2003 MANAGEMENT’S DISCUSSION AND ANALYSIS€¦ · • Gain on sale of properties in 2005 (0.11) • Restructuring provisions (0.04) • Non-cash foreign exchange 0.03 Net income

PRESS RELEASE

TORSTAR ANNOUNCES THIRD QUARTER RESULTS

TORONTO, ONTARIO – November 1, 2006, 4:00 p.m. Torstar Corporation today announced its results for the third quarter ended September 30, 2006. Operating results were stable year over year excluding the impact of foreign exchange, restructuring charges and the non-recurrence of unusual gains from property sales that occurred in the same quarter a year ago. The impact of these three items resulted in Torstar’s net income being down $16.0 million from $23.7 million in the third quarter of 2005 to $7.7 million in the third quarter of 2006. While earnings per share were down $0.20 in the third quarter, all of this decrease can be attributed to the $0.08 from the non-recurrence of the significant gain on the 2005 U.S. dollar hedge and the strengthening Canadian dollar, $0.11 from the non-recurrence of a gain on the sale of property in 2005, and $0.04 from higher restructuring provisions in 2006. These declines were partially offset by $0.03 from a non-cash foreign exchange loss reported in 2005. The following chart provides a continuity of earnings per share from 2005 to 2006 for the third quarter:

Third Quarter Net income per share 2005 $0.30 Changes: • Operations 0.00 • Currency impact on operations (0.08) • Gain on sale of properties in 2005 (0.11) • Restructuring provisions (0.04) • Non-cash foreign exchange 0.03 Net income per share 2006 $0.10

“Despite the challenging industry trends in newspapers, our operating results in the third quarter were stable before the impact of foreign exchange and restructuring provisions,” said Robert Prichard, Torstar’s President and Chief Executive Officer. “Strong growth at Metroland led our newspaper results while Harlequin was down slightly due to the continuing impact of the disruption of distribution in the Direct-to-Consumer division in the spring.” “During the quarter, we have taken significant steps to strengthen our businesses,” continued Robert Prichard. “We have integrated CityMedia with Metroland to form the Metroland Media Group under Murray Skinner’s leadership; created the Star Media Group to improve alignment and performance among our various properties under the leadership of Jagoda Pike; reduced

staffing levels and costs at Harlequin; and reduced corporate costs. These changes have simplified and strengthened our overall business and better positioned it for the future. Last week’s announcement of our increased ownership position in Workopolis confirms both the value we have created with our digital initiatives and our commitment to future growth in the digital space.” Highlights Total revenue, excluding the impact of foreign exchange on Book Publishing revenue, was up $2.6 million in the quarter. After the impact of foreign exchange, reported revenue was down $11.8 million to $366.2 million in the third quarter of 2006. Revenue growth at Metroland and Torstar Digital resulted in a $6.3 million or 2.6% increase in Newspaper revenues in the quarter. Reported Book Publishing revenues were down $18.1 million in the third quarter including a decrease of $14.4 million from the strengthening of the Canadian dollar and the non-recurrence of the significant gain realized on the U.S. dollar hedge contracts in 2005. Operating profit was up $1.2 million in the third quarter of 2006 before the impact of foreign exchange and restructuring provisions. Newspaper operating profits were up $2.4 million in the third quarter led by growth in Metroland’s operations. Excluding the impact of foreign exchange, Book Publishing results were down $1.2 million in the quarter. The strengthening Canadian dollar and the non-recurrence of the significant gain realized on the 2005 U.S. dollar hedge contracts reduced Book Publishing results by $9.3 million in the quarter. Restructuring provisions further reduced year over year operating profit by $4.8 million. Total operating profit was $19.4 million in the third quarter of 2006, down $12.9 million from $32.3 million in 2005. During the third quarter of 2006, restructuring provisions of $7.0 million were recorded. $4.5 million was for the newspapers, including $3.7 million for the outsourcing of the Toronto Star’s Circulation Call Centre. The Toronto Star announced its intention to outsource this work at the end of the second quarter. This will result in the elimination of approximately 70 positions, most of them part-time. Harlequin recorded a $2.5 million provision during the third quarter of 2006 for a restructuring which will result in a reduction of 4% of its global workforce. In the third quarter of 2005 the Toronto Star recorded a restructuring provision of $2.1 million for a voluntary severance program at its Vaughan printing facility. Corporate costs were $4.2 million in the third quarter down $0.1 million from the third quarter of 2005. Consolidated EBITDA, before the impact of foreign exchange and restructuring provisions, was $49.8 million for the third quarter, up $1.6 million from $48.2 million in the third quarter of 2005. Including the impact of foreign exchange, consolidated EBITDA before restructuring provisions was $40.5 million, down $7.7 million from $48.2 million in the third quarter 2005.

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Interest expense was $5.4 million in the third quarter, up $2.7 million from $2.7 million in 2005. This increase reflects both higher effective interest rates and more debt outstanding due to the Bell Globemedia Inc. (“BGM”) investment. Torstar reported a non-cash foreign exchange loss of $0.2 million in the third quarter of 2006 down from a loss of $2.2 million in the third quarter of 2005 as the Canadian dollar strengthened relative to the U.S. dollar. The loss arose as Torstar has net U.S. dollar assets from its Book Publishing segment which is hedged by the U.S. dollar debt. However, the offset is not exact as the net U.S. dollar assets are primarily working capital with amounts fluctuating daily. During the third quarter of 2005, Torstar reported an $11.1 million gain on the sale of surplus land. There were no sales of properties in 2006. Torstar’s effective tax rate was 44.7% in the third quarter of 2006, up from 38.1% in 2005. The effective tax rate was higher in the third quarter of 2006 from the impact of capital-based taxes and non-deductible expenses on a lower level of pre-tax income. The full-year 2006 tax rate is expected to be approximately 37.5% including the impact of the second quarter federal tax rate changes or 40.5% excluding it. The full-year tax rate is negatively impacted by the losses at Transit TV that are not currently being tax-effected. Recent Developments Subsequent to the end of the third quarter, Torstar announced the creation of the Star Media Group which will include the Toronto Star, thestar.com and certain publications that have been previously managed by Metroland – including Torstar’s interests in Sing Tao Daily and the Toronto, Ottawa and Vancouver Metro’s. The restructuring charges associated with this change will be reported during the fourth quarter. On October 26, 2006, Torstar announced that it had purchased an additional 10% ownership in Workopolis from BGM for $28.75 million in cash. The transaction reflected an enterprise value of $300 million for Workopolis. As part of the same transaction, Gesca Ltd. acquired an additional 30% ownership interest from BGM and Workopolis made a commitment to spend an incremental $5.0 million of advertising with BGM. Torstar and Gesca Ltd. will now each own 50% of the Workopolis partnership. Other On November 1, 2006, Torstar declared a quarterly dividend of 18.5 cents per share on its Class A shares and Class B non-voting shares, payable on December 31, 2006, to shareholders of record at the close of business on December 12, 2006.

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Further details For further details on Torstar’s third quarter results please refer to the Interim Management Discussion and Analysis and Consolidated Financial Statements dated November 1, 2006. Torstar’s new releases and these documents are available on the Internet at www.torstar.com. Conference call Torstar Corporation has scheduled a conference call for November 1, 2006 at 5:00 p.m. to discuss its third quarter results. The dial-in number in the Toronto area is 416-641-6450 and the toll free number for long distance participants is 1-877-871-4054. A live broadcast of the conference call will be available over the Internet at the News & Media Centre page on www.torstar.com and will be archived on the website following the webcast. A recording of the conference call will be available for 9 days by calling 416-626-4100 or 1-800-558-5253 and entering reservation number 212306242. About Torstar Torstar Corporation is a broadly based media company listed on the Toronto Stock Exchange (TS.B). Its businesses include Star Media Group led by the Toronto Star, Canada’s largest daily newspaper; Metroland Media Group, publishers of daily and community newspapers in Ontario; digital properties including workopolis.com, toronto.com, Olive Canada Network and LiveDeal.ca; and Harlequin Enterprises, a leading global publisher of women’s fiction. Non-GAAP Measures Management uses both operating profit 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 report 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 press release. 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 press release. The Company does not intend, and disclaims any obligation to, update any forward-looking statements 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

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http://www.torstar.com/

http://www.torstar.com/

the forward-looking statements in this press release as a number of factors could cause actual future results, conditions, actions or events to differ materially from the targets, outlooks, expectations, goals, estimates or intentions expressed in the forward-looking statements. These factors include, but are not limited to: general economic conditions in the principal markets in which the Company operates, revenues, 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, 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 23 of the Company’s 2005 Annual Report 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 press release, were applied in making the forward-looking statements set forth in this press release, some or all of which may be incorrect. For more information please contact: D. Holland Executive Vice-President and Chief Financial Officer Torstar Corporation (416) 869-4031

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INTERIM MANAGEMENT’S DISCUSSION AND ANALYSIS For the three and nine months ended September 30, 2006 and 2005

Dated: November 1, 2006 The following review and analysis of Torstar Corporation’s (the “Company” or “Torstar”) operations and financial position for the three and nine months ended September 30, 2006 and 2005 is supplementary to, and should be read in conjunction with the audited consolidated financial statements of Torstar Corporation for the year ended December 31, 2005 set forth in the Company’s Annual Report for such fiscal year and incorporated by reference in the Company’s renewal Annual Information Form dated March 21, 2006. 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 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 report 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 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. These factors include, but are not limited to: general economic conditions in the principal markets in which the Company operates, revenues, 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, litigation, and uncertainties associated with critical accounting estimates.

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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 23 of the Company’s 2005 Annual Report 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 or all of which may be incorrect. OVERVIEW Torstar Corporation is a broadly based media company listed on the Toronto Stock Exchange (TS.B). Its businesses include newspapers led by the Toronto Star, Canada’s largest daily newspaper; Metroland Media Group, publishers of daily and community newspapers in Ontario; digital properties including workopolis.com, toronto.com, Olive Canada Network and LiveDeal.ca; and Harlequin Enterprises, a leading global publisher of women’s fiction. The principal activities of Torstar are the publication of newspapers and women’s fiction. Torstar reports its operations in two segments: Newspapers and Book Publishing. OPERATING RESULTS – Third quarter and year to date 2006 Overall Performance Total revenue, excluding the impact of foreign exchange on Book Publishing revenue was up $2.6 million in the quarter. After the impact of foreign exchange, reported revenue was down $11.8 million to $366.2 million in the third quarter of 2006. Revenue growth at Metroland and Torstar Digital resulted in a $6.3 million or 2.6% increase in Newspaper revenues in the quarter. Reported Book Publishing revenues were down $18.1 million in the third quarter including a decrease of $14.4 million from the strengthening of the Canadian dollar and the non-recurrence of the significant gain realized on the U.S. dollar hedge contracts in 2005. Excluding the impact of foreign exchange on the Book Publishing revenue, total revenue was up $24.4 million year to date. After the impact of foreign exchange, year to date total revenue was down $26.0 million to $1,113.7 million. Newspaper revenues were up $18.7 million or 2.5% year to date with growth at Metroland, Torstar Digital and CityMedia. Reported Book Publishing revenues were down $44.6 million year to date as a $50.4 million negative impact from the strengthening of the Canadian dollar and the non-recurrence of the significant gain realized on the 2005 U.S. dollar hedge contracts more than offset $5.8 million of growth in underlying revenues. Operating profit was $19.4 million in the third quarter of 2006, down $12.9 million from $32.3 million in 2005. This decline was caused by a $9.3 million negative impact from the strengthening Canadian dollar and the non-recurrence of the

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significant gain realized on the 2005 U.S. dollar hedge contracts on Book Publishing results and $4.8 million of higher restructuring provisions during the quarter. Excluding the impact of these items, operating profit was up $1.2 million in the quarter. Newspaper operating profits were up $2.4 million in the third quarter driven by the growth in Metroland’s operations. Excluding the impact of foreign exchange, Book Publishing results were down $1.2 million in the quarter. During the third quarter of 2006, restructuring provisions of $7.0 million were recorded. $4.5 million was for the newspapers, including $3.7 million for the outsourcing of the Toronto Star’s Circulation Call Centre. The Toronto Star announced its intention to outsource this work at the end of the second quarter. This will result in the elimination of approximately 70 positions, most of them part-time. Harlequin recorded a $2.5 million provision during the third quarter of 2006 for a restructuring which will result in a reduction of 4% of its global workforce. In the third quarter of 2005 the Toronto Star recorded a restructuring provision of $2.1 million for a voluntary severance program at its Vaughan printing facility. Operating profit was $80.6 million year to date, down $48.9 million from $129.5 million in the same period last year. $28.3 million of the decline was from the negative impact of the strengthening Canadian dollar and the non-recurrence of the significant gain realized on the 2005 U.S. dollar hedge contracts on Book Publishing results and $8.6 million of higher restructuring provisions. Newspaper operating profits were down $7.1 million year to date as growth at Metroland was more than offset by declines at the Toronto Star and investment spending at Torstar Digital. Excluding the impact of foreign exchange, Book Publishing operating profits were down $4.8 million, primarily from weakness in the North American Direct-to-Consumer division. Year to date restructuring provisions were $10.7 million including the $3.7 million first quarter restructuring provision at the Toronto Star’s Vaughan printing facility. Corporate costs were $4.2 million in the third quarter down $0.1 million from the third quarter of 2005. Corporate costs were $13.8 million year to date, flat compared to the same period last year. Consolidated EBITDA, before restructuring provisions, was $40.5 million for the third quarter down $7.7 million from $48.2 million in 2005. Year to date, consolidated EBITDA before restructuring provisions was $133.7 million, down $41.2 million from $174.9 million in the same period last year. Excluding the impact of foreign exchange, consolidated EBITDA before restructuring provisions was $49.8 million and $162.0 million in the third quarter and first nine months of 2006 respectively. Interest expense was $5.4 million in the third quarter, up $2.7 million from $2.7 million in 2005. Year to date interest expense was $12.0 million, up $4.4 million from $7.6 million in the first nine months of 2005. These increases reflect both higher effective interest rates and more debt outstanding due to the Bell

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Globemedia Inc. investment. The average net debt (long-term debt and bank overdraft net of cash and cash equivalents) was $481.6 million in the third quarter and $340.2 million in the first nine months of 2006, compared to $296.7 million and $291.5 million in the same periods last year. Torstar’s effective interest rate was 4.8% in the third quarter and 4.5% year to date, up from 3.6% and 3.5% in the same periods last year. The weighted average interest rate on Torstar’s outstanding debt (long-term debt and bank overdraft) was 4.8% at September 30, 2006. Torstar reported a non-cash foreign exchange loss of $0.2 million in the third quarter of 2006 down from $2.2 million in the third quarter of 2005 as the Canadian dollar strengthened relative to the U.S. dollar. The loss arose as Torstar has net U.S. dollar assets from its Book Publishing segment which is hedged by the U.S. dollar debt. However, the offset is not exact as the net U.S. dollar assets are primarily working capital with amounts fluctuating daily. Year to date the non-cash foreign exchange loss was $1.0 million in 2006 and $2.8 million in the same period in 2005. On August 30, 2006, Torstar acquired a 20% equity interest in Bell Globemedia Inc. (“BGM”) for $283 million. Bell Globemedia is Canada’s premier multi-media company with ownership interests in Canada’s leading media properties including: CTV Inc., the number-one private broadcaster, and The Globe and Mail, the leading national daily newspaper. CTV operates 21 conventional television stations across Canada and offers a wide-range of quality news, sports, information and entertainment programming. Additionally, CTV has interests in 17 specialty channels. The Globe and Mail publishes Report on Business magazine and also owns many interactive properties including globeandmail.com. Other Bell Globemedia investments include: a 15 percent interest in Maple Leaf Sports and Entertainment, which owns the Toronto Maple Leafs, Toronto Raptors and the Air Canada Centre; and a 50 percent interest in Dome Productions, a North American leader in the provision of mobile high definition production facilities. On September 1, 2006, BGM acquired CHUM Limited. CHUM owns and operates 33 radio stations, 12 local television stations and 21 specialty channels. Torstar made an additional investment of $94 million in BGM on September 7, 2006 in order to provide its pro-rata share of the equity contribution in respect of the CHUM purchase price. Torstar’s investment in BGM will be accounted for using the equity method. However, as Torstar and BGM do not have coterminous year-ends, Torstar will reflect BGM’s operations with a one-month lag. Torstar’s financial statements for the third quarter ended September 30, 2006 reflect Torstar’s investment in BGM, but due to the one-month lag there is no income from associated businesses related to BGM in the income statement. The allocations of Torstar’s purchase price of BGM have not yet been established.

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Torstar also has a 19.35% equity investment in Black Press Ltd. and a 30% equity interest in Qponz Inc. Black Press Ltd. is a privately held company that publishes more than 100 newspapers (both dailies and weeklies) and has 17 printing plants in Western Canada, Washington State and Hawaii. Qponz Inc. is a coupon envelope business based in Toronto. Torstar’s income from associated businesses was $0.1 million in the third quarter, up $0.3 million from a loss of $0.2 million in 2005. Year to date, Torstar’s income from associated businesses was $1.2 million, up $1.0 million from $0.2 million in the same period last year. During the third quarter of 2005, Torstar reported an $11.1 million gain on the sale of surplus land at 7 Queen’s Quay East in Toronto. Year to date in 2005, Torstar reported a $12.4 million gain on the sale of properties which included a first quarter gain on the sale of land and building in Kitchener that had previously been occupied by The Record. There were no sales of properties in 2006. Torstar’s effective tax rate was 44.7% in the third quarter of 2006, up from 38.1% in 2005. Year to date, Torstar’s effective tax rate was 37.5% in 2006 down from 38.6% in 2005. During the second quarter of 2006, the Canadian federal government enacted corporate income tax rate 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 year to date tax expense by $3.3 million. Excluding this adjustment Torstar’s effective tax rate was 42.2% year to date. The effective tax rates were higher in 2006 from the impact of capital-based taxes and non-deductible expenses on a lower level of pre-tax income. The full-year 2006 tax rate is expected to be approximately 37.5% including the impact of the federal tax rate changes or 40.5% excluding it. The full-year tax rate is negatively impacted by the losses at Transit TV that are not currently being tax-effected. Net income was $7.7 million in the third quarter of 2006, down $16.0 million from $23.7 million in 2005. Year to date, net income was $43.1 million, down $37.8 million from $80.9 million in the same period last year. The non-recurrence of the significant gain on the 2005 U.S. dollar hedge and the strengthening Canadian dollar accounted for $6.0 million and $18.2 million of the decline in the quarter and year to date respectively. Higher restructuring provisions in 2006 and the gain on the sale of properties in 2005 accounted for a further $12.1 million and $15.5 million of the decline in the quarter and year to date respectively. Net income per share was $0.10 in the third quarter, down $0.20 from $0.30 in 2005. Year to date, net income per share was $0.55, down $0.49 from $1.04 in the same period last year.

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The following chart provides a continuity of earnings per share from 2005 to 2006 for both the third quarter and year to date:

Third Quarter Year to Date Net income per share 2005 $0.30 $1.04 Changes • Operations 0.00 (0.10) • Currency impact on operations (0.08) (0.23) • Gain on sale of properties in 2005 (0.11) (0.13) • Restructuring provisions (0.04) (0.07) • Non-cash foreign exchange 0.03 0.02 • Tax rate 0.00 (0.02) • Change in statutory tax rates 0.00 0.04 Net income per share 2006 $0.10 $0.55

SEGMENT OPERATING RESULTS – Newspaper segment The Newspaper Segment includes the newspaper, Internet, specialty publications and commercial printing results of the Toronto Star and Metroland Media Group; Torstar Digital; Torstar Media Group Television (“TMG TV”) and Transit TV. The Toronto Star has the largest circulation and readership of any daily newspaper in Canada. The Toronto Star’s Vaughan Press Centre primarily supports the Toronto Star’s printing needs but is also engaged in commercial printing, including the printing of the National Post. During the third quarter, Torstar announced an internal restructuring to combine the CityMedia Group and Metroland operations into a single reporting unit Metroland Media Group. Metroland Media Group publishes more than 100 community newspapers, three daily newspapers – The Hamilton Spectator, The Record (Kitchener, Cambridge and Waterloo) and the Guelph Mercury, a number of specialty publications, Gold Book Directories and the jointly-owned Metro daily commuter papers in Toronto, Ottawa and Vancouver and the jointly-owned Chinese language newspaper Sing Tao Daily. Torstar Digital is the reporting unit for the Newspaper segment’s independent Internet operations including workopolis, toronto.com, LiveDeal.ca, the Olive Canada Network and the Torstar Digital corporate group. Each newspaper reports the results for its own online activities within the newspaper results. TMG TV is a 24-hour direct response television business operating the SHOP TV Canada channel and TMG TV Productions. Transit TV is a U.S. based operation that delivers full motion, broadcast-quality information and entertainment programming with advertising to passengers on buses, rail and other modes of mass transit on screens mounted in the vehicle.

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The following tables set out, in $000’s, the results for the reporting units within the Newspaper Segment for the three months ended September 30, 2006 and 2005. Operating Revenue Operating Profit (Loss) Profit Margin 2006 20051 2006 2005 2006 20051

Toronto Star $97,096 $98,429 ($1,813) ($1,734) n/a n/a Metroland 103,839 96,363 16,329 13,336 15.7% 13.8%CityMedia 38,481 38,287 4,171 3,872 10.8% 10.1%Torstar Digital 5,439 4,393 421 878 7.7% 20.0%Other 2,585 3,662 (2,941) (2,543) n/a n/a Segment Total $247,440 $241,134 $16,167 $13,809 6.5% 5.7% Depreciation and

Amortization

EBITDA2

EBITDA Margin 2006 2005 2006 2005 2006 20051

Toronto Star $7,399 $7,450 $5,586 $5,716 5.8% 5.8%Metroland 2,256 2,098 18,585 15,434 17.9% 16.0%CityMedia 1,439 1,422 5,610 5,294 14.6% 13.8%Torstar Digital 254 120 675 998 12.4% 22.7%Other 923 713 (2,018) (1,830) n/a n/a Segment Total $12,271 $11,803 $28,438 $25,612 11.5% 10.6%

1 Metroland’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 $1.2 million in the third quarter of 2005 ($3.7 million for the nine months ended September 30, 2005). The 2005 profit and EBITDA margin percentages increased as a result of the restatement but there was no impact on operating profit or EBITDA. 2 EBITDA is calculated as reporting unit or segment operating profit (which is before restructuring provisions, interest, unusual items and taxes) plus depreciation and amortization.

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The following tables set out, in $000’s, the results for the reporting units within the Newspaper Segment for the nine months ended September 30, 2006 and 2005. Operating Revenue Operating Profit (Loss) Profit Margin 2006 20051 2006 2005 2006 20051

Toronto Star $305,453 $311,099 $4,804 $13,053 1.6% 4.2%Metroland 315,084 293,053 55,246 50,341 17.5% 17.2%CityMedia 118,008 116,497 14,083 14,296 11.9% 12.3%Torstar Digital 15,590 12,722 (237) 2,636 n/a 20.7%Other 7,751 9,849 (8,538) (7,861) n/a n/a Segment Total $761,886 $743,220 $65,358 $72,465 8.6% 9.8% Depreciation and

Amortization

EBITDA2

EBITDA Margin 2006 2005 2006 2005 2006 20051

Toronto Star $22,723 $24,453 $27,527 $37,506 9.0% 12.1%Metroland 6,790 6,157 62,036 56,498 19.7% 19.3%CityMedia 4,319 4,269 18,402 18,565 15.6% 15.9%Torstar Digital 733 374 496 3,010 3.2% 23.7%Other 2,532 2,170 (6,006) (5,691) n/a n/a Segment Total $37,097 $37,423 $102,455 $109,888 13.4% 14.8% Toronto Star The Toronto Star’s revenues were down $1.3 million in the third quarter of 2006 and $5.6 million year to date despite an extra Saturday publishing day during the third quarter of 2006. Linage was down 4.7% in the third quarter and 6.4% year to date. National linage was down 1.4% in the third quarter with weakness in the technology category. Year to date, national linage was down 5.6%. Retail linage was relatively stable down 0.9% in the third quarter and 2.6% year to date. Classified linage was down 16.0% in the third quarter and 14.0% year to date. The effective average line rate was up 3.6% in the quarter and 2.9% year to date. Weekly Scoop, which ceased publication in June 2006, had revenues of $1.5 million year to date. Higher newsprint prices in 2006 increased costs in both the quarter and year to date. The additional Saturday in the third quarter also increased newsprint consumption. Payroll costs were lower in both the quarter and year to date as general wage increases were more than offset by lower pension costs. EBITDA was down $0.1 million in the third quarter including the $0.6 million of cost savings from ceasing publication of Weekly Scoop in June 2006. Year to date, Toronto Star EBITDA was down $10.0 million including $3.9 million of higher

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Weekly Scoop EBITDA losses in 2006. Operating profit was down $0.1 million in the third quarter and $8.2 million year to date. Metroland Metroland’s revenues were up $7.5 million in the third quarter of 2006 including $4.0 million from acquisitions. Year to date, revenues were up $22.0 million including $15.2 million from acquisitions. The non-acquisition revenue growth in continuing operations was from increased advertising volumes, rate increases, new products and market expansion in both the quarter and year to date. Distributions were up 9.7% in the quarter and 5.1% year to date. Advertising linage was up 14.1% in the quarter and 16.6% year to date including acquisitions. On a “same paper” basis, linage was up 1.1% in the quarter and 1.2% year to date. Metroland’s newsprint costs were up in the quarter and year to date, primarily due to price increases. Payroll costs, including sales commissions, were higher in the quarter and year to date as a result of the acquisitions, new products, market expansions and general wage increases. Department costs were also up reflecting the expanded operations. Metroland’s EBITDA was up $3.2 million in the third quarter and $5.5 million year to date. Acquisitions provided no increase in EBITDA in the quarter and $1.1 million of the increase year to date. Metroland’s operating profit was up $3.0 million in the third quarter and $4.9 million year to date. CityMedia CityMedia’s revenues were up $0.2 million in the quarter and $1.5 million year to date. The CityMedia daily newspapers also benefited from the additional publishing Saturday in the third quarter. Advertising linage at the dailies was up 2.8% in the third quarter with gains in local retail and classified categories more than offsetting declines in national. The effective average line rate was down 4.2% in the quarter. Linage was flat and the effective average line rate was down 1.1% year to date. Distribution volumes were up 5.3% in the third quarter and 3.9% year to date with strong growth at the weekly newspapers. Newsprint and payroll costs were up in both the quarter and year to date reflecting higher newsprint prices and general wage increases. As a result of the second quarter settlement of the strike at the Hamilton Web facility, costs related to the strike were down $0.6 million in the quarter and $1.2 million year to date. CityMedia’s EBITDA and operating profit were up $0.3 million in the third quarter and down $0.2 million year to date. Torstar Digital Torstar Digital revenues were up $1.0 million in the third quarter and $2.9 million year to date with continued strong revenue growth at workopolis.com. Launched in the second quarter of 2006, Olive Canada Network , offering exclusive access to the Canadian impressions on its premium branded partner sites (including

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CNET and NHL.com), had a good quarter with revenue growth and the expansion of the network’s reach to 9.5 million unique Canadian visitors. The continued investment in Torstar Digital, including the building of LiveDeal.ca (a nationwide online classified service), Olive Canada Network and TOPS (an online publishing system that will power all of Torstar’s newspaper web sites and Toronto.com) resulted in higher payroll, operating and marketing costs in the quarter and year to date. Torstar Digital’s EBITDA was down $0.3 million in the quarter and $2.5 million year to date. Operating profit was down $0.5 million in the quarter and $2.9 million year to date. Other Revenues were down $0.6 million in the quarter and $1.7 million year to date at Transit TV. Efforts continue to build the national advertiser base. Transit TV’s EBITDA losses were $2.2 million in the third quarter of 2006, down $0.2 million from $2.4 million in the third quarter of 2005. Year to date, EBITDA losses were $7.0 million, up $0.1 million from $6.9 million in the same period last year. Operating losses were $3.1 million in the quarter and $9.3 million year to date compared to $3.0 million and $8.9 million in the same periods last year. TMGTV continued to face revenue challenges in the quarter due to reduced spending by direct-response advertisers and increased conventional television inventory.

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SEGMENT OPERATING RESULTS – Book Publishing The Book Publishing Segment reports the results of Harlequin Enterprises Limited, a leading global publisher of women’s fiction. Harlequin publishes women’s fiction around the world, selling books through the retail channel and directly to the consumer by mail and the Internet. Harlequin’s women’s fiction publishing operations are comprised of three divisions: North America Retail, North America Direct-To-Consumer and Overseas. The following tables set out, in $000’s, the results for the Book Publishing Segment, including the impact of foreign currency movements and foreign currency contracts, for the three and nine months ended September 30, 2006 and 2005. Three Months Nine Months 2006 20053 2006 20053

Reported revenue, prior year $136,868 $134,723 $396,441 $405,575 Impact of currency movements

(6,920)

(10,090)

(29,823)

(25,055)

Impact of U.S. dollar hedges (7,452) 3,436 (20,601) 7,505 Change in underlying operating revenue

(3,720)

8,799

5,757

8,416

Reported revenue, current year

$118,776

$136,868

$351,774

$396,441

U.S. dollar hedge gains 327 7,779 755 21,356 Revenue before hedges, current year

$118,449

$129,089

$351,019

$375,085

3 Harlequin’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 $1.4 million in the third quarter of 2005 ($3.8 million for the nine months ended September 30, 2005). The 2005 profit and EBITDA margin percentages increased as a result of the restatement but there was no impact on operating profit or EBITDA.

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Three Months Nine Months 2006 20053 2006 20053

Reported operating profit, prior year

$24,979

$23,325

$72,943

$72,317

Impact of currency movements

(1,694)

(2,426)

(7,172)

(6,636)

Impact of U.S. dollar hedges (7,452) 3,436 (20,601) 7,505 Impact of other currency foreign exchange contracts

(178)

(611)

(624)

(472)

Change in operating profit (1,216) 1,255 (4,844) 229 Reported operating profit, current year

$14,439

$24,979

$39,702

$72,943

Gains from U.S. dollar and other currency foreign exchange contracts

365

7,995

867

22,092 Operating profit before foreign exchange contract gains, current year

$14,074

$16,984

$38,835

$50,851 Reported operating profit margin

12.2%

18.3%

11.3%

18.4%

Operating profit margin, before foreign exchange contract gains

11.9%

13.2%

11.1%

13.6% Reported operating profit, current year

$14,439

$24,979

$39,702

$72,943

Depreciation and amortization

1,811

1,902

5,315

5,844

EBITDA4, current year $16,250 $26,881 $45,017 $78,787 Torstar had U.S. dollar contracts that matured in 2005 at an exchange rate of $1.59 for $76 million U.S. dollars, producing a total-year gain of $29.5 million. These contracts were entered into in 2002 when the Canadian dollar was much weaker. The U.S. dollar contracts that are in place for 2006 are for $30 million U.S. dollars at an exchange rate of $1.16. The lower contract exchange rate for U.S. dollars in 2006 and the continued strengthening of the Canadian dollar relative to the U.S. dollar and other currencies has had and will continue to have a significant negative impact through the fourth quarter of 2006 on reported Book Publishing revenue and operating profit. Book Publishing revenues were down $3.7 million in the third quarter excluding the impact of foreign exchange. North America Retail was down $3.3 million, North America Direct-to-Consumer was down $1.7 million while Overseas was up $1.3 million. Year to date revenues were up $5.8 million excluding the impact

4 EBITDA is calculated as segment operating profit (which is before restructuring provisions, interest, unusual items and taxes) plus depreciation and amortization.

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of foreign exchange. North America Retail was up $4.3 million, North America Direct-to-Consumer was down $1.4 million and Overseas was up $2.9 million. Book Publishing operating profit was down $1.2 million in the third quarter excluding the impact of foreign exchange. North America Retail was down $1.0 million, North America Direct-to-Consumer was down $0.9 million while Overseas was up $0.7 million. Year to date operating profit was down $4.8 million excluding the impact of foreign exchange. North America Retail was down $0.6 million, North America Direct-to-Consumer was down $4.3 million while Overseas was up $0.1 million. North America Retail operating profit was down in the third quarter with fewer books sold than in the third quarter of 2005. Part of the decrease can be attributed to a promotion with a U.S. retailer that occurred in the third quarter of 2005 but will be in the fourth quarter of 2006. Year to date, revenue gains have been offset by higher costs. During the third quarter, North America Direct-to-Consumer continued to feel the impact of operational issues experienced earlier in the year associated with the bankruptcy of a key supplier. The resulting shipping disruptions reduced customer retention from the spring mailing which will continue to negatively affect sales volumes from that mailing going forward. Subsequent mailings have been completed by in-sourcing the activity previously contracted to this supplier and have performed in line with expectations. Year to date, higher product and distribution costs have also reduced operating profits. The Overseas markets had mixed results during the third quarter. The U.K. and Japanese markets have had relatively stable unit sales during 2006 but other markets, including France and Germany, continued to face declining unit sales. 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 currently available will be adequate to cover forecasted financing requirements. In the third quarter of 2006, $56.9 million of cash was generated by operations, $389.9 million was used for investing activities and $331.9 million was generated by financing activities. Cash and cash equivalents net of bank overdraft decreased by $1.1 million in the quarter from $46.1 million to $45.0 million. Year to date, $82.8 million of cash was generated by operations, $410.0 million was used for investing activities and $331.4 million was generated by financing

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activities. Cash and cash equivalents net of bank overdraft increased by $4.0 million in the first nine months of 2006 from $41.0 million to $45.0 million. Operating activities Operating activities provided cash of $56.9 million in the third quarter, up from $53.1 million in the third quarter of 2005. Year to date, operating activities have provided cash of $82.8 million, down from $89.4 million in the same period last year. In the third quarter of 2006, non-cash working capital decreased by $33.0 million compared with a decrease of $23.1 million in 2005. Year to date, non cash working capital has increased by $0.7 million compared with an increase of $26.7 million in the same period last year. At the end of the third quarter in 2006, Torstar had a dividend payable of $14.4 million due to the timing of dividend funding. This positively impacted non-cash working capital for both the quarter and year to date. Year to date, non-cash working capital has also been positively impacted by lower prepaid balances and higher payables, including restructuring provisions. Investing activities During the third quarter of 2006, $377.8 million was used for the initial purchase of 20% of BGM and the additional investment related to BGM’s acquisition of CHUM. Additions to property, plant and equipment were $11.1 million in the third quarter of 2006, up from $7.1 million in 2005. During the third quarter of 2005, $11.3 million was used for Metroland acquisitions and a portfolio investment in Vocel (a wireless application publisher with whom Harlequin has a licensing agreement), and $12.0 million was received from the sale of surplus land. Year to date, $29.3 million has been used for additions to property, plant and equipment, up from $25.1 million in the same period in 2005. Investments were $4.2 million year to date, down from $34.9 million in 2005. These were primarily acquisitions of community newspapers for Metroland in both years. Total proceeds from the sale of properties were $17.7 million in the first nine months of 2005. Financing activities Torstar issued $599.6 million of bankers’ acceptances under a new banking facility during the third quarter of 2006. The funds were used for the BGM purchase and to repay $255.1 million of outstanding commercial paper. Net debt of $344.5 million was issued in the quarter and $371.0 million has been issued year to date. Torstar had two normal course issuer bids outstanding during the period May 7, 2004 to May 5, 2006. In the first nine months of 2005, 589,200 Class B shares were repurchased for a total price of $13.8 million. There were no shares purchased in 2006.

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Long-term debt At September 30, 2006, Torstar had long-term debt of $699.5 million outstanding. The debt consisted of U.S. dollar bankers’ acceptance of $117.7 million, Canadian dollar bankers’ acceptance of $481.8 million and Canadian dollar medium term notes of $100.0 million. During the third quarter, Torstar renegotiated its long-term bank credit facilities as part of the funding for its equity investment in BGM. The new facilities, which were finalized on October 19, 2006, consist of a $425 million revolving loan that will mature on January 4, 2012 and a $425 million revolving operating loan. The operating loan matures on January 11, 2008 and can be extended with the consent of all parties for up to four 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. With the change in the long-term bank credit facilities and the new borrowings for the BGM investment, Torstar has changed from borrowing through the commercial paper program supported by the long-term credit facility to bank borrowings primarily in the form of bankers’ acceptance. 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. The long-term credit facility for $850 million is also designated as a standby line in support of letters of credit. At September 30, 2006, $605.9 million was drawn under the facility and a $25.2 million letter of credit was outstanding relating to the executive retirement plan. The remaining credit of $218.9 million is considered to be adequate to cover forecasted financing requirements. Contractual obligations Other than the renegotiation of the long-term bank credit facilities, there were no material changes during the first nine months of 2006 in Torstar’s significant contractual obligations as disclosed in the December 31, 2005 annual MD&A. FINANCIAL INSTRUMENTS In September 2006, Torstar entered into three interest rate swap agreements to fix the interest rate on $250 million of Canadian dollar borrowings at 4.3% plus the interest rate spread based on Torstar’s long-term credit rating for the next five years. The interest rate spread is currently 0.6%. These swap contracts have been designated as hedges. KEY FACTORS AND RELATED RISKS There have been no material changes in any risks or uncertainties facing Torstar since the year ended December 31, 2005. OUTLOOK The outlook for the Newspaper Segment is difficult to predict. The Toronto and GTA markets remain very competitive for both newspaper and other media

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advertising. In this environment, daily newspapers are more challenged than community newspapers. Metroland continues to perform well year to date and is on track for a good year. Investment spending will still be required for the Torstar Digital properties and Transit TV to support the building of revenue platforms for the future. In Book Publishing, the 2006 reported results will continue to be negatively impacted from the strengthening Canadian dollar and the non-recurrence of the significant gain realized in 2005 on the U.S. dollar hedge contracts. Year to date, Book Publishing results have been negatively impacted by $28.4 million because of foreign exchange with another $9.0 million expected in the fourth quarter. As reported in the second quarter, the North America Direct-to-Consumer unit sales and financial results for 2006 will be reduced due to the disruption of the spring campaign. SUMMARY OF QUARTERLY RESULTS (In thousands of dollars except for per share amounts)

Sept. 30, 2006 June 30, 2006 March 31, 2006 Dec. 31, 2005 Revenue5 $366,216 $390,331 $357,113 $417,227 Net income $7,667 $25,631 $9,775 $37,894 Net income per Class A voting and Class B non-voting share Basic $0.10 $0.33 $0.13 $0.48 Diluted $0.10 $0.33 $0.12 $0.48

Sept. 30, 2005 June 30, 2005 March 31, 2005 Dec. 31, 2004 Revenue5 $378,002 $402,851 $358,808 $414,523 Net income $23,698 $36,112 $21,139 $42,592 Net income per Class A voting and Class B non-voting share Basic $0.30 $0.46 $0.27 $0.54 Diluted $0.30 $0.46 $0.27 $0.54

The summary of quarterly results illustrates the cyclical nature of revenues and operating profit in the Newspaper segment. The fourth quarter is generally the strongest for the daily newspapers. The weekly and community newspapers tend to have a more even performance during the year. The 2006 quarters will be negatively impacted by the strengthening of the Canadian dollar and the non-recurrence of the significant gain realized on the 2005 U.S. dollar hedge. 5 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 $2.3 million, $2.6 million, $2.6 million and $2.5 million in each of the first, second, third and fourth quarters respectively. There was no impact on net income.

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Unusual income and restructuring provisions have impacted the level of net income in several quarters. In 2006, restructuring provisions of $3.7 million and $7.0 million were recorded in the first and third quarters respectively. In 2005, the first quarter had a gain on the sale of properties of $1.4 million and the third quarter had a gain on the sale of properties of $11.1 million and a restructuring provision of $2.1 million. RECENT DEVELOPMENTS Subsequent to the end of the third quarter, Torstar announced the creation of the Star Media Group which will include the Toronto Star, thestar.com and certain publications that have been previously managed by Metroland – including Torstar’s interests in Sing Tao Daily and the Toronto, Ottawa and Vancouver Metro’s. The restructuring charges associated with this change will be reported during the fourth quarter. This change in reporting units as well as the formation of Metroland Media Group (which now includes CityMedia) will be reflected in the fourth quarter reporting and the annual financial statements. On October 26, 2006, Torstar announced that it had purchased an additional 10% ownership in Workopolis from BGM for $28.75 million in cash. The transaction reflected an enterprise value of $300 million for Workopolis. As part of the same transaction, Gesca Ltd. acquired an additional 30% ownership interest from BGM and Workopolis made a commitment to spend an incremental $5.0 million of advertising with BGM. Torstar and Gesca Ltd. will now each own 50% of the Workopolis partnership. OTHER At September 30, 2006, Torstar had 9,915,992 Class A voting shares and 68,483,348 Class B non-voting shares outstanding and 5,457,313 options to purchase Class B non-voting shares outstanding to executives and non-executive directors. More information on Torstar’s share capital is provided in Notes 3 and 4 of the consolidated financial statements. Additional information relating to Torstar including the Annual Information Form is available on SEDAR at www.sedar.com.

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http://www.sedar.com/

T o r s t a r C o r p o r a t i o n C o n s o l i d a t e d S t a t e m e n t s

o f I n c o m e(unaudited)

Three months ended Nine months endedSeptember 30 September 30

(thousands of dollars) 2006 2005 2006 2005Operating revenue

Newspapers $247,440 $241,134 $761,886 $743,220Book publishing 118,776 136,868 351,774 396,441

$366,216 $378,002 $1,113,660 $1,139,661Operating profit

Newspapers $16,167 $13,809 $65,358 $72,465Book publishing 14,439 24,979 39,702 72,943Corporate (4,233) (4,348) (13,778) (13,790)Restructuring provisions (note 8) (6,967) (2,119) (10,667) (2,119)

19,406 32,321 80,615 129,499Interest (5,422) (2,667) (11,951) (7,559)Foreign exchange (189) (2,181) (980) (2,836)Income of associated businesses 72 (240) 1,189 230Gain on sale of properties (note 8) 11,065 12,415Income before taxes 13,867 38,298 68,873 131,749Income and other taxes (6,200) (14,600) (25,800) (50,800)

Net income $7,667 $23,698 $43,073 $80,949

Earnings per Class A and Class B share (note 3(c)):Net income - Basic $0.10 $0.30 $0.55 $1.04Net income - Diluted $0.10 $0.30 $0.55 $1.03

(See accompanying notes)

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T o r s t a r C o r p o r a t i o nC o n s o l i d a t e d B a l a n c e S h e e t s

September 30 December 31 (thousands of dollars) 2006 2005

AssetsCurrent: Cash and cash equivalents $46,966 $47,783 Receivables 245,537 253,718 Inventories 35,363 35,568 Prepaid expenses 73,750 77,211 Prepaid and recoverable income taxes 2,599 3,130 Future income tax assets 24,727 21,630

Total current assets 428,942 439,040

Property, plant and equipment (net) 353,593 365,665Investment in associated businesses (note 7) 401,031 23,618Goodwill (net) 540,601 537,545Other assets 149,411 145,712Future income tax assets 45,070 50,102

Total assets $1,918,648 $1,561,682

Liabilities and Shareholders' EquityCurrent: Bank overdraft $1,941 $6,738 Accounts payable and accrued liabilities 211,974 204,710 Income taxes payable 2,776 15,047 Total current liabilities 216,691 226,495

Long-term debt (note 2) 699,483 334,317Other liabilities 89,102 85,689Future income tax liabilities 68,612 73,529

Shareholders' equity:Share capital (note 3) 381,011 376,925Contributed surplus 6,773 4,883Retained earnings 470,422 470,783Foreign currency translation adjustment (13,446) (10,939)

Total shareholders' equity 844,760 841,652

Total liabilities and shareholders' equity $1,918,648 $1,561,682


(unaudited)

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Three months ended Nine months endedSeptember 30 September 30

(thousands of dollars) 2006 2005 2006 2005

Cash was provided by (used in) Operating activities $56,891 $53,070 $82,761 $89,388 Investing activities (389,946) (6,337) (410,034) (42,151) Financing activities 331,918 (44,520) 331,405 (37,953)Increase (decrease) in cash (1,137) 2,213 4,132 9,284Effect of exchange rate changes 103 (2,091) (152) (3,148)Cash, beginning of period 46,059 46,829 41,045 40,815Cash, end of period $45,025 $46,951 $45,025 $46,951Operating activities: Net income $7,667 $23,698 $43,073 $80,949 Depreciation 13,386 13,084 40,315 41,398 Amortization 712 637 2,144 1,917 Future income taxes 1,423 1,400 (1,800) 2,100 Income of associated businesses (72) 240 (1,189) (230) Other (note 10) 743 (9,103) 911 (10,068)

23,859 29,956 83,454 116,066Decrease (increase) in non-cash working capital 33,032 23,114 (693) (26,678)Cash provided by operating activities $56,891 $53,070 $82,761 $89,388Investing activities: Additions to property, plant and equipment ($11,103) ($7,115) ($29,276) ($25,083) Investment in associated business (note 7) (377,779) (377,779) Acquisitions and investments (note 7) (1,992) (11,267) (4,167) (34,871) Proceeds on sale of properties (note 8) 12,044 17,744 Other 928 1 1,188 59Cash used in investing activities ($389,946) ($6,337) ($410,034) ($42,151)Financing activities: Issuance of bankers' acceptance $599,594 $599,594 Repayment of commercial paper (255,114) ($92,150) (255,114) ($46,938) Issuance of commercial paper 26,519 Issuance of medium term notes 100,000 100,000 Repayment of medium term notes (45,000) (45,000) Dividends paid (14,372) (14,231) (43,096) (42,530) Exercise of stock options 979 6,647 2,140 8,390 Purchase of shares for cancellation (note 3(b)) (773) (13,841) Other 831 987 1,362 1,966Cash (used in) provided by financing activities $331,918 ($44,520) $331,405 ($37,953)

Cash represented by: Cash and cash equivalents $46,966 $48,897 $46,966 $48,897 Bank overdraft (1,941) (1,946) (1,941) (1,946)

$45,025 $46,951 $45,025 $46,951


T o r s t a r C o r p o r a t i o nC o n s o l i d a t e d S t a t e m e n t s O f

C a s h F l o w s (unaudited)

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T o r s t a r C o r p o r a t i o nC o n s o l i d a t e d S t a t e m e n t s O f

R e t a i n e d E a r n i n g s(unaudited)

Nine months endedSeptember 30

(thousands of dollars) 2006 2005

Retained earnings, beginning of period $470,783 $425,787

Net income 43,073 80,949

Dividends (43,434) (43,425)

Premium paid on repurchase of shares for cancellation (note 3(b)) (10,689)

Retained earnings, end of period $470,422 $452,622


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TORSTAR CORPORATION Notes to the Interim Consolidated Financial Statements (Dollar amounts in thousands unless otherwise stated)

1. Accounting policies The accounting policies used in the preparation of these unaudited interim consolidated financial statements conform with those in Torstar Corporation’s December 31, 2005 audited annual consolidated financial statements except for the adoption of EIC-156 “Accounting by a Vendor for Consideration Given to a Customer (including a Reseller of the Vendor’s Products)” as described in Note 1(s) of the annual consolidated financial statements. EIC-156 has been applied effective January 1, 2006 with restatement of prior periods. As a result of the change, for the nine months ended September 30, 2005 revenue and operating expenses have been reduced by $7.5 million with no impact on net income. These interim financial statements do not include all of the disclosures included in the annual financial statements and accordingly should be read in conjunction with the annual consolidated financial statements.

2. Long-term debt

As at September 30, 2006

As at December 31, 2005

Bankers’ acceptance: Cdn. Dollar denominated $481,826 U.S. Dollar denominated 117,657 599,483 Commercial paper: Cdn. Dollar denominated $93,663 U.S. Dollar denominated 140,654 234,317Medium Term Notes: Cdn. Dollar denominated 100,000 100,000 $699,483 $334,317

a) During the third quarter, the company renegotiated its long-term bank credit facilities. The new

facilities, which were finalized on October 19, 2006, consist of a $425 million revolving loan that matures on January 4, 2012 and a $425 million revolving operating loan. The operating loan, which matures January 11, 2008, can be extended with the consent of all parties for up to four additional 364-day periods or can be converted to a 364-day term loan at the company’s option. Amounts may be drawn in Canadian or U.S. dollars.

Amounts borrowed under the bank credit facilities would primarily be in the form of bankers’ acceptances (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 LIBOR rate if in U.S. dollars, at September 30, 2006 was 0.6% and varies based on the company’s long-term credit rating. In September of 2006, the company entered into three 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 based on the company’s long term credit rating, currently 0.6%) for the next five years 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 $1.1 million unfavourable at September 30, 2006.

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On January 27, 2006, the company purchased, for a cost of $0.8 million, options to enter into five year interest rate swap agreements on November 1, 2006 under which Torstar would pay a fixed rate of 4.9% plus an interest rate spread of 0.5% and receive floating rate payments based on 90 day bankers’ acceptances rates for $200 million of Canadian dollar debt. The above agreements were entered into in anticipation of the purchase and related financing of a 20% equity interest in Bell Globemedia Inc. (see note 7). The cost of the swap will be amortized over the five year term of the new bank facility noted above. The fair value of these agreements was negligible at September 30, 2006 and the company does not intend to exercise these options. The average rate on Canadian dollar bank borrowings outstanding at September 30, 2006 was 4.9%. Including the effect of the above noted swap arrangements, the effective rate was 5.0%. The company is party to an interest rate swap arrangement that will fix the interest rate on U.S. $80 million of borrowings at approximately 3.5% (plus the credit spread of 0.6%) for four years ending December 2007. The swap has been designated as a hedge. The fair value of the U.S. interest rate swap arrangement was $2.3 million favourable at September 30, 2006. At September 30, 2006 bank debt outstanding included U.S. borrowings of U.S. $105.5 million at an average rate of 6.1%. Including the effect of the above noted swap arrangement, the effective rate was 4.7%.

b) A facility exists for the company to issue short-term notes in the form of commercial paper. These

notes may be issued in Canadian or U.S. dollars to an authorized limit of Canadian $550 million outstanding at any one time. No commercial paper was outstanding at September 30, 2006 and the company has suspended the program. All commercial paper with a term of less than one year is classified as long-term debt as the company has the ability to refinance these amounts under its existing long-term credit facilities.

c) The company issued in September 2005 $75 million 3.85% medium term notes which mature on

September 8, 2010. The company has entered into interest rate 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 on September 9, 2009. The company has entered into an interest rate 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 hedges and mature on the due dates of the respective notes. The effective interest rate on the medium term notes outstanding at September 30, 2006 was 4.9%. The fair value of the medium term notes was $3.6 million favourable at September 30, 2006. The fair value of the Canadian interest rate swap agreements related to the medium term debt issuance noted above were $2.5 million unfavourable at September 30, 2006.

3. Share Capital

a) A summary of changes to the company’s share capital is as follows:

Class A shares (voting) At September 30, 2006 there were 9,915,992 Class A shares outstanding with a stated value of $2,694. During the second quarter of 2006, 450 Class A shares were converted to Class B shares.

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Class B shares (non-voting) Shares AmountDecember 31, 2005 68,225,435 $374,231 Converted from Class A 450 Issued under Employee Share Purchase Plan 126,956 2,895 Stock options exercised 112,400 2,157 Dividend reinvestment plan 16,132 338 Other 1,975 42September 30, 2006 68,483,348 $379,663 Total Class A and Class B shares 78,399,340 $382,357 Reduction for RSU Trust shares (note 4(e)) (1,346)Share Capital $381,011

b) The company commenced a normal course issuer bid on May 6, 2005, effective for one year, to

repurchase for cancellation up to 2 million Class B shares, representing approximately 2.9% of the company’s outstanding Class B shares. Under this bid, no shares were repurchased during 2006 and 344,900 shares were repurchased and cancelled during the third and fourth quarters of 2005 at an average price of $22.59 per share for a total consideration of $7,790.

A similar issuer bid which commenced May 7, 2004, was completed during the second quarter of 2005.

During the nine months ended September 30, 2005, 589,200 Class B shares were repurchased under both issuer bids at an average price of $23.49 per share for a total consideration of $13,841. Retained earnings were reduced by $10,689 representing the excess of the cost of the shares repurchased over their stated value.

c) Earnings per share

Basic per share amounts have been determined by dividing net income by the weighted average number of shares outstanding during the period. Diluted per share amounts have taken into consideration the dilutive effect of stock options; the employee share purchase plan and the shares held by the RSU Trust. The weighted average number of Class A and Class B shares outstanding (in thousands) were:

Three months ended September 30 Nine months ended September 30

2006 2005 2006 2005 Basic 78,299 78,271 78,208 78,179 Diluted 78,383 78,822 78,381 78,607

d) During the nine months ended September 30, 2006, no controlling shareholders bought or sold

Class B shares.

4. Stock-based compensation The company has five stock-based compensation plans: an executive share option plan, an employee share purchase plan, a deferred share unit (“DSU”) plan for employees, a DSU plan for non-employee directors and an executive restricted share unit (“RSU”) plan.

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

Share optionsWeighted average

exercise priceDecember 31, 2005 5,138,468 $22.77 Granted 583,956 22.14 Exercised (112,400) (19.04) Cancelled (152,711) (24.15)September 30, 2006 5,457,313 $22.74

Options exercisable at September 30, 2006 are as follows: Range of exercise price

Share options exercisable

Weighted average exercise price

$15.75-18.05 395,500 $17.27 $18.50-22.20 2,318,412 $21.06 $25.00-29.01 1,351,942 $26.26$15.75-29.01 4,065,854 $22.42

b) The company has recognized in 2006 compensation expense totalling $2.4 million (2005 - $1.8

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. The fair value of the executive stock options granted in 2006 was estimated to be $3.08 per option at the date of grant using the Black-Scholes option pricing model with the assumptions of a risk-free interest rate of 4.2%, expected dividend yield of 3.3%, expected volatility of 16.8% and an expected time until exercise of 5 years.

c) No compensation expense has been recognized for the company’s stock-based compensation plans

granted in 2002. Had compensation cost been recognized for grants in 2002 based on the fair value method of accounting for stock-based compensation, the company’s 2005 net income and earnings per share would have been reduced to the pro forma amounts indicated below: Three months Nine months

ended September 30 ended September 30 2005 2005 Net income - As reported $23,698 $80,949 - Pro forma $23,271 $79,668 Earnings per share – Basic - As reported $0.30 $1.04 - Pro forma $0.30 $1.02 Earnings per share – Diluted - As reported $0.30 $1.03 - Pro forma $0.30 $1.01

The compensation cost for these grants would have been fully expensed by the end of 2005 and therefore would have had no impact on the company’s 2006 net income.

d) The company has a DSU plan for executives and non-employee directors. As at September 30, 2006, 252,813 units were outstanding at a value of $5.1 million. The company has entered into a derivative instrument in order to offset its exposure to 250,334 units. Changes in the fair value of this instrument will be recorded as compensation expense and will offset the impact of changes in the value of the outstanding DSUs.

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e) During 2006, the company introduced an RSU plan. Under the plan, eligible senior executives are granted RSU awards to receive Torstar Class B non-voting shares as part of their long-term incentive compensation. The value of an RSU is equal in value to a Torstar Class B non-voting share. RSUs vest after three years at which time Torstar Class B non-voting shares will be distributed to the participants. There were 105,187 RSUs granted in January 2006 of which 97,402 remain outstanding at September 30, 2006. An employee benefit trust (“RSU Trust”) has been established to purchase the necessary Torstar Class B non-voting shares in the open market. For accounting purposes, the RSU Trust is treated as a Variable Interest Entity and consolidated in the accounts of the company. As a result, unamortized compensation expense representing the related shares held by the RSU Trust is presented as a reduction of the company’s share capital.

5. 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. Post employment benefits other than pensions are also available to employees, primarily in the Canadian newspapers operations, which provide for various health and life insurance benefits. The company has expensed net pension benefit costs of $10.9 million for the nine months ended September 30, 2006 (2005 - $12.3 million) and $3.4 million for the quarter ended September 30, 2006 (2005 - $4.2 million). With respect to post-employment benefits other than pensions, for the nine months and quarter ended September 30, 2006 the net benefit cost was $3.7 million and $1.3 million respectively (2005 - $3.3 million and $1.1 million respectively).

6. Forward Foreign Exchange Contracts and Options

As described in Note 13 of the company’s December 31, 2005 annual financial statements, the company has entered into various forward foreign exchange contracts. The company has entered into forward foreign exchange contracts which establish a rate of exchange of Canadian dollar per U.S. dollar of $1.16 for U.S. $30 million in 2006 and $1.14 for U.S. $22.5 million in 2007.

7. Acquisitions and Investments

On August 30, 2006, the company acquired a 20% equity interest in Bell Globemedia Inc. (“BGM”). BGM acquired CHUM Limited on September 1, 2006. On September 7, 2006, the company made an additional investment in BGM to provide its pro-rata share of the equity contribution in respect of the CHUM acquisition. The total purchase price was $378 million. The investment is included in Investments in Associated Businesses and is accounted for using the equity method. The allocations of the purchase price of the acquisition have not yet been established. BGM’s year-end is August 31, 2006. Therefore, Torstar and BGM do not have coterminous year-ends and these financial statements reflect the company’s investment in BGM but due to the one-month lag, there is no income related to BGM included in Income of associated businesses on the Income Statement. During the first nine months of 2006, the company completed a number of community newspaper and miscellaneous acquisitions for a total purchase price of $3.1 million, which was primarily allocated to goodwill. The company also made a further portfolio investment in Vocel, Inc. of $1.1 million. In the first nine months of 2005, the company acquired community newspapers in the Muskoka, Huntstville and Parry Sound areas as well as Paton Publishing and the Toronto Wine and Cheese show for a total purchase price of $32.5 million which included $8.3 million of intangible assets and $24.1

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million allocated to goodwill. The company also made its initial portfolio investment in Vocel, Inc. of $2.4 million.

8. Restructuring Charges and Gain on Sale of Properties

During 2006, restructuring charges of $3.7 million were recognized in the first quarter with respect to a voluntary severance program at the Toronto Star’s printing facility. In the third quarter, additional restructuring charges of $7.0 million were recognized with respect to The Toronto Star’s Circulation Call Centre, reorganization of the City Media and Metroland operations, and reorganizations at Harlequin Enterprises Limited. In the third quarter of 2005, a $2.1 million provision was recorded with respect to a voluntary severance program at the Toronto Star’s printing facility. During the first quarter of 2005, the company recognized a $1.4 million gain from the completion of the sale of the land and building previously occupied by The Record in Kitchener. In the third quarter of 2005, a gain of $11.1 million was recognized on the sale of surplus land at 7 Queen’s Quay East in Toronto. Net proceeds on these two transactions were $17.7 million. Accounts payable and accrued liabilities include $9.9 million for restructuring provisions at September 30, 2006 ($4.3 million at December 31, 2005). The change in the liability during 2006 includes payments of $2.3 million related to the provisions made in 2006 and $2.7 million for provisions made prior to 2006.

9. Comparative Financial Statements

The comparative financial statements have been reclassified from the statements previously presented to conform to the presentation of the 2006 financial statements.

10. Other Cash (Used in) Provided by Operating Activities

Three months Nine months ended September 30 ended September 30

2006 2005 2006 2005 Gain on sale of properties ($11,065) ($12,415) Foreign exchange $189 2,181 $980 2,836 Post employment benefits (693) (1,105) (2,346) (4,270) Stock-based compensation plans 891 569 2,141 3,442 Other 356 317 136 339 $743 ($9,103) $911 ($10,068)

11. Subsequent event

In October 2006, the company purchased an additional 10% ownership in Workopolis from BGM for $28.8 million. With this purchase, the company now owns 50% of Workopolis.

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Documents

2003 MANAGEMENT’S DISCUSSION AND ANALYSIS€¦ · • Gain on sale of properties in 2005 (0.11) • Restructuring provisions (0.04) • Non-cash foreign exchange 0.03 Net income