actuarial reports as of December 31, 2011 to determine the 2012 funding requirements. Based on current market conditions, Torstar anticipates that the required funding in 2012 will be higher than 2011 levels. FINANCIAL INSTRUMENTS Foreign Exchange During the third quarter of 2011, Torstar realized a gain of $0.5 million on forward foreign exchange contracts to sell $8.3 million U.S. dollars at an average rate of $1.06. In the third quarter of 2010, Torstar realized a gain of $1.2 million on forward foreign exchange contracts to sell $13.4 million U.S. dollars at an average rate of $1.13. During the first nine months of 2011, Torstar realized a gain of $2.2 million on forward foreign exchange contracts to sell $27.3 million U.S. dollars at an average rate of $1.06. In the first nine months of 2010, Torstar realized a gain of $5.5 million on forward foreign exchange contracts to sell $38.2 million U.S. dollars at an average rate of $1.18. Torstar has entered into forward foreign exchange contracts to sell $8.2 million U.S. dollars during the fourth quarter of 2011 at an average rate of $1.07, $47.4 million U.S. dollars in 2012 at an average rate of $1.02 and $15.0 million U.S. dollars in 2013 at an average rate of $1.00. These U.S. dollar contracts are designated as revenue hedges for accounting purposes and any resulting gains or losses are recognized in Book Publishing revenues as realized. OUTLOOK In the Media Segment, advertising trends weakened during the third quarter and this trend has continued into October. Visibility on advertising revenue remains limited given the uncertain outlook for the economy. Offsetting this trend are digital revenues that have grown 30.6% year to date and the positive impact of acquisitions and



market expansion. The Metro and Performance Printing acquisitions are anticipated to contribute approximately $3.0 million of EBITDA in the fourth quarter. Net investment spending was increased in the Media Segment in the first nine months to support future growth in digital and other areas. Torstar expects to invest between $5 million and $10 million on such initiatives over the course of the year. For the balance of the year, pension expense is expected to be $0.3 million higher for the segment, while newsprint pricing is expected to remain flat. Cost savings from restructuring initiatives are expected to be $5.5 million in the fourth quarter. Year to date, Harlequin’s operating earnings are up $0.5 million compared to 2010 excluding the impact of foreign exchange. The transition from printed books to digital continued at a rapid pace through the third quarter. Harlequin has been adjusting the volume of printed books distributed into the market and expects to see lower book returns relative to books distributed which should contribute to improved operating results. For the full year, Harlequin’s earnings are anticipated to be up slightly excluding the impact of foreign exchange. If the Canadian dollar remains at its current levels relative to the U.S. dollar and overseas currencies, Harlequin anticipates a year over year negative foreign exchange impact of approximately $6.4 million (including the $5.7 million realized in the first nine months), including the impact of the U.S. dollar hedges currently in place. SUMMARY OF QUARTERLY RESULTS The following table presents, in $000’s (except for per share amounts) selected financial information for each of the eight most recently completed quarters: Quarter Ended Sept 30/11 June 30/11 March 31/11 Dec 31/10 Revenue $378,677 $393,322 $351,422 $417,530 Net income $25,279 $228,435 $15,388 $36,633 Net income attributable to equity shareholders per Class A voting and

Class B non-voting share Basic $0.32 $2.87 $0.20 $0.46 Diluted $0.32 $2.85 $0.19 $0.45

Quarter Ended Sept 30/10 June 30/10 March 31/10 Dec 31/091 Revenue $353,710 $377,561 $334,967 $394,785 Net income (loss) $14,686 $23,664 $16,552 $57,355 Net income (loss) attributable to equity shareholders per Class A voting

and Class B non-voting share Basic $0.18 $0.30 $0.21 $0.73 Diluted $0.18 $0.29 $0.21 $0.73

1 The quarter ended Dec 31/09 has not been restated to IFRS and is as originally reported under Canadian GAAP. The summary of quarterly results illustrates the cyclical nature of revenues and operating profit in the Media Segment. The fourth and second quarters are generally the strongest for the media businesses with the third quarter being the softest. Book Publishing revenues will vary each quarter depending on the publishing schedule and the impact of foreign exchange rates. Restructuring and other charges have impacted the level of net income in several quarters. In 2011, the first, second and third quarters had restructuring and other charges of $0.4 million, $3.4 million and $2.0 million respectively. In 2010, the first, second, third and fourth quarters had restructuring and other charges of $8.5 million, $4.1 million, $2.5 million and $17.5 million respectively. In 2009, the fourth quarter had restructuring and other charges of $13.0 million.



Net income for the 2009 fourth quarter is not comparable to the 2010 and 2011 quarters as the 2009 fourth quarter has not been restated to IFRS. Due to certain adjustments recorded on the transition to IFRS, Torstar’s pension expense and depreciation are significantly lower than they were under Canadian GAAP. These lower expenses, net of income taxes, result in the 2009 fourth quarter net income being lower than it would be if that quarter was restated to IFRS. During the second quarter of 2011, Torstar reported a gain of $190.1 million on the sale of its 20% interest in CTV. There were no taxes provided against the gain so the full amount was included in net income for that quarter. Net income in the first, second and third quarters of 2011 and the fourth quarter of 2010 compared with the first, second and third quarters of 2010 and the fourth quarter of 2009 respectively was also impacted by the level of income (loss) of associated businesses in those quarters as a result of Torstar ceasing to equity account for its investment in CTV on September 10, 2010. In the third quarter of 2011, Torstar reported a $0.6 million loss of associated businesses compared with a loss of $16.2 million in the third quarter of 2010. In the second quarter of 2011, Torstar reported a $0.6 million loss of associated businesses compared with a loss of $7.1 million in the second quarter of 2010. In the first quarter of 2011, Torstar reported a $0.6 million loss of associated businesses compared with a loss of $4.6 million in the first quarter of 2010. In the fourth quarter of 2010, Torstar reported a $0.4 million loss of associated businesses compared with income of $30.4 million in the fourth quarter of 2009. CHANGES IN ACCOUNTING STANDARDS Adoption of IFRS Torstar was required to prepare financial statements in accordance with IFRS starting with the interim financial statements for the quarter ended March 31, 2011. These statements required the 2010 results to be restated in accordance with IFRS. Detailed notes on the changes to previously reported amounts were included in the notes to the condensed consolidated financial statements for the periods ended March 31, 2011 and June 20, 2011. There is additional disclosure related to the three and nine months ended September 30, 2010 and as of September 30, 2010 in the condensed consolidated financial statements for the period ended September 30, 2011. All three sets of statements were filed on SEDAR and are also available on Torstar’s website www.torstar.com. Further IFRS Changes IFRS 7 Financial Instruments: Disclosures In October 2010, the IASB amended IFRS 7 to enhance the disclosure about transfers of financial assets. This improvement is to assist users in understanding the possible effects of any risks that remain in an entity after the asset has been transferred. In addition, if disproportionate amounts are transferred close to the year-end, additional disclosures would be required. The effective date of the amendment is for annual periods beginning on or after July 1, 2011. Torstar has determined that the adoption of this amendment will not have a material impact on the consolidated financial statements. IAS 12 Income Taxes In December 2010, the IASB amended IAS 12 for the recovery of underlying assets and the impact on deferred taxes. The amendments provide a solution to the problem of assessing whether recovery would be through use or through sale when the asset is measured at fair value under IAS 40 Investment Property, by adding the presumption that the recovery would normally be through sale. The amendment also incorporates the remaining guidance in SIC-21 Income Taxes – Recovery of Revalued Non-depreciable Assets, as SIC-21 has been withdrawn. The effective date of the amendment is for annual periods beginning on or after January 1, 2012. Torstar is in the process of reviewing the amendment to determine the impact on the consolidated financial statements. IFRS 9 Financial Instruments: Classification and Measurement In November 2009, the IASB issued IFRS 9, which covers classification and measurement as the first part of its project to replace IAS 39. In October 2010, the Board also incorporated new accounting requirements for liabilities. The standard introduces new requirements for measurement and eliminates the current classification of loans and receivables, available-for-sale and held-to-maturity, currently in IAS 39. There are new requirements for the accounting of financial liabilities as well as a carryover of requirements from IAS 39. Torstar does not



anticipate early adoption and will adopt the standard on the effective date of January 1, 2013. Torstar is in the process of reviewing the standard to determine the impact on the consolidated financial statements. In May 2011, the IASB issued the following standards which are effective for annual periods beginning on or after January 1, 2013 with early adoption permitted. Torstar is in the process of reviewing the standards to determine the impact on the consolidated financial statements. IFRS 10 Consolidated Financial Statements IFRS 10 requires an entity to consolidate an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. IFRS 10 supersedes SIC -12 Consolidations - Special Purpose Entities and replaces parts of IAS 27 Consolidated and Separate Financial Statements. IFRS 11 Joint Arrangements IFRS 11 requires a venturer to classify its interest in a joint arrangement as a joint operation or a joint venture. The standard eliminates the use of the proportionate consolidation method to account for joint ventures. Joint ventures will be accounted for using the equity method of accounting while for a joint operation, the venturer will recognize its share of the assets, liabilities, revenues and expenses of the joint operation. IFRS 11 supersedes SIC-13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers and IAS 31 Joint Ventures. IFRS 12 Disclosure of Interests in Other Entities IFRS 12 establishes disclosure requirements for interests in other entities such as subsidiaries, joint arrangements, associates and unconsolidated structured entities. The standard carries forward existing disclosures and also introduces significant additional disclosure requirements that address the nature of, and risks associated with, an entity’s interest in other entities. IFRS 12 replaces the previous requirements included in IAS 27 Consolidated and Separate Financial Statements; IAS 31 Joint Ventures and IAS 28 Investment in Associates. IFRS 13 Fair Value Measurement IFRS 13 is a comprehensive standard for fair value measurement and disclosure requirements for use across all IFRS standards. IFRS 13 defines fair value and establishes disclosures about fair value measurement. IAS 27 Separate Financial Statements The IASB amended IAS 27, which was an existing standard addressing accounting for investments in subsidiaries, jointly controlled entities and associates in non-consolidated financial statements. Those investments can be accounted at cost or in accordance with IFRS 9 in the separate financial statements. IAS 28 Investments in Associates and Joint Ventures The IASB also amended IAS 28, an existing standard, to include joint ventures in its scope and to address the changes in IFRS 10 to IFRS 12. In June 2011, the IASB amended the following standards, which Torstar is in the process of reviewing to determine the impact on the consolidated financial statements. IAS 1 Presentation of Financial Statements The IASB amended IAS 1 by revising how certain items are presented in other comprehensive income (“OCI”). Items within OCI that may be reclassified to profit and loss will be separated from items that will not. The standard is effective for financial years beginning on or after July 1, 2012 with early adoption permitted. IAS 19 Employee Benefits The IASB made a number of amendments to IAS 19, which included eliminating the use of the “corridor” approach and requiring remeasurements to be presented in OCI. The standard also included amendments related to termination benefits as well as enhanced disclosures. The standard is effective for financial years beginning on or after January 1, 2013 with early adoption permitted.



RISKS AND UNCERTAINTIES Other than the two updates that follow, there have been no material changes in any risks or uncertainties facing Torstar since the year ended December 31, 2010. Labour Disruptions During the first nine months of 2011, Metroland Media Group reached six new collective agreements covering approximately 240 employees within the community newspapers whose contracts had expired by the end of 2010. A first contract covering approximately 31 editorial employees in Ottawa was also reached in the first quarter. Negotiations are scheduled to begin in the fourth quarter for seven agreements covering approximately 240 employees at the daily newspapers whose contracts expired at the end of 2010 (four agreements, approximately 150 employees) and in May 2011 (three agreements, approximately 90 employees). The newspapers face the risk associated with these labour negotiations and the potential for business interruption should a strike, lockout or other labour disruption occur. Such a disruption may lead to lost revenues and could have an adverse effect on Torstar’s business. Reliance on Printing Operations During the second quarter of 2011, Harlequin’s North American third party printer, Quad/Graphics, Inc., announced the closure of its printing facility in Depew, New York that has printed Harlequin’s mass market paperback books for many years. Harlequin’s printing will be transitioned to another Quad/Graphics, Inc. facility and Harlequin is not anticipating any disruptions to its business from the transition. CONTROLS AND PROCEDURES Changes in Internal Control over Financial Reporting There have been no changes in Torstar’s internal controls over financial reporting that occurred during the third quarter of 2011, the most recent interim period, that have materially affected, or are reasonably likely to materially affect, Torstar’s internal controls over financial reporting. SUBSEQUENT EVENTS On October 14, 2011, Torstar announced that it had increased its interest in the English-language Metro newspaper operations (“Free Daily News Group”) jointly owned in Canada with Metro International S.A. to 90%. The aggregate consideration was $51.5 million and included the purchase of shares from Metro International S.A. and the negotiation of a new franchise agreement. Metro International S.A. will continue to hold a 10% interest in Free Daily News Group. On October 17, 2011, Torstar announced that it had acquired Performance Printing Limited of Smiths Falls, Ontario for $22.5 million. Performance Printing is a commercial printer with operations in Smiths Falls, as well as a newspaper publisher and flyer distributor in several Eastern Ontario communities including Kingston, Belleville, Brockville, Smiths Falls and Ottawa. OTHER Share Data At September 30, 2011, Torstar had 9,870,667 Class A voting shares and 69,643,059 Class B non-voting shares outstanding. More information on Torstar’s share capital is provided in Note 13 of the condensed consolidated financial statements for the period ended September 30, 2011. At September 30, 2011, Torstar had 4,020,621 options to purchase Class B non-voting shares outstanding to executives and non-executive directors. More information on Torstar’s stock option plan is provided in Note 14 of the condensed consolidated financial statements for the period ended September 30, 2011. Additional information relating to Torstar including the Annual Information Form is available on SEDAR at www.sedar.com and on Torstar’s corporate website at www.torstar.com.


TORSTAR - Condensed Consolidated Financial Statements

(see accompanying notes)

Torstar Corporation Consolidated Statement of Financial Position

(Thousands of Canadian Dollars)(Unaudited)

September 30 2011

December 31 2010

January 01 2010

Assets

Current: Cash and cash equivalents $56,649 $42,991 $39,158 Receivables (note 11) 248,008 266,436 250,289 Inventories (note 4) 33,500 34,294 33,953 Derivative financial instruments (note 11) 3,354 6,067 Prepaid expenses and other current assets 52,120 49,439 48,913 Prepaid and recoverable income taxes 4,060 3,013 2,997 Total current assets 394,337 399,527 381,377

Property, plant and equipment (note 6) 170,544 171,543 177,493 Investment in associated businesses (note 7) 932 2,201 170,783 Derivative financial instruments (note 11) 1,471 Intangible assets (note 8) 76,175 61,522 54,094 Goodwill (note 9) 605,183 594,303 580,302 Other assets 3,651 1,118 2,089 Deferred income tax assets 109,377 84,804 84,950 Investment in CTV Inc. − classified as held for sale (note 7) 98,945 Total assets $1,360,199

$1,413,963

$1,452,559

Liabilities and Equity

Current: Bank overdraft $9,534 $6,958 $2,052 Current portion of long-term debt (note 10) 136,017 Accounts payable and accrued liabilities 209,260 212,293 194,348 Derivative financial instruments (note 11) 1,390 4,947 Provisions (note 17) 19,318 21,170 27,966 Income tax payable 15,249 33,239 19,172 Total current liabilities 390,768 278,607 243,538

Long-term debt (note 10) 404,586 551,240 Derivative financial instruments (note 11) 9,578 7,647 16,633 Provisions (note 17) 10,760 20,923 2,095 Other liabilities 15,573 21,967 17,548 Employee benefits (note 16) 319,836 207,768 186,952 Deferred income tax liabilities 3,770 9,621 8,267 Equity:

Share capital (note 13) 395,254 392,816 391,626 Contributed surplus 14,423 13,235 12,182 Retained earnings 206,027 70,392 33,702 Accumulated other comprehensive loss (note 15) (8,046) (15,724) (12,530) Total equity attributable to equity shareholders 607,658 460,719 424,980 Minority interests 2,256 2,125 1,306

Total equity 609,914 462,844 426,286 Total liabilities and equity $1,360,199

$1,413,963

$1,452,559



Torstar Corporation Consolidated Statement of Income

(Thousands of Canadian Dollars except per share amounts)(Unaudited)

Three months ended September 30

Nine months ended September 30

2011 2010 2011 2010 Operating revenue $378,677 $353,710 $1,123,421 $1,066,238 Other operating costs (197,373) (175,598) (583,962) (523,972) Salaries and benefits (127,613) (122,973) (378,398) (367,356) Amortization and depreciation (8,500) (7,555) (23,966) (23,828) Restructuring and other charges (note 17) (1,961) (2,525) (5,748) (15,128) Operating profit 43,230 45,059 131,347 135,954 Interest and financing costs (note 10(d)) (1,814) (6,862) (14,568) (17,807) Adjustment to contingent consideration (note 17) 701 701 Foreign exchange (4,585) 3,402 (2,961) 424 Loss of associated businesses (note 7) (582) (16,242) (1,769) (27,898) Other income (note 20) 29 29 Gain on sale of assets 2,829 2,829 Gain on sale of CTV Inc. (note 19) 190,123 Income before taxes 36,979 28,186 302,902 93,502 Income and other taxes (note 5) (11,700) (13,500) (33,800) (38,600) Net income $25,279 $14,686 $269,102 $54,902 Attributable to:

Equity shareholders $25,239 $14,548 $268,971 $54,417 Minority interests $40 $138 $131 $485

Net income attributable to equity shareholders per Class A (voting) and Class B (non-voting) share (note 13(b)):

Basic $0.32 $0.18 $3.39 $0.69 Diluted $0.32 $0.18 $3.36 $0.68




Torstar Corporation Consolidated Statement of Comprehensive Income




2011 2010 2011 2010 Net income $25,279 $14,686 $269,102 $54,902 Other comprehensive income (loss): Unrealized foreign currency translation adjustment (no income tax effect) 13,402 (1,730) 9,552 (754)

Net loss on available-for-sale financial assets (no income tax effect) (18) (27) (24) (17)

Net movement on cash flow hedges (7,042) 1,474 (1,728) (3,643) Income tax effect 1,900 (495) 400 913 Net movement on cash flow hedges for associated businesses (no income tax effect) (387) 2,042

Loss on cash flow hedges for associated businesses recognized in net income upon sale of investment (no income tax effect) 2,522

Unrealized loss on hedge of net investment (5,968) (3,544) Income tax effect 850 500 Actuarial losses on employee future benefits (126,920) (4,580) (142,040) (107,020) Income tax effect 32,100 1,200 35,900 27,040 Actuarial losses on employee benefits for associated businesses (no income tax effect) (4,471) (4,471)

Other comprehensive loss, net of tax (91,696) (9,016) (98,462) (85,910) Comprehensive income (loss), net of tax ($66,417) $5,670 $170,640 ($31,008) Attributable to: Equity shareholders ($66,457) $5,532 $170,509 ($31,493) Minority interests $40 $138 $131 $485




Torstar Corporation Consolidated Statement of Changes in Equity



Share capital

Contributed surplus

Retained earnings

Accumulated other

comprehensive loss

Total attributable

to equity shareholders

Minority interests

Total equity

At December 31, 2010 $392,816 $13,235 $70,392 ($15,724)

$460,719 $2,125 $462,844

Net income for the period

268,971 268,971 131 269,102

Other comprehensive income (loss)

(106,140) 7,678 (98,462) (98,462)

Total comprehensive income

162,831 7,678 170,509 131 170,640

Dividends (note 13) 210 (27,196) (26,986) (26,986)Exercise of share options

(note 13) 361 (50) 311 311 Issue of share capital –

other (note 13) 1,867 1,867 1,867 Share-based

compensation expense

1,238 1,238 1,238

At September 30, 2011 $395,254 $14,423 $206,027 ($8,046) $607,658 $2,256 $609,914 At January 1, 2010 $391,626 $12,182 $33,702 ($12,530) $424,980 $1,306 $426,286 Net income for the period 54,417 54,417 485 54,902 Other comprehensive

loss (84,451) (1,459) (85,910) (85,910)Total comprehensive

income (loss) (30,034) (1,459) (31,493) 485 (31,008)Dividends (note 13) 197 (21,941) (21,744) (21,744)Issue of share capital –

other (note 13) 910 910 910 Share-based

compensation expense 770 770 770 At September 30, 2010 $392,733 $12,952 ($18,273) ($13,989) $373,423 $1,791 $375,214




Torstar Corporation Consolidated Statement of Cash Flows




2011 2010 2011 2010

Cash was provided by (used in)

Operating activities $44,615 $39,208 $68,644 $99,224 Investing activities (10,295) (6,959) 239,139 (15,452)Financing activities (17,660) (42,123) (298,559) (90,221)

Increase (decrease) in cash 16,660 (9,874) 9,224 (6,449)Effect of foreign exchange 1,263 1,240 1,858 (228)Cash, beginning of period 29,192 39,063 36,033 37,106 Cash, end of period $47,115 $30,429 $47,115 $30,429 Operating activities:

Net income $25,279 $14,686 $269,102 $54,902 Depreciation and amortization (notes 6 and 8) 8,500 7,555 23,966 23,828 Deferred income taxes (note 5) 3,900 1,900 8,000 7,300 Loss of associated businesses (note 7) 582 16,242 1,769 27,898 Gain on sale of CTV Inc. (note 19) (190,123) Non-cash employee benefit expense (note 16) 3,610 3,083 10,954 9,544 Employee benefits funding (note 16) (13,991) (4,892) (41,299) (14,669)Other (note 18) 2,853 (3,765) (3,152) 3,188

30,733 34,809 79,217 111,991 Decrease (increase) in non-cash working capital 13,882 4,399 (10,573) (12,767)

Cash provided by operating activities $44,615 $39,208 $68,644 $99,224 Investing activities:

Additions to property, plant and equipment and intangible assets (notes 6 and 8) ($9,290) ($6,210) ($26,326) ($15,214)

Proceeds from sale of CTV Inc. (note 19) 291,590 Acquisitions and investments (note 20) (1,150) (4,079) (26,067) (9,783)Proceeds from mortgage receivable 6,215 Proceeds from sale of assets 3,000 3,000 Other 145 330 (58) 330

Cash provided by (used in) investing activities ($10,295) ($6,959) $239,139 ($15,452)Financing activities:

Issuance of bankers’ acceptances $39,620 $8,521 $39,620 Repayment of bankers’ acceptances ($8,265) (281,430) (33,890)Repayment of medium term notes (75,000) (75,000)Dividends paid (9,880) (7,233) (26,986) (21,744)Exercise of share options 311 Other 485 490 1,025 793

Cash used in financing activities ($17,660) ($42,123) ($298,559) ($90,221) Cash represented by:

Cash $48,921 $29,274 $48,921 $29,274 Cash equivalents – short-term deposits 7,728 7,886 7,728 7,886 Cash and cash equivalents 56,649 37,160 56,649 37,160 Bank overdraft (9,534) (6,731) (9,534) (6,731)

$47,115 $30,429 $47,115 $30,429 (see accompanying notes)



NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Tabular amounts in thousands of Canadian dollars)

(Unaudited)

1. CORPORATE INFORMATION

Torstar Corporation is incorporated under the laws of Ontario, Canada and its Class B (non-voting) shares are publicly traded on the Toronto Stock Exchange. The condensed consolidated financial statements for the nine months ended September 30, 2011 include the accounts of the Company and all its subsidiaries and joint ventures. The registered office is located at One Yonge Street, Toronto, Canada. The principal activities of the Company and its subsidiaries are described in Note 21. The consolidated financial statements of the Company as at and for the year ended December 31, 2010 prepared in accordance with Canadian generally accepted accounting principles (“Canadian GAAP”) are available at www.sedar.com and on the Company’s corporate website at www.torstar.com.

2. STATEMENT OF COMPLIANCE

These condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting (“IAS 34”) and IFRS 1, First-time Adoption of International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). These condensed consolidated financial statements have been prepared using the accounting policies the Company expects to adopt in its annual financial statements for the year ending December 31, 2011, which have been disclosed in Note 3 of the Company’s condensed consolidated financial statements for the three months ended March 31, 2011. These condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and accordingly should be read in conjunction with the Company’s annual consolidated financial statements and with the IFRS transition disclosures included in the condensed consolidated financial statements for the three months ended March 31, 2011, which are available at www.sedar.com and on the Company’s corporate website at www.torstar.com. These statements include a Transition section which describes differences in certain accounting policies and methods between previously applied Canadian GAAP and IFRS and the changes from reported to restated results for the three and nine months ended September 30, 2010. These condensed consolidated financial statements have been authorized for issue in accordance with a resolution from the Board of Directors on November 1, 2011.

3. ACCOUNTING POLICIES

Changes in accounting standards IFRS 7 Financial Instruments: Disclosures

In October 2010, the IASB amended IFRS 7 to enhance the disclosure about transfers of financial assets. This improvement is to assist users in understanding the possible effects of any risks that remain in an entity after the asset has been transferred. In addition, if disproportionate amounts are transferred close to the year-end, additional disclosures would be required. The effective date of the amendment is for annual periods beginning on or after July 1, 2011. The Company has determined that the adoption of this amendment will not have a material impact on the consolidated financial statements. IAS 12 Income Taxes

In December 2010, the IASB amended IAS 12 for the recovery of underlying assets and the impact on deferred taxes. The amendments provide a solution to the problem of assessing whether recovery would be through use or through sale when the asset is measured at fair value under IAS 40 Investment Property, by adding the presumption that the recovery would normally be through sale. The amendment also incorporates the remaining guidance in SIC-21 Income Taxes – Recovery of Revalued Non-depreciable Assets, as SIC-21 has been



withdrawn. The effective date of the amendment is for annual periods beginning on or after January 1, 2012. The Company is in the process of reviewing the amendment to determine the impact on the consolidated financial statements. IFRS 9 Financial Instruments: Classification and Measurement

In November 2009, the IASB issued IFRS 9, which covers classification and measurement as the first part of its project to replace IAS 39. In October 2010, the Board also incorporated new accounting requirements for liabilities. The standard introduces new requirements for measurement and eliminates the current classification of loans and receivables, available-for-sale and held-to-maturity, currently in IAS 39. There are new requirements for the accounting of financial liabilities as well as a carryover of requirements from IAS 39. The Company does not anticipate early adoption and will adopt the standard on the effective date of January 1, 2013. The Company is in the process of reviewing the standard to determine the impact on the consolidated financial statements. In May 2011, the IASB issued the following standards which are effective for annual periods beginning on or after January 1, 2013 with early adoption permitted. The Company is in the process of reviewing the standards to determine the impact on the consolidated financial statements: IFRS 10 Consolidated Financial Statements

IFRS 10 requires an entity to consolidate an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. IFRS 10 supersedes SIC -12 Consolidations - Special Purpose Entities and replaces parts of IAS 27 Consolidated and Separate Financial Statements. IFRS 11 Joint Arrangements

IFRS 11 requires a venturer to classify its interest in a joint arrangement as a joint operation or a joint venture. The standard eliminates the use of the proportionate consolidation method to account for joint ventures. Joint ventures will be accounted for using the equity method of accounting while for a joint operation, the venturer will recognize its share of the assets, liabilities, revenues and expenses of the joint operation. IFRS 11 supersedes SIC-13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers and IAS 31 Joint Ventures. IFRS 12 Disclosure of Interests in Other Entities

IFRS 12 establishes disclosure requirements for interests in other entities such as subsidiaries, joint arrangements, associates and unconsolidated structured entities. The standard carries forward existing disclosures and also introduces significant additional disclosure requirements that address the nature of, and risks associated with, an entity’s interest in other entities. IFRS 12 replaces the previous requirements included in IAS 27 Consolidated and Separate Financial Statements; IAS 31 Joint Ventures and IAS 28 Investment in Associates. IFRS 13 Fair Value Measurement

IFRS 13 is a comprehensive standard for fair value measurement and disclosure requirements for use across all IFRS standards. IFRS 13 defines fair value and establishes disclosures about fair value measurement. IAS 27 Separate Financial Statements

The IASB amended IAS 27, which was an existing standard addressing accounting for investments in subsidiaries, jointly controlled entities and associates in non-consolidated financial statements. Those investments can be accounted at cost or in accordance with IFRS 9 in the separate financial statements. IAS 28 Investments in Associates and Joint Ventures

The IASB also amended IAS 28, an existing standard, to include joint ventures in its scope and to address the changes in IFRS 10 to IFRS 12.



In June 2011, the IASB amended the following standards, which the Company is in the process of reviewing to determine the impact on the consolidated financial statements: IAS 1 Presentation of Financial Statements

The IASB amended IAS 1 by revising how certain items are presented in other comprehensive income (“OCI”). Items within OCI that may be reclassified to profit and loss will be separated from items that will not. The standard is effective for financial years beginning on or after July 1, 2012 with early adoption permitted. IAS 19 Employee Benefits

The IASB made a number of amendments to IAS 19, which included eliminating the use of the “corridor” approach and requiring remeasurements to be presented in OCI. The standard also included amendments related to termination benefits as well as enhanced disclosures. The standard is effective for financial years beginning on or after January 1, 2013 with early adoption permitted.

4. INVENTORIES

September 30, 2011 December 31, 2010 January 1, 2010 Finished goods $10,635 $10,681 $11,164 Work in progress 10,221 11,013 11,292 Raw materials 12,644 12,600 11,497 $33,500 $34,294 $33,953

The Company has expensed inventory costs of $159.8 million for the nine months ended September 30, 2011 (2010 - $148.6 million) and $57.1 million for the three months ended September 30, 2011 (2010 - $50.0 million). The Company recorded an inventory write-down of $1.7 million for the nine months ended September 30, 2011 (2010 - $1.7 million) and $0.3 million for the three months ended September 30, 2011 (2010 - $0.1 million).

5. INCOME TAXES

Income tax expense is made up of the following: Three months ended

September 30 Nine months ended

September 30 2011 2010 2011 2010 Current income tax expense (recovery): Current year $7,900 $11,600 $25,600 $31,800 Adjustment for prior years (100) 200 (500) 7,800 11,600 25,800 31,300 Deferred income tax expense (recovery): Origination and reversal of temporary differences 4,200 1,900 9,900 7,100 Recognition of previously unrecognized tax losses (1,400) (200) Adjustment for prior years (300) (500) 400 3,900 1,900 8,000 7,300 Income tax expense 11,700 13,500 33,800 38,600 Current income tax recovery in OCI (200) Deferred income tax recovery in OCI (34,650) (705) (36,800) (27,953) Income tax recovery in OCI (34,850) (705) (36,800) (27,953) Total income taxes ($23,150) $12,795 ($3,000) $10,647

The Company sold its 20% interest in CTV in April 2011 and recognized a gain of $190.1 million which was not subject to tax, as the Company had previously written down the cost of the investment below its tax basis. The



Company realized a capital loss for tax purposes of $45.6 million on the disposition. No tax benefit has been recognized on $37.5 million of the capital loss.

6. PROPERTY, PLANT AND EQUIPMENT

Land

Building and leasehold

improvements

Machinery and

equipment Total Cost Balance at January 1, 2010 $6,836 $135,358 $207,058 $349,252 Acquisitions – business combinations 33 33 Additions 4,109 12,196 16,305 Disposals (85) (3,499) (12,140) (15,724) Reclassifications 384 (2,099) (1,715) Foreign exchange (132) (563) (1,253) (1,948) Balance at December 31, 2010 6,619 135,789 203,795 346,203 Acquisitions – business combinations 52 266 318 Additions 3,827 10,450 14,277 Disposals (1,230) (4,024) (5,254) Reclassifications 234 738 972 Foreign exchange 111 528 1,037 1,676 Balance at September 30, 2011 $6,730 $139,200 $212,262 $358,192 Depreciation and impairment Balance at January 1, 2010 $48,513 $123,246 $171,759 Depreciation 6,979 14,830 21,809 Disposals (3,271) (12,015) (15,286) Reclassifications (112) (2,138) (2,250) Foreign exchange (434) (938) (1,372) Balance at December 31, 2010 51,675 122,985 174,660 Depreciation 5,586 10,585 16,171 Disposals (1,230) (3,883) (5,113) Reclassifications 94 763 857 Foreign exchange 397 676 1,073 Balance at September 30, 2011 $56,522 $131,126 $187,648 Net book value At January 1, 2010 $6,836 $86,845 $83,812 $177,493 At December 31, 2010 $6,619 $84,114 $80,810 $171,543 At September 30, 2011 $6,730 $88,036 $75,778 $170,544

7. INVESTMENT IN ASSOCIATED BUSINESSES

The Company’s Investment in associated businesses includes a 33.33% equity interest in Canadian Press Enterprises Inc. (“Canadian Press”), a 19.35% equity interest in Black Press Ltd. (“Black Press”) and a 30% equity interest in Q-ponz Inc. (“Q-ponz”). The Company’s 20% equity interest in CTV Inc. (“CTV”) was also classified as an investment in associated businesses until September 10, 2010 when it was classified as held for sale. During the third quarter of 2011, the Company committed to invest an additional $0.5 million in Canadian Press.



The following is a continuity of Investment in associated businesses: Three months ended


September 30 2011 2010 2011 2010

Balance, beginning of period $1,014 $161,556 $2,201 $170,783 Loss of associated businesses (582) (16,242) (1,769) (27,898)Actuarial losses on employee benefits for associated

businesses Change in investees’ AOCI Reclassification of CTV to Investment in CTV Inc. –

classified as held for sale

(4,471)

(387)

(138,945)

(4,471)2,042

(138,945)

Investment in Canadian Press 500 500 Balance, end of period $932 $1,511 $932 $1,511

8. INTANGIBLE ASSETS

Non-amortizable

Amortizable Total Software Other Total

Cost Balance at January 1, 2010 $25,132 $65,816 $19,041 $84,857 $109,989 Acquisitions – business combinations 4,071 413 2,704 3,117 7,188 Additions – internally developed 4,195 4,195 4,195 Additions – purchased 6,473 6,473 6,473 Disposals (4,363) (4,363) (4,363) Reclassifications 1,581 1,581 1,581 Foreign exchange 45 (241) 21 (220) (175)Balance at December 31, 2010 29,248 73,874 21,766 95,640 124,888 Acquisitions – business combinations 3,756 6,399 6,399 10,155 Additions – internally developed 2,942 2,942 2,942 Additions – purchased 9,107 9,107 9,107 Disposals (305) (305) (305) Reclassifications 223 (8) 215 215 Foreign exchange 138 219 36 255 393 Balance at September 30, 2011 $33,142 $86,060 $28,193 $114,253 $147,395 Amortization and impairment Balance at January 1, 2010 $1,633 $49,333 $4,929 $54,262 $55,895 Amortization 6,401 3,282 9,683 9,683 Impairment loss 90 90 Disposals (4,363) (4,363) (4,363) Reclassifications 2,250 2,250 2,250 Foreign exchange (182) (7) (189) (189)Balance at December 31, 2010 1,723 53,439 8,204 61,643 63,366 Amortization 5,010 2,785 7,795 7,795 Disposals (305) (305) (305) Reclassifications 180 180 180 Foreign exchange 174 10 184 184 Balance at September 30, 2011 $1,723 $58,498 $10,999 $69,497 $71,220 Net book value At January 1, 2010 $23,499 $16,483 $14,112 $30,595 $54,094 At December 31, 2010 $27,525 $20,435 $13,562 $33,997 $61,522 At September 30, 2011 $31,419 $27,562 $17,194 $44,756 $76,175



9. GOODWILL

Goodwill Cost and net book value: Balance at January 1, 2010 $580,302 Acquisitions – business combinations 14,197 Foreign exchange and other (196) Balance at December 31, 2010 594,303 Acquisitions – business combinations 10,260 Foreign exchange and other 620 Balance at September 30, 2011 $605,183

10. LONG-TERM DEBT

September 30, 2011

December 31, 2010

January 1, 2010

Bankers’ acceptance: Cdn. dollar denominated $39,477 $320,998 $381,819 U.S. dollar denominated 96,540 83,588 92,951 $136,017 $404,586 $474,770 Medium term notes: Cdn. dollar denominated $75,000 Fair value hedge 1,470 $76,470 $136,017 $404,586 $551,240 Current $136,017 Long-term $404,586 $551,240

(a) Bank debt

i. The Company has long-term credit facilities with its bankers consisting of a $275 million revolving term loan (reduced from $425 million in April 2011 at the Company’s request). The term loan matures in January 2012 and has been reclassified from long-term debt to current at September 30, 2011. Prior to April 2011, the long-term credit facilities also included a revolving operating loan of $175 million, which was cancelled in April 2011 at the Company’s request. The credit facilities may be drawn in Canadian or U.S. dollars and are subject to financial tests and other covenants with which the Company was in compliance at September 30, 2011.

ii. Amounts borrowed under the bank credit facilities are primarily in the form of bankers’ acceptance (or an

equivalent) at varying interest rates and normally mature over periods of 30 to 180 days. The interest rate spread above the bankers’ acceptance rate if in Canadian dollars, or the LIBOR rate if in U.S. dollars, varies based on the Company’s long-term credit rating for borrowings under the revolving term loan (range of 0.4% to 1.5%). Effective January 2011, the interest rate spread is 0.6% on the revolving term loan (January 2010 – 0.6%). Prior to April 2011, the interest rate spread on new borrowings under the revolving operating loan was 2.25% and varied based on the company’s net debt to operating cash flow ratio (range of 2.0% to 3.8%). The interest rate spread at September 30, 2011 was 0.6% (December 31, 2010 – blended rate of 1.6%).

iii. In September 2006, the Company entered into interest rate swap agreements for five years through

September 2011, with major Canadian chartered banks that fix the interest rate on $250 million of Canadian dollar borrowings. As a result, the Company paid quarterly a fixed rate of 4.3% per annum (plus the interest rate spread referred to in 10(a)(ii)) and received quarterly floating rate payments based on 90 day bankers’ acceptance rates. These swap contracts were designated as cash flow hedges until the Company extinguished these swap agreements in March 2011 and paid $3.8 million, which has been



included in interest expense. The fair value of these swap agreements was $4.9 million unfavourable at December 31, 2010.

iv. The average rate on Canadian dollar bank borrowings outstanding at September 30, 2011 was 1.7%

(December 31, 2010 – 2.7%; 5.3% including the effect of the interest rate swap noted in 10(a)(iii)).

v. In May 2008, the Company entered into two interest rate swap agreements that fix the interest rate on U.S. $80 million of borrowings at approximately 4.2% (plus the interest rate spread referred to in 10(a)(ii)) for seven years ending May 2015. These swaps have been designated as cash flow hedges. The fair value of the U.S. interest rate swap arrangements at September 30, 2011 was $9.6 million unfavourable (December 31, 2010 – $7.6 million unfavourable).

vi. Bank debt outstanding at September 30, 2011 included U.S. dollar borrowings of U.S. $93.0 million

(December 31, 2010 – U.S. $84.2 million) at an average rate of 0.7% (December 31, 2010 – 1.9%). Including the effect of the interest rate swap noted in 10(a)(v) the effective rate was 4.3% at September 30, 2011 (December 31, 2010 – 5.8%).

(b) The Company is exposed to credit related losses in the event of non-performance by counterparties to the above described derivative instruments, but it does not anticipate any counterparties to fail to meet their obligations given their high credit ratings. The Company has a policy of only contracting with major financial institutions, as approved by the Board of Directors, as counterparties.

(c) Loans under the long term credit facilities may only be made provided there has been no development materially adversely affecting the business or financial condition or position of the Company and its subsidiaries considered on a consolidated basis. There were no such developments as at September 30, 2011.

(d) Interest expense for the nine month period ended September 30, 2011 consists of interest on long-term debt of $12.6 million, including the $3.8 million paid to extinguish the swap agreements in 10(a)(iii), (2010 – $17.3 million) and interest accretion costs of $2.0 million (2010 – $0.5 million). Interest expense for the three month period ended September 30, 2011 consists of interest on long-term debt of $1.2 million (2010 – $6.6 million) and interest accretion costs of $0.6 million (2010 – $0.3 million).

(e) Interest paid during the nine month period ended September 30, 2011 (excluding the $3.8 million paid to extinguish the swap agreements in 10(a)(iii)) was $8.9 million (2010 – $17.8 million).



11. FINANCIAL INSTRUMENTS

Fair value of financial instruments The carrying values of the Company’s financial instruments approximate their fair values unless otherwise noted. September 30,

2011 December 31,

2010 January 1,

2010 Financial assets: Loans and receivables, measured at amortized cost:

Cash and cash equivalents $56,649 $42,991 $39,158 Trade accounts receivable 242,005 256,922 236,718 Other receivables 6,003 9,514 13,571 Receivables 248,008 266,436 250,289

Available-for-sale, measured at cost:

Portfolio investments 563¹ 98,945 811¹Available-for-sale, measured at fair value:

Portfolio investments¹ 178 203 72 Derivatives designated as effective hedges, measured at fair value:

Foreign currency forward contracts (1,390) 3,354 6,067 Interest rate swaps – cash flow hedges (current) (4,947) Interest rate swaps – cash flow hedges (non-current) (9,578) (7,647) (16,632)Interest rate swaps – fair value hedges (non-current) 1,470

Derivatives Other (non-current) 1 Other (non-current) (1)

Other financial liabilities, measured at amortized cost: Bank overdraft 9,534 6,958 2,052 Current portion of long-term debt 136,017 Long term debt 404,586 551,240 Accounts payable and accrued liabilities 209,260 212,293 194,348 Deferred payments on acquisitions¹ 3,984 3,667 Provisions (current) 19,318 21,170 27,966 Provisions (non-current) 10,760 20,923 2,095

¹ These amounts are included in Other assets or Other liabilities Risk management The Company is exposed to various risks related to its financial assets and liabilities. These risk exposures are managed on an ongoing basis. Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due or at a reasonable cost. The Company manages liquidity risk primarily by maintaining sufficient unused capacity within its long term credit facilities. The unused capacity at September 30, 2011 was approximately $112 million (December 31, 2010 - $173 million). The credit facilities mature in January 2012 and the Company has the intention to renegotiate the renewal during the fourth quarter of 2011.



Credit risk In the normal course of business, the Company is exposed to credit risk from its accounts receivable from customers. The carrying amounts for accounts receivable are net of applicable allowances for doubtful accounts and returns, which are estimated based on past experience, specific risks associated with the customer and other relevant information. The Company is also exposed to credit-related losses in the event of non-performance by counterparties to derivative instruments. The Company manages its counterparty risk by only contracting with major financial institutions with high credit ratings, as approved by the Board of Directors, as counterparties. The maximum exposure to credit risk is the carrying value of these financial assets. The following table sets out details of the age of trade receivables and provision for doubtful debts and book returns: September 30, 2011 December 31, 2010 January 1, 2010 Gross accounts receivable:

Current $254,259 $263,012 $250,421 Up to three months past due date 76,836 97,355 86,861 Three to twelve months past due date 7,858 6,483 4,522 Impaired 8,203 6,905 6,051

347,156 373,755 347,855 Allowance for doubtful accounts (15,552) (14,247) (13,478) Book returns provision (89,599) (102,586) (97,659) $242,005 $256,922 $236,718

Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Company’s income or the value of its financial instruments. a) Foreign currency risk

The Company is exposed to foreign currency risk through Harlequin’s international operations. The most significant foreign currency exposure is to movements in the U.S. dollar/Cdn. dollar exchange rate. To manage this exchange risk in its operating results, the Company’s practice is to enter into forward foreign exchange contracts to hedge a portion of its U.S dollar revenues as detailed below. From time to time, the Company may also enter into forward foreign exchange contracts to hedge other currencies (Yen, Euro, Pound Sterling) realized in Harlequin’s overseas operations. A $0.05 higher (lower) average U.S. dollar/Cdn. dollar exchange rate during the nine month period ended September 30, 2011 would have increased (decreased) net income by approximately $1.1 million (2010 – $0.6 million).

The Company has entered into forward foreign exchange contracts to allow it to convert a portion of its expected future U.S. dollar revenue into Canadian dollars. The forward foreign exchange contracts establish a rate of exchange of Canadian dollar per U.S. dollar of $1.07 for U.S. $35.5 million in 2011, $1.02 for U.S. $47.4 million in 2012 and $1.00 for U.S. $15.0 million in 2013 (December 31, 2010 – $1.07 for U.S. $35.5 million in 2011 and $1.07 for U.S. $19.0 million in 2012). These forward foreign exchange contracts have been designated as cash flow hedges and the net fair value of these contracts was $1.4 million unfavourable at September 30, 2011 (December 31, 2010 – $3.4 million favourable).

In order to offset the exchange risk on its consolidated statement of financial position from net U.S. dollar denominated assets, the Company maintains a certain level of U.S. dollar denominated debt as indicated in Note 10(a)(vi). Effective January 1, 2011, the Company has designated $80 million of its U.S. dollar debt as a hedge of its U.S. dollar denominated net investment in subsidiaries with the U.S. dollar as their functional currency. Gains or losses on the translation of the designated hedge amount are transferred to OCI to offset



any gains or losses on translation of the net investments in subsidiaries with the U.S. dollar as their functional currency. There was no hedge ineffectiveness in the nine month period ended September 30, 2011.

b) Interest rate risk

The Company’s interest rate risk arises from borrowings issued at variable rates which expose the Company to cash flow interest rate risk. The Company manages this risk through the use of interest rate swap contracts to fix the interest rate on a portion of the debt as detailed in Note 10.

An assumed increase of 1% in the Company’s short term borrowing rates during the nine month period ended September 30, 2011 would have decreased net income by $0.8 million (2010 – $1.0 million), with an equal but opposite effect for an assumed decrease of 1% in short term borrowing rates.

12. CAPITAL MANAGEMENT

The Company’s capital management objectives are to maintain financial flexibility in order to preserve its capacity to meet its financial commitments, to pay dividends and to meet its potential obligations resulting from internal growth and acquisitions. The Company defines capital as: • Total equity • Long term debt • Bank overdraft net of cash and cash equivalents

Total managed capital was as follows:

September 30, 2011 December 31, 2010 January 1, 2010 Total equity $609,914 $462,844 $426,286 Long term debt (including current portion) 136,017 404,586 551,240 Bank overdraft 9,534 6,958 2,052 Cash and cash equivalents (56,649) (42,991) (39,158) $698,816 $831,397 $940,420

The Company manages its capital structure in accordance with changes in economic conditions. In order to maintain or adjust its capital structure, subject to capital market conditions, the Company may elect to adjust the amount of debt outstanding, adjust the amount of dividends paid to shareholders, return capital to its shareholders, repurchase its shares in the marketplace or issue new shares. The Company is currently meeting all its financial commitments. The Company’s credit facilities are subject to financial tests and other covenants with which it was in compliance at September 30, 2011. There have been no changes in the Company’s approach to capital management during the year. The Company is not subject to any external capital requirements.



13. SHARE CAPITAL

(a) Summary of changes in the Company’s share capital:

Nine months ended September 30 2011 2010

Shares Amount Shares Amount Class A shares (voting) Balance, beginning of period 9,873,337 $2,682 9,875,407 $2,683 Converted to Class B (2,670) Balance, end of period 9,870,667 $2,682 9,875,407 $2,683 Class B shares (non-voting) Balance, beginning of period 69,244,753 $390,134 69,129,929 $388,943 Converted from Class A 2,670 Dividend reinvestment plan 17,421 210 21,232 197 Issued under ESPP 334,997 1,853 83,194 896 Share option plan 42,068 361 Other 1,150 14 1,350 14 Balance, end of period 69,643,059 $392,572 69,235,705 $390,050 Total Class A and Class B shares 79,513,726 $395,254 79,111,112 $392,733

(b) Earnings per share

Basic earnings per share amounts have been determined by dividing net income attributable to equity shareholders by the weighted average number of Class A and Class B shares outstanding during the year.

The treasury stock method is used for the calculation of the dilutive effect of share options and other dilutive securities. In calculating diluted per share amounts under the treasury stock method, the numerator remains unchanged from the basic per share calculation as the assumed exercise of the Company’s share options and employee share purchase plan (“ESPP”) does not result in an adjustment to income. The reconciliation of the denominator in calculating diluted per share amounts is as follows:

Three months ended


September 30 (thousands of shares) 2011 2010 2011 2010 Weighted average number of shares outstanding, basic 79,507 79,100 79,361 79,062 Effect of dilutive securities - share options 405 492 608 368 - ESPP 176 26 148

Weighted average number of shares outstanding, diluted 79,912 79,768 79,995 79,578

(c) Dividends:

The following dividends were declared and distributed by the Company per Class A (voting) share and Class B (non-voting) share:

Three months ended


September 30 2011 2010 2011 2010 First quarter ended March 31: 9.25 cents (2010 - 9.25 cents) $7,320 $7,308 Second quarter ended June 30: 12.5 cents (2010 - 9.25 cents) 9,937 7,316 Third quarter ended September 30: 12.5 cents (2010 - 9.25 cents) $9,939 $7,317 9,939 7,317 Total dividends $9,939 $7,317 $27,196 $21,941



14. SHARE-BASED COMPENSATION PLANS

a) Share option plan

A summary of changes in the share option plan is as follows:

Share options Weighted average

exercise price At December 31, 2010 4,149,077 $17.19 Granted 488,813 $12.21 Exercised (42,068) $7.40 Forfeited or expired (575,201) $20.96 At September 30, 2011 4,020,621 $16.14

Options exercisable at September 30, 2011 are as follows:

Range of exercise price Share options

exercisable Weighted average

exercise price $5.75 – 8.37 438,695 $7.35 $15.75 – 19.61 465,046 $19.22 $20.30 – 22.20 1,137,325 $22.12 $25.50 – 29.01 515,737 $27.31 $5.75 – 29.01 2,556,803 $20.11

The fair value of the share options granted in 2011 (which will vest and be expensed over four years from 2011 to 2014) was estimated to be within the range of $3.49 to $3.61 per option at the date of grant using the Black-Scholes option pricing model with the assumptions of a risk free interest rate of between 2.4% to 2.7%; expected dividend of $0.37 per share; expected volatility of between 35.4% to 41.1% and an expected time until exercise of 5 to 7 years. Volatility is calculated using the logarithmic share price returns approach based on historical Company share prices.

b) Restricted share unit (“RSU”) plan

A summary of changes in the RSU plan is as follows: Units At December 31, 2010 627,252 Vested and paid (113,368) Granted 146,341 Forfeited (2,918) At September 30, 2011 657,307

RSUs are accrued over the three-year vesting period as compensation expense and a related liability. As at September 30, 2011, 403,132 units have been accrued at a value of $3.3 million of which 241,093 units have been accrued in Accounts payable and accrued liabilities at a value of $2.0 million while 162,039 units have been accrued in Other liabilities at a value of $1.3 million (December 31, 2010 – 361,960 units accrued at a value of $4.4 million of which 113,368 units have been accrued in Accounts payable and accrued liabilities at a value of $1.4 million while 248,592 units have been accrued in Other liabilities at a value of $3.0 million). The Company has entered into a derivative instrument in order to lock in the expense for 561,194 RSUs. Changes in the fair value of this instrument are recorded as compensation expense and offset the impact of changes in the value of the RSUs that have been accrued. As the RSUs are accrued over the three-year period until the RSUs vest, there will not be an exact offset each period.

c) The Company has recognized in 2011 compensation expense totaling $2.5 million (2010 - $1.6 million) for the share options granted in 2008 to 2011, RSUs granted in 2009 to 2011 and the ESPP originating in 2009 to 2011.



d) Deferred share unit (“DSU”) plan The Company has a DSU plan for executives and one for non-employee directors. As at September 30, 2011, 307,487 units were outstanding at a value of $2.5 million (December 31, 2010 – 262,868 units at a value of $3.2 million). The Company has entered into a derivative instrument in order to offset its exposure to 258,600 units. Changes in the fair value of this instrument are recorded as compensation expense and offset the impact of changes in the value of the outstanding deferred share units.

15. ACCUMULATED OTHER COMPREHENSIVE LOSS (NET OF TAX)

Foreign currency

translation adjustment

Unrealized gains

(losses) on cash flow hedges

Unrealized losses on available-for-sale

securities

Net investment

hedge

Unrealized losses on

CTV’s cash flow hedges Total

As at December 31, 2010 ($6,332)¹ ($6,770)² ($100)¹ ($2,522)¹ ($15,724) OCI 9,552 (1,328) (24) ($3,044) 2,522 7,678 As at September 30, 2011 $3,220¹ ($8,098)² ($124)¹ ($3,044)³ ($8,046)

1Net of deferred income tax asset of $nil (2010 – $nil). ²Net of deferred income tax asset of $2,870 (2010 – $2,470). ³Net of deferred income tax asset of $500.

16. EMPLOYEE FUTURE BENEFITS

The Company maintains a number of defined benefit plans which provide pension benefits to its employees in Canada and the United States. The Company also maintains capital accumulation plans in Canada, the United States and in certain overseas operations of Harlequin. Post employment benefits other than pensions are also available to employees, primarily in the newspaper operations, which provide for various health and life insurance benefits. The Company has expensed net pension benefit costs of $8.7 million for the nine months ended September 30, 2011 (2010 – $7.2 million) and $2.9 million for the three months ended September 30, 2011 (2010 – $2.4 million). With respect to post-employment benefits other than pensions, for the nine months and three months ended September 30, 2011 the net benefit cost was $2.3 million and $0.7 million respectively (2010 – $2.3 million and $0.8 million respectively). Changes to the net defined benefit obligation were as follows:

Pension plans Post employment benefit plans Total1

Funded Unfunded2Canada United States

Balance at December 31, 2010 $124,302 $8,892 $23,158 $51,416 $207,768 Expense recognized in income statement 6,259 899 1,511 2,285 10,954

Amounts recognized in OCI 131,470 3,910 2,100 4,560 142,040Contributions to plan (36,843) (1,069) (1,666) (1,721) (41,299)Foreign exchange and other (41) 452 (38) 373 Balance at September 30, 2011 $ 225,147 $13,084 $25,065 $56,540 $319,836

1At January 1 and September 30, 2011, the entire net defined benefit obligation is reflected in Employee Benefits liabilities. ²The unfunded pension plan is an executive retirement plan, which is supported by an outstanding letter of credit of $25.2 million as at September 30, 2011 (December 31, 2010 - $21.9 million).

The total amount expensed for capital accumulation plans for the nine months and three months ended September 30, 2011 was $2.3 million and $0.8 million respectively (2010 – $2.1 million and $0.7 million respectively).



17. PROVISIONS

Restructuring

Legal

Contingent consideration Total

Balance at December 31, 2010 $32,387 $2,560 $7,146 $42,093 Provisions made during the period 5,840 1,087 6,927 Reversals of provisions during the period (92) (374) (466) Adjustment to contingent consideration (701) (701) Foreign exchange 8 12 20 Provisions paid during the period (17,284) (1,795) (412) (19,491) Interest accretion 1,065 631 1,696 Balance at September 30, 2011 $21,924 $403 $7,751 $30,078 Current $12,604 $403 $6,311 $19,318 Non-current $9,320 $1,440 $10,760

Restructuring

During the nine month period ended September 30, 2011, the Company recorded restructuring provisions of $5.7 million, of which $5.3 million was recorded in the Media Segment and $0.4 million in the Book Publishing Segment.

The Media Segment restructuring provisions include $2.9 million relating to staff reductions and a $2.4 million charge for rented space that will be vacated as reduced staff counts allow for space consolidation. The $2.4 million charge represents the discounted shortfall between the remaining obligation under the existing lease and the amounts to be received through a sublease arrangement. The non-current restructuring provisions are expected to be paid out from 2012 through 2028 within the Media Segment.

The $0.4 million recorded in the Book Publishing Segment relate to staff reductions in the North American Retail business and are all classified as current provisions.

Legal

The Company is involved in various legal actions, primarily in the Media Segment, which arise in the ordinary course of business. While the final outcome of these matters cannot be predicted with certainty, any additional liability that may arise from such contingencies is not expected to have a material adverse effect on the financial position or results of operations of the Company.

Contingent consideration

The contingent consideration provision is an estimate of the fair value of contingent consideration for acquisitions within the Media Segment, which are based on revenue levels realized by the acquired businesses for specified periods following the acquisition.

18. OTHER NON-CASH ITEMS PROVIDED BY (USED IN) OPERATING ACTIVITIES



2011 2010 2011 2010 Share-based compensation plans ($859) $1,882 ($1,216) $4,909 Foreign exchange 4,585 (3,402) 2,961 (424) Restructuring provisions (560) (6,038) Interest accretion 619 315 1,985 489 Adjustment to contingent consideration (701) (701) Other (231) (2,560) (143) (1,786) $2,853 ($3,765) ($3,152) $3,188



19. GAIN ON SALE OF CTV

On April 1, 2011, the Company completed the sale of its 20% interest in CTV to BCE Inc. for proceeds of $291.6 million and recorded a gain of $190.1 million, which was not subject to tax, as the Company had previously written down the cost of the investment below its tax basis.

20. ACQUISITIONS AND INVESTMENTS

During the nine month period ended September 30, 2011, the Company completed acquisitions and investments in its Media Segment with a total purchase price of $22.2 million. The purchase price included $19.6 million of cash, $1.5 million of deferred purchase payments and a $1.1 million estimate of the fair value of contingent consideration.

The Company also made payments of $6.1 million for deferred purchase payments and $0.4 million of contingent consideration in respect of prior year acquisitions. The deferred purchase payments included $3.4 million in respect of the Book Publishing Segment’s prior year acquisition of the remaining 50% of its German publishing business, Cora Verlag from Axel Springer Verlag, its joint venture partner in Germany since 1976. The remaining $2.7 million deferred purchase payments were in the Media Segment for eyeReturn Marketing and Gottarent. The $0.4 million contingent consideration was also paid in the Media Segment.

Total cash used for acquisitions and investments during the period was $26.1 million.

The Media Segment completed acquisitions of $21.6 million and investments of $0.6 million. The acquisitions included Autocatch.com (a web-based classified advertising solution for vehicle dealers and sellers) on February 15, 2011; Brant News (a community newspaper publishing and flyer distribution business operating in the Brantford area) on April 15, 2011; exercising the option to purchase an additional 16.67% of Tuango (a Quebec-based daily deal business) on April 18, 2011, bringing the Company’s interest to 50%; Starmail Distributors (a distribution business operating in London, Ontario) on June 1, 2011; the remaining 50% of Save.ca (an online coupon website providing consumers with savings on leading packaged goods brands) on June 16, 2011; The Kit (a digital fashion and beauty magazine) on July 28, 2011 and Foodscrooge (an online group buying site focused on heavily discounted food offerings) on September 28, 2011.

The acquisition of the remaining 50% of Save.ca was a step acquisition in which the Company obtained control of Save.ca. The Company re-measured its previously held 50% interest to the acquisition date fair value of $3.7 million, resulting in a gain on re-measurement of $29 thousand which has been recorded as other income on the consolidated statement of income during the third quarter.

The Media Segment acquisitions were accounted for by the purchase method. The preliminary allocation of the $21.6 million total purchase price for these acquisitions (including $19.0 million of cash, $1.5 million of deferred purchase payments and a $1.1 million estimate of the fair value of contingent consideration) was $0.3 million to property, plant and equipment, $3.8 million to non-amortizable intangible assets, $6.4 million to amortizable intangible assets, $10.3 million to goodwill, $1.4 million to other assets, $0.3 million to deferred tax assets, $0.4 million to deferred tax liabilities and a credit of $0.5 million to working capital. The amount of goodwill that is deductible for tax purposes is $6.3 million. Goodwill recognized on the acquisitions comprises integration with existing web-based products; market reputation and access to existing network of carriers. The Starmail acquisition facilitated the launch of a community newspaper in the London, Ontario region.

These acquisitions contributed $3.8 million of revenue and $0.1 million of operating profit in the Media Segment in 2011. If the acquisitions had occurred on January 1, 2011, the Company’s consolidated revenues and operating profit would have been $1,127.8 million and $131.5 million respectively.

In addition, the Company made portfolio investments of $0.6 million, including $0.5 million in Social Game Universe (a Toronto-based developer and publisher of social games) on April 21, 2011. These investments have been classified as available for sale and carried at cost since they are not quoted on a stock exchange market. During the nine month period ended September 30, 2010, the Company completed acquisitions with a total purchase price of $17.7 million. The purchase price included $6.5 million of cash, $5.7 million of deferred purchase payments and a $5.5 million estimate of the fair value of contingent consideration. The Company also



made payments of $2.7 million for deferred purchase payments and $0.6 million of contingent consideration in respect of prior year acquisitions. Total cash used for acquisitions and investments during the period was $9.8 million.

The total purchase price for Harlequin’s acquisition of the remaining 50% of Cora Verlag was $8.1 million, of which $2.4 million has been paid while the remaining $5.7 million is deferred purchase price that is payable in 2011 and 2012. This acquisition was completed on April 1, 2010 and has been accounted for by the purchase method. The final allocation of the purchase price (including the discounted value of the deferred payments), was $2.8 million to non-amortizable intangible assets, $0.6 million to amortizable intangible assets, $6.1 million to goodwill, $0.6 million to other liabilities, $0.1 million to deferred tax liabilities and a credit of $0.7 million to working capital. The amount of goodwill that is deductible for tax purposes is $5.0 million.

The Media Segment acquisitions included the remaining 86% of Travelwire Inc. (a business that provides travel deals through its email newsletter) on September 10, 2010; WagJag (a business that allows local businesses to access new customers featuring one deal per day) on June 4, 2010 and several other smaller businesses. The total purchase price for these acquisitions was $9.6 million, including $4.1 million of cash and a $5.5 million estimate of the fair value of contingent consideration. The contingent consideration related to two of the acquisitions and are based on revenue levels realized by the acquired businesses in the two years following the acquisition and will be payable in 2011 and 2012. The Media Segment acquisitions were accounted for by the purchase method. The final allocation of the $9.6 million purchase price was $1.3 million to non-amortizable intangible assets, $2.5 million to amortizable intangible assets, $7.2 million to goodwill, $0.9 million to deferred tax liabilities, a credit of $0.2 million to working capital and a credit of $0.3 million to other assets. The amount of goodwill that is deductible for tax purposes is $0.9 million.

21. SEGMENTED INFORMATION

The Company reports its operations in two segments: Media and Book Publishing.

The Media Segment publishes over 100 newspapers including the Toronto Star, Canada’s largest daily newspaper, The Mississauga News, Oshawa This Week and The Hamilton Spectator. It also includes digital properties such as thestar.com, toronto.com, InsuranceHotline.com, Wheels.ca, flyerland.ca, goldbook.ca, Workopolis, Olive Media, eyeReturn Marketing and wagjag.com. The Media Segment derives its revenues from advertising, circulation, distribution, third-party printing and other.

The Book Publishing Segment represents Harlequin, a global publisher of books for women. Harlequin publishes books around the world in a variety of genres and formats, including digital. Harlequin sells books through the retail channel, in stores and online, and directly to the consumer through its direct mail business and from its internet sites. Harlequin derives its revenue from the publishing and distribution of books in both hard copy and digital formats.

The Company also has investments in Canadian Press, Black Press and Q-ponz, which the Company presents as associated businesses.

Segment profit or loss has been defined as operating profit which corresponds to operating profit as presented in the consolidated statement of income. All other income and expense items are managed on a Company basis and are not provided to the chief operating decision-maker at the operating segment level. These items are therefore not allocated to the operating segments.

Three months ended September 30, 2011 Media Book

Publishing Total

segments Corporate Consolidated Operating Revenue $262,980 $115,697 $378,677 $378,677 Other operating costs (130,414) (66,156) (196,570) ($803) (197,373)Salaries and benefits (99,817) (24,760) (124,577) (3,036) (127,613)Amortization and depreciation (7,461) (1,024) (8,485) (15) (8,500)Restructuring and other charges (1,523) (438) (1,961) (1,961)Reportable Segment Operating Profit $23,765 $23,319 $47,084 ($3,854) $43,230



Three months ended September 30, 2010 Media Book

Publishing Total

segments Corporate Consolidated Operating Revenue $236,226 $117,484 $353,710 $353,710 Other operating costs (105,438) (69,206) (174,644) ($954) (175,598) Salaries and benefits (96,181) (24,083) (120,264) (2,709) (122,973) Amortization and depreciation (6,648) (888) (7,536) (19) (7,555) Restructuring and other charges (2,525) (2,525) (2,525) Reportable Segment Operating Profit $25,434 $23,307 $48,741 ($3,682) $45,059

Nine months ended September 30, 2011 Media Book

Publishing Total

segments Corporate Consolidated Operating Revenue $782,049 $341,372 $1,123,421 $1,123,421 Other operating costs (379,511) (201,877) (581,388) ($2,574) (583,962)Salaries and benefits (294,428) (74,632) (369,060) (9,338) (378,398)Amortization and depreciation (21,110) (2,811) (23,921) (45) (23,966)Restructuring and other charges (5,310) (438) (5,748) (5,748)Reportable Segment Operating Profit $81,690 $61,614 $143,304 ($11,957) $131,347

Nine months ended September 30, 2010 Media Book

Publishing Total

segments Corporate Consolidated Operating Revenue $718,136 $348,102 $1,066,238 $1,066,238 Other operating costs (315,127) (205,816) (520,943) ($3,029) (523,972) Salaries and benefits (287,902) (72,081) (359,983) (7,373) (367,356) Amortization and depreciation (20,777) (3,003) (23,780) (48) (23,828) Restructuring and other charges (11,992) (357) (12,349) (2,779) (15,128) Reportable Segment Operating Profit $82,338 $66,845 $149,183 ($13,229) $135,954

22. SUBSEQUENT EVENTS

On October 14, 2011, the Company announced that it has increased its interest in the English-language Metro newspaper operations (“Free Daily News Group”) jointly owned in Canada with Metro International S.A. to 90%. The aggregate consideration was $51.5 million and included the purchase of shares from Metro International S.A. and the negotiation of a new franchise agreement. Metro International S.A. will continue to hold a 10% interest in Free Daily News Group.

On October 17, 2011, the Company announced that it has acquired Performance Printing Limited of Smiths Falls, Ontario for $22.5 million. Performance Printing is a commercial printer with operations in Smiths Falls, as well as a newspaper publisher and flyer distributor in several Eastern Ontario communities including Kingston, Belleville, Brockville, Smiths Falls and Ottawa.

The Company is in the process of preparing the purchase price allocations which will be finalized within twelve months of the acquisition dates.



TRANSITION TO IFRS

In preparing its opening IFRS Consolidated Statement of Financial Position, the Company has adjusted amounts previously reported that have been prepared in accordance with Canadian GAAP. An explanation of how the transition from Canadian GAAP to IFRS has affected the Company’s financial position and financial performance on the Transition Date, for the year ended December 31, 2010 and as of December 31, 2010 are set out in the tables and notes in the Company’s condensed consolidated financial statements for the first quarter ended March 31, 2011. The Company has also selected certain transition exemptions on the Transition Date, the details of which are also in the notes to the March 31, 2011 financial statements. These statements are available at www.sedar.com and on the Company’s corporate website at www.torstar.com. An explanation of how the transition from Canadian GAAP to IFRS has affected the Company’s financial position and financial performance for the three and nine months ended September 30, 2010 and as of September 30, 2010 is set out in the following tables and the notes that accompany the tables. The transition adjustments did not have a material impact on the Company’s cash flows. Reconciliation of Consolidated Statement of Income for the three months ended September 30, 2010

Notes

As reported under Canadian GAAP for

the three months ended

September 30, 20101 Adjustments

As reported under IFRS for the three

months ended September 30, 2010

Operating revenue $352,708 $1,002 $353,710 Other operating costs (175,303) (295) (175,598) Salaries and benefits T1 (126,578) 3,605 (122,973)

Amortization and depreciation T2 (11,154) 3,599 (7,555) Restructuring and other charges T3 (2,425) (100) (2,525) Operating profit 37,248 7,811 45,059 Interest and financing costs (6,700) (162) (6,862) Foreign exchange T4 (383) 3,785 3,402 Loss of associated businesses

Gain on sale of assets T6 (17,877)

2,829 1,635 (16,242)

2,829 Income before taxes 15,117 13,069 28,186 Income and other taxes T8 (11,000) (2,500) (13,500) Net income $4,117 $10,569 $14,686 Attributable to: Equity shareholders $4,117 $14,548 Minority interests $138 Net income attributable to equity shareholders per Class A (voting) and Class B share (non-voting):

Basic $0.05 $0.18 Diluted $0.05 $0.18

1 Reclassified to conform to the presentation of the consolidated statement of income under IFRS



Reconciliation of Consolidated Statement of Income for the nine months ended September 30, 2010

Notes

As reported under Canadian GAAP for

the nine months ended

September 30, 20101 Adjustments

As reported under IFRS for the nine

months ended September 30, 2010

Operating revenue $1,063,447 $2,791 $1,066,238 Other operating costs (523,383) (589) (523,972) Salaries and benefits T1 (377,959) 10,603 (367,356)

Amortization and depreciation T2 (34,944) 11,116 (23,828) Restructuring and other charges T3 (15,535) 407 (15,128) Operating profit 111,626 24,328 135,954 Interest and financing costs (17,605) (202) (17,807) Foreign exchange T4 (2,103) 2,527 424 Loss of associated businesses

Gain on sale of assets T6 (29,033)

2,829 1,135 (27,898)

2,829 Income before taxes 65,714 27,788 93,502 Income and other taxes T8 (31,500) (7,100) (38,600) Net income $34,214 $20,688 $54,902 Attributable to: Equity shareholders $34,214 $54,417 Minority interests $485 Net income attributable to equity shareholders per Class A (voting) and Class B share (non-voting):

Basic $0.43 $0.69 Diluted $0.43 $0.68

1 Reclassified to conform to the presentation of the consolidated statement of income under IFRS Reconciliation of Consolidated Statement of Comprehensive Income for the three months ended September 30, 2010

Notes

As reported under

Canadian GAAP for the three

months ended September 30,

2010 Adjustments

As reported under IFRS for

the three months ended September 30,

2010 Net income $4,117 $10,569 $14,686 Other comprehensive income (loss), net of tax

Unrealized foreign currency translation adjustment T4 2,454 (4,184) (1,730) Unrealized loss on available-for-sale financial assets (27) (27) Realized gain on cash flow hedges transferred to net

income (698)

(698) Unrealized change in fair value of cash flow hedges 1,677 1,677 Realized loss on cash flow hedges for associated

businesses transferred to net income 140

140 Unrealized change in fair value of cash flow hedges

for associated businesses (527)

(527) Actuarial losses on employee benefits T5 (3,380) (3,380) Actuarial losses on employee benefits for associated

businesses

T6

(4,471)

(4,471) Other comprehensive income (loss) 3,019 (12,035) (9,016) Comprehensive income (loss) $7,136 ($1,466) $5,670 Attributable to: Equity shareholders $7,136 $5,532 Minority interests $138



Reconciliation of Consolidated Statement of Comprehensive Income for the nine months ended September 30, 2010

Notes

As reported under

Canadian GAAP for the nine

months ended September 30,

2010 Adjustments

As reported under IFRS for

the nine months ended

September 30, 2010

Net income $34,214 $20,688 $54,902 Other comprehensive income (loss), net of tax

Unrealized foreign currency translation adjustment T4 1,887 (2,641) (754) Unrealized loss on available-for-sale financial assets (17) (17) Realized gain on cash flow hedges transferred to

net income (3,321)

(3,321) Unrealized change in fair value of cash flow hedges 591 591 Realized loss on cash flow hedges for associated

businesses transferred to net income 2,260

2,260 Unrealized change in fair value of cash flow hedges

for associated businesses (218)

(218) Actuarial losses on employee benefits T5 (79,980) (79,980) Actuarial losses on employee benefits for associated

businesses

T6

(4,471) (4,471) Other comprehensive income (loss) 1,182 (87,092) (85,910) Comprehensive income (loss) $35,396 ($66,404) ($31,008) Attributable to: Equity shareholders $35,396 ($31,493) Minority interests $485

Reconciliation of Consolidated Statement of Changes in Equity on September 30, 2010

Notes Share capital

Contributed surplus

Retained earnings AOCI

Minority interests

Total equity

Reported under Canadian GAAP as at September 30, 2010 $392,733 $14,123 $304,579 ($15,671) $695,764 IFRS adjustments increase (decrease):

Employee benefits T1 (243,715) (243,715) Property, plant and

equipment T2

(62,285)

(62,285) Changes in functional

currencies T4 2,599 (5,382) (2,783)Foreign currency IFRS 1

adjustment T4

(7,064) 7,064 Income taxes T8 105,993 105,993 Share-based compensation (1,171) 1,464 293 Revenue recognition (1,147) (1,147) Prepaid expenses and other

current assets

(918)

(918) Provisions 513 513 Impairments 539 539

Investment in associates T6 (11,381) (11,381)Actuarial loss T1, T5 (107,020) (107,020)Business combinations (430) (430)

Minority interests T7 $1,791 1,791 Reported under IFRS as at

September 30, 2010 $392,733 $12,952 ($18,273) ($13,989) $1,791 $375,214



Reconciliation of AOCI (net of tax) on September 30, 2010

Foreign

currency translation adjustment

Unrealized gains (losses) on cash flow

hedges

Unrealized loss on available-

for- sale securities

Unrealized loss on associated businesses’

cash flow hedges Total

AOCI as reported under Canadian GAAP as at September 30, 2010

($2,436)1

($10,356)2

($357)1

($2,522)1 ($15,671)

Changes in functional currencies (5,382) (5,382) Foreign currency IFRS 1 adjustment

7,064

7,064

AOCI as reported under IFRS as at September 30, 2010

($754)1

($10,356)2

($357)1

($2,522)1

($13,989)

1 Net of deferred income tax benefit of $nil 2 Net of deferred income tax benefit of $3,852 Notes to the September 30, 2010 reconciliation schedules:

T1. SALARIES AND BENEFITS

For the nine months ended September 30, 2010, the salaries and benefits expense was lower by $10.6 million from Canadian GAAP ($3.6 million for the three months ended September 30, 2010). This decrease included $10.3 million from the changes in employee benefits ($3.3 million for the three months ended September 30, 2010). The expense also decreased by $1.7 million as a result of the changes in the share-based compensation ($0.8 million for the three months ended September 30, 2010) (Note T10 – March 31, 2011), and was offset by higher expenses of $1.4 million ($0.5 million for the three months ended September 30, 2010) for the presentation change for minority interests (Note T7 – September 30, 2011). On transition, a decrease in opening retained earnings of $254.0 million was recorded as a result of adjustments made for the change in accounting for past service costs, actuarial gains and losses, and minimum funding requirements relating to employee benefits. (Note T1 – March 31, 2011). This transition adjustment combined with the lower employee benefit expense for the nine months ended September 30, 2010, resulted in a decrease in the September 30, 2010 retained earnings of $243.7 million.

T2. PROPERTY, PLANT AND EQUIPMENT AND RELATED AMORTIZATION AND DEPRECIATION

Amortization and depreciation expense for the nine months ended September 30, 2010 was $11.1 million lower under IFRS than it was under Canadian GAAP ($3.6 million for the three months ended September 30, 2010). This was primarily the result of the Company electing to measure specific items of property, plant and equipment at fair value as deemed cost on transition. As discussed in Note T2 of the March 31, 2011 condensed consolidated financial statements, a transition adjustment of $73.2 million reduced the value of property, plant and equipment. This transition adjustment, combined with lower depreciation expense for the nine months ended September 30, 2010, resulted in a decrease in the September 30, 2010 retained earnings of $62.3 million.

T3. RESTRUCTURING AND OTHER CHARGES

Restructuring and other charges for the nine months ended September 30, 2010 were $0.4 million lower under IFRS than they were under Canadian GAAP. This included a $0.9 million decrease from the timing of restructuring provisions, (Note T9 – March 31, 2011), partially offset by the impact of expensing $0.4 million of transaction costs related to Harlequin’s acquisition of the remaining half of its German publishing business (Note 16 – March 31, 2011) and other charges of $0.1 million.



T4. FOREIGN EXCHANGE

As a result of the transition to IFRS, effective January 1, 2010, the Company determined that the U.S. dollar was the functional currency of certain of its foreign subsidiaries (Note T3 – March 31, 2011). The foreign exchange on the translation of a significant portion of the Company’s U.S. dollar denominated assets is recorded through OCI under IFRS rather than through net income under Canadian GAAP.

T5. EMPLOYEE BENEFITS – ACTUARIAL GAINS AND LOSSES

The Company has chosen to recognize actuarial gains and losses related to its employee benefit plans through OCI. The amount recognized each period is not retained in AOCI but goes directly to retained earnings.

T6. INVESTMENT IN ASSOCIATES

The investment in associates adjustment includes the transition adjustments of $8.0 million, which primarily related to employee benefits partially offset by reversals of impairment provisions and other miscellaneous items (Note T6 – March 31, 2011), $1.1 million lower loss of associated businesses for the period ended September 30, 2010 and actuarial losses of $4.5 million reflected through OCI.

T7. MINORITY INTERESTS

The Company began to present the minority interest in Olive Media as part of the transition to IFRS (Note T11 – March 31, 2011).

T8. INCOME TAXES

The income taxes adjustment includes the income tax impact of the transition adjustments (Note T4 – March 31, 2011) and the related changes in the consolidated statement of income and consolidated statement of comprehensive income through September 30, 2010.

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