MANAGEMENT’S DISCUSSION & ANALYSIS DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS – FULL YEAR 2004 OVERALL PERFORMANCE 23 TORSTAR 2004 Certain statements in this report may constitute for ward-looking statements that reflect management’s expectations regarding the Company’s future growth, results of operations, performance and business prospects and opportunities. Wherever possible, words such as “anticipate”, “believe”, “expect”, “intend” and similar expressions have been used to identify these forward-looking  statements. Such forward-looking statements involve risks, uncertainties and other factors which may cause actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. References in this discussion to “Torstar” are to Torstar Corporation and its  subsidiaries as presented in Torstar’s December 31, 2004 consolidated financial statements. 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. T otal revenue was $1,541.8 million in 2004, up $53.5 million from $1,488.3 million in 2003. Newspaper revenue grew $100.1 million to $1,003.5 million including $38.1 million from a change in accounting for circulation revenue at the daily newspapers and $18.1 million from acquisitions. Book Publishing revenues were $538.4 million in 2004, down $46.5 million from $584.9 million in 2003. The strengthening of the Canadian dollar reduced Book Publishing revenues by $19.3 million but the decline was more than offset by a gain on U.S. dollar hedges of $21.4 million. Sales volumes were down in almost all of Harlequin’s markets in 2004, which reduced revenues by $42.4 million. Newspaper Segment operating profits were $127.6 million in 2004, up $17.5 million from $110.1 million in 2003. Lower newsprint costs, higher Internet profits and cost containment measures at the Toronto Star, CityMedia and TMG TV provided $13.0 million of the increase. Metroland’s operating profits were up $5.2 million in 2004 including $1.7 million from the jointly owned Sing Tao and Metro publications. TTN’s operating losses were $8.9 million in 2004, up $4.0 million from $4.9 million in 2003. Acquisitions provided $3.2 million of the increase in newspaper operating profits in 2004. During 2004, the Canadian dollar strengthened relative to the U.S. dollar. This resulted in Torstar reporting a non-cash foreign exchange loss of $1.7 million on the translation of its net U.S. dollar asset position. Torstar has U.S. dollar denominated debt which provides a hedge against its U.S. dollar assets. However the offset is not exact as the U.S. dollar assets are primarily working capital with amounts fluctuating daily. In 2003 there was a loss of $4.0 million on the translation of Torstar’s net U.S. dollar asset position. Interest expense was $10.9 million in 2004, down $1.9 million from $12.8 million in 2003. The decrease was from the lower level of debt outstanding during the year. The average net debt (long-term debt and bank overdraft net of cash and cash equivalents) was $306 million in 2004, down from $382 million in 2003. Torstar’s effective interest rate of 3.6% in 2004 was slightly higher than the 3.4% incurred in 2003. Corporate costs were $15.6 million in 2004, up $1.4 million from $14.2 million in 2003. The increase was from higher payroll costs including $0.8 million related to the expensing of stock-based and medium-term incentive compensation. Book Publishing operating profits were $97.2 million in 2004, down $26.9 million from $124.1 million in 2003. The strengthening of the Canadian dollar reduced Book Publishing operating profits by $6.9 million, offset by $7.2 million of higher gains on U.S. dollar and other currency hedges. Operating profits were down $27.2 million in 2004, with declines in each of Harlequin’s divisions.