Torstar Corp. Annual Report 2007

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FY2007 Annual Report · Torstar Corp.

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O U R G O A L

Torstar Corporation is a broadly based media company. It was built on the

foundation of its flagship newspaper, the Toronto Star, which remains firmly

committed to being a great metropolitan newspaper dedicated to observing and

promoting the principles of its long-time Publisher, Joseph Atkinson.

From this foundation, Torstar’s media presence has expanded through Metroland

Media Group, Star Media Group and Torstar Digital, which together include more

than 100 newspapers, web-based businesses and related services, principally based

in southern Ontario. Torstar has also built a major presence in book publishing

through Harlequin, which is a leading global publisher of romance and women’s

fiction, selling books in 29 languages in more than 100 international markets.

Torstar strives to be one of Canada’s premier media companies. Torstar and all of

its businesses are committed to outstanding corporate performance in the areas

of maximizing long-term shareholder value and returns, advancing editorial

excellence, creating a great place to work and having a positive impact in the

communities we serve.

2 0 0 7 A N N U A L R E P O R T

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F I N A N C I A L H I G H L I G H T S

O P E RAT I N G R E S U LT S ( $ 0 0 0 )

2007

2006

Operating revenue

EBITDA (1)

Operating profit

Net income

Cash from operating activities

O P E RAT I N G R E S U LT S

EBITDA – Percentage of revenue

Operating profit –
percentage of revenue

Cash from operating activities –
percentage of average shareholders’ equity

P E R C L A S S A A N D C L A S S B S H A R E S

Net income

Dividends

$1,546,537

$1,528,270

225,421

162,780

101,391

136,152

14.6%

10.5%

15.2%

$1.29

$0.74

202,134

123,332

79,141

111,591

13.2%

8.1%

13.0%

$1.01

$0.74

Price range (high/low)

$23.40/17.86

$23.66/16.90

FINANCIAL POSITION ($000)

Long-term debt

Shareholders’ equity

$650,798

$917,761

$724,193

$872,746

The Annual Meeting of shareholders will be held Wed., April 30, 2008 at the Toronto Star building, 3rd Floor

Auditorium, One Yonge Street, Toronto beginning at 10 a.m. It will also be webcast live on the Internet.

O P E RAT I N G R E V E N U E ( $ M I L L I O N S )

O P E RAT I N G P RO F I T ( $ M I L L I O N S )

1,488

1,542

1,557

1,528

1,547

I N C O M E F RO M C O N T I N U I N G
O P E RAT I O N S P E R S H A R E

1.59

1.42

1.52

1.01

1.29

E B I T DA ( $ M I L L I O N S ) ( 1 )

209

201

195

123

163

276

266

253

202

225

(1) Operating profit before depreciation, amortization and restructuring provisions. Please see “Non-GAAP Measures” on page 22.

This annual report contains forward-looking statements within the meaning of certain securities laws, including the “safe harbour“ provisions of the
Securities Act (Ontario). We caution readers not to place undue reliance on these statements as a number of factors could cause our results to differ
materially from the beliefs, plans, objectives, expectations, anticipations, estimates and intentions expressed in such forward-looking statements.
Additional information about these factors is contained on page 22 under the heading “Forward-Looking Statements”.

DA I LY N E W S PA P E R S

D I G I TA L

C O M M U N I T Y N E W S PA P E R S

Metroland Media Group is Ontario’s leading publisher
of community newspapers in print and online, publishing
more than 100 community newspapers. Some of the larger
publications include:

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Ajax/Pickering News Advertiser
Aurora/Newmarket Era-Banner
Barrie Advance
Bracebridge Examiner
Brampton Guardian
Burlington Post
Etobicoke Guardian
Markham Economist & Sun
Mississauga News
Niagara This Week
Oakville Beaver
Oshawa/Whitby This Week
Peterborough This Week
Renfrew Mercury
Richmond Hill Liberal
Scarborough Mirror
Regional Internet Portals

TELEVISION INITIATIVES

I N V E ST M E N T S

S P E C I A LT Y P RO D U C T S

Specialty products include:

Eye Weekly
Desi Life
Forever Young
Real Estate News
Car Guide
City Parent
Premier Consumer Shows
Gold Book Directories

JOINT VENTURES
Harlequin Brazil

Harlequin France

Harlequin Germany

Harlequin Greece

Harlequin Hungary

Harlequin Italy

HARLEQUIN ENTERPRISES

Harlequin is a leading global publisher

of women’s fiction.

Harlequin North America

Harlequin Mills & Boon U.K.

Harlequin Australia

Harlequin Holland

Harlequin India

Harlequin Japan

Harlequin Nordic

Harlequin Poland

Harlequin Spain

Project Direction:

Creative Director:

Art Director:

Graphic Design:

Bob Hepburn

Lorne Silver

Joan Blastorah

Rudy Hurtado

Production Art Director:

Darlene Dewell

Printing:

Photography:

The Incredible Printing Group of Companies

Ken Faught/Star Photography Team

Central Imaging:

Steve Leadbeater

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F R A N K I A C O B U C C I

Chairman, Board of Directors

M E S S A G E F R O M T H E C H A I R M A N

Although challenges are often difficult, they can bring opportunities for change and improvement. As with the media and
book environment generally, this year continued to be one of challenges for Torstar and its businesses. At the same time,
though, many opportunities presented themselves to strengthen the company. In his message to shareholders, our
President and Chief Executive Officer elaborates more specifically on the many challenges, achievements, opportunities
and changes that occurred during the year.

We were pleased to have finished the year with positive results, and I wish to emphasize the key role of our management
and employees in the achievement of these results. Torstar is blessed with talented people whose commitment and
industry are central to converting a challenge into an opportunity and, ultimately, into success. We, on the Board of
Directors, wish to salute all our business leaders and staff for another year of first-class effort and dedication.

I would also like to acknowledge my colleagues on the Board, whose background, experience and skills have been
instrumental in contributing to the successful handling of the issues that have come before the Board. I am proud to say
that we have a strong Board whose commitment to Torstar is exemplary, and it is an honour for me to serve as Chairman.

The Board is also most conscious of good governance practices and continually reviews its structure and functioning to
ensure we have top governance policies and practices. Infusing these policies and practices of governance is a
commitment to the values referred to as the Atkinson Principles, developed a century ago by an extraordinary Publisher,
Joseph E. Atkinson. Although these Principles apply formally only to the Toronto Star, nonetheless their underlying
commitments to doing good work are shared by all of Torstar’s businesses. The Board has an obligation to these
Principles. It also has a commitment to the creation of long-term value for all of Torstar’s businesses.

On a sad note, this year marks the retirement of one of our long-serving directors, Lance Primis. Lance has served the
Board of Torstar with great distinction for more than 10 years and has understandably decided to reduce his
commitments. Lance joined the Board after a stellar career as President of the New York Times and he has made many
valuable contributions to the work of the Board that have drawn on his wide experience and standards of excellence that
he attained during his career. We will miss Lance and are grateful to him for his outstanding service.

To conclude, I wish to thank Torstar management and the employees of Torstar and its businesses for their inexorable
efforts during the year and for the collaborative relationship that exists between the Board and management. Finally,
I thank my colleagues on the Board for their unalloyed commitment to serve the best interests of our shareholders.

F R A N K I A C O B U C C I

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J . R O B E R T

S .

P R I C H A R D

President and Chief Executive Officer

T O O U R

S H A R E H O L D E R S

2007 was a good year for Torstar as we performed well
throughout the year and as we delivered stronger results in all of
our businesses.

A year ago I wrote of our determination to grow earnings in
2007 over 2006. I am pleased to report we did exactly that and
more. Overall, we grew EBITDA by 11% and net income by 28%.
At the same time, we continued to invest in our future growth,
maintained our strong dividend and strengthened our balance
sheet. As a result, we are a stronger company with a higher base
of earnings than a year ago. Despite challenging industry
conditions and a higher Canadian dollar, we made real and
measurable progress over the year.

Our success in 2007 reflected changes we made a year ago when
we streamlined our organization, restructured our businesses
and charged our leadership teams with focused execution and
the imperative of growth. We were also assisted by favourable
cost trends for newsprint that boosted the performance of our
community and daily newspaper businesses.

All of our businesses grew in 2007. Our largest business,
Metroland Media Group, grew EBITDA by 10%, delivering on its
goal of double-digit growth and demonstrating again that
community newspapers are a growing business and a wonderful
platform for serving communities.
It was an excellent
performance which emphasizes the importance of Torstar’s
concentration in this most attractive segment of the newspaper
industry.

Community newspapers focus on local news, for which there are
few substitutes. We use this core platform to serve our
communities and advertisers in multiple ways, both in print and
online. Metroland’s business includes community newspapers,
magazines, directories, consumer trade shows, flyer distribution,
online newspapers, community calendars and much more.

Harlequin Enterprises, our second-largest business, also grew,
increasing its EBITDA by 6% (excluding foreign exchange) and

delivering on its promise of stabilization and growth. As
significant as Harlequin’s financial success was, its success in
stabilizing North American series sales and worldwide units was
even more so. Management’s top priority has been to refresh,
renew and stabilize the series business, knowing that with this
foundation secured, growth from a variety of programs and
initiatives is then possible. Achieving this goal represents a
major achievement with lasting consequences and we are very
pleased with it. With the underlying Harlequin business
stabilized and numerous initiatives in place to drive growth, we
are optimistic about Harlequin’s prospects.

Our third-largest business, Star Media Group, delivered EBITDA
growth of 15%, reflecting favourable cost trends at the Toronto
Star, the non-recurrence of losses from Weekly Scoop which we
closed in 2006 and the overall strength of Star Media Group,
which includes Metro, Sing Tao and our digital properties. We
intend to make all our businesses as prominent online as they
are in print, believing this will allow us to serve our readers,
advertisers and communities best.

The Toronto Star remains Canada’s largest and most successful
daily newspaper committed to observing and promoting the
Atkinson Principles. It lies at the heart of Star Media Group and
provides an exceptional editorial foundation on which we have
built multiple print and online products to serve Toronto and
beyond. While large city daily newspapers across North America
face challenges, we are confident the Toronto Star, as the
leading newspaper franchise at the heart of one of North
America’s leading media markets, will remain not only a powerful
voice, but also a vital business.

Torstar Digital led the growth of our digital revenues in 2007,
primarily through Workopolis and Olive Canada Network.
Overall, Torstar’s digital revenues grew 46%. As I wrote a year
ago, the digital revolution compels us to transform all our
businesses and we are making good progress.

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Good performance often attracts good luck and we had some of
that in 2007 as well. Newsprint pricing, the benefits of
restructuring and other favourable cost trends all gave us a good
boost, helping raise our EBITDA from $202 million a year ago to
$225 million today.

We also strengthened our balance sheet during the year as net
borrowings dropped from $680 million to $620 million.
Combined with our growing EBITDA, our debt to EBITDA ratio
dropped from 3.4 times to 2.8 times.

As we grew our earnings in 2007, we also continued to invest in
growth.
In Metroland Media Group, our Niagara expansion
turned profitable during the latter part of the year and we
continue to build our community newspaper platform in the
Ottawa region. Similarly, we are investing in our directories
initiative, Gold Book, and are very pleased with the results. We
have directories in virtually every community covered by our
newspapers. Metroland will continue to add new products and
services to drive growth and expand into new geographic areas
when good opportunities arise.

At Harlequin, we launched our business in India, which has the
largest English-speaking population in the world with more than
400 million English-speaking citizens. While it will take time to
build our business there to its full potential, we start with a well-
established brand name and an exceptional opportunity.
Harlequin has been built over decades through a combination of
growing its North American business and international
expansion. We are committed to this recipe for growth as
globalization increasingly opens new opportunities for us.

In Star Media Group, we launched the Halifax edition of Metro
in February 2008, partnering with Transcontinental and Metro
International. We now have the nation’s leading free daily
newspaper franchise stretching from coast to coast with editions
in Vancouver, Calgary, Edmonton, Toronto, Ottawa and Halifax
and a close working relationship with Metro in Montreal. We also
invested in new online products, including wheels.ca, which has
rapidly seized a prominent place in the marketplace for cars.

Within Torstar Digital, we are continuing aggressive growth
plans for both Workopolis and the Olive Canada online
advertising sales network. Recently, Workopolis acquired
Brainhunter’s North American industry association job boards
business to add a new growth platform to Workopolis’ portfolio
of businesses. We plan to build on the Workopolis and Olive
Canada platforms through organic growth and acquisitions to
claim the leadership positions in both these fields.

In addition to Torstar’s operating businesses, we have two major
investments that add significantly to Torstar’s portfolio: our 20%
interests in CTVglobemedia and Black Press. CTVglobemedia is
Canada’s premier multimedia company and Black Press is
Western Canada’s leading community newspaper franchise.
These investments diversify Torstar’s portfolio of media assets
and give us additional opportunities for long-term value
creation and strategic options. Both CTVglobemedia and Black
Press are able to make accretive investments not available to us

directly and supported by their respective balance sheets, thus
extending Torstar’s opportunities for growth beyond our
operating businesses alone.

The only significant disappointment in 2007 was that our share
price declined even as we grew our earnings, strengthened our
balance sheet, maintained our strong dividend and invested in
the future. This reflects broader forces in equity markets as
traditional media company valuations retreated, led by concerns
about the daily newspaper business and the impact of the
Internet and the North American economic outlook. Torstar’s
relative total shareholder returns have held up well compared to
our North American peers, but we have not been immune to the
broader forces. We do, however, enjoy a differentiated portfolio
with a concentration in community, not daily, newspapers and
book publishing. Our flagship Toronto Star represents less than
20% of Torstar’s overall portfolio. As we stay focused on growing
earnings and transforming our businesses in the digital age, in
due course we expect the real strength of our portfolio and
performance to be fairly valued.

Looking forward to 2008, we are no less determined than we
were a year ago. We will continue to make the changes and
investments necessary to grow our businesses. The current
economic outlook is challenging and some of the particularly
favourable cost trends of 2007 are unlikely to recur in 2008.
Furthermore, in the short term, the strong Canadian dollar
exposes us to foreign exchange headwinds. All these forces will
make 2008 tougher for us than 2007. However, we still aim to
grow, albeit at a more modest rate than in 2007. We enter 2008
with higher earnings, a stronger balance sheet, great franchises
and experienced and determined leadership teams.

Our most significant advantage is the talent and commitment of
my colleagues throughout Torstar. We are fortunate to attract
and keep very fine people throughout our businesses.

We also have excellent leaders of our operating businesses. One
of them, Murray Skinner, President of Metroland Media Group,
will retire on July 1, 2008, and be succeeded by Ian Oliver.
Murray has led Metroland with great distinction for the past
eight years. On his watch, Metroland has become our largest and
most profitable business. Everyone at Torstar is grateful for
Murray’s outstanding service for over 33 years. We will miss him
as a fine colleague and friend. Ian Oliver is a very worthy
successor who currently serves as Executive Vice-President of
Metroland. He is an experienced, successful leader with a strong
record of innovation and growth. We expect that under Ian’s
leadership, Metroland will extend its enviable record of growth
and profitability.

I thank the more than 7,000 employees of Torstar for all they do
to advance our cause. We thank our Board of Directors for their
wise counsel and we thank you, our shareholders, for vesting
your confidence in us. We will do our utmost to vindicate it with
our work.

R O B E R T P R I C H A R D

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N E W S P A P E R S

A N D D I G I T A L

N E W S P A P E R S

O T H E R P U B L I C A T I O N S

Torstar’s Newspapers and Digital business operation is
largely concentrated in the Golden Horseshoe region of
Ontario, the largest and most attractive media market in
Canada. In 2007, revenues of the division were $1.08
billion, up 2.6% versus prior year. This represents 70% of
Torstar’s revenue.

Through its numerous media properties within the
division, Torstar is committed to delivering editorial
excellence and innovative approaches to serve readers and
advertisers with relevant local content and services across
all of its properties.

The media environment continues to evolve and we remain
focused on advancing our digital initiatives to broaden
our offerings and better serve our readers and advertisers.

Newspapers and Digital is comprised of Star Media Group,
which includes the flagship newspaper, the Toronto Star,
and Torstar Digital; Metroland Media Group, built on a
foundation of community papers and focused on serving
local needs; and Transit Television Network, a U.S.-based
operation that delivers broadcast-quality information to
passengers on buses via screens mounted in the vehicles.

W E B S I T E S

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J A G O D A

P I K E

Publisher, Toronto Star and President,
Star Media Group

S T A R M E D I A G R O U P

Star Media Group is broadly based with interests in
led by its
print, digital and broadcast media,
flagship property, the Toronto Star, Canada’s largest
daily newspaper. Created in 2006, Star Media
Group also includes our online newspaper business
at thestar.com, toronto.com, Torstar Syndication
Services, TMGTV, Eye Weekly, Sway Magazine, Desi
Life, Real Estate News and The Canadian
Immigrant. In addition, it has an interest in the
jointly owned Metro free daily newspapers in
Toronto, Ottawa, Vancouver, Calgary, Edmonton
and Halifax, and in Sing Tao Daily, the largest
Chinese-language newspaper in Canada. For
financial reporting purposes, Star Media Group
includes Torstar Digital.

In 2007, Star Media Group enjoyed a particularly
good year, increasing overall revenues and earnings
while continuing to invest in the development of
key content and products in both its newspaper
and online businesses with the goal of further
strengthening revenues and earnings in future
years through diversification.

This is particularly true in the Toronto Star’s digital
business, thestar.com, where revenues rose more
than 40% in 2007. Indeed, thestar.com is the
number one newspaper website destination in the
Greater Toronto Area. Overall, digital revenue for
Star Media Group properties grew significantly in
2007 with revenue from our digital properties
growing to more than 8% of overall revenue.

While 2007 was another difficult year for many
large metropolitan newspapers across North
America, the Toronto Star was able to maintain its
leading position in both readership and circulation
in the Greater Toronto Area (GTA).

While revenue remained under pressure in the
highly competitive Greater Toronto Area media
market,
the Toronto Star undertook several
important initiatives to address these challenges.

With 2.9 million readers in print and online
Monday to Sunday, the Toronto Star once again

be in the know

maintained its leading position as the largest daily
newspaper in Canada. In May, the Toronto Star
launched its redesigned paper, which is easier to
read and handle and is filled with more of the
content our readers enjoy. Chief among the
editorial changes were enhanced local news
coverage, a new World and Comment section, an
expanded Living section, larger print size and more
spacing between each line.

In August, the Toronto Star began to convert its six
presses to allow the newspaper to be printed in a
more convenient size. With this move, completed in
October, the Toronto Star became the first major
metropolitan newspaper in North America to move
to a 46-inch web width (four pages wide). The
change allowed the Toronto Star to offer a size that
is friendlier to its readers and the environment,
while reducing newsprint consumption.

The Toronto Star continued its tradition of
crusading journalism grounded in the spirit of the
launching
Star’s founder, Joseph E. Atkinson,
several major editorial initiatives. These included
an anti-poverty campaign that led to improvements
in government programs for the disadvantaged,
extensive environmental and climate change
coverage and in-depth reporting on diversity in the
Greater Toronto Area.

The Toronto Star continued to be recognized both
in Canada and internationally for its outstanding
journalism. The Star won three National
Newspaper Awards (NNA), adding to its record of
having garnered the most NNAs of any paper in
Canada. It also won 15 Society for News Design
awards for excellence in design and photography,
placing it among the best in the world. Other
awards included a Michener Awards Foundation
nomination for an investigative series on the state
of air traffic safety conducted jointly by the Toronto
Star, The Hamilton Spectator and The Record, an
investigative journalism award by the Canadian
Association of Journalists and an International
Online Journalism Award for a series on
immigration consultants, Lost in Migration.

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In addition, the Toronto Star received numerous other
national and international awards and citations, including
for newspaper marketing, photo editing, circulation
promotion and media innovation.

The Toronto Star also developed a new
strategy based on modular
sales
advertising and sectional pricing for
launch in January 2008. This sales plan
will allow for better return on advertiser
investment, cleaner and more attractive
layouts, more choice and price options
for advertisers, with the ability to target
audiences more effectively.

In March 2007,
the Toronto Star
launched Desi Life, a bi-monthly magazine created
specifically for the burgeoning South Asian community in
the GTA. Each edition of the magazine is distributed to
more than 70,000 homes by targeted home delivery, and
through select retail locations across the GTA.

thestar.com recorded its highest readership in 2007, with
more than 3 million monthly unique
visitors (individual readers) in May and
more than 58 million unique page views
in October.

wheels.ca, an automotive website designed to help users
navigate all phases of buying a car, from choosing a model
to the final purchase. Drawing content from multiple
Torstar sources,
including the Toronto
Star, Car Guide and World of Wheels, the
site contains the latest auto news, 10 years
of automotive reviews, a car comparison
tool and a dealership locater. By year-end,
wheels.ca was attracting more than
400,000 unique visitors a month.

In 2007, toronto.com installed a new
management team, executed an aggressive
consumer marketing campaign and
realigned the local sales force under Olive
Canada Network. The results of these
changes proved significant: toronto.com
increased unique visitors by 20% and national sales
reached record levels.
interactive
functionality on the site, including “send to phone,” user
ratings and personalization features also contributed to the
website’s growing appeal.

The addition of

LiveDeal.ca is a partnership with Gesca Ltée. that provides
Canadians with an online marketplace for
buying and selling goods at both the local
and national level.

In 2007,
thestar.com continued to
provide readers with more features,
better content and easier accessibility.
The Toronto Star believes it is imperative
to win in the digital space, and it is
confident the improvements it has
launched will
compete
successfully in today’s media landscape.

help

In May, Star Media Group took one of Canada’s most
trusted automotive resources online with the launch of

channel

shopping

TMGTV includes SHOP TV Canada, a 24-
hour
reaching
approximately 1.7 million homes in
southern Ontario and Nova Scotia, with a
potential reach of more than 4 million
people. SHOP TV airs both short-form and
long-form advertising, with lengths
ranging from 15 seconds to 30 minutes.
TMGTV also operates an award-winning, full-service suite of
video production and post-production facilities, as well as a
360-degree virtual studio.

79998_AR_EditorialSec:79998_AR_EditorialSec 3/13/08 8:17 AM Page 9

Eye Weekly is one of Canada’s leading urban
weeklies. This exciting, informative entertainment
resource now reaches more than 280,000 readers
every Thursday. In October, eyeweekly.com was
relaunched utilizing the Torstar Digital TOPS
platform to offer readers enhanced content, and
advertisers new opportunities to reach readers
aged 18 to 34.

Sway is a quarterly magazine launched in 2006
that celebrates the power and influence of
Canada's black community.
In March, The
Canadian Immigrant Magazine, first started in
Vancouver,
launched a Toronto edition. With
30,000 copies distributed in Vancouver and
50,000 in Toronto, The Canadian Immigrant
gives advertisers a unique vehicle to reach
Canada’s growing immigrant population.

Sing Tao is Canada’s most widely read Chinese-
language newspaper, with daily editions in
Toronto, Calgary and Vancouver. In March, Sing
Tao acquired CCUE Chinese Media Inc., an
Internet publisher, to expand its online presence
and service offerings.

Real Estate News has been around for nearly four
decades. In June, REN.ca was launched using the
real estate platform developed by Sing Tao
subsidiary CCUE. In October, Real Estate News
moved from being a bi-weekly magazine to a
weekly zoned tabloid distributed every Friday
through home subscriber copies of the Toronto
Star within the GTA. Real Estate News continues
to be Toronto's only real estate publication
endorsed by the Toronto Real Estate Board.

In March, B Magazine – Beauty and Beyond – was
launched in partnership with Paper City Mag Inc.
This monthly magazine is designed for women

aged 25 to 55. Some 50,000 copies are
distributed free throughout the GTA.

Torstar Syndication Services provides value-
added services
to publishers, companies,
governments and consumers by collecting,
packaging, marketing, licensing and distributing
content,
including text, photos and graphics.
From an archive of almost 1 million images,
covering events for the past 100 years, Torstar
Syndication Services offers reprints of more than
30,000 Toronto Star photographs and full pages
for commercial and personal use. Registered users
may also license and download images for
commercial and editorial use.

Metro, Toronto’s
largest-reach free daily
newspaper, launched papers in two new markets
in 2007, adding Metro Calgary in March and
Metro Edmonton in April. Metro Halifax was
launched in February 2008 in partnership with
Metro S.A. and Transcontinental Media. In May
2007, Torstar and Metro S.A. acquired all of the
interest held by CanWest MediaWorks in the
Metro Vancouver and Metro Ottawa editions.

In 2007, Star Media Group acquired Insurance
Hotline.com, a web-based business that allows
consumers to compare easily a wide range of
insurance companies to determine the lowest
auto, home and life insurance rates for their
unique situation.

Star Media Group remains fully committed to
providing both readers and advertisers with
exceptional content and service, both in print and
online. In 2008, we will remain focused on
growing print and online products and improving
the financial performance of our flagship paper,
the Toronto Star.

79998_AR_EditorialSec:79998_AR_EditorialSec 3/13/08 8:17 AM Page 10

T O M E R S T R O L I G H T

President, Torstar Digital
VP, Digital Media, Star Media Group

T O R S T A R D I G I T A L

OLIVE CANADA NETWORK

In 2007, Olive Canada Network continued to be a key driver of
audience growth and revenue for Torstar Digital. Its network of
exclusively represented, premium-branded websites grew in
2007 from 18 to more than 40, including iVillage, CNET and
Babycenter. With a reach of more than 13 million unique
Canadian visitors, the Olive Canada Network offers media
buyers one-stop access to many of the most desired, premium
websites. In January 2007, Torstar sold 25 per cent of Olive
Canada Network to Gesca Ltée, with the intent of strengthening
its competitive advantage by offering a national, bilingual
service. This partnership brought 11 French-language sites into
the network, including Cyberpresse and LaPresseAffaires. It also
increased Olive Canada Network’s reach by approximately 3.5
million unique visitors.

Torstar Digital’s vision is to build the Great Canadian Digital
Media Company. Over the past three years, Torstar Digital has
made significant progress toward that goal by assembling a
portfolio of
through both
development and partnerships.

leading online

franchises

2007 was a year of investment at each of Torstar Digital’s
properties, which included, among others, significant marketing
investment in Workopolis to cement its leadership plan; the first
full year of operation at Olive Canada Network; the first full year
of deployment of TOPS, Torstar Digital’s online content
management system; and the launch of Torstar Digital’s first
digital lab initiative in social networking, ourfaves.com.

The Torstar Digital audience continued to grow, reaching more
than 13 million monthly unique visitors in 2007, up from 9 million
in 2006.

WORKOPOLIS.COM

is a 50/50
Workopolis, Canada’s largest career website,
partnership between Torstar and Gesca Ltée.
In 2007,
Workopolis achieved record levels on several key measures. It
had more than 3.3 million unique visitors monthly, more than
665,000 jobs posted and more than 1.5 million searchable
resumés posted, resulting in record revenues.

Workpolis also made a significant investment to upgrade its
infrastructure to continue to support its strong growth in the
online job category. These changes will allow for more rapid
development of the site and support the traffic growth expected
in future years.

In January 2008, Workopolis purchased Brainhunter’s
CareerSite North American industry association job boards
business, a network of nearly 100 association niche sites that
will provide the more than 10,000 employers that now post to
Workopolis an opportunity to extend their reach to large
numbers of new candidates.

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OURFAVES.COM

TOPS

Launched in May 2007, ourfaves.com is Torstar’s first web 2.0
site. It combines three major trends in online media: user-
generated content, social networking and local search to allow
users to share and discover favourite places and things in
Toronto. The site has maintained month-over-month growth of
more than 80% since it was launched, and attracted more than
In 2008,
100,000 unique visitors in December 2007.
ourfaves.com plans to expand to additional cities.

Developed and launched in 2006, TOPS (Total Online
Publishing System) is Torstar Digital’s integrated online
publishing platform. In 2007, TOPS migrated all remaining
Torstar newspaper websites onto the new technology platform,
relaunching a total of more than 60 Torstar sites. Key
development priorities in 2008 include ongoing development
of the platform and functionality to enable user-generated
content and social networking for its internal client sites.

G E R R Y N O B L E

President and CEO,
Transit Television Network

T R A N S I T

T E L E V I S I O N N E T W O R K

Transit Television Network (Transit TV) develops, installs, services
and manages digital out-of-home advertising networks, primarily
on mass transit bus systems through LCD screens mounted inside
the vehicles. It delivers full-motion, broadcast-quality information
and entertainment programming to its audience, including audio
and visual “next stop” announcements, local and national news,
weather and sports, advertising and lifestyle programming.
Transit TV reaches a daily audience of 1.7 million riders through
8,500 screens installed on bus systems in Los Angeles, California;
Chicago, Illinois; Atlanta, Georgia; Milwaukee, Wisconsin; and
Orlando, Florida. Its network is the largest of its kind in North

America and operates in each of its markets through exclusive
long-term contracts with the local transit agencies.

In 2007, Torstar initiated a strategic review process. As a result of
that process, Transit TV entered into a strategic sales relationship
with IdeaCast in January 2008. IdeaCast operates one of North
America’s largest health-club based digital advertising networks.
In addition to the sales relationship, Torstar entered into a letter
of intent that provides IdeaCast with an option to acquire Transit
TV in exchange for shares in IdeaCast. The option can be
exercised in the second quarter of 2008.

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M U R R A Y

S K I N N E R

President,
Metroland Media Group

M E T R O L A N D M E D I A G R O U P

Metroland Media Group celebrated another record year in
2007, its first full year operating both community and daily
newspapers following a corporate restructuring in late 2006.

Metroland’s revenue increased more than $19 million in 2007,
with growth registered in both daily and community
newspaper segments. Operating profit jumped 10% to $110
million, with increases in each of the major groups, including
daily newspapers, community newspapers, flyer distribution
and printing.

In 2007, Metroland achieved significant progress in three key
areas of investment: Niagara community newspapers, Ottawa
community newspapers and Gold Book Directories.

The recent community newspaper expansion in both the
Niagara region and Ottawa area resulted in increased revenue
in 2007 and further solidified their market positions.

An aggressive campaign to expand Gold Book Directories was
successfully implemented in 2007. The number of print and
online directories in Metroland’s southern Ontario markets
rose to 25 from nine, resulting in impressive revenue growth.
Gold Book’s innovative online offerings, in combination with
the promotional capabilities of Torstar’s newspapers and

Metroland’s distribution network, have contributed to the
success of the new directories.

During 2007, Metroland continued to grow through
acquisitions and by launching new publications. Metroland
purchased the Brighton Independent weekly newspaper, the
Parkdale Liberty monthly newspaper, Kitchener’s This Week in
Real Estate publication, and the Great Toronto Getaway and
Great Ontario Getaway publications. The company launched
three new weekly community newspapers: the Bradford West
Gwillimbury Topic, the Innisfil Journal and the South Asian
Focus in Brampton. Metroland also launched Guelph Life,
which joined Metroland’s stable of
local magazines, and
bought the Kawartha Home & Cottage Country Show.

All of Metroland’s more than 100 newspapers are heavily
involved in the communities they serve. Local news and
content make each paper the leading source of information in
its respective market.

In 2007, Metroland won a record number of awards for its
editorial and online excellence. The Hamilton Spectator
received the Excellence in Journalism Award from the Canadian
Journalism Foundation, becoming the only Canadian media
outlet to be awarded the honour twice.

G O L D B O O K D I R E C T O R I E S

g o l d b o o k . c a

D A I L Y P A P E R S

79998_AR_EditorialSec:79998_AR_EditorialSec 3/13/08 8:17 AM Page 13

C O M M U N I T Y P A P E R S

The Hamilton Spectator also garnered eight Ontario Newspaper Awards, and
three National Newspaper Award (NNA) nominations. The Record received
an NNA for editorial writing, an NNA nomination for sports writing, and five
Ontario Newspaper Awards. The Guelph Mercury received the Canadian
Journalism Foundation Excellence in Journalism Award for small media, one
National Newspaper Award nomination and four Ontario Newspaper Awards.

Collision Course, a joint investigation of air safety in Canada by The
Spectator, The Record and the Toronto Star, was honoured with several top
national awards, including a Michener Awards Foundation citation of merit.

Metroland’s community newspapers continued to dominate the Ontario
Community Newspaper Awards and the Canadian Community Newspaper
Awards. They also were recognized by Suburban Newspapers of America with
the second-highest number of awards won by any group in North America.

In 2007, the Metroland Media Group accelerated online efforts at the
individual newspaper level with increased interactivity and local focus.
Metroland developed and launched a new online classified advertising site in
late 2007, yourclassifieds.ca, which provides a wide range of classified listings
including merchandise, help wanted, real estate sales and rentals and
services. Early results are very promising for this new venture. At the same
time, a centralized group was established to drive initiatives for the benefit of
all local papers. Metroland’s commitment to online was recognized by the
Suburban Newspapers of America with 14 awards in its local community
website contest, including first-place finishes for various Metroland websites
in the categories of Best Site Architecture, Best Reader Interactivity, Best
Multi-Media Initiative, Best Real Estate Site and Best Advertising Initiative.

Based on the combination of strong local focus, diversified product mix,
and entrepreneurial culture, Metroland looks forward to continuing its
legacy of growth in 2008.

M A G A Z I N E S

79998_AR_EditorialSec:79998_AR_EditorialSec 3/13/08 8:17 AM Page 14

D O N N A H A Y E S

Publisher and Chief
Executive Officer

H A R L E Q U I N

Harlequin is unique in the publishing industry. With strong
brands and a dominant position in series romance publishing,
Harlequin is a global publisher of books for women in a variety of
genres,
formats. Also, Harlequin
continues to invest in longstanding Retail channel partner
relationships and its unique Direct-To-Consumer and Overseas
channels.

in both print and digital

Harlequin remains committed to being a leading publisher of
great reading entertainment for women. Four strategic themes
guide the pursuit of this vision:
1. Relevant portfolio of reading for women
2. Optimal channel and market management
3. Cost reduction and execution
4. Engaging the right people

In 2007, Harlequin made good progress against these themes and
positioned itself for further success in the future.

INDUSTRY
Consumer book publishing remains a relatively stable, modest
growth industry. Book retailing in the United States was stable in
2007 and Harlequin’s North America Retail business performed
well during the year.

The direct-to-consumer environment in which Harlequin
operates continues to prove challenging for all participants. Sales

in the traditional U.S. direct mail industry have declined steadily
in recent years. Similar weakness exists in certain Overseas direct-
to-consumer businesses as well, as consumers shift their buying
behaviour to other channels. Consumers’ migration to the
Internet opens new opportunities for publishers to reach readers
directly. Harlequin has responded to consumer demand for
online sales and social community, seeing double-digit sales
growth via third-party websites and eHarlequin.com in 2007.

In addition, publishers are using technology to drive advances in
the creation, promotion and distribution of their content. As
audiobooks and eBooks become more popular with readers,
digital publishing has emerged as a relatively small, but rapidly
growing, market. Harlequin has established itself as a leader in
digital publishing and now releases all new titles, which total
more than 100 a month, in electronic formats.

OPERATING REVIEW
In 2007, Harlequin earned EBITDA of $65.5 million, up $2.1
million from $63.4 million in 2006. Excluding the effect of
foreign exchange, Harlequin EBITDA would have been $4.1
million higher in 2007 than in 2006. Books sold declined
slightly in 2007 to 130 million from 131 million. After excluding
the impact of foreign exchange, revenue was stable at $462.7
million in 2007.

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HARLEQUIN’S STRATEGY
In 2007, Harlequin maintained its focus on four strategic
themes.

1. Relevant Portfolio of Reading for Women

The series publishing model is unique to Harlequin, with close
to 80 titles published each month across 15 series. In 2007,
Harlequin ensured the series business remains vibrant by
investing in product development, editorial quality and
promotion. Harlequin introduced innovative editorial within
existing series and through new series development. This
editorial also reached readers in new ways, through eBooks in
North America and mobile phone downloads and manga
comics in print and digital formats in Japan.

In addition to series, Harlequin continues to serve a broader
group of women with entertaining content across a variety of
single title genres and imprints.

2007 Progress
• In 2007, Harlequin strengthened its editorial offering with

new and expanded innovative product lines including:
– Introducing Kimani TRU, a new fiction line for African-
American teens;
– Expanding its Love Inspired Suspense inspirational line;
– Launching digital and print manga comics in Japan;
– Incorporating emerging trends in existing product lines.
• In response to evolving editorial content, U.S. consumers gave
Harlequin editorial its highest relevance scores to date in a
national survey.

Harlequin author.

• In the North American digital publishing program’s second
year, Harlequin published its entire frontlist in eBook format,
and grew the number of titles in Harlequin’s digital warehouse
to more than 9,000.

2008 Initiatives
• Drive product innovation by building on consumer expertise.
• Continue to improve the relevance and appeal of series

romance books.

• Broaden the range of content Harlequin publishes:

– Continue increased emphasis on thriller, suspense and
paranormal fiction.
– Expand into non-fiction, a segment representing 60% of the
U.S. consumer book publishing market.
– Build on the success of the Love Inspired series line with an
extension into historical inspirational romance.

• Maintain focus on developing and promoting Harlequin’s top

authors to higher levels of performance.

2. Optimal Channel and Market Management

Serving existing channels more effectively and identifying new
channels through which to sell books remain top priorities for
Harlequin.

2007 Progress
• In partnership with key North American retailers, Harlequin
focused on maximizing efficient distribution opportunities
and using its sampling program to build awareness and trial.
• Key Overseas markets performed well, particularly the

• Top selling authors under Harlequin imprints reached new

Nordic region.

levels of achievement:
– Collectively, Harlequin authors enjoyed 230 weeks on the
New York Times Bestseller Lists, up from the 181 weeks
achieved in 2006.
– Debbie Macomber achieved the #1 ranking simultaneously
on the New York Times, USA Today and Publishers Weekly
Bestseller Lists for her book 74 Seaside Avenue, a first for a

• In France, certain series product lines were relaunched with

positive results.

• Harlequin established operations in India, one of the world’s

largest English-speaking markets.

• eHarlequin.com and the digital publishing business

delivered double-digit sales growth.

79998_AR_EditorialSec:79998_AR_EditorialSec 3/13/08 8:17 AM Page 16

2008 Initiatives
• Continue to optimize sales of series and single title books in

the North America Retail channel.

• Continue to introduce Harlequin titles to new distribution

channels, particularly in Overseas markets.

• Grow online sales via eHarlequin.com and Harlequin’s

Internet partners’ websites.

• Continue to grow sales of digital products,

including
audiobooks, eBooks and mobile content in the U.S. and
Japan.

• Expand existing Overseas operations into adjacent markets
to reach new readers while leveraging existing resources.

3. Cost Reduction and Execution

While Harlequin has stabilized net units and revenue,
excluding the effect of foreign exchange, costs have grown at
a faster pace in recent years. In response to this margin
pressure, Harlequin undertook a significant cost reduction
initiative in 2006 and pursued it further in 2007. These
efforts will continue in 2008 in an effort to ensure Harlequin
grows revenue faster than costs.

4. Engaging the Right People

The foundation of Harlequin’s business lies in the talent of its
author base and employees. Accordingly, Harlequin works to
align the organization with its strategies, develop and retain
talent and reward performance.

FUTURE OUTLOOK
By continuing to publish excellent editorial
for women,
Harlequin maintains its unique position in the book
publishing industry. Publishing editorial in diverse genres
allows Harlequin to reach new readers, while remaining fresh
and relevant to its loyal base.

Looking ahead, Harlequin will continue to deliver relevant
editorial in innovative formats around the world. Key growth
initiatives will include Harlequin’s entry into non-fiction in
late 2008 and continued growth in digital publishing in
North America and abroad. Broadening distribution channels
will make Harlequin books more widely available, reaching
women where they already shop. Reducing costs and
improving execution will grow Harlequin’s profitability, while
facilitating continued investment in brands and authors.

79998_AR_EditorialSec:79998_AR_EditorialSec 3/13/08 8:18 AM Page 17

C T V g l o b e m e d i a

Torstar acquired a 20% equity interest in CTVglobemedia in
2006 for $283 million.
Subsequent to this investment,
CTVglobemedia acquired CHUM Ltd. Torstar participated in
this transaction by subscribing for $94 million of additional
In June
equity to maintain its 20% interest in CTVglobemedia.
2007, the CHUM transaction closed after meeting the
regulatory requirement to divest the Citytv stations, which were
sold to Rogers Communications Inc.

The CHUM acquisition represented a top strategic priority for
CTVglobemedia and provides several important benefits. It
creates a broader TV platform to leverage fixed programming
costs, expands CTV’s stable of specialty channels, diversifies
CTVglobemedia’s revenue stream through the addition of radio
and adds properties that better target young viewers and
listeners.

Torstar’s investment in CTVglobemedia gives it exposure to the
Canadian conventional and specialty television industries and
strengthens Torstar as a broadly based media company by
diversifying its revenue streams and geographic concentration.
The CTVglobemedia investment has also provided Torstar with
the opportunity to participate in Canadian television industry
consolidation on financially reasonable terms through the
CHUM acquisition.

The combination of CTVglobemedia and CHUM has led to the
creation of Canada’s premier multimedia
company,
representing many of the industry’s strongest properties.

In conventional television, the CTV Television Network includes
21 stations and is the nation’s leading private broadcaster.
Programs on the network held more top 10 and top 20 ratings
positions than any other broadcaster. The addition of CHUM’s
six “A Channel” stations further strengthens this position.

In specialty television, CTV has combined its specialty channels
with CHUM’s channels to create the nation’s leading specialty
channel provider with 35 specialty channels and many of the
leading franchises. These include TSN, MuchMusic, The
Comedy Network, Discovery Channel, Space and Bravo!.

In newspapers, the Globe and Mail is one of Canada’s leading
publications.

In radio, the CHUM Radio Network operates 35 radio stations
across Canada, including CHUM FM, which is Canada’s leading
FM station.

CTVglobemedia also holds a 15% interest in Maple Leaf Sports
and Entertainment Ltd., owner of the Toronto Maple Leafs, the
Toronto Raptors and the Air Canada Centre.

The combination of CTVglobemedia and CHUM creates a
powerful multimedia platform with strong positions in
newspapers, radio and conventional television, and significant
exposure to the attractive specialty television segment. With the
acquisition and initial
integration completed in 2007,
CTVglobemedia is well positioned to realize the strategic and
operating benefits of the broader platform in 2008.

B L A C K P R E S S

Torstar owns a 19.35% share of Black Press Ltd., a privately
owned and operated company with its head office in
Victoria, B.C. Black Press publishes more than 150 daily and
weekly newspapers, and has 17 press centres in Western
Canada, Washington state, Ohio and Hawaii.

While Black Press’s primary operations are in Western
Canada, the company has expanded its presence in the
United States in recent years. In the summer of 2006, Black
Press acquired the Akron Beacon Journal, a daily newspaper

in Akron, Ohio. Through a series of acquisitions in 2007,
Black Press also increased its community newspaper
holdings in the Washington state area.

Through this
investment, Torstar has expanded its
community-based newspaper presence in Western Canada
and the United States.

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C O M M I T M E N T T O O U R C O M M U N I T I E S

Torstar and each of its companies are proud of their long tradition of providing
cash and in-kind contributions to support the communities in which they operate

The Toronto Star Fresh Air Fund was launched in 1901 during one
of the worst heat waves on record. Atkinson appealed to Toronto
Star readers to help poor children escape the sweltering city heat
by providing funds for picnics, excursions and vacations at camp.
His message did not go unnoticed or forgotten. In the 1930s, the
emphasis switched to camps in the country where disadvantaged
children could spend two or three weeks running in the woods,
swimming in a lake or learning to paddle a canoe. Today, The
Toronto Star Fresh Air Fund gives children with serious illnesses,
mental and physical handicaps, and children from low-income
families, the chance to create some summertime memories at
camp. In 2007, The Toronto Star Fresh Air Fund raised $606,633
by the end of the campaign to send more than 25,000 children to
103 day and residential camps.

TORONTO STAR
Toronto Star Publisher Joseph E. Atkinson relentlessly pressed for
social and economic programs to help the marginalized, the less
fortunate and, particularly, children. His strong values and beliefs
inspired the Atkinson Principles, which are the driving force
behind the Toronto Star’s editorial and charitable endeavours. For
more than a century, the Toronto Star has held fast to the
Atkinson Principles. Atkinson’s passionate campaigns for social
justice led him to create two of the Greater Toronto Area’s most
successful charities – The Toronto Star Fresh Air Fund and The
Toronto Star Santa Claus Fund. His goal was to ensure that
underprivileged children were given a memorable camp
experience in the summer, and were not forgotten at Christmas.
This legacy is now ours to continue.

The Toronto Star covers all administrative expenses of The
Toronto Star Children’s Charities. This tradition has ensured that
every dollar contributed by readers goes directly to supporting
vulnerable children and youth. In 2007, more than 80,000
children and teenagers were supported by the funds.

79998_AR_EditorialSec:79998_AR_EditorialSec 3/13/08 8:18 AM Page 19

reinvested in Harlequin’s charitable initiatives. For more
information about this program and the award winners, please
visit www.HarlequinMoreThanWords.com.

M E T RO L A N D M E D I A G RO U P
Metroland Media Group’s newspapers provide support to
hundreds of charitable efforts throughout the communities they
serve. In 2007, Metroland properties donated millions of dollars
of in-paper space to a wide variety of worthy causes. Each
newspaper
suitable local charities and cultural
organizations and provides support by donating promotional
space in the newspaper. Here are just a few examples:

selects

In Simcoe County, the total value of donated promotional space in
community newspapers topped $750,000. Some 55 local
organizations benefited, including the Royal Victoria Hospital,
Talk Is Free Theatre, Theatre by the Bay, the Rotary Club of Barrie
and the Barrie Agricultural Society.

The Mississauga News partnered with the Maggie Steacy Summer
Breakfast Program to provide healthy morning meals for children
during July and August, when school-based programs are not
operating. The News worked with Lancaster Public School to help
deliver a fully integrated, unique program for recent immigrants.
Lancaster, a Malton neighbourhood school, was the one-stop
venue for the program, which allowed parents to enrol in English
language classes and provided their children with summer camp
programs.
In addition, The News ran three other programs
throughout Mississauga.

The Hamilton Spectator continued its lengthy tradition of
providing camping experiences for disadvantaged children,
through funds raised in the Summer Camp Fund. In 2007, more
than 1,100 children spent a week at camp. In addition, Hamilton
Spectator employees continued their Kids Unlimited initiative, an
outreach program through a partnership with an inner-city school
to support poverty reduction in the Hamilton community. Among
the projects in 2007 were the launch of an after-school program,
volunteer support for a breakfast club, a literacy/mentorship
program, special holiday meals, new team uniforms, sponsorship of
25 families for holiday gifts and clothing, and raising thousands of
dollars to support these ongoing programs.

The Toronto Community News division undertook a variety of
initiatives in Toronto neighbourhoods, including a first annual
holiday gift drive, a Toronto Children’s Breakfast Club and
continued support of community organizations, such as the
Dorothy Ley Hospice, Scarborough Walk of Fame and the Rouge
Valley Health System.

The Grand River Media Books for Kids drive collected
approximately 5,000 books for the Salvation Army's annual
Christmas hamper program. In addition, The Record supported
more than 400 regional non-profit organizations with in-kind
advertising linage or cash donations.

2007 proved to be another stellar fundraising year for The Toronto
Star Santa Claus Fund. The fund, which celebrated its 102nd year,
ensured that 45,000 children received a gift at Christmas.
Surpassing its $1.4 million goal, the fund raised more than $1.6
million by Christmas Eve from Toronto Star readers, as well as
readers of our sister papers, The Mississauga News, The Brampton
Guardian and the Ajax-Pickering News Advertiser. The bright gift
boxes, delivered directly to children’s homes by thousands of
volunteers, are filled with a warm shirt, socks, mitts and hat, a book,
small toy and candy.
In addition, The Toronto Star Santa Claus
Fund was able to support some 10,500 teens, aged 13 to 17, by
giving them movie passes and gift certificates for theatre
concession stands.

The Toronto Star also continues to extend a helping hand in the
community by supporting such agencies as the United Way,
ShareLife and the United Jewish Appeal, as well as Toronto Public
Library literacy programs, the Children’s Aid Foundation and
journalism scholarships at Ryerson University, Loyalist College,
Humber College Institute of Technology and Advanced Learning
and Sheridan Institute of Technology and Advanced Learning.

H A R L E Q U I N
Now in its fifth year of operation, the Harlequin More Than Words
program honours ordinary women who make extraordinary
contributions to their communities. From nominations it receives
each year from across North America, Harlequin presents five
women with the More Than Words award. Harlequin is proud to
make a $10,000 donation to each of the award winners’ associated
charities and to promote the charities online and through a North
America-wide publicity campaign. In addition, five of Harlequin’s
leading authors donate their time and creative talents to a
collection of short stories inspired by the award winners’
dedication and compassion. Proceeds from the book are

79998_AR_EditorialSec:79998_AR_EditorialSec 3/13/08 8:18 AM Page 20

D A V I D H O L L A N D

Executive Vice-President and
Chief Financial Officer

F I N A N C I A L

R E S U L T S

Torstar enjoyed positive financial performance in 2007; a combination of modest revenue growth and favourable cost
factors resulted in good earnings growth for the year. Revenues increased to $1.55 billion, up 1.2% versus prior year.
Excluding foreign currency related impact, revenues were up 1.7%. Earnings before interest, taxes, depreciation and
amortization (“EBITDA”) before restructuring charges increased by $23.3 million, or 11.5%, from $202.1 million to
$225.4 million in the year. Each of the major businesses contributed to the growth experienced in the year.

•The Metroland Media Group, focused on serving its local communities, had another strong year building on the growth
achieved in 2006. EBITDA grew by $11.2 million, or 9.8%, to $124.7 million. Revenue increased by 3.5% to $577.4
million.

•Following a difficult 2006, Star Media Group reported improved results in 2007. EBITDA was $60.8 million, an
improvement of $8.0 million from $52.8 million in 2006. Lower newsprint and pension costs were important factors
contributing to the improved EBITDA. Revenue of the group increased to $504.2 million, up 1.5% for the year.

•Harlequin had a good year in 2007, growing EBITDA to $65.5 million. The underlying EBITDA growth, excluding foreign
currency related impact, was $4.1 million or 6.5%. Continued growth in the North American Retail business and a
recovery from a difficult 2006 for North America Direct-To-Consumer more than offset lower results in Overseas.
Excluding currency impact, revenue of $462.7 million was stable compared to prior year.

Torstar made good progress on its net borrowing position in 2007, closing the year at $620.3 million, a reduction of
$60.0 million from the December 31, 2006 position of $680.3 million. The favourable movement in the borrowing
position resulted from solid operating results, favourable working capital movements, low investment in acquisitions and
the favourable impact of the stronger Canadian dollar on the translation of U.S. debt.

Looking ahead to 2008, acknowledging the uncertain economic outlook, we will remain focused on execution of our
plans, which depend on operating effectively and on leveraging the strength of our leading franchises. We will also remain
disciplined about seeking opportunity and making the investments necessary to enhance value over the long term.

D A V I D H O L L A N D

79998_AR_EditorialSec:79998_AR_EditorialSec 3/13/08 8:18 AM Page 21

F I N A N C I A L T A B L E O F C O N T E N T S

MANAGEMENT’S DISCUSSION & ANALYSIS

MANAGEMENT’S STATEMENT OF RESPONSIBILITY

INDEPENDENT AUDITORS’ REPORT TO SHAREHOLDERS

CONSOLIDATED FINANCIAL STATEMENTS

ANNUAL OPERATING HIGHLIGHTS, SEVEN-YEAR-SUMMARY

CORPORATE INFORMATION

79998_AnnualReport07:79998_AnnualReport07 3/13/08 8:23 AM Page 22

M A N A G E M E N T ’ S D I S C U S S I O N & A N A L Y S I S
M A N A G E M E N T ’ S D I S C U S S I O N & A N A L Y S I S

For the year ended December 31, 2007

Dated: February 27, 2008

The following review and analysis of Torstar Corporation’s (“Torstar”) operations and financial position is supplementary to, and
should be read in conjunction with the audited consolidated financial statements of Torstar Corporation for the year ended
December 31, 2007.

Torstar reports its financial results under Canadian generally accepted accounting principles (“GAAP”) in Canadian dollars.
Per share amounts are calculated using the weighted average number of shares outstanding for the applicable period.

Non-GAAP Measures

Management uses both operating profit, as presented in the consolidated statements of income, and EBITDA as measures to
assess the performance of the reporting units and business segments. EBITDA 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 the reporting unit or
segment. EBITDA is not the actual cash provided by operating activities and is not a recognized measure of financial performance
under GAAP. Torstar calculates EBITDA as the reporting unit or segment’s operating profit before restructuring provisions,
interest, unusual items, taxes, depreciation and amortization of intangible assets. Torstar’s method of calculating EBITDA may
differ from other companies and accordingly, may not be comparable to measures used by 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 report. 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 report. 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.

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 to not 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. 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.

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,
the Company’s ability to attract advertisers, cyclical and seasonal variations in the Company’s revenues, newsprint costs, labour
disruptions, foreign exchange fluctuations, restrictions imposed on existing credit facilities, reliance on its printing operations,
reliance on technology and information systems, litigation, 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.
For more information, please see the discussion starting on page 4 concerning the effect certain risk factors could have on actual
results, as well as the discussion in the Company’s current Annual Information Form, which is incorporated herein by reference.

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. 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;
and successful development of new products. There is a risk that some or all of these assumptions may prove to be incorrect.

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M A N A G E M E N T ’ S D I S C U S S I O N & A N A L Y S I S

OVERVIEW

Torstar Corporation is a broadly based media company listed
on the Toronto Stock Exchange (TS.B). Torstar reports its
operations in two segments: Newspapers and Digital; and Book
Publishing. The Newspapers and Digital Segment includes the
Star Media Group led by the Toronto Star, Canada’s largest
daily newspaper and digital properties including thestar.com,
toronto.com, LiveDeal.ca, Workopolis, and Olive Canada
Network; and Metroland Media Group, publishers of
community and daily newspapers in Ontario. Its Book
Publishing Segment represents Harlequin Enterprises Limited,
a leading global publisher of books for women. Torstar also has
investments in CTVglobemedia Inc. (“CTVgm”) and Black Press
Limited which are accounted for as Associated Businesses,
using the equity method. In 2007, Torstar had revenues of
$1.5 billion and net income of $101.4 million.

NEWSPAPERS AND DIGITAL SEGMENT

The Newspapers and Digital Segment includes the Star Media
Group; Metroland Media Group (“Metroland”); and Transit
Television Network (“Transit TV”).

The Star Media Group and Metroland Media Group reporting
units have been aggregated into one segment due to their
similar economic factors, geography, customers, distribution
channels and the level of interaction between the reporting
units. Transit TV has been included in the Newspapers and
Digital Segment as it, like the other businesses in this segment,
is a media platform providing news content and generating
advertising revenue. However, this reporting unit is small
relative to the other reporting units in the segment. Each of the
reporting units is discussed separately in the MD&A in order to
provide more specific information about their operations.

Star Media Group includes the Toronto Star, with the largest
circulation and readership of any daily newspaper in Canada;
Torstar’s interests in Sing Tao Daily and the Toronto, Ottawa,
Vancouver, Edmonton, Calgary and Halifax1 editions of Metro;
thestar.com; toronto.com; LiveDeal Canada; and Torstar Media
Group Television (“TMG TV”). Recognizing the level of
interaction between the Star Media Group digital businesses
and Torstar Digital, Star Media Group also includes
Workopolis, Olive Canada Network and the Torstar Digital
corporate group.

Torstar owns 100% of toronto.com, an online destination for
where to go and what to do in the Greater Toronto Area. Torstar
owns 60% of LiveDeal Canada, a web classified site; 50% of
Workopolis, Canada’s leading provider of Internet recruitment
and job search solutions; and 75% of Olive Canada Network, an
advertising network of premium websites that reaches over
13 million unique Canadian visitors monthly on its network of
top-tier
including CNET.com, ArtistDirect.com,
thestar.com, toronto.com, cyberpresse.ca and tetesaclaques.tv.
Gesca Ltd. is Torstar’s partner in each of these partnerships.

sites

1 Launched February 2008.

The Toronto Star’s Vaughan Press Centre primarily supports
the Toronto Star’s printing needs but is also engaged in
commercial printing, including printing the National Post.
TMG TV is a 24-hour direct response television business
operating the SHOP TV Canada channel and TMG TV
Productions.

Metroland Media Group publishes in print and online more than
100 community newspapers and three daily newspapers – The
Hamilton Spectator, The Record (Kitchener, Cambridge and
Waterloo) and the Guelph Mercury. It is also the publisher of
Gold Book Directories, a number of specialty publications, and
operates several consumer shows throughout Ontario. Metroland
Media Group has nine web press facilities which print the
Metroland newspapers but also engage in commercial printing.

information and entertainment

Transit TV is a U.S. based operation that delivers full motion,
broadcast-quality
to
passengers on buses and rail transit on screens mounted in the
vehicle. In 2007, Torstar undertook a strategic review of Transit
TV. In early 2008 Torstar announced a sales relationship with
IdeaCast, Inc. (a U.S. provider of custom television content and
advertising to health clubs) and a letter of intent giving
IdeaCast an option to acquire Transit TV in the second quarter
of 2008. If the option is exercised, the consideration for the
acquisition would be IdeaCast shares. Torstar’s carrying value
in Transit TV’s net assets at December 31, 2007 was
approximately $19.0 million.

BOOK PUBLISHING SEGMENT

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, selling through the retail channel and directly to the
consumer by mail and the Internet. Harlequin’s publishing
operations are comprised of three divisions: North America
Retail, North America Direct-To-Consumer and Overseas.
In 2007 Harlequin published books in 29 languages in 107
international markets. Harlequin reported a total of 130 million
books sold in 2007, down slightly from 131 million in 2006.

imprints including
Harlequin sells books under several
Harlequin, Silhouette, MIRA, HQN, Red Dress Ink, Steeple Hill,
LUNA, Spice and Kimani Press. Harlequin publishes books in
both series and single title formats. Series titles are published
monthly in mass-market paperback format under an imprint
that identifies the type of story to the reader. Each series
typically has a preset number of titles that will be published
each month. The single title publishing program provides a
broader spectrum of content in a variety of formats (mass-
market paperback, trade paperback, hardcover) and generally a
lengthier book. New single title books are published each
month and the individual titles have a longer shelf life.

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ASSOCIATED BUSINESSES

Torstar owns a 20% equity interest in CTVglobemedia Inc.
(“CTVgm”). CTVgm is a Canadian multi-media company with
ownership interests in CTV, a Canadian private broadcaster, and,
the national daily newspaper, The Globe and Mail. CTVgm owns
and operates conventional television and radio stations across
Canada and national specialty channels. Other CTVgm
investments include: an approximate 15% interest in Maple Leaf
Sports and Entertainment Ltd., which owns the Toronto Maple
Leafs, Toronto Raptors and the Air Canada Centre; and a 50%
interest in Dome Productions, a North American leader in the
provision of mobile high definition production facilities.

Torstar has a 19.35% equity investment in Black Press Ltd. Black
Press Ltd. is a privately held company that publishes more than
160 newspapers (weeklies, dailies and shoppers) including the
Akron Beacon Journal, the daily newspaper in Akron, Ohio, and
has 17 press centres in Western Canada, Washington State, Ohio
and Hawaii. Torstar may make additional investments in Black
Press under certain circumstances.

KEY FACTORS AND RELATED RISKS AFFECTING
REVENUES AND OPERATING INCOME

Torstar is subject to a number of risks and uncertainties,
including those set forth below. A risk is the possibility that an
event might happen in the future that could have a negative
effect on the financial condition, results of operations or
business of Torstar. The actual effect of any event on Torstar’s
business could be materially different from what is anticipated.
A further discussion of risks affecting Torstar and its businesses
is set forth in Torstar’s current Annual Information Form, which
is incorporated herein by reference.

Revenues

revenue

in-paper

Torstar’s newspapers generate revenue primarily from
advertising and from paid circulation for the daily newspapers.
Advertising
advertising,
includes
inserts/flyers, and specialty publications as well as on-line ads.
Competition for advertising revenue comes from local and
regional newspapers, radio, broadcast and cable television,
outdoor, direct mail, Internet and other communications and
advertising media that operate in Torstar’s markets. The extent
and nature of such competition is, in large part, determined by
the location and demographics of each market and the number
of media alternatives available.

Advertising revenue is sensitive to prevailing economic
conditions, including changes in local and regional economic
conditions, and the level of consumer confidence. A large
portion of Torstar’s advertising revenue is derived from the
automotive, technology, retail, telecommunications, travel,
financial and entertainment sectors. These sectors have
historically been sensitive to changes in economic conditions.
Advertising revenue tends to be seasonal with the second and
fourth quarters being stronger than the first and third.

In January 2008, the Toronto Star moved to modular advertising

and sectional pricing. Modular advertising is the sale of
advertising by standard unit sizes instead of by the line.
Sectional pricing means that advertisements are placed in the
section of the newspaper selected by the advertiser and that the
rate for placement in that section is correlated to the readership
and demographics of the audience that the section delivers.
This change offers advertisers the opportunity to use the
Toronto Star as a mass or targeted medium. Management
believes that this change should help the Toronto Star align
with the full range of media options available to advertisers,
including online, TV and radio, which already offer standardized
sizes and targeting opportunities. There is a risk inherent in
undertaking this change as the Toronto Star is the first
newspaper in Canada to adopt this approach and it may not
prove to be accepted by advertisers.

Readership levels are an important factor in the ability of a
newspaper to generate advertising revenues. Changes in
everyday lifestyle have meant that people are choosing not to
devote as much time to reading newspapers as they used to. In
addition, increased usage of the Internet over the past decade
has changed how people receive news and other information
which may also reduce their newspaper reading and purchasing
habits. In response to this trend, Torstar’s newspapers have
established electronic versions which are updated regularly
during the day for breaking news and which have various
interactive features. These sites complement the printed
product and provide both readership and advertising
opportunities. In addition, Torstar has made investments in
digital operations including development of special interest and
classified websites where print revenues have migrated to over
the past few years.

In 2007, digital revenues represented 4.5% of Torstar’s
Newspapers and Digital Segment revenues. However, digital
revenues tend to be priced lower than traditional media, due in
part to the lower cost structure and, in some cases, low barriers
to entry. The digital space also includes competitors for the
distribution of information that may have no or only a nominal
profit motivation and who provide services for free. Generating
a significant level of digital revenues may require a large volume
of transactions at relatively low rates. To get the volume of
transactions, a critical mass of relevant content, brand
recognition and effective technology are key requirements. A
challenge for Torstar in the digital space is that the competitive
environment continues to change at a rapid pace, there are
lower barriers to entry, and the competitors range from start-up
operations with low cost structures to global players with access
to greater financial and other resources than Torstar.

TMG TV generates revenues primarily by selling time for direct
response advertising on the SHOP TV Canada channel. The
direct response television business in Canada has been
challenging for several years. Channel placement with the cable
networks is an important selling feature for this business. TMG
TV’s contract with Rogers for access to their cable network in
the Toronto area expired on December 31, 2006 but access has

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continued through 2007 and is expected to do so in the future.

Employees

The Transit TV model is to generate revenues by selling
advertising space on programming broadcast on buses and
trains. The medium enjoys the advantage of a relatively “captive”
audience, is less expensive for advertisers than television and
may provide better access to key demographics. However, as a
new product, there is no guarantee of commercial success and
Torstar’s experience to date is that advertisers have been slow to
embrace it.

A key risk for book publishing revenue is the ability to publish
books that consumers want to read and to have them available
where and when consumers are making their purchasing
decision. Given the large percentage of its sales in the U.S.,
Harlequin has considerable exposure to trends occurring in the
U.S. book market. Harlequin regularly introduces new product
lines in order to attract new readers and discontinues products
where consumer interest has declined. Harlequin also continues
to expand its distribution network through retail stores, by direct
mail and through the Internet in both print and digital formats.

Books sold through the retail channel are sold to wholesalers
and retailers with a right of return leaving the ultimate sales risk
with Harlequin. In order to reflect the ability of the retailers to
return books that they don’t sell, a provision for returns is made
when revenue is recognized. (See additional information in the
Critical Accounting Policies and Estimates section of this
MD&A.) The provision is then adjusted as actual returns are
received over time. Series books are on sale for approximately
one month. Returns for these books are normally received
within one year, with more than 95% received within the first six
months. Single title books are on sale for several months and, as
a result, experience a longer return period. The difference
between the initial estimate of returns and the actual returns
realized has an impact on Harlequin’s results during subsequent
periods as the returns are received. Single title books tend to
have a higher variability in return rates than series books,
increasing the related risk in the provision for returns estimate.

A key revenue risk for Harlequin’s direct-to-consumer business is
maintaining the customer base. This is done through a
combination of acquiring new customers and keeping the
existing ones. A significant source of new customers has
historically been through promotional direct mailings. The
direct marketing industry continues to face considerable
challenges from a lack of available mailing lists, regulation and
competitive pressure from alternate channels. This makes the
acquisition of new customers through promotional mailings
difficult. Harlequin has responded to these challenges in a
its Internet site,
number of ways including the use of
eharlequin.com, to attract new customers. There is no guarantee
that there will be a sufficient number of new customers acquired
each year to offset the decline of existing customers.

Torstar has a number of collective agreements at its newspaper
operations that have historically tied annual wage increases to
cost of living. The newspapers face the risk of future labour
negotiations and the potential for business interruption should
a strike, lockout or other labour disruption occur. Such an
interruption could materially adversely affect Torstar’s revenue.
The level of unionization at the newspapers also impacts the
ability of Torstar to respond quickly to downturns in the
economy that negatively impact revenue.

Four of the Toronto Star’s collective agreements covering
approximately 750 employees at One Yonge Street and 70
employees at the Vaughan Press Centre expired at the end of
2007. New agreements were reached in early 2008 that provide
for basic wage increases of 2% each year. Two of these expire at
the end of 2010, one at the end of 2011 and one, covering
approximately 40 employees, will expire at the end of 2008. The
new agreements will also provide for increased flexibility in the
assignment of staff and remove barriers to inefficient workflow.
Three additional agreements covering approximately 400
employees at the Vaughan Press Centre will expire at the end of
2011. Sing Tao has two collective agreements covering
approximately 125 employees that will expire at the end of 2009.
Metro’s Toronto operations have a collective agreement covering
approximately 50 employees that will expire in March of 2010.

Metroland Media Group has a number of collective agreements
throughout their operations covering approximately 900
employees. Eleven new collective agreements were reached
during 2007 covering approximately 550 employees. These
agreements generally provide for annual basic wage raises
dependent upon increases in the Consumer Price Index, but in
the range of 1.5% to 3.0% and will expire between the end of
2009 and mid 2011. Four additional collective agreements, with
similar terms, covering approximately 175 employees will expire
during 2009. There are five collective agreements covering
approximately 165 employees that have either expired or will
expire by the end of 2008.

Newsprint Costs

Newsprint costs are the single largest raw material expense for
Torstar’s newspapers and are one of the Newspapers and Digital
Segment’s most significant operating costs. Newsprint is priced
as a commodity with price increases or decreases implemented
at regular intervals. In 2007, newsprint prices decreased during
the year and Torstar’s newsprint price was on average 13% lower
than in 2006. Torstar’s newspapers consume approximately
140,000 tonnes of newsprint each year. A $10 change in the
price per tonne affects operating profits by $1.4 million.

Technology

The media industry is experiencing rapid and significant
technological changes. The continued growth in the popularity
of the Internet has increased the number of content options that

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M A N A G E M E N T ’ S D I S C U S S I O N & A N A L Y S I S

compete with newspapers. In order to be able to compete,
Torstar is required to be able to attract and retain appropriately
skilled staff. Torstar also must manage the changes in and
acquire, develop or integrate new technologies. The cost of such
acquisition, development or
implementation of new
technologies could be significant.

Printing Operations

In its Newspapers and Digital Segment, Torstar places
considerable reliance on the functioning of its printing
operations for the printing of its various publications. In the
event that any of Torstar’s print facilities experiences a shutdown,
Torstar will attempt to mitigate potential damage by shifting the
printing to its other facilities or outsourcing the work to a third
party commercial printer. However, such a shutdown could
result in Torstar’s inability to print some publications and
consequentially could negatively impact revenues.

Harlequin uses third party printing arrangements for its book
publishing operations in North America and worldwide. Should
there be a change in any of the existing arrangements or should
they cease to be available, Harlequin would attempt to mitigate
the situation by using an alternative supplier or print location.
In January 2008, Quebecor World (Harlequin’s printer for
North American mass-market paperbacks) applied for court
protection in Canada and the U.S. in order to conduct
restructuring. As part of that process Quebecor World has
secured new financing enabling it to continue to operate.
To date, there has not been any disruption in printing services
during the restructuring and management believes that the
outcome of the Quebecor World restructuring process will not
likely have a material impact on the book publishing business.

Litigation

Torstar is involved in various legal actions, primarily in the
Newspapers and Digital Segment, which arise in the ordinary
course of business. There can be no assurance as to the
outcome of any future litigation or whether the outcome will
have a material impact on Torstar’s results.

Foreign Exchange

As an international publisher, approximately 94% of Harlequin’s
revenues are earned in currencies other than the Canadian
dollar. As a result, Harlequin’s reported revenues and operating
profits are affected by changes in foreign exchange rates relative
to the Canadian dollar. The most significant risk is from changes
in the U.S.$/Cdn.$ exchange rate. Harlequin also has exposure
to many other currencies, the most significant of which are the
Euro, Yen and British Pound. From 2006 to 2007, the Canadian
dollar strengthened by 5% on average relative to the U.S. dollar
and by 6.5% to the Yen. It weakened by 3% relative to both the
Euro and the British Pound. The total impact of Harlequin’s
exposure to foreign currencies in 2007 as compared to 2006
was a decrease of $2.9 million in Harlequin’s reported
operating profit.

To offset some of this exposure, Torstar enters into forward
foreign exchange contracts to sell U.S. dollars. (See additional
information on foreign exchange risks in the Financial
Instruments section of this MD&A.) In 2007, Torstar realized
gains of $1.7 million related to $27.5 million of U.S. dollar
contracts at an average exchange rate of $1.14. (In 2006, gains
of $0.8 million related to $30.0 million of U.S. dollar contracts
at an average exchange rate of $1.16.) These gains were
included in Harlequin’s reported revenue and operating profit.

Investment in CTVgm

Torstar has a significant investment in CTVgm. Torstar does not
own a controlling interest in CTVgm and does not exercise
control over its management, strategic direction or daily
operations. CTVgm’s results, and the value of Torstar’s
investment, are dependent upon the television and radio
broadcasting and newspaper environment in Canada and
CTVgm’s position in relation to its competitors. CTVgm faces
many of the same challenges as Torstar does from the growth of
the Internet as well as declines in conventional television
revenues. Broadcasting is subject to extensive government
regulation in Canada. Changes to the applicable regulations
and policies or terms of licenses could have a material effect on
CTVgm’s businesses. Given the level of debt carried by CTVgm,
a change in CTVgm’s operations could have a significant impact
on the value of Torstar’s investment. A negative change in the
value of CTVgm could require Torstar to take a charge to
earnings in order to reduce its carrying value.

Interest Expense

Torstar may be exposed to fluctuations in interest rates under its
borrowing arrangements. With the increased levels of long-term
debt arising from Torstar’s investment in CTVgm in 2006,
Torstar has entered into interest rate swap agreements to fix the
rate of interest on $250 million of Canadian dollar borrowings
at 4.3% (plus the interest rate spread based on Torstar’s long-
term credit rating, currently 0.6%) through 2011.

OPERATING RESULTS – YEAR ENDED
DECEMBER 31, 2007

Overall Performance

Total revenue was $1,546.5 million in 2007, up $18.2 million
from $1,528.3 million in 2006. Newspapers and Digital revenue
grew $27.3 million to $1,083.8 million with strong growth in
the digital operations and market expansions. Reported Book
Publishing revenue was $462.7 million in 2007, down $9.1
million from $471.8 million in 2006 including an $8.1 million
decline from the strengthening of the Canadian dollar during
the year. Revenue improvements for North America Retail and
Overseas were not sufficient to offset declines in North America
Direct-To-Consumer.

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Operating profit was $162.8 million in 2007, up $39.5 million
from $123.3 million in 2006. The increase included
$14.8 million of lower restructuring provisions in 2007.
Newspapers and Digital Segment operating profit was $128.7
million in 2007, up $20.9 million from $107.8 million in 2006
including $13.7 million of savings from lower newsprint pricing
and $4.5 million from the mid-2006 closure of Weekly Scoop.
Continued investment in the digital operations offset growth in
the other businesses. Book Publishing reported operating profit
was $60.6 million in 2007, up $4.3 million from $56.3 million
in 2006. Underlying operating profit was up $6.3 million in the
year while the strengthening Canadian dollar decreased profits
by $2.0 million. Underlying results were up in the North
America Retail and Direct-To-Consumer divisions and down in
Overseas. Corporate costs were $19.0 million in 2007,
up $0.5 million from $18.5 million in 2006.

EBITDA2, excluding restructuring provisions, was $225.4 million
in 2007, up $23.3 million from $202.1 million in 2006.

Newspapers and Digital
Book Publishing
Corporate
EBITDA, excluding
restructuring provisions

2007

2006

$178,921
65,473
(18,973)

$157,112
63,439
(18,417)

$225,421

$202,134

Restructuring provisions of $7.5 million were recorded in 2007
compared with $22.3 million in 2006. In 2007, the Star Media
Group offered the second voluntary severance program at the
Vaughan Press Centre that had been agreed to in the 2006
contract negotiations and Metroland Media Group undertook
further restructuring. Total annual savings from these
restructuring activities are expected to be approximately
$3.7 million.

The 2006 provisions for the Star Media Group included a
voluntary severance program at the Vaughan Press Centre, the
outsourcing of its circulation call centre and a fourth quarter
restructuring for a total cost of $13.6 million. Restructuring
provisions of $6.0 million were recorded by Metroland Media
Group from restructuring of operations triggered by the
combination of the CityMedia and Metroland operations.
Harlequin reduced its global workforce by 4% in the third
quarter of 2006 at a cost of $2.7 million.

Interest expense was $34.4 million in 2007, up $13.6 million
from $20.8 million in 2006. The higher expense reflects a full
year of the higher level of debt outstanding from the investment
in CTVgm in the third quarter of 2006 and higher interest rates.
The average net debt (long-term debt and bank overdraft net of
cash and cash equivalents) was $660.7 million in 2007, up
$214.5 million from $446.2 million in 2006. Torstar’s effective
interest rate was 5.2% in 2007 and 4.7% in 2006. Net debt was

$620.3 million at December 31, 2007, down $60.0 million from
$680.3 million at December 31, 2006.

Torstar reported a non-cash foreign exchange loss of $1.9
million in 2007. This loss arose from the translation of foreign-
currency (primarily U.S. dollars) denominated assets and
liabilities into Canadian dollars. The amount of the loss or gain
in any year will vary depending on the movement in relative
value of the Canadian dollar and on whether Torstar has a net
asset or net liability position in the foreign currency. In 2006, a
non-cash foreign exchange gain of $0.1 million was reported.

Income from associated businesses was $20.4 million in 2007
up from $16.0 million in 2006. CTVgm contributed $17.2
million in 2007 and $14.0 million in 2006. As Torstar’s
investment in CTVgm was made in September 2006, the 2007
income represents CTVgm’s full year ended November 30, 2007
while the 2006 results were only the one quarter ended
November 30, 2006. (As Torstar and CTVgm do not have
coterminous quarter-ends, Torstar reflects CTVgm’s operations
with a one-month lag.) In both periods, CTVgm’s results were
adjusted for the impact of the accounting allocation of Torstar’s
purchase price to CTVgm’s underlying assets and liabilities. In
the fourth quarter of 2007, these adjustments included a
positive $5.2 million earnings impact as future tax liabilities
related to intangible assets were reduced to reflect the
reduction in future Canadian federal
income tax rates.
Excluding this adjustment, CTVgm contributed $12.0 million in
2007. CTVgm realized operating profit growth in 2007 from
their specialty television channels and the full year impact of the
CHUM acquisition, which received final regulatory approval in
June 2007. Offsetting this growth was higher interest expense
due to higher levels of debt related to the CHUM acquisition
and higher effective tax rates. CTVgm also recorded a write-
down related to its 40% interest in TQS (a French-language
conventional television broadcaster) which was only partially
offset by adjustments related to Canadian Radio-television and
Telecommunications Commission Part II fees.

Torstar’s income from Black Press was $3.1 million in 2007
compared with $1.8 million in 2006. Black Press realized
EBITDA growth in 2007 from the strong economy in Western
Canada and from U.S. acquisitions made in mid 2006. Black
Press’ net income was negatively impacted during 2007 by
higher interest expense related to the acquisitions.

Torstar’s effective tax rate was 31.0% in 2007 compared with
33.3% in 2006. During 2006 and 2007, the Canadian federal
government enacted corporate income tax decreases for future
years. Under Canadian generally accepted accounting
principles the impact of these changes on Torstar’s future
income tax assets and liabilities is to be recorded during the
period the tax changes are substantially enacted. The impact
was to reduce Torstar’s tax expense by $5.9 million in 2007 and
$4.6 million in 2006. Excluding this adjustment, Torstar’s
effective tax rate was 35.0% in 2007 and 37.2% in 2006.

2 EBITDA is calculated as operating profit before restructuring provisions, interest, unusual items, taxes depreciation and amortization of intangible assets.

See “non-GAAP measures”.

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M A N A G E M E N T ’ S D I S C U S S I O N & A N A L Y S I S

The effective tax rate was lower in 2007 due to changes in the
mix of income.

The following chart provides a continuity of earnings per share from
2006 to 2007:

Net income was $101.4 million in 2007, up $22.3 million
from $79.1 million in 2006. Net income per share was $1.29
in 2007, up $0.28 from $1.01 in 2006. The average number
of Class A and Class B non-voting shares outstanding was 78.6
million in 2007 up slightly from 78.3 million in 2006.

$1.01

Net income per share 2006
Changes
•

Operations

•

Restructuring provisions

Non-cash foreign exchange

Income from associated businesses

Interest on CTVgm investment

Change in statutory tax rates

0.24

0.12

(0.05)

0.05

(0.10)

0.02

Net income per share 2007

$1.29

Segment Operating Results – Newspapers and Digital

The following tables set out, in $000’s, the results for the reporting units within the Newspapers and Digital Segment for the years
ended December 31, 2007 and 2006.

Star Media
Metroland Media
Transit TV
Segment Total

Operating Revenue
2006
2007

Operating Profit (Loss)
2006
2007

$504,153
577,425
2,250
$1,083,828

$496,518
558,156
1,788
$1,056,462

$28,754
109,996
(10,075)
$128,675

$20,474
99,911
(12,536)
$107,849

Profit Margin

2007

5.7%
19.0%
n/a
11.9%

2006

4.1%
17.9%
n/a
10.2%

Depreciation
and Amortization

EBITDA

EBITDA Margin

2007

$31,998
14,717
3,531
$50,246

2006

$32,297
13,624
3,342
$49,263

2007

2006

$60,752
124,713
(6,544)
$178,921

$52,771
113,535
(9,194)
$157,112

2007

12.1%
21.6%
n/a
16.5%

2006

10.6%
20.3%
n/a
14.9%

Total revenue of the Newspapers and Digital Segment was $1,083.8 million in 2007, up $27.3 million from $1,056.5 million in
2006. Digital revenues grew 45.7% in 2007 and were 4.5% of the total Newspapers and Digital Revenue in 2007, up from 3.2% in
2006. EBITDA was up $21.8 million in the year including $13.7 million from lower newsprint pricing and $4.5 million from 2006
losses for Weekly Scoop. Excluding these savings, EBITDA was up $3.6 million or 2.3%. Operating profit was up $20.8 million in
the year.

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M A N A G E M E N T ’ S D I S C U S S I O N & A N A L Y S I S

were up at both the community and daily newspapers and the
Gold Book directories expanded the number of books
published during the year. EBITDA was $124.7 million in 2007,
up $11.2 million from $113.5 million in 2006. Operating profit
was $110.0 million in the year, up $10.1 million from $99.9
million in 2006.

ROP advertising revenues were up 1.1% at the community
newspapers including acquisitions. Distribution revenues were
up 7.7%. At the daily newspapers, ROP advertising revenue was
up 0.8% and distribution revenues were up 3.7%. Gold Book
revenues were up 73% in the year with the number of
directories published increasing from 9 in 2006 to 25 in 2007.
Revenue from Metroland Media Group’s various Internet
properties, including Gold Book, increased by $0.7 million in
the year.

Metroland Media Group benefited from lower newsprint
pricing in 2007 along with lower labour costs at the daily
newspapers as a result of the restructuring undertaken in the
fourth quarter of 2006 and lower pension costs.

Metroland Media Group’s EBITDA was up $11.2 million in the
year as the growth at the community and daily newspapers more
than offset the investment spending for the Gold Book
directories.

Transit TV

Transit TV 2007 revenues of $2.3 million were up $0.5 million
from $1.8 million in 2006. EBITDA losses were $6.5 million in
2007 down $2.7 million from $9.2 million in 2006. Transit TV’s
operating loss was $10.1 million in 2007, down $2.4 million
from $12.5 million in 2006.

Star Media Group

The Star Media Group reported revenues of $504.2 million in
2007, an increase of $7.7 million from $496.5 million in 2006.
Strong revenue growth at the digital properties, the Metro
newspapers (including the new markets) and Sing Tao more
than offset lower revenue at the Toronto Star. Star Media
Group’s EBITDA was $60.8 million in 2007, up $8.0 million
from $52.8 million in 2006. $4.5 million of the improvement in
EBITDA was from the elimination of losses incurred in 2006
related to Weekly Scoop prior to it ceasing publication in June
2006. The Star Media Group had an operating profit of $28.8
million in 2007, up $8.3 million from $20.5 million in 2006.

for

revenues

Star Media Group’s digital
thestar.com,
toronto.com and the jointly owned Workopolis and Olive
Canada Network were up a combined 52% in the year as
advertising revenues grew on each of the sites and Olive Canada
Network expanded its operations. Revenues for the jointly-
owned Sing Tao and Metro newspapers were up 22% in the year
as Sing Tao expanded its products and Metro continued to grow
its revenues in the Toronto, Vancouver and Ottawa markets and
expanded into Calgary and Edmonton.

Toronto Star advertising revenues were down 3.9% in the year
as declines in ROP3 and insert revenues were only partially offset
by increases in the special and zoned sections. Although the
ROP revenue declines occurred throughout the year, the fourth
quarter was relatively strong due to increased activity in the
automotive and financial categories. Circulation revenues were
down 1.9% in 2007.

Operating expenses in the digital operations were up in 2007
reflecting significant investments in promotional spending and
increased staffing levels. Similarly Metro had higher operating
expenses in 2007 reflecting the costs to build out the new
markets. The Toronto Star realized savings from lower newsprint
and labour costs in 2007 that were sufficient to offset the
decline in revenues. Newsprint prices were 13% lower during
the year and consumption was also lower due to reduced print
runs and the benefits of converting to the smaller web-width in
the second half of the year. Labour costs were lower in 2007 due
to savings realized from the 2006 restructuring activities as well
as lower pension expense.

The Star Media Group EBITDA was up $3.5 million in 2007
excluding the impact of the 2006 Weekly Scoop losses, with
improved EBITDA at the Toronto Star and the jointly-owned
Sing Tao and Metro businesses more than offsetting the
increased investment in EBITDA losses at the digital operations.

Metroland Media Group

Metroland Media Group revenues were $577.4 million in 2007,
up $19.2 million from $558.2 million in 2006, including $1.2
million from acquisitions. Advertising and distribution revenues

3 “Run of Press” advertising is advertising that is included in the full press run and distribution.

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M A N A G E M E N T ’ S D I S C U S S I O N & A N A L Y S I S

Segment Operating Results – Book Publishing

The following tables set out, in $000’s, a summary of operating
results for the Book Publishing Segment and a continuity of
revenue and operating profit, including the impact of foreign
currency movements, for the years ended December 31, 2007
and 2006.

Revenue

2007

2006

$462,709

$471,808

EBITDA
Depreciation & amortization
Operating profit

$65,473
4,833
$60,640

$63,439
7,162
$56,277

EBITDA margin
Operating profit margin

14.1%
13.1%

13.4%
11.9%

Reported revenue, prior year
Impact of currency movements and
foreign exchange contracts
Change in underlying revenue
Reported revenue, current year

Reported operating profit, prior year
Impact of currency movements and
foreign exchange contracts
Change in underlying operating profit
Reported operating profit, current year

$471,808

(8,140)
(959)
$462,709

$56,277

(1,970)
6,333
$60,640

Book Publishing revenues were down $1.0 million in 2007
excluding the impact of foreign exchange. North America Retail
was up $3.6 million, North America Direct-To-Consumer was
down $5.0 million and Overseas was up $0.4 million.

Book Publishing operating profits were up $6.3 million in 2007
excluding the impact of foreign exchange. North America Retail
was up $5.8 million, North America Direct-To-Consumer was up
$2.2 million and Overseas was down $1.7 million.

North America Retail operating profits were up $5.8 million in
2007 from a combination of the positive impact from the mid-
year price increase on series books, a more profitable mix of
titles, reduced overhead and promotion costs and lower
amortization expense. Overheads were lower due to savings
realized from the restructuring undertaken in late 2006. North
America Retail had been recognizing $2.1 million of
amortization expense each year related to the cost of a
distribution agreement. This cost was fully amortized by the end
of 2006. The number of books sold was stable for both series
and single title product in 2007.

North America Direct-To-Consumer operating profits were up
$2.2 million in 2007 with improved performance from the
2007 promotional programs. A portion of this year over year
improvement was related to the shipping disruptions associated
with the bankruptcy of a key supplier in 2006 which negatively
affected last year’s results. North America Direct-To-Consumer
benefited in 2007 from higher sales via the Internet, lower
promotional spending and the positive impact of the mid-year
price increase on series books which helped to offset underlying
volume declines.

Overseas results were down $1.7 million in 2007 with growth in
the Nordic group more than offset by lower results in the United
Kingdom, Japan and Holland. The Nordic group had another
successful year with growth in the series and single title
businesses in both their retail and direct-to-consumer markets.
The United Kingdom had lower results in 2007 as lower year
over year positive adjustments to returns provisions and
declining volumes in their direct-to-consumer market more
than offset improvements in retail series book sales. Japan
experienced success with their Manga line (series based comics)
and digital downloads in 2007, but these improvements were
not sufficient to offset declines in the core series book sales.
Holland’s results were down due to lower sales volumes during
the last half of the year. Decreased losses from the Brazilian joint
venture operations (launched in 2005) were offset by
investment spending in India.

LIQUIDITY AND CAPITAL RESOURCES

Overview

Funds are generally used for capital expenditures, debt
repayment and distributions to shareholders. Long-term debt is
used to supplement funds from operations and as required for
acquisitions. It is expected that future cash flows from operating
activities, combined with the credit facilities available will be
adequate to cover forecasted financing requirements.

In 2007, $136.2 million of cash was generated by operations,
$41.2 million was used for investing activities and $105.5
million was used for financing activities. Cash and cash
equivalents net of bank overdraft decreased by $13.4 million in
the year from $43.9 million to $30.5 million.

Operating activities

Operating activities provided cash of $136.2 million in 2007, up
$24.6 million from $111.6 million in 2006. The higher level of
cash provided in 2007 reflected the improved operating profits
and a decrease in non-cash working capital.

Other adjustments to operating cash flows were uses of cash of
$10.3 million in 2007 and $2.4 million in 2006. A significant
portion of this item is to adjust the pension expense recorded in
operating profit to Torstar’s cash funding of the pension plans.

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M A N A G E M E N T ’ S D I S C U S S I O N & A N A L Y S I S

The combination of a lower pension expense in 2007 and
slightly higher funding resulted in a $15.7 million adjustment in
2007 compared with $5.1 million in 2006. The balance of the
adjustment was primarily for the non-cash foreign exchange
loss and stock-based compensation.

Non-cash working capital investments decreased $9.5 million
in 2007. The most significant source of this change was a
decrease of $19.5 million in net current taxes due to the timing
of tax payments. Excluding the impact of foreign exchange, the
other working capital balances changed consistent with the
underlying operating results. The decrease in payables included
$6.3 million related to a net reduction in restructuring
provisions. In 2006, non-cash working capital increased $8.4
million from increases in receivables and prepaid and
recoverable income taxes that were partially offset by increases
in payables including $12.7 million related to restructuring
provisions.

Investing activities

During 2007, $41.2 million was used for investments, down
from $449.4 million in 2006 which included the investment in
CTVgm.

Additions to property, plant and equipment were $38.1 million
in 2007, down slightly from $38.3 million in 2006. The 2007
additions included general capital replacement across all the
operations, $10.2 million for inserting machines at Metroland
Media Group and $8.3 million for the web-width reduction at
the Toronto Star.

In 2007, $4.7 million was used for the acquisition of several
community newspapers and publications and Insurance
Hotline. In 2006, $378.0 million was used for the initial
purchase of 20% of CTVgm and the additional investment
related to CTVgm’s acquisition of CHUM, $28.8 million for an
additional 10% of Workopolis, $4.7 million for the acquisition
of community newspapers and magazines and $1.1 million for
an additional investment in Vocel, Inc.

2008 Capital expenditures

Capital expenditures in 2008 are expected to be approximately
$40.0 million, $1.9 million higher than the $38.1 million spent
in 2007. The 2008 capital expenditures are anticipated to
include a web-width reduction and mailroom improvements at
The Hamilton Spectator and continued investment in
technology to improve the utilization of information across the
Newspapers and Digital Segment both in print and on the
Internet.

Financing activities

Cash of $105.5 million was used in financing activities during
2007, compared with $338.0 million that was generated in
2006.

Torstar repaid $51.8 million of long-term debt during 2007.
In 2006, Torstar increased its long-term debt by $390.2 million

primarily to fund its investment in CTVgm. The increase
included the issuance of $618.8 million of bankers’ acceptances
under a new banking facility net of the repayment of $228.6
million of commercial paper.

Cash dividends paid to shareholders were $57.7 million in 2007,
up $0.5 million from $57.2 million in 2006. $2.6 million of cash
was received from the exercise of stock options in 2007, down
from $3.1 million received in 2006.

Net Debt

Net debt was $620.3 million at December 31, 2007, down
$60.0 million from $680.3 million at December 31, 2006.

Long–term debt

At December 31, 2007, Torstar had long-term debt of $650.8
million outstanding. The debt consisted of U.S. dollar bankers’
acceptances of $108.0 million, Canadian dollar bankers’
acceptances of $444.6 million and Canadian dollar medium
term notes of $100.0 million reduced by $1.8 million related to
fair value hedge adjustments.

Torstar has long-term bank credit facilities that consist of a
$425 million revolving loan that will mature on January 4, 2012
and a $375 million revolving operating loan. The operating loan
matures on January 9, 2009 and can be extended with the
consent of all parties for up to three additional 364-day periods
or can be converted to a 364-day term loan at Torstar’s option.
Amounts may be drawn under the facility in either Canadian or
U.S. dollars. Torstar borrows under the facility primarily in
the form of bankers’ acceptances. The bankers’ acceptances
normally mature over periods of 30 to 180 days but are
classified as long-term as they are issued under the long-term
credit facility.

Bankers’ acceptances are generally issued for a term of less than
six months in order to provide for flexibility in borrowing.
However, the bankers’ acceptances program has been and is
intended to continue to be an ongoing source of financing for
Torstar. Recognizing this intent, to the extent that the long-term
credit facility has sufficient credit available that it could be used
to replace the outstanding bankers’ acceptances, the bankers’
acceptances are classified as long-term debt on Torstar’s balance
sheet.

The long-term credit facility for $800 million is also designated
as a standby line in support of letters of credit. At December 31,
2007, $559.0 million was drawn under the facility and a $28.6
million letter of credit was outstanding relating to an executive
retirement plan. The remaining credit of $212.4 million is
considered to be adequate to cover forecasted financing
requirements.

Torstar has a policy of maintaining a sufficient level of U.S. dollar
denominated debt in order to provide a hedge against its U.S.
dollar assets. It is expected that the level of U.S. dollar debt will
remain relatively constant during 2008.

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Contractual obligations

Torstar has the following significant contractual obligations4 (in $000’s5):

Nature of the obligation

Office leases
Services
Equipment leases
Revenue share
Capital purchases
Long-term debt

Total

$159,016
26,470
3,807
1,685
989
652,633

$844,600

Less than
1 Year
(2008)

$17,319
7,242
1,264
334
284

2 – 3 Years
(2009 – 2010)

4 – 5 Years
(2011 – 2012)

After 5 Years
(2013 +)

$30,326
9,748
1,806
470
705
100,000

$26,594
6,763
737
396

552,633

$587,123

$84,777
2,717

485

$87,979

$26,443

$143,055

Office leases include the offices at One Yonge Street in Toronto for
Torstar and the Toronto Star, Harlequin’s Toronto head office and
The Record in Kitchener. The One Yonge Street and Kitchener leases
extend until the year 2020. Harlequin’s lease will expire in 2009.
Equipment leases include office equipment and company vehicles.

The services include content for Transit TV, the outsourced
Toronto Star circulation call centre, the acquisition by Olive
Canada Network of advertising impressions on third party websites
and a distribution contract for Harlequin’s United Kingdom
operations. The revenue share obligations are the guaranteed
minimum revenue share commitments to various transit
commissions in connection with Transit TV’s operations.

The full amount of the bank debt is included in the above chart as
maturing in 2012 on the basis that the revolving portion of the
facility will be extended through 2012. Torstar expects to be able to
secure new debt financing prior to the bank facility maturing in
2012 and as such does not expect to be required to fund a full debt
repayment in that year.

Torstar has a guarantee outstanding in relation to an operating
lease for a warehouse in New Hampshire that was entered into by
one of the businesses in its former Children’s Supplementary
Education Publishing segment. Lease payments are under U.S.
$1.0 million per year and the lease runs through December 2018.
The warehouse has been subleased, on identical terms and
conditions, to the purchaser of that business. The sublease is
secured by a U.S. $0.7 million letter of credit.

2008 OUTLOOK

Uncertainty in the economic outlook for both Canada and the U.S.
may affect Torstar’s businesses in 2008. Newspapers have
traditionally experienced lower revenues and results in difficult
economic conditions. Early indications in 2008 are that the
economy may be having a negative impact on newspaper revenues.
While the book publishing industry has traditionally not been as
cyclical, the current economic uncertainty in the U.S. could have a
negative impact on Harlequin’s U.S. sales if discretionary consumer
spending falls.

After delivering almost 10% EBITDA growth in 2007, Metroland
Media Group is expected to continue to grow in 2008. The
community newspaper business remains a good business with
strong connections to their communities and an ability to react
quickly to changing market conditions. Metroland Media Group
will also continue to invest in new products and market expansions
in 2008.

Within the Star Media Group, the Toronto Star is expected to
continue to face the same declining revenue trends that are being
experienced by large daily urban newspapers across North
America. In order to provide some offset to the potential revenue
declines, the Toronto Star announced in February 2008, a
substantial voluntary separation program for employees which will
reduce the size of the workforce. This program, along with other
initiatives, should provide for operating cost relief.

Torstar expects revenue and profit improvements from its existing
digital operations in 2008. Torstar Digital will continue to develop
new products for the digital space as well as exploring acquisitions
and partnership opportunities. The costs related to this start-up
activity could offset some of the profit improvement from the
existing businesses.

Harlequin’s underlying business is expected to be stable in 2008
but with some variances in the quarters compared to 2007.
Changes in the publishing schedule are expected to cause the first
quarter of 2008 to be lower than the strong first quarter of 2007.
The strength of the Canadian dollar will continue to have an
impact on Harlequin’s results during 2008. In 2007, including the
impact of the U.S. dollar contracts, Harlequin’s U.S. dollar earnings
were translated at a rate of approximately $1.11. For 2008, Torstar
has U.S. dollar contracts for $29.9 million U.S. at an average
exchange rate of $1.06. The balance of Harlequin’s U.S. earnings in
2008 will be translated at the average exchange rates realized
during the year.

The Writers Guild of America strike is expected to have some
negative impact on CTVgm’s 2008 results with the most significant
impact anticipated for Torstar’s first quarter.

4 This chart does not include Torstar’s obligations for Employee future benefits as detailed in Note 14 of the consolidated financial statements.

5 All foreign denominated obligations were translated at the December 31, 2007 spot rates.

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OPERATING RESULTS – THREE MONTHS ENDED
DECEMBER 31, 2007

Overall Performance

Total revenue was $402.9 million in the fourth quarter, down
$11.7 million from $414.6 million in the fourth quarter of 2006.
Newspapers and Digital revenue was up $1.7 million to $296.3
million despite lower revenue from fewer publishing days for the
Metroland Media Group community newspapers. (This is the
reversal of the benefit reported in the first quarter of 2007.)
Reported Book Publishing revenues were $106.6 million in the
fourth quarter of 2007, down $13.4 million from $120.0 million
in the same period last year. Excluding the decline of $10.3
million from the impact of the strengthening Canadian dollar,
underlying revenues were down $3.1 million in the quarter with
declines in North America Retail and Overseas.

Operating profit was $50.2 million in the fourth quarter, up
$7.5 million from $42.7 million in the fourth quarter of 2006
including $4.2 million of lower restructuring provisions.
Restructuring provisions were $7.5 million in 2007 and $11.7
million in 2006. Newspapers and Digital Segment operating
profit was $49.9 million in 2007, up $7.4 million from $42.5
million in 2006, including $5.5 million in savings from lower
newsprint pricing. Book Publishing reported operating profits
were $12.8 million in the fourth quarter, down $3.8 million
from $16.6 million in the same period last year. Excluding the
decline of $2.1 million from the impact of the strengthening
Canadian dollar, underlying operating profits were down $1.7
million in the fourth quarter with decreases in the North
America Retail and Overseas divisions more than offsetting an
increase in North America Direct-To-Consumer. Corporate
costs were $4.9 million in the fourth quarter of 2007, up $0.2
million from $4.7 million in 2006.

EBITDA, excluding restructuring provisions, was $71.0 million
in the fourth quarter, up $2.6 million from $68.4 million in the
same period last year.

Newspapers and Digital
Book Publishing
Corporate
EBITDA, excluding
restructuring provisions

Fourth Quarter
2007

Fourth Quarter
2006

$61,924
13,951
(4,905)

$54,657
18,423
(4,686)

$70,970

$68,394

Restructuring provisions of $7.5 million were recorded in the
fourth quarter of 2007, down from $11.7 million in 2006. In
2007, the Star Media Group offered the second voluntary
severance program at the Vaughan Press Centre that had been
agreed to in the 2006 contract negotiations and Metroland
Media Group undertook further restructuring. Total annual

savings from these restructuring activities are expected to be
approximately $3.7 million. Fourth quarter 2006 restructuring
provisions included restructurings at both the Star Media
Group and Metroland Media Group.

Interest expense was $8.3 million in the fourth quarter of 2007,
down $0.5 million from $8.8 million in the fourth quarter of
2006. This decrease was from a lower level of debt outstanding
during the fourth quarter of 2007. The average net debt (long-
term debt and bank overdraft net of cash and cash equivalents)
was $627.4 million in the fourth quarter of 2007, down $40.0
million from $667.4 million in 2006. Torstar’s effective interest
rate was 5.3% in the fourth quarter of both 2007 and 2006.

Income from associated businesses was $17.6 million in the
fourth quarter of 2007 compared with $14.8 million in 2006.
CTVgm contributed $17.1 million in 2007 and $14.0 million in
2006 from its quarter ended November 30, 2007. (As Torstar
and CTVgm do not have coterminous quarter-ends, Torstar
reflects CTVgm’s operations with a one-month lag.) In both
periods, CTVgm’s results were adjusted for the impact of the
accounting allocation of Torstar’s purchase price to CTVgm’s
underlying assets and liabilities. In the fourth quarter of 2007,
these adjustments included a positive $5.2 million earnings
impact as future tax liabilities related to intangible assets were
reduced to reflect the reduction in future Canadian federal
income tax rates. Excluding this adjustment, CTVgm
contributed $11.9 million in the fourth quarter of 2007.
CTVgm realized operating profit growth in the fourth quarter of
2007 that was offset by higher interest expense and higher
effective tax rates. CTVgm also recorded a write-down related to
its 40% interest in TQS (a French-language conventional
television broadcaster) which was offset by adjustments related
to Canadian Radio-television and Telecommunications
Commission Part II fees.

Torstar’s income from Black Press was $0.6 million in the fourth
quarter of 2007 compared with $0.8 million in 2006. Black
Press benefited in the quarter from the strong economy in
Western Canada but was negatively impacted by non-cash mark-
to-market losses on foreign exchange and interest rate
derivatives.

Torstar’s effective tax rate was 21.3% in the fourth quarter of
2007, down from 27.5% in the same period in 2006. During
2006 and 2007, the Canadian federal government enacted
corporate income tax decreases for future years. Under
Canadian generally accepted accounting principles the impact
of these changes on Torstar’s future income tax assets and
liabilities is to be recorded during the period the tax changes
are substantially enacted. The impact was to reduce Torstar’s tax
expense by $5.5 million in the fourth quarter of 2007 and $1.3
million in 2006. Excluding this adjustment, Torstar’s effective
tax rate in the quarter was 30.5% in 2007 and 30.2% in 2006.

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M A N A G E M E N T ’ S D I S C U S S I O N & A N A L Y S I S

Net income was $47.2 million in the fourth quarter of 2007, up
$11.1 million from $36.1 million in the fourth quarter of 2006.
Net income per share was $0.60 in 2007, up $0.14 from $0.46
in 2006. The average number of Class A and Class B non-voting
shares outstanding in the fourth quarter of 2007 was 78.7
million, up slightly from 78.4 million in 2006.

The following chart provides a continuity of earnings per share
from 2006 to 2007:

$0.46

Net income per share fourth quarter 2006
Changes
•

Operations

•

Restructuring provisions

Income from associated businesses

Change in statutory tax rates

0.01

0.04

0.05

Net income per share fourth quarter 2007

$0.60

Segment Results – Newspapers and Digital

The following tables set out, in $000’s, the results for the reporting units within the Newspapers and Digital Segment for the
fourth quarters ended December 31, 2007 and 2006.

Star Media

Metroland Media

Transit TV

Segment Total

Operating Revenue

2007

2006

Operating Profit (Loss)
2006
2007

Profit Margin

2007

2006

$139,406

$135,858

156,464

158,154

$16,519

35,366

462

564

(2,024)

$12,984

32,710

(3,203)

$296,332

$294,576

$49,861

$42,491

11.8%

22.6%

n/a

16.8%

9.6%

20.7%

n/a

14.4%

Depreciation
and Amortization

EBITDA

EBITDA Margin

2007

2006

2007

2006

2007

2006

Star Media

Metroland Media

Transit TV

Segment Total

$8,014

3,270

779

$7,867

3,328

971

$24,533

$20,851

38,636

(1,245)

36,038

(2,232)

$12,063

$12,166

$61,924

$54,657

17.6%

24.7%

n/a

20.9%

15.3%

22.8%

n/a

18.6%

Newspapers and Digital revenues were up $1.7 million in the
fourth quarter of 2007. The impact of acquisitions was
insignificant in the quarter. Digital revenues were 4.7% of the
total in the fourth quarter of 2007, up from 3.4% in the fourth
quarter of 2006.

revenues

Star Media Group revenues were up $3.5 million in the fourth
quarter with higher revenues at the digital operations and
Metro more than offsetting modest declines at the Toronto Star.
thestar.com,
Star Media Group’s digital
toronto.com and the jointly owned Workopolis and Olive
Canada Network were up a combined 42% in the quarter as
revenues grew in each of the operations. Toronto Star
advertising revenues were down 1.2% in the quarter as declines
in ROP and insert revenues were almost offset by increases in
the special and zoned sections. Advertising revenue was
stronger in the fourth quarter due to increased activity in the

for

automotive and financial categories. Circulation revenues were
down 3.0% in the quarter.

Metroland Media Group’s revenues were down $1.7 million in
the fourth quarter as lower revenues at the community
newspapers (affected by the calendar – as referred to below)
more than offset growth at the daily newspapers and Gold Book.

As was noted in the first quarter 2007 MD&A, the comparison
of Metroland Media Group’s 2007 quarterly results to the prior
year was impacted by the calendar. During the first quarter the
daily newspapers had an extra Saturday and the community
newspapers had six extra calendar days which provided at least
one additional publication day for most of the weekly
publications. The impact of the extra Saturday for the dailies
reversed in the second quarter and the impact of the extra
publishing days for the community newspapers reversed in the
fourth quarter.

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M A N A G E M E N T ’ S D I S C U S S I O N & A N A L Y S I S

ROP advertising revenues were down 7.8% for the community
newspapers in the fourth quarter, reflecting the impact of the
loss of the calendar days and advertising in the fourth quarter
of 2006 from the municipal elections. Distribution revenue was
up 0.8% in the quarter. The daily newspapers had advertising
revenue growth of 4.5% in the fourth quarter with
improvements in both ROP and insert revenues.

Newspapers and Digital EBITDA was up $7.3 million in the
quarter, including $5.5 million from lower newsprint pricing
and $1.0 million from lower losses at Transit TV. Excluding these
savings, EBITDA was up $0.8 million as reduced losses at Star
Media Group’s digital operations were offset by the fewer
publishing days at Metroland Media Group’s community
newspapers. The loss of publishing days was estimated to reduce
fourth quarter EBITDA by $1.5 million. The Newspapers and
Digital Operating profit was up $7.4 million in the quarter.

Segment Results – Book Publishing

Fourth Quarter

2007

2006

Book Publishing revenues were down $3.1 million in the fourth
quarter of 2007 excluding the impact of foreign exchange.
North America Retail was down $1.3 million, North America
Direct-To-Consumer was down $0.1 million and Overseas was
down $1.7 million.

Book Publishing operating profits were down $1.7 million in
the fourth quarter of 2007 excluding the impact of foreign
exchange. North America Retail was down $1.0 million, North
America Direct-To-Consumer was up $1.0 million and Overseas
was down $1.7 million.

North America Retail sales volumes were relatively flat in the
fourth quarter with revenues down slightly. The decrease in
operating profit in the fourth quarter was driven by higher
expenses. North America Direct-To-Consumer results were up in
the fourth quarter due primarily to lower promotional
spending. Slightly lower sales volumes were offset by the positive
impact of the mid-year price increase.

Overseas results were down in the fourth quarter. Higher results
in the Nordic group and Japan were more than offset by lower
results in the United Kingdom and Holland and increased
investment spending in India. The Nordic group continued its
growth trend during the quarter and Japan realized some cost
savings. The lower United Kingdom results were due to lower
year over year positive adjustments to returns provisions.
Holland’s results were down as it continued to be impacted by
lower sales volumes during the summer and fall.

Revenue

$106,598

$120,034

Liquidity

EBITDA
Depreciation & amortization
Operating profit

EBITDA margin
Operating profit margin

$13,951
1,189
$12,762

13.1%
12.0%

Reported revenue, prior year
Impact of currency movements and
foreign exchange contracts
Change in underlying revenue
Reported revenue, current year

Reported operating profit, prior year
Impact of currency movements and
foreign exchange contracts
Change in underlying operating profit
Reported operating profit, current year

$18,423
1,848
$16,575

15.3%
13.8%

Fourth
Quarter

$120,034

(10,341)
(3,095)
$106,598

$16,575

(2,139)
(1,674)
$12,762

In the fourth quarter of 2007, $41.3 million of cash was
generated by operations, $13.8 million was used for investing
activities and $36.7 million was used for financing activities.
Cash and cash equivalents net of bank overdraft decreased by
$8.5 million in the quarter from $39.0 million to $30.5 million.

Operating activities provided $41.3 million of cash in the
quarter, up $12.5 million from $28.8 million in 2006. The
higher level of cash provided in the fourth quarter of 2007 was
from a $6.6 million decrease in non-cash working capital.
Working capital decreased in the fourth quarter of 2007 as
increases in payables and taxes payable more than offset the
traditionally higher receivables (due to higher fourth quarter
revenues). In the fourth quarter of 2006 working capital
increased $7.7 million.

During the fourth quarter of 2007, $13.8 million was used for
fixed asset additions including payments for inserting machines
at Metroland Media Group and the web-width reduction at the
Toronto Star. $1.5 million was used for acquisitions of several
community newspapers and publications during the fourth
quarter of 2007. In 2006, $30.5 million was used for
acquisitions, primarily for the purchase of an additional 10% of
Workopolis.

Torstar repaid $22.7 million of bankers’ acceptances during the
fourth quarter of 2007 and paid dividends of $14.4 million. In
the fourth quarter of 2006, Torstar issued $19.2 million of
bankers’ acceptances and paid dividends of $14.1 million.

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M A N A G E M E N T ’ S D I S C U S S I O N & A N A L Y S I S

FINANCIAL INSTRUMENTS

Foreign Exchange

Harlequin’s international operations provide Torstar with
approximately 28% of its operating revenues. As a result,
fluctuations in exchange rates can have a significant impact on
Torstar’s reported profitability.

To manage the exchange risk in its operating results, Torstar
enters into forward foreign exchange contracts. Torstar’s most
significant exposure is to the movements in the U.S.$/Cdn.$
exchange rate. Torstar’s current practice is to hedge, one year in
advance on a quarterly basis, U.S. dollar revenues equivalent to
approximately 50% of its expected U.S. dollar operating profit.
Torstar has entered into forward foreign exchange contracts to
sell $29.0 million U.S. dollars during 2008 at an average rate of
$1.06 and $2.5 million in 2009 at an average rate of $1.02.
These contracts are designated as revenue hedges for
accounting purposes and any resulting gains or losses are
recognized in Book Publishing revenues as realized.

The counterparties to the foreign currency contracts are all
major financial institutions with high credit ratings. Further
details are contained in Note 15 of the consolidated financial
statements.

In order to offset the exchange risk on its balance sheet from net
U.S. dollar denominated assets, Torstar maintains a certain level
of U.S. dollar denominated debt. These net assets are primarily
current in nature, and to the extent that the amount of net U.S.
dollar assets differs from the amount of the U.S. dollar debt, a
non-cash foreign exchange gain or loss is recognized in
earnings.

Interest rates

Torstar has long-term debt in the form of medium-term notes
and bankers’ acceptances issued under a bank loan facility.
Torstar issues debt in both Canadian and U.S. dollars with the
U.S. dollar debt used as a hedge against the U.S. dollar
denominated assets in the Book Publishing Segment. Torstar
issues bankers’ acceptances at floating rates and medium term
notes with either fixed or floating interest rates. Torstar’s general
position is to have at least one half of its debt at floating interest
rates.

Torstar has entered into swap agreements that effectively
convert the $100 million of Canadian dollar fixed rate medium
term notes that were issued in 2005 into floating rate debt
based 90-day bankers’ acceptances rates plus 0.4%.

With the incremental debt incurred from the investment in
CTVgm during the third quarter of 2006, Torstar entered into
interest rate swap agreements to fix the rate of interest on $250
million of Canadian dollar borrowings at 4.3% (plus the interest
rate spread based on Torstar’s long-term credit rating, currently
0.6%) through September 2011.

All of the interest rate swap arrangements have been designated

as hedges. The fair value of the interest rate swap arrangements
was $1.3 million unfavourable at December 31, 2007.

Torstar’s exposure to credit related losses in the event of non-
performance by counterparties to the interest rate swaps and
derivatives is mitigated by accepting only major financial
institutions with high credit ratings as counterparties. Further
details are contained in Note 6 of the consolidated financial
statements.

PENSION OBLIGATIONS

Torstar maintains a number of defined benefit plans which
provide pension benefits to its employees in Canada and the
U.S. Torstar also maintains defined contribution plans in
Canada, the U.S. and in certain of Harlequin’s overseas
operations.

The accounting for defined benefit plans requires the use of
actuarial estimates for pension expense and pension plan
obligations. In making the estimates, certain assumptions must
be made. The significant assumptions made by Torstar in 2007
and 2006 for determining the pension plan obligations and
expenses were:

Discount rate – year end obligation
Discount rate – annual expense
Rate of future compensation
increase
Expected long-term rate
of return on plan assets
Average remaining service life
of active employees (years)

2007

5.25%
5.0%

2006

5.0%
5.0%

3.0% to 4.0%

3.0% to 3.5%

7.0%

8 to 17

7 to 17

The discount rate of 5.25% is the yield at December 31, 2007
on high quality fixed income investments with maturities that
match the expected maturity of the pension obligations (as
prescribed by the Canadian Institute of Chartered Accountants
(“CICA”)). A one percent increase in the discount rate would
result in a decrease in the total pension plan obligation of $79.6
million and a decrease in the current year expense of $3.1
million. A one percent decrease in the discount rate would
increase the total pension plan obligation by $90.8 million and
increase current year expense by $9.4 million.

The rate of future compensation increases has been assumed to
be between 3.0% and 4.0%. This rate is slightly above the level
of increases over the past few years and is management’s best
estimate of future compensation increases.

Torstar has maintained its expected long-term rate of return on
plan assets at 7%, as management believes it to be a reasonable
estimate. The return on plan assets was below the 7% rate in
2007 but exceeded it in both 2006 and 2005. Given the level
of market disruption realized in the markets during 2007,
management feels that the poor return for the one year does

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M A N A G E M E N T ’ S D I S C U S S I O N & A N A L Y S I S

not require an adjustment in the long-term expectations. A one
percent increase (decrease) in the expected return on plan
assets would decrease (increase) the current year expense by
$6.7 million.

The average remaining service life of active employees is used to
amortize past service costs from plan improvements and net
actuarial gains or losses. Torstar’s estimate of this time period is
8-17 years. This range reflects the current composition of
Torstar’s workforce and expectations for staff turnover. The
estimate of the average remaining service life is generally
reviewed every three years.

Torstar’s total pension expense related to defined benefit plans
was $8.6 million in 2007, down from $14.9 million in 2006.
Torstar’s total pension funding related to defined benefit plans
was $28.3 million in 2007, up from $22.4 million in 2006.

Torstar’s pension plans are in a net unfunded position of $4.0
million at December 31, 2007 compared with a net funded
position of $0.3 million at the end of 2006. This balance
includes $26.4 million ($26.1 million in 2006) for an executive
retirement plan, which is not funded until payments are made
to the executives upon retirement, but is supported by a letter
of credit. Excluding the executive retirement plan, Torstar’s
pension plans are in a net funded position of $22.4 million
compared with $26.4 million in 2006.

Torstar also provides post-employment benefits including
health and life insurance benefits to certain grandfathered
employees, primarily in the Canadian newspaper operations.
This obligation is being funded as payments are made to
retirees. Torstar has recorded a liability of $56.2 million on its
December 31, 2007 balance sheet and an annual expense of
$3.6 million ($54.6 million and $5.0 million respectively in
2006). At December 31, 2007 the unfunded obligation for
these benefits was $59.2 million, down slightly from $60.0
million at December 31, 2006. The key assumptions for this
obligation are the discount rate and the health care cost trends.
The discount rate is the same as the prescribed rate for the
pension obligation. For health care costs, the estimated
trend was for a 10.0% increase for the 2007 expense. For 2008,
health care costs are estimated to increase by 9.5% with a 0.5%
decrease each year until 2017. A 1% increase in the estimated
increase in health care costs would increase the obligation
by $3.4 million. The increase in the annual expense would be
$0.4 million.

DISCLOSURE CONTROLS AND PROCEDURES

As required by Multilateral Instrument 52-109 issued by the
Canadian Securities Administrators, Torstar’s Chief Executive
Officer (“CEO”) and Chief Financial Officer (“CFO”) must certify
that they are responsible for establishing and maintaining
disclosure controls and procedures and have designed such
disclosure controls and procedures (or caused such disclosure

controls and procedures to be designed under their
supervision) to ensure that the material information with
respect to Torstar, including its consolidated subsidiaries, is
made known to them and that they have evaluated the
effectiveness of Torstar’s disclosure controls and procedures as
of the end of the period covered by these annual filings.

Disclosure controls and procedures are designed to ensure that
information required to be disclosed by Torstar in reports filed
with securities regulatory authorities is recorded, processed,
summarized and reported on a timely basis, and is accumulated
and communicated to Torstar’s management, including the
CEO and CFO, as appropriate, to allow timely decisions
regarding required disclosure. Torstar’s management, including
the CEO and CFO, does not expect that Torstar’s disclosure
controls will prevent or detect all misstatements due to error or
fraud. Because of the inherent limitations in all control systems,
an evaluation of control can provide only reasonable, not
absolute, assurance that all control issues and instances of fraud
or error, if any, within Torstar have been detected. Torstar has
adopted or formalized such controls and procedures as it
believes are necessary and consistent with its business and
internal management and supervisory practices.

As of December 31, 2007, under the supervision of, and with
the participation of the CEO and CFO, Torstar’s management
evaluated the effectiveness of the design and operation of its
disclosure controls and procedures. Based on this evaluation,
Torstar’s CEO and CFO have concluded that, as at December
31, 2007, the Company’s disclosure controls and procedures
were effective.

INTERNAL CONTROLS OVER FINANCIAL
REPORTING

As required by Multilateral Instrument 52-109 issued by the
Canadian Securities Administrators, Torstar’s CEO and CFO
must also certify that they have designed a system of internal
control over financial reporting to provide reasonable assurance
regarding the reliability of
financial reporting and the
preparation of financial statements for external purposes in
accordance with Canadian GAAP.

As of December 31, 2007, under the supervision of, and with the
participation of the CEO and CFO, Torstar’s management also
evaluated the effectiveness of the design of its internal controls
over financial reporting. Based on this evaluation, Torstar’s CEO
and CFO have concluded that, as at December 31, 2007, the
Company’s internal controls over financial reporting were
designed effectively.

There have been no changes in Torstar’s internal controls over
financial reporting that occurred during the fourth quarter of
2007, the most recent interim period, that have materially
affected, or are reasonably likely to materially affect, Torstar’s
internal controls over financial reporting.

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M A N A G E M E N T ’ S D I S C U S S I O N & A N A L Y S I S

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Torstar prepares its consolidated financial statements in
Canadian dollars and in accordance with Canadian GAAP. A
summary of Torstar’s significant accounting policies is
presented in Note 1 of the consolidated financial statements.
Some of Torstar’s accounting policies require subjective,
complex judgments and estimates as they relate to matters that
are inherently uncertain. Changes in these judgments or
estimates could have a significant impact on Torstar’s financial
statements. Critical accounting estimates that require
management’s judgments include the provision for book
returns, valuation of goodwill, accounting for employee future
benefits and accounting for income taxes.

Provision for book returns

Revenue from the sale of books, net of provisions for estimated
returns, is recognized for retail sales based on the publication
date and for sales made directly to the consumer when the
books are shipped and title has transferred.

The provision for estimated returns is significant for retail sales
where books are sold with a right of return. As revenue is
recognized, a provision is recorded for returns. This provision is
estimated by management, based primarily on point-of-sale
information, returns patterns and historic sales performance for
that type of book and the author. Books are returned over time
and are adjusted against the returns provision. On a quarterly
basis the actual returns experience is used to assess the
adequacy of the provision.

The impact of the variance between the original estimate for
returns and the actual experience is reported in a period
subsequent to the original sale. This can have either a positive (if
the actual experience is better than estimated) or negative
(if the actual experience is worse) impact on reported results. A
change in market conditions can therefore have a compounded
effect on the book publishing results. If the market sales are
declining, the estimate being made for returns on current period
sales will generally be higher and the adjustment to the returns
provision for prior period sales is likely to be negative (i.e. the
market has softened since the original estimate was made).

Series books are on sale for approximately one month and
returns are normally received within one year, with more than
95% received within the first six months. Single title books are
on sale for several months and, as a result, experience a longer
return period. For these books, there is more variation in net
sale rates between titles, even for the same author. As a result,
the estimate for returns on these titles has more variability than
that for the series titles.

At December 31, 2007, the returns provision deducted from
accounts receivable on the consolidated balance sheets was
$101 million ($104 million in 2006). A one percent change in
the average net sale rate used in calculating the global retail
returns provision on sales from July to December 2007 would
have resulted in a $3.6 million change in reported 2007
revenue.

Valuation of goodwill

Under Canadian GAAP, goodwill is not amortized but is assessed
for impairment at the reporting unit level at least on an annual
basis. Torstar has established September 30th as the date for its
annual assessment of goodwill for impairment. Goodwill is
assessed for impairment using a two-step approach. The first
step is to assess whether the fair value of the reporting unit to
which the goodwill is associated is less than its carrying value. If
the fair value of the reporting unit is less than the carrying
value, the second step is required. The second step is a
comparison of the fair value of goodwill to its carrying amount.
If the fair value of goodwill is less than its carrying value,
goodwill is considered impaired and a charge for impairment
must be recognized immediately.

Reporting units are identified based on the nature of the
business and the level of integration between operations.
Torstar uses a market approach to determine the fair value of its
reporting units. This approach uses several factors including
normalized or projected earnings and price earnings multiples.
Comparable transactions are reviewed for appropriate price
earnings multiples. The fair value of an asset is defined as the
amount at which it could be bought or sold in a current
transaction between willing parties.

Torstar has completed its annual impairment test and no
adjustment for impairment was required.

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M A N A G E M E N T ’ S D I S C U S S I O N & A N A L Y S I S

Accounting for employee future benefits

The cost of defined benefit pension and other retirement
benefits earned by employees is actuarially determined each
year based on management’s estimates of the long-term rate of
investment return on plan assets and future compensation and
health care costs. Management applies judgment in the
selection of these estimates, based on regular reviews of
historical investment returns, salary increases and health care
costs. Expectations regarding future economic trends and
including inflation rates are also
business conditions,
considered.

The discount rate used in measuring the liability and expected
healthcare costs is prescribed to be equal to the current yield on
long-term, high-quality corporate bonds with a duration similar
to the duration of the benefit obligation.

Management’s estimates, along with a sensitivity analysis of
changes in these estimates on both the benefit obligation and
the benefit expense are further discussed under “Pension
Obligations” in the MD&A and are disclosed in Note 14 of the
consolidated financial statements.

Accounting for income taxes

Future income taxes are recorded to account for the effects of
future taxes on transactions occurring in the current period.
Management uses judgment and estimates in determining the
appropriate rates and amounts to record for future taxes, giving
consideration to timing and probability. Previously recorded tax
assets and liabilities are adjusted if the expected tax rate is
revised based on current information.

The recording of future tax assets also requires an assessment of
recoverability. A valuation allowance is recorded when Torstar
does not believe, based on all available evidence, that it is more
likely than not that all of the future tax assets recognized will be
realized prior to their expiration. This assessment includes a
projection of future year earnings based on historical results
and known changes in operations.

“Hedges” and (iv) Section 1530 “Comprehensive Income”. These
sections provide standards for recognition, measurement,
disclosure and presentation of financial assets, financial
liabilities and non-financial derivatives, and describe when and
how hedge accounting may be applied. Section 1530 provides
standards for the reporting and presentation of comprehensive
income. A new Statement of Comprehensive Income (Loss) now
forms part of the Company’s consolidated financial statements.
The Company has replaced the Statement of Retained Earnings
with the Statement of Changes in Shareholders’ Equity which
comprises sections for share capital, contributed surplus,
retained earnings and accumulated other comprehensive
income (loss).

There was no restatement of prior periods except for the
presentation of the $9.1 million foreign currency translation
adjustment as at December 31, 2006 reclassified to the opening
balance of accumulated other comprehensive loss. The
Company also recorded losses (net of taxes) of $0.4 million and
$1.1 million to the opening balance of accumulated other
comprehensive loss with respect to the forward currency
contracts and interest rate swaps respectively. There was no
impact on opening retained earnings.

Financial Instruments

The CICA has issued two new standards: Section 3862
“Financial Instruments – Disclosures” and Section 3863 -
“Financial Instruments – Presentation”. Together, these two
sections replace Section 3861 “Financial Instruments –
Disclosure and Presentation” and apply to the Company
effective January 1, 2008. Section 3862 describes the required
disclosure for the assessment of the significance of financial
instruments on an entity’s financial position and performance
and of the nature and extent of risks arising from financial
instruments to which the entity is exposed and how those risks
are managed. Section 3863 establishes standards for
presentation of
instruments and non-financial
derivatives.

financial

More information on Torstar’s income taxes is provided in Note
12 of the consolidated financial statements.

Capital Disclosures

CHANGES IN ACCOUNTING POLICIES

Financial instruments

On January 1, 2007, the Company adopted four new accounting
standards
Instruments –
Recognition and Measurement”, (ii) Section 3861 “Financial
Instruments – Disclosure and Presentation”, (iii) Section 3865

(i) Section 3855 “Financial

The CICA issued Section 1535 “Capital Disclosures” which
applies to the Company effective January 1, 2008. It establishes
standards for disclosure of both qualitative and quantitative
information that enable users to evaluate the entity’s objectives,
policies and processes for managing capital; the disclosure and
compliance with any externally imposed capital requirements
and the consequences of any non-compliance.

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M A N A G E M E N T ’ S D I S C U S S I O N & A N A L Y S I S

Total revenues have been steady over the past three years as
growth in the Newspapers and Digital Segment has been offset
by declines in Book Publishing. Revenue at Metroland Media
Group has grown over the three years with growth arising from
new products and market expansions. Star Media Group
revenues have been down as lower revenue at the Toronto Star
has more than offset higher revenues in the digital properties
and the jointly-owned Metro and Sing Tao. Reported Book
Publishing revenues declined $49.3 million in 2006 with
declines of $30.0 million as a result of the strengthening
Canadian dollar and $28.7 million of gains realized in 2005 on
U.S. dollar contracts more than offsetting $9.4 million of
underlying revenue growth. In 2007, reported Book Publishing
revenues were down $9.1 million including $8.1 million from
the strengthening of the Canadian dollar.

Net income decreased in 2006 from the negative impact of
foreign exchange and the U.S. dollar contracts in Book
Publishing, lower revenues at the Toronto Star, investment
spending for Torstar Digital, restructuring provisions, and a gain
on the sale of properties realized in 2005. In 2007, net income
increased due to cost savings from lower newsprint prices, lower
pension costs, the closure of Weekly Scoop in June 2006 and
lower restructuring provisions.

The increase in total assets and long-term debt in 2006
reflected the $378.0 million investment in CTVgm.

Inventories

The CICA issued Section 3031 “Inventories” to replace Section
3030 and is effective January 1, 2008. This section prescribes
the measurement of inventories at the lower of cost and net
realizable value, with guidance on cost determination including
the allocation of overheads and other costs to inventory.
Reversals of previous write-downs to net realizable value are
permitted when there is a subsequent increase in the value of
inventories.

The Company has assessed that the new standards that became
effective on January 1, 2008, will not have a significant impact
on net income but will require increased disclosures.

ANNUAL INFORMATION – 3 YEAR SUMMARY

The following table presents, in $000’s (except for per share
amounts) selected key information for the past three years:

2007

2006

2005

Revenue6

$1,546,537 $1,528,270 $1,556,888

Net income
Per share (basic)
Per share (diluted)

$101,691
$1.29
$1.29

$79,141
$1.01
$1.01

$118,843
$1.52
$1.51

Average number of
shares outstanding
during the year (in 000’s)
Basic
Diluted

78,620
78,707

78,250
78,414

78,214
78,621

Cash dividends per share

$0.74

Total assets
Total long-term debt

$1,960,837 $2,001,473
724,193

650,798

$1,561,682
334,317

6 Torstar’s 2005 revenue has been restated as a result of the January 1, 2006 adoption, with retroactive restatement, of EIC-156 – “Accounting by a vendor for

consideration given to a customer”. The effect was to decrease both revenues and operating expenses by $10.1 million in 2005. There was no impact on net income.

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M A N A G E M E N T ’ S D I S C U S S I O N & A N A L Y S I S

SUMMARY OF QUARTERLY RESULTS

(In thousands of dollars except for per share amounts)

Revenue

Net income

Net income per Class A voting
and Class B non-voting share

Basic

Diluted

2007 Quarter Ended

Dec. 31

$402,930

$47,182

Sept. 30

$369,200

$8,419

June 30

$396,965

$30,053

March 31

$377,442

$15,737

$0.60

$0.11

$0.38

$0.20

Dec. 31

Sept. 30

June 30

March 31

2006 Quarter Ended

Revenue

Net income

$414,610

$36,068

$366,216

$7,667

$390,331

$25,631

$357,113

$9,775

Net income per Class A voting
and Class B non-voting share

Basic

Diluted

$0.46

The summary of quarterly results illustrates the cyclical nature
of revenues and operating profit in the Newspapers and Digital
Segment. The fourth and second quarters are generally the
strongest for the newspapers.

Restructuring provisions have impacted the level of net income
in several quarters. In 2007, the fourth quarter had a
restructuring provision of $7.5 million. In 2006, the first, third
and fourth quarters had restructuring provisions of $3.7
million, $7.0 million and $11.7 million respectively.

RECENT DEVELOPMENTS

In January 2008, Workopolis purchased the specialist online
employment board business of Brainhunter Inc. in Canada and
the U.S. for approximately $10 million.

In February 2008, Metro announced the launch of a Halifax
edition. Torstar will own approximately one-third of Metro
Halifax in a joint venture with Metro International S.A. and
Transcontinental Media G.P.

$0.33

$0.13

$0.12

$0.10

OTHER

At January 31, 2008, Torstar had 9,907,602 Class A voting
shares and 68,839,000 Class B non-voting shares outstanding.
More information on Torstar share capital is provided in Note
10 of the consolidated financial statements.

At January 31, 2008, Torstar had 5,600,206 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 11 of the consolidated financial
statements.

Additional information relating to Torstar including the Annual
Information Form is available on SEDAR at www.sedar.com.

79998_AnnualReport07:79998_AnnualReport07 3/13/08 8:23 AM Page 42

C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

MANAGEMENT’S REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING
Management is responsible for preparation of the consolidated financial statements, notes hereto and other financial information
contained in this annual report. The financial statements have been prepared in conformity with Canadian generally accepted
accounting principles using the best estimates and judgments of management, where appropriate. Information presented elsewhere
in this annual report is consistent with that in the financial statements.

Management is also responsible for maintaining a system of internal control designed to provide reasonable assurance that assets
are safeguarded and that accounting systems provide timely, accurate and reliable information.

The Board of Directors is responsible for ensuring that management fulfills its responsibilities for financial reporting and internal
control. The Board is assisted in exercising its responsibilities by the Audit Committee of the Board. The Committee meets quarterly
with management and the internal and external auditors, and separately with the internal and external auditors, to satisfy itself that
management’s responsibilities are properly discharged, and to discuss accounting and auditing matters. The Committee reviews the
consolidated financial statements and recommends approval of the consolidated financial statements to the Board.

The internal and external auditors have full and unrestricted access to the Audit Committee to discuss their audits and their related
findings as to the integrity of the financial reporting process.

J. Robert S. Prichard

David P. Holland

President and Chief Executive Officer

Executive Vice-President and Chief Financial Officer

February 25, 2008

AUDITORS’ REPORT TO THE SHAREHOLDERS OF TORSTAR CORPORATION
We have audited the consolidated balance sheets of Torstar Corporation as at December 31, 2007 and 2006 and the consolidated
statements of income, comprehensive income, changes in shareholders’ equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company
as at December 31, 2007 and 2006 and the results of its operations and its cash flows for the years then ended in accordance with
Canadian generally accepted accounting principles.

Toronto, Ontario,

February 25, 2008

Ernst & Young LLP

Chartered Accountants

Licensed Public Accountants

79998_AnnualReport07:79998_AnnualReport07 3/13/08 8:23 AM Page 43

T O R S T A R C O R P O R A T I O N (Incorporated under the laws of Ontario)

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2007 AND 2006

(thousands of dollars)

Assets
Current:
Cash and cash equivalents
Receivables (note 2)
Inventories
Prepaid expenses
Prepaid and recoverable income taxes
Future income tax assets (note 12)
Total current assets
Property, plant and equipment (net) (note 3)
Investment in associated businesses (note 4)
Goodwill (net)
Other assets (note 5)
Future income tax assets (note 12)
Total assets

Liabilities and Shareholders’ Equity

Current:
Bank overdraft
Accounts payable and accrued liabilities
Income taxes payable
Total current liabilities
Long-term debt (note 6)
Other liabilities (note 9)
Future income tax liabilities (note 12)
Shareholders’ equity:
Share capital (note 10)
Contributed surplus
Retained earnings
Accumulated other comprehensive loss (note 8)
Total shareholders’ equity
Total liabilities and shareholders’ equity

Commitments and contingencies (note 18)

(See accompanying notes)

ON BEHALF OF THE BOARD

2007

2006

$34,096
263,779
31,807
61,325
3,097
19,010
413,114
330,391
434,294
555,643
189,425
37,970
$1,960,837

$3,616
208,217
17,065
228,898
650,798
89,678
73,702

388,036
9,929
535,242
(15,446)
917,761
$1,960,837

$46,037
269,977
38,208
72,665
16,665
23,002
466,554
349,842
416,320
552,928
171,547
44,282
$2,001,473

$2,173
227,001
14,174
243,348
724,193
88,313
72,873

382,397
7,466
491,999
(9,116)
872,746
$2,001,473

The Hon. Frank Iacobucci
Director

J. Spencer Lanthier
Director

79998_AnnualReport07:79998_AnnualReport07 3/13/08 8:23 AM Page 44

T O R S T A R C O R P O R A T I O N

CONSOLIDATED STATEMENTS OF INCOME

YEARS ENDED DECEMBER 31, 2007 AND 2006

(thousands of dollars except per share amounts)

Operating revenue

Newspapers and digital
Book publishing

Operating profit

Newspapers and digital
Book publishing
Corporate
Restructuring provisions (note 16)

Interest (note 6(d))
Foreign exchange
Income of associated businesses
Income before taxes
Income and other taxes (note 12)
Net income

Earnings per Class A and Class B share (note 10(c))

Net income – Basic
Net income – Diluted

(See accompanying notes)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

YEARS ENDED DECEMBER 31, 2007 AND 2006

(thousands of dollars)

Net income
Other comprehensive income (loss), net of tax:

Unrealized foreign currency translation adjustment
Unrealized change in fair value of cash flow hedges
Realized gain on cash flow hedges transferred to net income

Other comprehensive income (loss)

Comprehensive income

(See accompanying notes)

2007

2006

$1,083,828
462,709
$1,546,537

$1,056,462
471,808
$1,528,270

$128,675
60,640
(19,028)
(7,507)
162,780
(34,432)
(1,873)
20,416
146,891
(45,500)
$101,391

$1.29
$1.29

2007

$101,391

(7,980)
3,869
(693)
(4,804)

$96,587

$107,849
56,277
(18,475)
(22,319)
123,332
(20,761)
70
16,000
118,641
(39,500)
$79,141

$1.01
$1.01

2006

$79,141

1,823

$80,964

79998_AnnualReport07:79998_AnnualReport07 3/13/08 8:23 AM Page 45

T O R S T A R C O R P O R A T I O N

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

YEARS ENDED DECEMBER 31, 2007 AND 2006

(thousands of dollars)

2007

2006

Share capital (note 10)

$388,036

$382,397

Contributed surplus

Balance, beginning of year

Stock-based compensation expense

Transfer to share capital for stock options exercised

Balance, end of year

Retained earnings

Balance, beginning of year

Net income

Dividends

Balance, end of year

$7,466

2,464

(1)

$9,929

$491,999

101,391

(58,148)

$535,242

$4,883

2,600

(17)

$7,466

$470,783

79,141

(57,925)

$491,999

Accumulated other comprehensive loss

Unrealized foreign currency translation adjustment losses

($9,116)

($10,939)

Cumulative impact of accounting changes relating

to financial instruments (note 1(s))

Adjusted balance, beginning of year

Other comprehensive income (loss)

Balance, end of year (note 8)

(1,526)

(10,642)

(4,804)

($15,446)

(10,939)

1,823

($9,116)

Total shareholders’ equity

$917,761

$872,746

(See accompanying notes)

79998_AnnualReport07:79998_AnnualReport07 3/13/08 8:23 AM Page 46

T O R S T A R C O R P O R A T I O N

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2007 AND 2006

(thousands of dollars)

Cash was provided by (used in)

Operating activities
Investing activities
Financing activities

(Decrease) increase in cash
Effect of exchange rate changes
Cash, beginning of year
Cash, end of year

Operating activities:
Net income
Depreciation
Amortization
Future income taxes
Income of associated businesses
Other (note 17)

Decrease (increase) in non-cash working capital
Cash provided by operating activities

Investing activities:
Additions to property, plant and equipment
Investment in associated business (note 4)
Acquisitions and investments (note 13)
Other
Cash used in investing activities

Financing activities:
Issuance of banker’s acceptance
Repayment of banker’s acceptance
Repayment of commercial paper
Issuance of commercial paper
Dividends paid
Exercise of stock options (note 10(b))
Other
Cash provided by (used in) financing activities

Cash represented by:

Cash and cash equivalents
Bank overdraft

(See accompanying notes)

2007

$136,152
(41,225)
(105,464)
(10,537)
(2,847)
43,864
$30,480

$101,391
53,722
1,412
885
(20,416)
(10,331)
126,663
9,489
$136,152

($38,139)

(4,693)
1,607
($41,225)

$13,541
(65,350)

(57,658)
2,586
1,417
($105,464)

$34,096
(3,616)
$30,480

$111,591
(449,394)
337,997
194
2,625
41,045
$43,864

$79,141
53,496
2,987
2,752
(16,000)
(2,354)
120,022
(8,431)
$111,591

($38,317)
(377,982)
(34,647)
1,552
($449,394)

$618,763

(255,114)
26,519
(57,237)
3,054
2,012
$337,997

$46,037
(2,173)
$43,864

79998_AnnualReport07:79998_AnnualReport07 3/13/08 8:23 AM Page 47

T O R S T A R C O R P O R A T I O N

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2007 and 2006

(Tabular amounts in thousands of dollars)

1. ACCOUNTING POLICIES

The consolidated financial statements are prepared in
accordance with Canadian generally accepted accounting
principles (“GAAP”). The following is a summary of significant
accounting policies.

(a) Principles of consolidation

The consolidated financial statements include the accounts
of the Company and all its subsidiaries and joint ventures.
The major subsidiaries are: Toronto Star Newspapers
Limited; Harlequin Enterprises Limited (“Harlequin”) and
Metroland Media Group Limited. The Company
proportionately consolidates its joint ventures.

(b) Foreign currency translation

Assets and liabilities denominated in foreign currencies have
been translated to Canadian dollars primarily at exchange
rates prevailing at the year end. Revenues and expenses are
translated at average rates for the year. Translation gains or
losses relating to self-sustaining foreign operations,
principally in Europe and Asia, are deferred and included in
accumulated other comprehensive loss within shareholders’
equity as foreign currency translation adjustments. A
proportionate amount of these deferred gains or losses are
recognized in income when there is a reduction in the
Company’s net investment in the foreign operation.

On January 1, 2007, the Company prospectively adopted
the Canadian Institute of Chartered Accountants (“CICA”)
Handbook Section 3855 “Financial
Instruments –
Recognition and Measurement”, Section 3861 “Financial
Instruments – Disclosure and Presentation”, Section 3865
“Hedges” and Section 1530 “Comprehensive Income”.
Under the new standards, all financial assets are classified as
(i) held-for-trading, (ii) held-to-maturity investments, (iii)
loans and receivables or (iv) available-for-sale. Also, all
financial liabilities are classified as (i) held-for-trading or (ii)
other financial
liabilities. Upon initial recognition, all
financial instruments are recorded on the consolidated
balance sheet at their fair values. After initial recognition,
the financial instruments are measured at their fair values,
loans and
except
liabilities, which are
receivables and other financial
measured at amortized cost using the effective interest rate
method. Changes in the fair value of financial instruments
classified as held-for-trading are recognized in net income.
If a financial asset is classified as available-for-sale, any gain
or loss arising from a change in its fair value is recognized
in other comprehensive income until the financial asset is
derecognized and all cumulative gain or loss is then
recognized in net income.

for held-to-maturity investments,

The Company has classified its cash equivalents, short-term
investments and derivative financial instruments that are
not designated as hedges as held-for-trading. They are
presented at their fair value and the gains or losses arising
on the revaluation at the end of each period are included in
net income. The carrying values of these instruments
approximate their fair values.

Accounts receivables are classified as loans and receivables,
which are measured at amortized cost. Accounts payable
and accrued liabilities are classified as other financial
liabilities and are measured at amortized cost. The long
term debt instruments have been classified as other
financial liabilities and are measured at amortized cost as
the Company has the ability and intention to hold to
maturity.

Portfolio investments are classified as available-for-sale and
are measured at fair value except for securities that do not
have a quoted market price in an active market which are
carried at cost. Any changes in the fair value are recognized
in other comprehensive income except for other than
temporary impairment losses which are recognized in net
income.

Derivative financial instruments that are designated as cash
flow hedges, such as the floating to fixed interest rate swap
agreements and forward exchange contracts are presented
at their fair value. The gains or losses arising from the
revaluation at the end of each period are included in other
comprehensive income to the extent of hedge effectiveness.
For effective fair value hedges, such as the fixed to floating
interest rate swap agreements, changes in the fair value of
the hedging derivative are recorded in net income. The
carrying value of the hedged item is adjusted for unrealized
gains or losses attributable to the hedged risk and also
recognized in net income.

An embedded derivative is a component of a hybrid
instrument that also includes a non-derivative host
contract, with the effect that some of the cash flows of the
combined instrument vary in a way similar to a stand-alone
derivative. If certain conditions are met, an embedded
derivative is separated from the host contract and
accounted for as a derivative in the balance sheet, at its fair
value. The Company will recognize embedded derivatives on
its consolidated balance sheet, when applicable.

The fair value of the Company’s financial instruments
approximates their carrying value unless otherwise stated.

The Company manages
its exposure to currency
fluctuations, primarily U.S. dollars, through the use of
derivative financial
instruments. Foreign exchange
contracts to sell U.S. dollars have been designated as hedges
against future Book publishing revenue. Gains and losses on
these instruments are accounted for as a component of the
related hedged transaction. Foreign exchange contracts
which do not qualify for hedge accounting are reported on
a mark to market basis in Book publishing earnings.

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T O R S T A R C O R P O R A T I O N

The Company uses interest rate swap contracts to manage
interest rate risks and has designated all interest rate swap
contracts as hedges. Payments and receipts under interest
rate swap contracts are recognized as adjustments to
interest expense on an accrual basis. Any resulting carrying
amounts are included in receivables in the case of
favourable contracts and accounts payable in the case of
unfavourable contracts.

The Company manages its exposure associated with
changes in the fair value of its Deferred Share Unit Plan
through the use of a derivative instrument. Changes in the
fair value of this instrument are recorded as compensation
expense.

The Company does not engage in trading or other
speculative activities with respect to derivative financial
instruments.

Hedge accounting is applied when the derivative
instrument is designated as a hedge and is expected to be
effective throughout the life of the hedged item. When such
derivative instrument ceases to exist as a hedge, or when
designation of a hedging relationship is terminated, any
associated deferred gains or losses are carried forward to be
recognized in income in the same period as the
corresponding gains or losses associated with the hedged
item. When a hedged item ceases to exist, any associated
deferred gains or losses are recognized in the current
period's consolidated statement of income.

The fair value of derivative financial instruments reflects the
estimated amount that the Company would have been
forced to settle all unfavourable
required to pay if
outstanding contracts or the amount that would be received
if forced to settle all favourable contracts at year end. The
fair value represents a point-in-time estimate that may not
be relevant in predicting the Company’s future earnings or
cash flows.

(d) Cash and cash equivalents

Cash and cash equivalents consists of cash in bank and
short-term investments with maturities on acquisition of 90
days or less.

(e) Receivables

Receivables are reduced by provisions for anticipated book
returns and estimated bad debts which are determined by
reference to past experience and expectations.

(f)

Inventories

Inventories are valued at the lower of cost and net realizable
value.

(g) Prepaid expenses

Prepaid expenses include advance royalty payments to
authors which are deferred until the related works are

published and are reduced by estimated provisions for
advances that may exceed royalties earned

(h) Property, plant and equipment

These assets are recorded at cost and depreciated over their
estimated useful lives. The rates and methods used for the
major depreciable assets are:

Buildings:

• straight-line over 25 years or 5% diminishing

balance

Leasehold Improvements:

• straight-line over the life of the lease

Machinery and Equipment:

• straight-line over 10 to 20 years or 20%

diminishing balance

(i)

Impairment of long-lived assets

Long-lived assets are tested for recoverability whenever
events or changes in circumstances indicate that their
carrying amount may not be recoverable. An impairment
loss is recognized when their carrying value exceeds the
total undiscounted cash flows expected from their use and
eventual disposition. Any impairment loss would be
determined as the excess of the carrying value of the assets
over their fair value.

(j)

Investments in associated businesses

Investments in associated businesses are accounted for
using the equity method.

(k) Intangible assets

Intangible assets are recorded at their fair value on the date
of acquisition. Intangible assets with finite lives are
amortized over their useful lives and consist primarily of
customer relationships which are being amortized on a
straight line basis over 10 years. Certain of the Company’s
intangible assets, which include trade and domain names
and newspaper mastheads, have an indefinite life and
accordingly are not amortized. Intangibles with indefinite
lives are tested for impairment annually or when
impairment
is indicated by events or changes in
circumstances.

(l) Goodwill

Goodwill represents the cost of acquired businesses in
excess of the fair value of net identifiable assets acquired.
Goodwill is tested for impairment on an annual basis.
Goodwill is allocated to reporting units and any potential
impairment is identified by comparing the carrying value of
the reporting unit with its fair value. Any impairment loss
would be charged against current period earnings and
shown as a separate item in the Consolidated Statement of
Income.

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T O R S T A R C O R P O R A T I O N

(m) Other assets

The cost of a distribution services agreement is amortized
on a straight-line basis over the 10-year term of the
agreement and was fully amortized by December 31, 2006.
Portfolio investments are accounted for by the cost method.

(n) Employee future benefits

The Company maintains both defined benefit and defined
contribution plans. Details with respect to accounting for
defined benefit employee future benefit plans are as follows:

•

The cost and obligations of pensions and post
employment benefits earned by employees are
actuarially determined using the projected benefit
method prorated on service and management's best
estimate of assumptions of future investment returns
for funded plans, salary changes, retirement ages of
employees and expected health care costs.

•

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

• As prescribed by the CICA, the discount rate used for
determining the benefit obligation is the current
interest rate at the balance sheet date on high quality
fixed income investments with maturities that match
the expected maturity of the obligations.

•

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

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

Company pension contributions in excess of the amounts
expensed in the statements of income are recorded as
accrued benefit assets in other assets in the balance sheet.
Liabilities related to unfunded post employment benefits
and an executive retirement plan are included as post
employment benefits in other long-term liabilities.

Company contributions to defined contribution employee
future benefit plans are expensed as incurred.

(o) Stock-based compensation plans

The Company has a stock option plan, an employee share
purchase plan, two deferred share unit plans and a
Restricted Share Unit (“RSU”) Plan.

The Company uses the fair value method of accounting for
stock options granted subsequent to December 31, 2002.
Under this method, the fair value of the stock options is
determined at the date of grant using an option pricing

model. Over the vesting period, this fair value is recognized
as compensation expense and a related credit to contributed
surplus. The contributed surplus balance is reduced as
options are exercised through a credit to share capital. No
compensation expense has been recorded for stock options
awarded and outstanding prior to January 1, 2003. The
consideration paid by option holders is credited to share
capital when the options are exercised.

The fair value method of accounting is utilized for the
Company’s annual employee share purchase plans. Under
this method, the Company recognizes a compensation
expense and a related credit to contributed surplus each
period, based on the excess of the current share price over
the opening price, in accordance with the terms that would
apply if the plan had matured at the current share price.
Upon maturity of the plan, contributed surplus is eliminated
and share capital is credited. No compensation expense has
been recorded for plans originating prior to January 1,
2003. The consideration paid by the plan members is
credited to share capital when the plan matures.

Eligible executives and non-employee directors may receive
or elect to receive deferred share units equivalent in value to
Class B non-voting shares of the Company. A compensation
expense is recorded in the year of granting of the deferred
share units and changes in the intrinsic value of outstanding
including deemed dividend
deferred share units,
equivalents, are recorded as an expense in the period that
they occur. Outstanding deferred share units are recorded
as long-term liabilities.

For the RSU plan, a deferred compensation balance and an
RSU equity are recorded for the total grant-date value on the
date of the grant. The deferred compensation balance is
recorded as a reduction of shareholders’ equity and is
amortized as compensation expense over the applicable
vesting period. The RSU equity is recorded as an increase of
shareholders’ equity. The Company may choose to fund this
liability at any time prior to the vesting date by purchasing
Class B non-voting shares of the Company in the open
market through an employee benefit trust (“Trust”). Any
difference between the value of the RSU equity and the price
paid for the shares purchased is recorded as an adjustment
to shareholders’ equity. For accounting purposes, the Trust
is treated as a Variable Interest Entity and consolidated in
the accounts of the Company. On consolidation, the
dividends paid on the shares held by the Trust are
eliminated. The shares are treated as not being outstanding
for the basic earnings per share (“EPS”) calculations at the
time of initial purchase by the Trust. They are amortized
back into basic EPS over the vesting period. All of the shares
held by the Trust are included in the fully-diluted EPS
calculations.

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T O R S T A R C O R P O R A T I O N

(p) Income taxes

The Company follows the liability method of accounting for
income taxes. Under the liability method of tax allocation,
future tax assets and liabilities are determined based on
differences between the financial reporting and tax bases of
assets and liabilities and are measured using substantively
enacted tax rates and laws that will be in effect when the
differences are expected to reverse.

(q) Revenue recognition

Advertising revenue is recognized when publications are
delivered or advertisements are broadcast or placed on the
Company’s Web sites. Newspaper circulation revenue is
recognized when the publication is delivered. Subscription
revenue for newspapers is recognized as the publications are
delivered over the term of the subscription. Revenue from
the sale of books is recognized for the Retail distribution
channel based on the book’s publication date (books are
shipped prior to the publication date so that they are in
stores by the publication date) and for the Direct-to-
Consumer distribution channel when the books are
shipped. Book publishing revenue is recorded net of
provisions for estimated returns and direct-to-consumer bad
debts, which are estimated primarily based on past
experience. Other revenue is recognized when the related
service or product has been delivered. Amounts received in
advance are included in the balance sheet in Accounts
payable and accrued liabilities until the revenue is
recognized in accordance with the policies noted above.

(r) Use of estimates

The preparation of financial statements in conformity with
Canadian generally accepted accounting principles requires
management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure
of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues
and expenses during the reporting year. Actual results could
differ from those estimates.

(s) Changes in accounting policies

Financial Instruments

On January 1, 2007, the Company adopted four new
accounting standards
(i) Section 3855 “Financial
Instruments – Recognition and Measurement”, (ii) Section
3861 “Financial Instruments – Disclosure and Presentation”,
(iii) Section 3865 “Hedges” and (iv) Section 1530
“Comprehensive Income”. These sections provide standards
for recognition, measurement, disclosure and presentation
of financial assets, financial liabilities and non-financial
derivatives, and describe when and how hedge accounting
may be applied. Section 1530 provides standards for the
reporting and presentation of comprehensive income. A new
Statement of Comprehensive Income (Loss) now forms part
of the Company’s consolidated financial statements. The
Company has replaced the Statement of Retained Earnings

with the Statement of Changes in Shareholders’ Equity
which comprises sections for share capital, contributed
surplus,
retained earnings and accumulated other
comprehensive income (loss).

There was no restatement of prior periods except for the
presentation of the $9,116 foreign currency translation
adjustment as at December 31, 2006 reclassified to the
opening balance of accumulated other comprehensive loss.
The Company also recorded losses (net of taxes) of $387 and
$1,139 to the opening balance of accumulated other
comprehensive loss with respect to the forward currency
contracts and interest rate swaps respectively. There was no
impact on opening retained earnings. The impact of these
changes in accounting policies on net income for the year
ended December 31, 2007 was insignificant.

Future accounting changes include the following items:

Financial Instruments

The CICA has issued two new standards: Section 3862
“Financial Instruments – Disclosures” and Section 3863 -
“Financial Instruments – Presentation”. Together, these two
sections replace Section 3861 “Financial Instruments –
Disclosure and Presentation” and apply to the Company
effective January 1, 2008. Section 3862 describes the
required disclosure for the assessment of the significance of
financial instruments on an entity’s financial position and
performance and of the nature and extent of risks arising
from financial instruments to which the entity is exposed
and how those risks are managed. Section 3863 establishes
standards for presentation of financial instruments and
non-financial derivatives.

Capital Disclosures

The CICA issued Section 1535 “Capital Disclosures” which
applies to the Company effective January 1, 2008. It
establishes standards for disclosure of both qualitative and
quantitative information that enable users to evaluate the
entity’s objectives, policies and processes for managing
capital; the disclosure and compliance with any externally
imposed capital requirements and the consequences of any
non-compliance.

Inventories

The CICA issued Section 3031 “Inventories” to replace
Section 3030 and is effective for the Company January 1,
2008. This section prescribes the measurement of
inventories at the lower of cost and net realizable value, with
guidance on cost determination including the allocation of
overheads and other costs to inventory. Reversals of previous
write-downs to net realizable value are permitted when there
is a subsequent increase in the value of inventories.

The Company has assessed that these new standards relate
primarily to increased disclosures and will not have a
significant impact on net income.

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T O R S T A R C O R P O R A T I O N

2. Receivables

The provisions for anticipated book and magazine returns
and bad debts deducted from receivables at December 31,
2007 amounted to $118 million (December 31, 2006 - $126
million). Under a billing and collection agreement with a
third party, the Book publishing segment has a net receivable
of $29 million at December 31, 2007 (December 31, 2006 -
$40 million). The Company believes that the credit risk
associated with this balance is mitigated by the financial
stability and payment history of the third party.

3. Property, plant and equipment

Accumulated
Depreciation

Cost

$7,424

Net

$7,424

On August 30, 2006, the Company acquired a 20% equity
interest in CTVgm. On September 7, 2006, the Company
made an additional investment in CTVgm to provide its pro-
rata share of the equity contribution in respect of CTVgm’s
acquisition of all of the common shares of CHUM Limited
(“CHUM”). The total purchase price, including transaction
costs, was $378.0 million. Torstar and CTVgm do not have
coterminous quarter-ends and these financial statements
reflect the Company’s share of CTVgm’s results for the twelve
months ended November 30, 2007 and three months ended
November 30, 2006.

A summary of the Company’s 20% share of the fair values of
the assets and liabilities acquired in CTVgm on its August 30,
2006 acquisition, excluding its $94.2 million share of
CTVgm’s September 7, 2006 investment in CHUM is as
follows:

2007
Land
Buildings and leasehold
improvements
Machinery and equipment
Total

2006
Land
Buildings and leasehold
improvements
Machinery and equipment
Total

229,113
785,941
$1,022,478

$129,373
562,714
$692,087

99,740
223,227
$330,391

Current assets
Property, plant and equipment
Goodwill and other intangible assets
Other assets

$7,451

228,799
763,921
$1,000,171

$121,728
528,601
$650,329

107,071
235,320
$349,842

Current liabilities
Long-term debt
Other liabilities and non-controlling interests

Net assets acquired at fair value

$112,860
65,361
461,282
45,125
$684,628
$58,995
278,473
63,402
$400,870
$283,758

4. Investment in associated businesses

The Company’s Investment in associated businesses includes
a 20% equity interest in CTVglobemedia Inc. (“CTVgm”), a
19.35% equity interest in Black Press Ltd. and a 30% equity
interest in Q-ponz Inc. The Investment in associated
businesses is comprised of the following:

Balance, beginning of year
Income of associated businesses
Investment in CTVgm
Change in investee foreign currency
translation adjustment
Balance, end of year

2007

2006

$416,320
20,416

$23,618
16,000
377,982

(2,442)
$434,294

(1,280)
$416,320

The $20.7 million initial investment in Black Press included
$17.9 million of goodwill.

Intangible assets include the Company’s share of broadcast
licenses of $316.4 million, newspaper mastheads of $20.3
million and other intangibles of $2.3 million which are
indefinite life assets. Fair value adjustments include an
increase in other liabilities of $19.8 million for pension and
post-retirement benefits, an after tax gain related to the
subsequent sale of the careers web site “Workopolis” of $16.1
million, an increase in property values of $5.7 million and
other adjustments, primarily related to debt, of $8.2 million
which increase liabilities. Future income tax liabilities related
to the above total $39.7 million. The fair value adjustments
will be amortized over the next 5 to 15 years. None of the
$122.2 million of goodwill included above is deductible for
tax purposes.

Outlined below is summarized financial information for
100% of CTVgm, including fair value adjustments, for the
periods ended November 30, 2007 and 2006 and the twelve
months ended November 30, 2007 and three months ended
November 30, 2006.

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T O R S T A R C O R P O R A T I O N

2007

2006

6. Long-term debt

Balance Sheet
Current assets
Property, plant and equipment
Investment in CHUM
Goodwill and other intangible assets
Other assets
Other assets

$770,170
533,305

3,515,033
194,240
$5,012,748

$580,008
323,660
1,388,960
2,201,964
233,216
$4,727,808

Bankers’ acceptance:
Cdn. dollar denominated
U.S. dollar denominated

Medium Term Notes:
Cdn. dollar denominated (note 6(b))

2007

2006

$444,632
108,001
552,633

$491,885
132,308
$624,193

98,165
$650,798

100,000
$724,193

$448,254
2,091,143

$341,836
2,185,765

(a) Bank debt

Current liabilities
Long-term debt
Other liabilities and non-controlling

interests

Shareholders’ equity

Statement of Income
Revenues
Net income

433,610
2,039,741
$5,012,748

246,078
1,954,129
$4,727,808

$1,938,295
$85,880

$487,402
$70,160

The November 2007 balance sheet above reflects CTVgm’s
purchase price allocation with respect to the September
2006 acquisition of CHUM. The balance sheet
incorporates fair value adjustments including indefinite
life intangible assets with respect to the value of broadcast
licenses, intangible assets for brands some of which are
subject to amortization, property, plant and equipment,
employee future benefits and certain liabilities including
Canadian Radio-television and Telecommunications
Commission benefits. CHUM’s results were equity
accounted between the date of acquisition and when
regulatory approval was granted in June 2007. Beginning
in July 2007, CHUM’s results were consolidated and
CTVgm’s revenues for the twelve months ended November
30, 2007 include five months of revenues for CHUM.

5. Other assets

Accrued benefit assets (note 14)
Intangible assets
Portfolio investments (note 13)
Derivative instruments (note 7)
Other

2007

2006

$139,124
35,250
7,632
2,473
4,946
$189,425

$122,620
35,415
7,054

6,458
$171,547

(i) The Company has long-term credit facilities with its
bankers which consist of a $425 million revolving loan
that matures in January, 2012 and a $375 million
revolving operating loan. The operating loan matures in
January 2009 and can be extended with the consent of
all parties for up to two additional 364-day periods
(and a third additional period not to extend beyond
January 2012) or can be converted to a 364-day term
loan at the Company’s option. The credit facilities may
be drawn in Canadian or U.S. dollars. The credit
facilities are subject to financial tests and other
covenants with which the company was in compliance
at December 31, 2007.

(ii) Amounts borrowed under the bank credit facilities
would primarily be in the form of bankers’ acceptance
(or an equivalent) at varying interest rates and would
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, at December 31, 2007 was 0.6% and varies
based on the Company’s long-term credit rating
(December 31, 2006 – 0.6%).

(iii)

In September 2006, the Company entered into interest
rate swap agreements with major Canadian chartered
banks that will fix the interest rate on $250 million of
Canadian dollar borrowings. As a result, the Company
will pay quarterly a fixed rate of 4.3% per annum (plus
the interest rate spread referred to in 6(a)(ii)) for the
subsequent five years through September 2011 and will
receive quarterly floating rate payments based on 90
day bankers’ acceptance rates. These swap contracts
have been designated as hedges. The fair value of these
swap agreements was $0.5 million favourable at
December 31, 2007 (December 31, 2006 - $0.8
million unfavourable).

(iv) The average rate on Canadian dollar bank borrowings
outstanding at December 31, 2007 was 5.3%
(December 31 2006 – 4.9%). Including the effect of
the interest rate swap noted in 6(a)(iii) the effective
rate was 5.2% at December 31, 2007 (December 31
2006 – 4.9%).

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T O R S T A R C O R P O R A T I O N

(v) The Company had an interest rate swap arrangement,
which expired in December 2007, to fix the interest rate
on U.S. $80 million of borrowings at approximately
3.5% (plus the interest rate spread referred to in
6(a)(ii)). The swap was designated as a cash flow hedge.
The fair value of the U.S. interest rate swap arrangement
at December 31, 2006 was $1.7 million favourable.

(vi) Bank debt outstanding at December 31, 2007 included
U.S. dollar borrowings of U.S. $109.3 million
(December 31 2006 – U.S. $113.5 million) at an
average rate of 5.6% (December 31 2006 – 6.1%).
Including the effect of the expired interest rate swap
noted in 6(a)(v) the effective rate was 4.8% at
December 31, 2006.

(b) Medium Term Notes

The Company issued in September 2005 $75 million 3.85%
medium term notes which mature in September 2010. The
Company has entered into swap agreements effectively
converting this debt into floating rate debt based on 90-day
bankers’ acceptance rates plus 0.39%. The Company also
issued in September 2005 $25 million 3.7% medium term
notes which mature in September, 2009. The Company has
entered into a swap agreement effectively converting this
debt into floating rate debt based on 90-day bankers’
acceptance rates plus 0.36%. Interest on the medium term
notes as well as the payments under the swap agreements is
paid semi-annually. The swap agreements have been
designated as fair value hedges and mature on the due dates
of the respective notes.

The effective interest rate on the medium term notes
outstanding at December 31, 2007, including the above
noted swaps, was 5.3% (December 31, 2006 – 4.9%).
The fair value of the medium term notes at December 31,
2007 was $4.7 million favourable (December 31, 2006 -
$3.6 million favourable). The fair value of the interest rate
swap agreements related to the medium term debt issuance
noted above were $1.8 million unfavourable at December
31, 2007 (December 31, 2006 - $2.7 million unfavourable).
In accordance with the accounting policy for a fair value
hedge, the debt has been reduced by $1.8 million to $98.2
million. There was no impact on net income or other
comprehensive income.

(c) 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
accepting major financial institutions, as approved by the
Board of Directors, as counterparties.

(d) Interest expense includes interest on long-term debt of

$35.3 million (2006 - $21.8 million).

(e) Interest of $34.7 million was paid during the year (2006 -

$22.7 million).

7. Derivative instuments at fair value

The fair values of derivatives designated as hedges as disclosed
in notes 6 and 15 are as follows:

As at December 31, 2007

Foreign currency hedges

Interest rate swaps

Assets
$1,963

510

$2,473

Liabilities
$0

1,835

$1,835

These amounts are included in Other assets and Other liabilities.

8. Accumulated other comprehensive loss (net of tax)

As at

Other
January 1, comprehensive December
31, 2007
income (loss)

2007

As at

Foreign currency translation
adjustment

Unrealized gains (losses)
on cash flow hedges

($9,116)

($7,980)

1
($17,096)

(1,526)

3,176

2
1,650

($10,642)

($4,804)

($15,446)

1Net of income tax benefit of $572.
2Net of income tax liability of $823.

9. Other liabilities

Post employment benefits (note 14)
Employees’ shares subscribed (note 11(b))
Deferred share unit plan (note 11(e))
Derivative instruments (note 7)
Other

2007

2006

$71,578
5,558
5,700
1,835
5,007
$89,678

$70,654
6,547
5,233

5,879
$88,313

10. Share capital

(a) Rights attaching to the company’s share capital:

(i) Class A (voting) and Class B (non-voting) shares

Class A and Class B shareholders may elect to receive
dividends in cash or stock dividends in the form of
Class B shares. Class A shares are convertible at any
time at the option of the holder into Class B shares.

(ii) Voting provisions

Class B shares are non-voting unless eight consecutive
quarterly dividends have not been paid.

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T O R S T A R C O R P O R A T I O N

(iii) Restrictions on transfer

Totals

Registration of the transfer of any of the company’s
shares may be refused if such transfer could
jeopardize either the ability of the Company to
engage in broadcasting or its status as a Canadian
newspaper publisher.

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

Class A (voting) and Class B (non-voting) shares

Class A shares

The only changes in the Class A shares were the
conversion to Class B shares of 7,190 shares (with a stated
value of $1,953) in 2007 and 1,650 shares (with a stated
value of $448) in 2006. Total Class A shares outstanding
at December 31 were:

2006

2007

Shares
9,914,792

9,907,602

Amount
$2,694

$2,692

Class B shares

The changes in the Class B shares were:

January 1, 2006
Converted from Class A
Issued under Employee
Share Purchase Plan
Stock options exercised
Dividend reinvestment plan
Other
December 31, 2006
Reduction for RSU Trust Shares
(note 11(c))
December 31, 2006
Converted from Class A
Issued under Employee
Share Purchase Plan
Stock options exercised
Dividend reinvestment plan
Other

Change in reduction for
RSU Trust Shares (note 11(c))
December 31, 2007

Shares
68,225,435
1,650

126,956
166,800
35,416
2,675
68,558,932

68,558,932
7,190

107,142
139,800
24,586
1,325
68,838,975

Amount
$374,231

2,894
3,071
688
55
380,939

(1,236)
$379,703
2

2,009
2,587
490
27
384,818

68,838,975

526
$385,344

The total Class A and Class B shares outstanding at
December 31 were:

2006

2007

Amount

78,473,724

$382,397

78,746,577

$388,036

An unlimited number of Class B shares is authorized. While the
number of authorized Class A shares is unlimited, the issuance
of further Class A shares, may under certain circumstances,
require unanimous board approval.

Basic earnings per share amounts have been determined by
dividing income by the weighted average number of Class A
and Class B shares outstanding during the year after
deducting the unvested shares held by the RSU Trust.

The treasury stock method is used for the calculation of the
dilutive effect of stock 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 stock options and employee share purchase plan
does not result in an adjustment to income. The
reconciliation of the denominator in calculating diluted per
share amounts is as follows:

(thousands of shares)
Weighted average number of
shares outstanding, basic
Effect of dilutive securities
– stock options
– unvested RSU shares
Weighted average number of
shares outstanding, diluted

2007

2006

78,620

78,250

57
30

105
59

78,707

78,414

Outstanding stock options totalling 3,965,932 (2006 –
4,063,545), which are out of the money, have been excluded
from the above calculation of dilutive securities.

11. Stock-based compensation plans

(a) Stock option plan

Eligible senior executives may be granted options to
purchase Class B non-voting shares at an option price which
shall not be less than the closing market price of the shares
on the last trading day before the grant. Prior to January 1,
2003, non-executive directors were also eligible to be
granted options.

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T O R S T A R C O R P O R A T I O N

The maximum number of shares that may be issued under
the stock option plan is 12,500,000, and the number of
shares reserved for issuance to insiders cannot exceed 10%
of the outstanding shares. The term of the options shall not
exceed ten years from the date the option is granted. Up to
25% of an option grant may be exercised twelve months after
the date granted, and a further 25% after each subsequent
anniversary. Options to purchase 10,857,613 shares have
been granted as of December 31, 2007.

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

January 1, 2006
Granted
Exercised
Forfeited or expired
December 31, 2006
Granted
Exercised
Forfeited or expired
December 31, 2007

Options
5,138,468
583,956
(166,800)
(167,479)
5,388,145
523,891
(139,800)
(659,582)
5,112,654

Weighted average
exercise price
$22.77
22.14
(18.30)
(24.22)
$22.80
19.70
(18.50)
(22.94)
$22.57

As at December 31, 2007, outstanding stock options were as
follows:

Options Outstanding

Number
outstanding

Weighted
average
remaining

December 31, 2007 contractual life

250,800
3,321,217
1,540,637
5,112,654

1.2 years
5.6 years
3.5 years
4.8 years

Weighted
average
exercise
price
$17.48
$21.02
$26.75
$22.57

Range of
exercise
price
$15.75–18.05
$18.50–22.20
$25.00–29.01
$15.75–29.01

Options Exercisable

Number
exercisable
December 31, 2007
250,800
2,114,507
1,422,862
3,788,169

Weighted
average
exercise
price
$17.48
$20.99
$26.56
$22.85

Subsequent to year-end, 586,552 stock options were granted
at an exercise price of $18.78 per share.

In estimating the compensation expense for stock options
granted in 2003 to 2007, the Company used the Black-Scholes
options pricing model. The fair value of the options on the date
of grant and the assumptions used are as follows:

2007

2006

2005 2004 2003

$2.56
Fair Value
4.0%
Risk-free interest rate
Expected dividend yield 3.8%
Expected share
price volatility
Expected time until
exercise (years)

16.3%

$3.08 $3.48 $5.52 $5.28
4.1%
4.2%
2.5%
3.3%

3.7%
3.4%

4.1%
2.4%

16.8% 20.7% 20.6% 23.2%

(b) Under the company’s annual employee share purchase
plans, employees may subscribe for Class B shares to be paid
for through payroll deductions over two-year periods at a
purchase price which is the lower of the market price on the
entry date or the market price at the end of the payment
period. The value of the shares that an employee may
subscribe for is restricted to a maximum of 20% of salary at
the beginning of the two year period. As at December 31,
outstanding employee subscriptions were as follows:

22007

2006

2008

2009

2007

2008

$21.86
132,356

$21.00
$21.86
$24.99
126,871 126,563 154,801

Maturing
Subscription price
at entry date
Number of shares

Eligible senior executives may be granted RSU awards
equivalent in value to Class B non-voting shares of the
Company as part of their long-term incentive compensation.
RSUs vest after three years at which time Class B non-voting
shares of the Company will be distributed to the
participants. A summary of changes in the RSU plan is as
follows:

January 1, 2006
Granted
Forfeited
December 31, 2006
Granted
Forfeited
December 31, 2007

Units

105,187
(14,406)
90,781
102,423
(2,701)
190,503

Weighted average
issue price

$20.62
(20.62)
$20.62
19.71
(20.07)
$20.14

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T O R S T A R C O R P O R A T I O N

Subsequent to year-end, 117,223 RSUs have been granted at a
price of $18.97.

(d) The Company has recognized in 2007, compensation
expense totalling $3.0 million for the stock options granted
in 2004 to 2007, RSUs granted in 2006 to 2007 and the
employee share purchase plans originating in 2005 to 2007
(2006 - $3.2 million for the stock options granted in 2003
to 2006, RSUs granted in 2006 and the employee share
purchase plans originating in 2004 to 2006).

(e) Deferred Share Unit Plan (“DSU”)

Eligible executives may elect to receive certain cash
incentive compensation in the form of DSU units. Each unit
is equal in value to one Class B non-voting share of the
Company. The units are issued on the basis of the closing
market price per share of Class B non-voting shares of the
Company on the Toronto Stock Exchange on the date of
issue. The units also accrue dividend equivalents payable in
additional units in an amount equal to dividends paid on
Class B non-voting shares of the Company. DSU units
mature upon termination of employment, whereupon an
executive is entitled to receive the fair market value of the
equivalent number of Class B non-voting shares, net of
withholdings, in cash.

The Company has also adopted a DSU for non-employee
directors. Each non-employee director receives an award of
DSU units as part of his or her annual Board retainer. In
addition, a non-employee director holding less than 8,000
Class B non-voting shares, Class A voting shares, DSU units,
or a combination thereof, receives the cash portion of his or
her annual Board retainer in the form of DSU units. Any
non-employee director may elect to participate in the DSU
in respect of part or all of his or her retainer and attendance
fees. The terms of the director DSU are substantially the
same as the executive DSU.

As at December 31, 2007, 294,767 units were outstanding at
a value of $5.5 million (December 31, 2006 – 264,076 units,
value $5.2 million). There were 29,332 units redeemed
during 2007 at an average price of $21.76 per unit (2006 –
14,994 units, average price $21.25 per unit).

The Company has entered into a derivative instrument in
order to offset its exposure to changes in the fair value of
units issued under its DSU Plan. The derivative instrument
is settled quarterly. As at December 31, 2007, the derivative
instrument offset 277,281 units (December 31, 2006 –
252,813 units).

12. Income and other taxes

A reconciliation of income taxes at the average statutory tax
rate to actual income taxes is as follows:

Income before taxes

Provision for income taxes based on
Canadian statutory rate of
36.1% (2006 – 36.1%)
(Increase) decrease in taxes resulting from:
Foreign income taxed at lower rates
Foreign losses not tax effected
Manufacturing and processing
profits allowance
Large Corporations tax and other taxes
Permanent differences
Reduction in future tax rates

2007

2006

$146,891

$118,641

($53,100)

($42,800)

3,000
(3,700)

3,900
(4,500)

1,500
(1,400)
2,300
5,900
($45,500)

900
(1,800)
200
4,600
($39,500)

Effective income tax rate

31.0%

33.3%

Income taxes of $24.5 million were paid during the year
(2006 – $54.6 million).

The components of the provision for income taxes are as follows:

Current tax provision
Future tax provision
Total tax provision

2007

2006

$40,800
4,700
$45,500

$42,500
(3,000)
$39,500

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The total purchase price was $28.8 million and included
intangible assets of $20.7 million, future income tax
liabilities of $2.4 million, other assets of $0.2 million,
current liabilities of $0.2 million and $10.5 million
allocated to goodwill. The intangible assets identified
included trade and domain names of $13.6 million,
customer relationships of $6.9 million and a non-compete
agreement of $0.2 million. The customer relationships and
non-compete agreement will be amortized on a straight-
line basis over 10 and 3 years respectively.

The Company also completed a number of other
acquisitions during 2006 primarily of community
newspapers and magazines for a total purchase price of
$4.7 million. These acquisitions were accounted for under
the purchase method and $4.7 million has been allocated
to goodwill. The Company also made an additional
investment in Vocel, Inc. for $1.1 million which was
accounted for by the cost method.

The consideration for each acquisition was cash. The
amount of goodwill that is expected to be deductible for
tax purposes is $0.3 million (2006 - $2.0 million).

14. 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
defined contribution 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 Canadian
newspaper operations, which provide for various health
and life insurance benefits.

Future income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes. Significant components of
the Company’s future income tax assets and liabilities as of
December 31 are as follows:

Current future income tax assets:
Receivables
Other

Non-current future income tax assets:
Tax losses carried forward
Post employment benefits
Other

Non-current future income tax liabilities:
Property, plant and equipment
Post employment benefits
Investment in associated businesses
Goodwill and other

2007

2006

$14,464
4,546
$19,010

$16,549
6,453
$23,002

$33,618
1,255
3,097
$37,970

$34,264
21,399
5,498
12,541
$73,702

$39,763
813
3,706
$44,282

$39,187
18,356
2,903
12,427
$72,873

At December 31, 2007, the Company had net operating
loss carryforwards of approximately U.S. $173.8 million for
U.S. income tax purposes. No future income tax asset has
been recognized for U.S. $77.5 million of these losses. U.S.
$131.6 million of the U.S. loss carryforwards will expire
between 2019 to 2021 and U.S. $42.2 million will expire
between 2023 and 2027.

The Company had Canadian income tax losses available for
carryforward of approximately $5.3 million that will expire
in 2025 and 2026.

13. Acquisitions and investments

The Company completed a number of acquisitions during
2007 in the newspapers and digital segment for a total
purchase price of $4.1 million. These acquisitions were
accounted for under the purchase method and $2.8
million has been allocated to goodwill. The Company also
made an additional investment in Vocel, Inc. for $0.6
million which was accounted for by the cost method.

In the fourth quarter of 2006, the Company acquired an
additional 10% of Workopolis from CTVgm which
increased its interest in Workopolis to 50%. The purchase
has been accounted for under the purchase method.

79998_AnnualReport07:79998_AnnualReport07 3/13/08 8:23 AM Page 58

T O R S T A R C O R P O R A T I O N

Information concerning the Company’s post employment benefit plans as at December 31 is as follows:

Pension Plans

Post Employment Benefit Plans

2007

2006

2007

2006

Accrued benefit obligations
Balance, beginning of year
Current service cost
Interest cost
Benefits paid
Actuarial losses (gains)
Participant contributions
Past service costs
Foreign exchange
Special termination benefits
Balance, end of year
Plans’ assets
Fair value, beginning of year
Return on plan assets
Benefits paid
Contributions to plan
Foreign exchange
Fair value, end of year
Funded status – surplus (deficit)
Unamortized losses
Unrecognized prior service costs
Accrued benefit asset (liability)
Recorded in:
Other assets
Other liabilities
Accrued benefit asset (liability)

Net benefit expense for the year
Current service cost
Interest cost on benefit obligation
Actual return on plan assets
Actuarial loss (gain) on benefit obligation
Past service costs
Excess of (shortfall) actual return on plan
assets over expected return
Difference between net actuarial loss
recognized and actual actuarial
loss on benefit obligation
Difference between recognized and
actual past service costs
Special termination benefits
Net benefit expense

$749,248
19,173
37,739
(37,062)
(22,060)
7,469
1,570
(2,378)
534
$754,233

$749,590
3,641
(37,062)
35,793
(1,712)
$750,250
($3,983)
104,593
23,107
$123,717

$139,124
(15,407)
$123,717

$19,173
37,739
(3,641)
(22,060)
1,570

$714,136
19,000
36,035
(34,670)
3,529
7,675
2,683
(7)
867
$749,248

$671,495
82,659
(34,670)
30,111
(5)
$749,590
$342
82,036
24,191
$106,569

$122,620
(16,051)
$106,569

$19,000
36,035
(82,659)
3,529
2,683

$59,988
679
2,968
(2,146)
(2,329)

$67,839
986
3,370
(2,394)
(9,813)

$59,160

$59,988

($59,160)
2,812
177
($56,171)

($59,988)
5,192
193
($54,603)

($56,171)
($56,171)

($54,603)
($54,603)

$679
2,968

$986
3,370

(2,329)

(9,813)

(48,948)

35,156

23,136

1,067
534
$8,570

568

2,329

10,398

(311)
867
$14,868

$3,647

$4,957

79998_AnnualReport07:79998_AnnualReport07 3/13/08 8:23 AM Page 59

T O R S T A R C O R P O R A T I O N

Significant assumptions used
To determine benefit obligation at end of year:
Discount rate
Rate of future compensation increase
To determine benefit expense:
Discount rate
Expected long-term rate of
return on plan assets
Rate of future compensation increase
Health care cost trend rates at end of year:
Initial rate
Ultimate rate
Year ultimate rate reached
Average remaining service life
of active employees

Pension Plans

Post Employment Benefit Plans

2007

2006

2007

2006

5.25%
3.0% to 4.0%

5.0%
3.0% to 3.5%

5.0%

7.0%
3.0% to 4.0%

7.0%
3.0% to 3.5%

N/A
N/A
N/A

5.25%
N/A

5.0%

N/A
N/A

10.0%
5.0%
2017

5.0%
N/A

5.0%

N/A
N/A

10.0%
5.0%
2017

8 to 17 years

7 to 17 years

12 years

15 years

Long-term liabilities includes $13.7 million related to an unfunded executive retirement plan which is supported by an outstanding
letter of credit of $28.6 million at December 31, 2007.

The effect of a one percent increase or decrease in significant assumptions used for the Company’s pension and post employment
benefit plans would result in an increase (decrease) in the net benefit expense and accrued benefit obligation at
December 31, 2007:

Net Benefit Expense

Accrued Benefit Obligation

1% Increase

1% Decrease

1% Increase

1% Decrease

($3,116)

$9,359

($79,643)

$90,812

Pension plans:

Discount rate
Expected long-term rate of
return on plan assets
Rate of compensation increase
Post employment benefits plans:

Discount rate
Per capita cost of health care

(6,709)
1,797

(471)
361

Pension plan assets, measured as at December 31, are as follows:

Equity investments
Fixed income investments
Total

2007

64%
36%
100%

7,704

(6,760)
3,372

(7,368)

7,644
(3,177)

6,709
(1,478)

1,022
(176)

2006

68%
32%
100%

The Company measures the accrued benefit obligations and the fair value of the Plans’ assets for accounting purposes as at
December 31 of each year. The most recent actuarial valuation of the Plans’ for funding purposes was performed as at
December 31, 2005 and the next required valuation will be as at December 31, 2008.

The total amount expensed for defined contribution plans in 2007 was $2 million (2006 - $2 million).

79998_AnnualReport07:79998_AnnualReport07 3/13/08 8:23 AM Page 60

T O R S T A R C O R P O R A T I O N

15. Forward foreign exchange contracts and options

17. Other cash provided by (used in) operating activities

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 $1.06 for
U.S. $29 million in 2008 and $1.02 for U.S. $2.5 million
in 2009. These forward foreign exchange contracts have
been designated as cash flow hedges and the net fair value
of these contracts was $2.0 million favourable at
December 31, 2007.

Forward foreign exchange contracts settled in 2007
established a rate of exchange of Canadian dollar per U.S.
dollar of $1.14 for U.S. $27.5 million in 2007 (2006 - $1.16
for U.S. $30 million).

16. Restructuring Provisions

Restructuring provisions of $7.5 million were incurred in
2007 compared with $22.3 million in 2006. In 2007, the
Star Media Group offered the second voluntary severance
program at the Vaughan Press Centre that had been agreed
to in the 2006 contract negotiations and Metroland Media
Group undertook further restructuring.

During 2006, restructuring charges of $22.3 million were
recorded. Star Media Group undertook several initiatives
including, the renegotiation of its labour contracts at the
Vaughan Press Centre which resulted in a workforce
reduction, the outsourcing of its circulation call centre and
a fourth quarter targeted separation program for a total
cost of $13.6 million. Restructuring provisions of $6.0
million were recorded by Metroland Media Group for
restructuring of operations triggered by the combination
of the CityMedia and Metroland operations. Harlequin
reduced its global workforce by 4% in the third quarter of
2006 at a cost of $2.7 million.

Accounts payable and accrued liabilities include $10.7
million for restructuring provisions at December 31, 2007
($17.0 million at December 31, 2006). The change in the
liability during 2007 includes payments of $12.8 million
related to provisions made in 2006 and $1.0 million for
provisions made prior to 2006.

Post employment benefits
Stock-based compensation plans
Foreign exchange
Other

2007

2006

($15,720)
3,457
1,873
59
($10,331)

($5,095)
3,049
(70)
(238)
($2,354)

18. Commitments and contingencies

The Company is involved in various legal actions, primarily
in the newspapers and digital segment, which arise in the
ordinary course of business. While the final outcome of
these matters cannot be predicted with certainty, any
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.
The Company has operating lease commitments of
approximately $19 million in 2008, $17 million in 2009,
$15 million in 2010, $14 million in 2011, $13 million in
2012 and a total of $85 million in 2013 and thereafter. In
addition, the Company has guaranteed sub-lease payments
to a third party of approximately U.S. $1 million for each of
the next 11 years.

19. Related party transactions

As described in note 13, the Company purchased from
CTVgm a 10% interest in Workopolis in 2006. While the
Company conducts transactions in the normal course of
business with CTVgm, these transactions are insignificant
to these financial statements.

20. Joint ventures

The Company proportionately consolidates its interests in
joint ventures. The significant joint ventures in the
newspapers and digital segment include Workopolis, Sing
Tao Daily Limited, Olive Canada Network and Free Daily
News Group (publishes the Metro newspapers in Toronto,
Vancouver, Ottawa, Edmonton and Calgary). Harlequin
also conducts some of its businesses overseas with joint
venture partners the most significant of which include
France, Germany and Italy. The Company’s proportionate
share of revenue from these businesses is $128 million
(2006 - $110 million) and operating profit is $16 million
(2006 - $17 million).

79998_AnnualReport07:79998_AnnualReport07 3/13/08 8:23 AM Page 61

T O R S T A R C O R P O R A T I O N

21. Comparative financial statements

The comparative financial statements have been reclassified
from statements previously presented to conform to the
presentation of the 2007 financial statements.

22. Segmented information

Spectator and The Record (Kitchener, Cambridge and
Waterloo). Digital operations include Workopolis, Olive
Canada Network, thestar.com and toronto.com. Metroland
publishes over 100 community newspapers and Gold Book
Directories. This segment also includes the operations of
the Transit Television Network.

The Company operates two business segments: Newspapers
and digital and Book publishing, which are described
below.

Book publishing – The publishing and distribution of
Harlequin’s women’s fiction through retail outlets, by direct
mail and through the Internet.

Newspapers and digital – Includes the newspaper, digital,
specialty publications and commercial printing businesses
of the Star Media Group and Metroland Media Group.
Daily newspapers include the Toronto Star, The Hamilton

Segment profit or loss has been defined as operating profit
which corresponds to operating profit as presented in the
Consolidated Statements of
Income but before
restructuring provisions.

SUMMARY OF BUSINESS AND GEOGRAPHIC SEGMENTS OF THE COMPANY:

Business Segments

Operating Revenue

Depreciation and Amortization

Operating Profit

Newspapers and Digital
Book publishing

Corporate
Restructuring provisions
Consolidated

2007

2006

$1,083,828
462,709
1,546,537

$1,056,462
471,808
1,528,270

2007

$50,246
4,833
55,079
55

2006

$49,263
7,162
56,425
58

$1,546,537

$1,528,270

$55,134

$56,483

2007

2006

$128,675
60,640
189,315
(19,028)
(7,507)
$162,780

$107,849
56,277
164,126
(18,475)
(22,319)
$123,332

Identifiable Assets
2007
$1,159,570
350,743
1,510,313
16,230
434,294
$1,960,837

2006
$1,159,390
410,352
1,569,742
15,411
416,320
$2,001,473

Newspapers and Digital
Book publishing

Corporate
Investment in associated businesses
Consolidated

Geographic Segments

Additions to
Capital Assets

2007
$36,155
1,997
38,152
127

2006
$34,186
4,539
38,725
32

Additions to Goodwill
& Intangible Assets
2007
$3,748

2006
$35,711
236
35,947

3,748

$38,279

$38,757

$3,748

$35,947

Canada
United States
Other (a)
Segment Totals

Operating Revenue
2007
$1,107,757
237,645
201,135
$1,546,537

2006
$1,079,363
251,971
196,936
$1,528,270

Capital Assets
and Goodwill

2007
$764,888
93,395
27,833
$886,116

2006
$774,067
101,358
27,762
$903,187

(a) Principally – United Kingdom, Japan, Germany, Australia, Sweden and France.

79998_AnnualReport07:79998_AnnualReport07 3/13/08 8:23 AM Page 62

T O R S T A R C O R P O R A T I O N

ANNUAL OPERATING HIGHLIGHTS CONTINUING OPERATIONS

2
Operating revenue
(thousands of dollars)
Newspapers and Digital
Book publishing
Total
Operating profit & Income
from continuing operations
(thousands of dollars)
Newspapers and Digital
Book publishing
Corporate
Restructuring provisions
Operating profit
Interest
Foreign exchange
Income (losses) of
associated businesses
Gain on sale of assets
Unusual items
Income before taxes
Income and other taxes
Income from continuing
operations before
amortization of goodwill
Amortization of
goodwill (net of tax)
Income from continuing
operations
Cash from continuing
operating activities
Average number of shares
outstanding (thousands)
Per share Data
Income from continuing
operations
Dividends – Class A
and Class B shares
Rate of Return on Revenue
Operating profit
Return on equity
Cash from operating
activities as a percentage of
average shareholders’ equity
Financial position
Total Assets
Long-term debt
Shareholders’ equity
Property, plant and
equipment (net)

2007

2006

2005

2004

2003

2002

2001

$1,083,828
462,709
$1,546,537

$1,056,462
471,808
$1,528,270

$1,035,816
521,072
$1,556,888

$1,003,473
538,376
$1,541,849

$903,385
584,924
$1,488,309

$856,956
618,093
$1,475,049

$825,765
596,898
$1,422,663

$128,675
60,640
(19,028)
(7,507)
162,780
(34,432)
(1,873)

$107,849
56,277
(18,475)
(22,319)
123,332
(20,761)
70

$120,288
95,381
(19,001)
(2,119)
194,549
(10,463)
(2,723)

$127,601
97,182
(15,555)
(8,399)
200,829
(10,916)
(1,723)

$110,116
124,121
(14,166)
(11,015)
209,056
(12,806)
(4,011)

20,416

16,000

565
12,415

496
(3,883)

134
10,342

146,891
(45,500)

118,641
(39,500)

194,343
(75,500)

184,803
(72,100)

202,715
(79,200)

$105,495
119,168
(12,764)

211,899
(12,751)
973

504
(5,924)
2,624
197,325
(72,000)

$54,300
99,643
(10,773)
(13,000)
130,170
(29,143)
392

(8,022)
(28,744)
(28,800)
35,853
(14,900)

101,391

79,141

118,843

112,703

123,515

125,325

20,953

(17,973)

$101,391

$79,141

$118,843

$112,703

$123,515

$125,325

$2,980

$136,152

$111,591

$124,140

$178,598

$162,976

$167,732

$91,711

78,620

78,250

78,214

79,168

77,645

76,329

75,292

$1.29

$1.01

$1.52

$1.42

$1.59

$1.64

$0.04

0.74

10.5%

0.74

8.1%

0.74

0.70

0.64

0.58

$0.58

12.5%

13.0%

14.0%

14.4%

9.1%

15.2%

13.0%

15.2%

23.2%

23.5%

28.5%

15.4%

$1,960,837
650,798
917,761

$2,001,473
724,193
872,746

$1,561,682
334,317
841,652

$1,510,027
317,829
793,661

$1,511,767
387,800
745,055

$1,480,721
448,390
643,506

$1,490,154
508,848
534,398

330,391

349,842

365,665

392,141

401,172

391,521

410,427

front page 2007 safe Darlene 3/19/08 4:45 PM Page 2

F I N A N C I A L H I G H L I G H T S

O P E RAT I N G R E S U LT S ( $ 0 0 0 )

2007

2006

Operating revenue

EBITDA (1)

Operating profit

Net income

Cash from operating activities

O P E RAT I N G R E S U LT S

EBITDA – Percentage of revenue

Operating profit –
percentage of revenue

Cash from operating activities –
percentage of average shareholders’ equity

P E R C L A S S A A N D C L A S S B S H A R E S

Net income

Dividends

$1,546,537

$1,528,270

225,421

162,780

101,391

136,152

14.6%

10.5%

15.2%

$1.29

$0.74

202,134

123,332

79,141

111,591

13.2%

8.1%

13.0%

$1.01

$0.74

Price range (high/low)

$23.40/17.86

$23.66/16.90

FINANCIAL POSITION ($000)

Long-term debt

Shareholders’ equity

$650,798

$917,761

$724,193

$872,746

The Annual Meeting of shareholders will be held Wed., April 30, 2008 at the Toronto Star building, 3rd Floor Auditorium, One Yonge Street,

Toronto beginning at 10 a.m. It will also be webcast live on the internet by Torstar Media Group Television with interactive capabilities.

O P E RAT I N G R E V E N U E ( $ M I L L I O N S )

O P E RAT I N G P RO F I T ( $ M I L L I O N S )

1,488

1,542

1,557

1,528

1,547

I N C O M E F RO M C O N T I N U I N G
O P E RAT I O N S P E R S H A R E

1.59

1.42

1.52

1.01

1.29

E B I T DA ( $ M I L L I O N S ) ( 1 )

209

201

195

123

163

276

266

253

202

225

(1) Operating profit before depreciation, amortization and restructuring provisions. Please see “Non-GAAP Measures” on page 22.

DA I LY N E W S PA P E R S

D I G I TA L

be in the know

C O M M U N I T Y N E W S PA P E R S

Metroland Media Group is Ontario’s leading publisher
of community newspapers in print and online, publishing
more than 100 community newspapers. Some of the larger
publications include:

TELEVISION INITIATIVES

I N V E ST M E N T S

S P E C I A LT Y P RO D U C T S

Eye Weekly
Desi Life
Forever Young
Real Estate News
Car Guide
Boat Guide
City Parent
Premier Consumer Shows
Gold Book Directories
10 Metroland Regional Internet Portals

JOINT VENTURES
Harlequin Brazil

Harlequin France

Harlequin Germany

Harlequin Greece

Harlequin Hungary

Harlequin Italy

HARLEQUIN ENTERPRISES

Harlequin is a leading global publisher

of women’s fiction.

Harlequin North America

Harlequin Mills & Boon U.K.

Harlequin Australia

Harlequin Holland

Harlequin India

Harlequin Japan

Harlequin Nordic

Harlequin Poland

Harlequin Spain

Project Direction:

Creative Director:

Art Director:

Graphic Design:

Bob Hepburn

Lorne Silver

Joan Blastorah

Rudy Hurtado

Production Art Director:

Darlene Dewell

Printing:

Photography:

The Incredible Printing Group of Companies

Ken Faught/Star Photography Team

Central Imaging:

Maria Doyle

79998_AR_InsideCovers:79998_AR_InsideCovers 3/13/08 7:57 AM Page 1

B O A R D O F D I R E C T O R S

THE HONOURABLE
FRANK IACOBUCCI
Chairman, Torstar Corporation,
Former Justice of the
Supreme Court of Canada
Director since 2004

CAMPBELL R. HARVEY
Professor of International
Business,
Duke University
Director since 1992

LANCE R. PRIMIS
Managing Partner,
Lance R Primis & Partners LLC
Director since 1997

J. ROBERT S. PRICHARD
President and
Chief Executive Officer,
Torstar Corporation
Director since 2002

MARTIN E. THALL
President and
Chief Executive Officer,
Thall Group of Companies
Director since 2002

J. SPENCER LANTHIERR
Corporate Director
Director since 2002

SARABJIT S. MARWAH
Vice-Chairman and
Chief Administrative Officer,
The Bank of Nova Scotia
Director since 2003

RONALD W. OSBORNE
Chairman,
Sun Life Financial Inc.
Director since 2003

JOHN A. HONDERICH
Former Special Advisor to
the Premier of Ontario on
the Fiscal Imbalance
Director since 2004

CORPORATE OFFICE

TRANSFER AGENT & REGISTRAR

One Yonge Street
Toronto, Ontario
Canada
M5E 1P9
Telephone: (416) 869-4010
Fax: (416) 869-4183
e-mail: torstar@torstar.ca
Website: www.torstar.com

CIBC Mellon Trust Company
P.O. Box 7010
Adelaide Street Postal Station
Toronto, Ontario
M5C 2W9
AnswerLine (416) 643-5500 or
1-800-387-0825
(toll-free in North America)

www.cibcmellon.com/InvestorInquiry
inquiries@cibcmellon.com

Torstar Class B non-voting shares are traded
on the Toronto Stock Exchange under the
symbol TS.B

79998_AR_InsideCovers:79998_AR_InsideCovers 3/13/08 7:57 AM Page 2

DONALD BABICK
Past President,
Southam Publications
Corporate Director
Director since 2004

JACK FULLER
Past President,
Tribune Publishing Company
Corporate Director
Director since 2004

PETER A. ARMSTRONG
Corporate Director,
President, Atkinson Charitable
Foundation.
Director since 2006

ELAINE B. BERGER
Corporate Director
Director since 2006

THE HONOURABLE
ROY J. ROMANOW
Former Premier of Saskatchewan
Corporate Director
Director since 2007

OFFICERS

THE HONOURABLE
FRANK IACOBUCCI
Chairman

DAVID P. HOLLAND
Executive Vice-President
and Chief Financial Officer

LORENZO DEMARCHI
Vice-President,
Corporate Development

J. ROBERT S. PRICHARD
President and
Chief Executive Officer

MARIE E. BEYETTE
Vice-President, General
Counsel and Corporate
Secretary

GAIL MARTIN
Vice-President of Finance

D. TODD SMITH
Treasurer